Measuring Ethics

Headline: “AT&T wins ethics award – and three hours later the company gets tied to Michael Cohen’s money mess.”

The award was “based on process, not performance”, said the organization granting the award.

Now, imagine if the hospital where you are about to get your surgery says: “Top surgical center! Based on how often our surgical staff wash their hands, not on how many patients get infected after surgery.”

Or the driver of your children’s school bus: “Safe driver! Based on drivers’ ed attendance, not actual performance.”

How confident would you feel about that hospital or driver?

Yet that is precisely how ethics has been measured and awarded in the corporate world: based on self-reported efforts and process, not performance or outcome. In an era of growing interest in corporate accountability, being “ethical” is useful branding for corporate image marketing. Yet how much should anyone believe in such branding when the evaluation process is so meaningless?

There are two fundamental deficiencies in the way corporate ethics is currently measured: lack of clarity on what “ethical” means, and incomplete data sources.

“Ethical” – as defined by Merriam Webster dictionary for this context – means “conforming to accepted standards of conduct.” What may be “accepted” by some may not be accepted by others, and what may be accepted at one point in time may not be at a later time. Giving preferential treatment to one’s friends and relatives may be acceptable and even desirable in some cultures, while considered unethical or even illegal in others. Racial segregation was acceptable at one point in history: that acceptance has now changed. When awards are given for “ethical” companies, by whose standard and what specific characteristics of ethics are being judged? One prominent ethics award purports to recognize companies that “drive positive change in the business community and societies”. A company shortchanges its employees and suppliers to cut cost, thereby making its products more affordable. Another company treats its employees well to create an innovative environment, then sells its innovations to governments to suppress dissent. Which of these conducts are “positive” or “accepted”, as determined by whom?

This leads to the second deficiency: for all the ethics awards I have seen, the data comes from one source and one source only – the company being evaluated. Setting aside all the biases inherent in self-reporting, even accurate self-reporting is just that: one data source, one perspective. In essence, it is asking someone: “Do you think you are ethical and if so, tell us why.” “Well, I go to church every Sunday. I don’t shoplift. And I always finish what I start.” “Congratulations! You are the world’s most ethical person!”

For eight years in a row since 2010, the Hospital Corporation of America (HCA), has been named one of the “World’s Most Ethical Companies” (a trademarked designation with its own web domain name). In 2012, a New York Times article chronicled HCA’s profit-generating billing practices and turning away of patients who were not able to pay. The article also cited instances when an HCA facility was fined for “delaying the start of dialysis in patients, not administering physician-prescribed drugs and not documenting whether ordered tests had been performed.” In October, 2017, four of HCA’s hospitals paid $8.6 million to settle allegations they “received kickbacks from various ambulance companies in exchange for rights to the hospitals’ more lucrative Medicare and Medicaid transport referrals.”

I wonder how those patients felt about HCA being called a “World’s Most Ethical Company”? Did any of them rely on that designation only to be turned away or even harmed? Were any of them interviewed for the ethics evaluation? How about the doctors and nurses who expressed concerns for patient care in such an environment: were they interviewed? How about the ambulance drivers?

For its article, the New York Times “examined federal and state hospital records, lawsuits and regulatory investigations, and interviewed dozens of current and former doctors, nurses and administrators. It also carried out an extensive data analysis based on statistics from the Centers for Medicare and Medicaid Services, the Florida Agency for Health Care Administration and the American Hospital Directory, a private company that processes and resells federal health care data.” Multiple data source.

For the ethics recognition, only HCA’s self-reported data was examined. Single data source.

How, then, should we measure ethics? Are there more reliable ways to recognize “ethical” companies?

People are complicated: they do good things as well as bad things. Companies, made of people, are even more complicated. To label an entire organization of hundreds, thousands, or tens of thousands of individuals as “ethical” is truly to paint with a broad brush. I would be more comfortable recognizing specific acts, supported by specific definition of what aspect of “ethics” such acts demonstrate: turning down a deal because of concerns for environmental impact; adjusting pay scales to ensure equal pay for equal work; identifying and eliminating discrimination in selling/lending practices, etc. Each act can be recognized for what it is and for the specific ethical principle it enshrines, without assuming multiple standards of ethics apply to every facet of the entire company across time and places.

If, however, there remain organizations willing to risk granting “ethical” labels to companies, at least let the standards be clearly articulated, and let the measurements be based on multiple data sources: employees, customers, suppliers, regulators, enforcers, competitors. Only then can these recognitions stand any intellectual scrutiny and carry any credibility.

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