Friday, October 26, 2007

Reader Email: Ethics Case Study

"Donna" sent in the following email today about a business case. The email is in italics and I'll add my comments in the body as you read along:

I just read a very interesting case for my Ethic & Business class, but I'm very confused about the ethical dilemma of this case.

So you're getting outside help for your ethics course? Is this ethical? (just kidding - the whole point of case studies is to start a discussion, and more importantly to learn how to argue your case since there is typically no "right" answer - you can read everything I write and still hold the opposite opinion).

The case is called Martha McCaskey. It is about a consultant Martha McCaskey, whose company was hired to get detailed information (e.g. cost and manufacturing process) of their competitor's new chip.

First, this is what consultants are hired to do. Getting the scoop on your competitor is not unethical, it's business. But there are ethical ways get this sort of data and there are unethical ways.

McCaskey was assigned to pay a former employee of this manufacturing firm to supply her with these information.

This is the unethical way.

A typical consultant, when asked this sort of data, will come up with something close to an estimate - or educated guess - based on publicly available data, expertise of the market, and maybe even a "tear-down" of the product, bought on the open market.

I regularly pay for "tear-down reports", which come with cost estimates and guesses on how the product is made. Just this week I got a report on the iPhone. The guys who did the report are a bunch of engineers from industry who do this for a living, are public about what they do, and everything is on the up-and-up. In the past I have even bought tear-down reports on my own company's products to see how accurate the report is (they are usually in the general ballpark, but obviously miss a lot).

But asking a former employee right out for this information is crossing the ethics line. It is very likely that such information would be under the former employee's non-disclosure agreement (NDA) with the company, which stay in effect even after they leave.

To be fair, note that many people leave companies and hire themselves out as "consultants", leveraging their expertise and contacts at their former employer. This is okay. What isn't okay is taking the cost spreadsheets and process flow out of your desk and selling it on the open market. In some cases this could get you arrested and long years in jail, as happened with a secretary at Coke.

The company promised Martha's company to double the fee and offered a future project, if they were able to get them the required information.

Note that the client company didn't ask Martha's company to do anything unethical or illegal, but they are putting enough heat on this to make it worth their while. While we will never know, it is likely the client knows (or is saying over cocktails to Martha's management) exactly what they want done, but by using the consulting company they can keep their hands clean.

Also, successful completion of the project would gain McCaskey a promotion and a significant raise. McCaskey, however, cannot see a way to complete the project without compromising her values. She must decide whether to maintain the high degree of integrity that has always characterized her work or to compromise and "play the game."

To me this case is pretty cut and clear. The request doesn't pass what my ethics prof called the "smell test", which if something smells fishy, it usually is.

I was wondering what do you think McCaskey should do… give away her values and play the game everyone in her company was playing? Is Martha's business ethical? and is this business practice legal?

So my bottom line is that McCaskey shouldn't do it. What is being asked is definitely unethical, and if not illegal, could bring civil penalties (by inducing the employee to break his NDA, McCaskey and her company could be held liable for civil damages).

The best way for her to approach this is to propose to her management an ethical proposal using the ethical means I outlined above, pointing out NDA and other issues with getting the information directly from a former employee. If this doesn't fly - and my guess it won't - she should turn down the request.

At that point McCaskey would be killing her career at her employer, so she would have to start looking for another job.

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