I believe that in order to create an ethical corporate culture, every person in the company must take personal responsibility for ethical behavior. To do so requires ten specific actions or strategies a person can adopt. For example, to comply with the law you must know the law. To create socially responsible programs you must take an outside in view, and instead of starting with internal policies and procedures, start with an understanding of how consumers want to be treated, and how YOU would want to be treated by the companies you deal with.
The English common law understood something of commerce, but did not anticipate the complexities of the modern, publicly traded corporation with its responsibilities to shareholders, employees and regulators. As corporate law evolved, the law often gave corporations “personhood,” that is, bestowed upon corporations human attributes and behaviors as a way of understanding and regulating them. Joel Bakan, in the book and movie The Corporation, maintains that corporations are people, but their behavior is psychopathic. This may a bit extreme in the typical corporation, but it helps to understand why corporations, and the people in them, behave they way they do. At the top, the corporation is driven by revenue, growth and profitability. These are the things Wall Street wants. Senior executives are measured, compensated and sometimes fired on the basis of these measures. Amongst the rank and file, the typical managers and individual contributors, performance management, the process of ranking all employees based on their performance and value to the company, drives similar behaviors. If an employee, for example, runs one of the company’s advertising programs, he/she might hear of a new method for improving the number of consumers who respond to an ad. The employee will be driven by the need to meet the goals of the performance management plan, and not primarily by ethical considerations. After all, employees who don’t measure up, will not be considered for raises and promotions, may be the first selected when there is a layoff, and may find themselves “managed out” of the company. Ultimately, people may be faced with decisions that require choosing between ethical behavior and behavior that will go toward helping them stay employed (feed, house and clothe their family). And in most corporations, there is no incentive for ethical behavior.
Privacy is an issue that overlaps the language issue. Not only do we have language incompatibilities, but our language is now highly visible to people who might judge us because of it. As McLuhan says, publication, on a social network, is self-invasion of privacy. Whatever we post online might be seen by employers, potential mates, employees, credit agencies, clients, etc. McLuhan clearly foresaw the whole phenomenon of blogging, Twitter and Facebook status updates. Whenever we publish details about our selves, we have affirmatively decided to invade our own privacy. How much information is too much? Location-based services like Foursquare and Rally (which I use regularly) are fun, and useful, but are we giving away too many personal details? Must we give up our privacy? The merger of our personal and business lives in a single social networking “presence” has its problems, too. Is it really smart to let current and future employers know about a drunken beach party or a bailout from a Mexican jail? More and more we are living our lives out in the open, on the public web, and this has its consequences. It also limits the degree to which we can protest about invasions of privacy.
Here’s an example of the ways in which Facebook’s lack of privacy can cause all kinds of havoc. This screenshot is from Rudy Giuliani’s daughter’s Facebook page. You can see from the Mini-Feed that Caroline has just left a Barack Obama support group page. This caused her father, a Republican, a bit of embarrassment. Personally, I don’t think it matters that someone’s daughter doesn’t share the same political views, but I guess at the highest levels of politics, this is seen as a failing or inconsistency on the part of the elder Giuliani. What I found more interesting, and more embarrassing, was that Caroline, who was, I believe, 17 at the time this was published, is looking for “Random play” and “Whatever I can get.”
Facebook continues to commit gaffes in the area of privacy. In one case, Facebook users launched a weak revolt, creating Facebook pages and posting status updates urging users to close their accounts in protest. By most estimates, only a few hundred thousand users did so. At the time, Facebook has 400 million users, so even a loss of a million users would represent just .25 % of all users, and would not inflict noticeable (financial) harm on Facebook.
Here is the text from the 2009 Facebook privacy agreement that users found most objectionable. Note that it requires the user to grant Facebook license to all of their content, and that even if they close their account and/or remove the content, Facebook will keep archival copies.
http://www.apple.com/legal/privacy/ If you have an iPhone, you might have been presented at one time or another with an updated user agreement. These are often close to 100 pages long. This language appeared on Apple’s general privacy agreement on its web site on June 21, 2010. It allows Apple to share users’ previously private location data with Apple business partners.
Mashable: Tipster Trey Copeland wrote to us with a link to results for the search: site:blippy.com +&quot;from card&quot;. That search returns results showing detailed purchase information for transactions. Each result highlights that there was a &quot;debit card transaction&quot; or &quot;card transaction,&quot; the amount spent, the specific location (address included) and the full card number. CNN Blog: After an incident last week in which at least five Blippy users&apos; credit card numbers were made public &quot;due to a technical oversight,&quot; the website&apos;s CEO said Monday that he is enacting security measures to keep that from happening again. Blippy CEO Ashvin Kumar writes in a blog post that he expressed &quot;sincere remorse&quot; to eight of the site&apos;s users whose sensitive information may have been compromised. He plans to keep that from happening again; he says Blippy will: 1. Hire a chief security officer and associated staff that will focus solely on issues relating to information security. 2. Have regular 3rd-party infrastructure & application security audits. 3. Continue to invest in systems to aggressively filter out sensitive information. 4. Control caching of information in search engines. 5. Create a security and privacy center that contains information about what we are doing to protect you.
Scott McNealy, former CEO, president and chairman of Sun Microsystems, had a different philosophy on privacy. He said, “You have no privacy. Get over it.” He was referring to all of the people we provide our information to, our date of birth, social security number, driver’s license number, etc. We have given away so much information and the holders of this information are often incompetent or unscrupulous. Laptops full of private information have been stolen. Huge databases have been hacked. Privacy is fleeting, or maybe, imagined. http://articles.sfgate.com/2003-09-14/business/17508716_1_mcnealy-joy-vinod-khosla-greg-papadopoulos-bill-joy-sun/5
This tweet appears to be from an individual Twitter account. It actually goes to the DISH Network home page shown in the next slide (and not a page where a user can view the so-called “astronaut commercials.”) This is either a DISH Network employee or an affiliate marketer. The shortened URL is also a problem for consumers since it masks the domainof the destination site. This undisclosed advertisement is probably in violation of FTC endorsement rules.
Affiliate programs are perhaps the single most insidious hidden effect on the integrity of social media and all online communications. Affiliate advertising rewards bloggers, web site owners and others for driving traffic to goods and services for sale. In some cases, affiliate programs pay members when a click results in a sale. In other cases, members are paid by the click. For example, I belong to several affiliate programs like Amazon, Barnes and Noble and Borders. If you were to go directly to Amazon and do a search to find my SocialCorp book, here is the link Amazon would use: http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Dstripbooks&field-keywords=socialcorp&x=0&y=0 If you were to go to my blog and click the link to buy the book on Amazon, here is what you would get: http://www.amazon.com/gp/product/0321580087?tag=socialized-20 The “socialized-20” at the end indicates that the click to Amazon came from my blog. If you were to buy the book, I would get a commission. It doesn’t matter that I am the author. Here’s where it gets interesting. If you click the link, look at the book, decide not to buy it, but then, on the same visit to Amazon, you buy a Crank II BluRay DVD, custom wheels and a vacuum cleaner, I get commissions on all of those sales, since I was technically responsible for sending you to Amazon. This has nothing to do with me being the author of the book. Anyone can sign up to be an affiliate. Why is this a problem? Let’s say I have a book review blog, reading and recommending the latest business books, and I am an Amazon affiliate. Given that I am basically being paid by Amazon to recommend books, that is, I get a commission every time someone reads my blog and then clicks over to Amazon to buy a book I’ve recommended, how can you trust my reviews? I would have a monetary incentive to give all positive reviews. And why not add espresso machines to my reviews? And infant car seats? Affiliate programs constitute hidden financial arrangements that compromise the integrity of editorial all over the web. There are a couple of other things that happen. with affiliate programs. First, people sign up for Twitter and create blogs just to publish affiliate links under false pretenses. You might see a tweet or a blog post linking to “Five Great Ways to Grow Your Business Online” but if you click the link, you end up at a Viagra or dating site. And all of that spam you’re getting? The majority is intended to generate clicks on affiliate links. I would guess that affiliate advertising is the number one source of spam, followed by identity theft and mischief making. I am not sure why people aren’t angry about affiliate advertising and the mess it makes, or why the FTC hasn’t cracked down here.
Now in Blogs, Product Placement, New York Times, June 13 Thus far, the commission has focused on marketers, Ms. Engle said, though it could also pursue individual bloggers under the law. (There is no investigation in the Absolut vodka case so far.) A promotion in January by Ann Taylor Loft — submit a blog post about the summer 2010 collection and receive a gift of up to $500 — was the first to be investigated by the commission. While no action was taken, marketers viewed the case as a shot across the bow.
Corporate sponsorships of socially responsible efforts can often miss the target when connected with the wrong product. Here, Kentucky Fried Chicken is endorsing the Susan G. Komen Foundation drive to fight breast cancer with a product that is responsible for obesity and heart disease. Elizabeth Kuchinich jokes about using alcohol in a similar way, though of course someone steps up and does exactly that with a cocktail dedicated to the Susan G. Komen Foundation intended to honor women.
Amazon’s Mechanical Turk, is a micro-contractor service (my name for it) that “sells” offshore labor in tiny increments. Like ShortTask, Amazon Mechanical Turk (MT) pays microworkers small amounts, sometimes pennies, for repetitive tasks that are too difficult for computer programs to do, such as moderating blog comments, moderating photos on a dating site, and identifying the subject matter of a photograph. Some companies use MT in unscrupulous ways, just as ShortTask is. It’s only fitting that Amazon’s Mechanical Turk imitates an artificial intelligence machine that is actually run by humans hidden behind the scenes. The original Mechanical Turk was an 18th century chess playing machine, represented as an automaton but most likely had a smallish person crouched inside executing chess moves against a human player.
ShortTask, launched in late February 2009, has the potential to be an interesting service, but has, in my opinion, become one of a number of clearinghouses for third-party astroturfing schemes of somewhat questionable ethical intent. ShortTask, according to the company, is: “based on the idea that there are still many online jobs that cannot be fully replaced by technology and require human input. ShortTask has subdivided its working into two categories — solvers and seekers. Seekers are companies or individuals who need various tasks accomplished without hiring in-house staff, while solvers are workers who can complete these jobs virtually and get paid.” In other words, if a company regularly has short tasks that cannot be done by a computer, it can post those tasks on ShortTask for Solvers to perform on a per task basis. ShortTask is very similar to Amazon’s Mechanical Turk (which I wrote about here.) Anyone can sign up for either service. ShortTask refers to Seekers (people contracting out small tasks) and Solvers (people who perform the tasks.) Though not the point of this post, the impact of this on the American worker is clear. So many in-house salaried positions have been converted to temporary contractor positions. And with microcontracting/microsourcing, it gets worse. Not only are jobs outsourced, so are tasks. But beyond economic concerns, ShortTask (and other services) seem to facilitate behavior of questionable ethical intent. For example, some ShortTask tasks require users to post positive product reviews on Epinion, or RateItAll. The instructions for these tasks make it clear that payment will not be made unless the reviews are positive, and that when rating systems are available, products and services must be rated no lower than three or four out of a possible five. Others require a “Like” on StumbleUpon or a Digg. All of these actions use deception and misrepresentation to create a positive impression of a product, service, company or etc. The practice of having company representatives, or their agents (PR firms, for example, or in this case, Solvers), leave anonymous comments on blogs, web sites, communities, etc. to create the impression of independent consumer endorsement of products, services and companies is called astroturfing, and is a disservice to consumers, unethical, and in some cases illegal. Industry associations like the Word of Mouth Marketing Association are trying to address this trend with codes of ethics and education, but as evidenced by continuing ethical breaches by individuals and corporations alike, self-regulation is apparently not enough. The EU’s Unfair Commercial Practices Directive bans astroturfing, The FTC is also increasingly concerned about this trend, and may crack down. What’s happening with ShortTask (and other services) is that companies and their agents are struggling to create arms-length astroturfing schemes in which, somehow, because of the involvement of multiple third parties, companies mistakenly believe they can create amorphous arrangements that shield them from accusations of wrongdoing. ShortTask is not necessarily to blame for this. As spammers and unethical “business people” take advantage of blogs, Twitter, Facebook and other vehicles to peddle their scams, they will also do so when new media become available. ShortTask has the potential to be very useful to companies microsourcing tasks and to people looking for a modest income performing these tasks. For now, companies and consumers alike should be aware that not every bit of user-generated content is user-generated, and until more demanding standards are in place, by choice or regulation, social media is no more trustworthy than “old media,” and in some cases, less so. Note: I offered a ShortTask representative the opportunity to respond, but have not heard back. That offer remains open, and I welcome a ShortTask response either as a comment on this post or in a guest blog post.
Plagiarism has become hip. This young German author lifted numerous sections from another author’s book, and was still selected as a finalist at the Leipzig Book Fair, because, as the judges acknowledged, mixing is part of Berlin’s culture. DJs do sampling and remixes, why not authors?
Yelp has constantly eroded its position as the hyperlocal source for user-generated reviews. The company has hired professional writers to generate reviews, but worse still is the announcement in February, 2010, that the company was the target of a class action suit for alleged extortion in a scheme where it offered to suppress poor reviews for businesses who paid a $300 monthly fee. When something is no longer what it says it is, consumers move on. These kinds of mistakes reduce brand equity, and ultimately cost the company far more real dollars than they earned from being devious.
July, 2007: “The Securities and Exchange Commission has reportedly begun an informal inquiry into the Internet message board postings of Whole Foods Market. The online version of The Wall Street Journal reported late Friday that regulators will likely examine whether Web comments by Mackey during an eight-year stint of posting company-cheering entries under a pseudonym had contradicted official Whole Foods statements. The SEC also will likely look at whether Mackey selectively disclosed material corporate information in violation of securities laws, the Journal said. In a Whole Foods blog post following the disclosure by the Federal Trade Commission of Mackey’s Web writings, the CEO said he never revealed any ‘proprietary’ information about the company.” (Original source unknown, but portions from The Wall Street Journal) Mackey subsequently apologized: &apos;&apos;I sincerely apologize to all Whole Foods Market stakeholders for my error in judgment in anonymously participating on online financial message boards,&apos;&apos; Mr. Mackey said Tuesday in a statement. &apos;&apos;I am very sorry and I ask our stakeholders to please forgive me.&apos;&apos; Whole Foods Market said Tuesday that federal regulators and its own board were investigating online postings by the chief executive, who apologized for his actions. The chairman and chief executive, John P. Mackey, using the name &apos;&apos;Rahodeb,&apos;&apos; boasted about Whole Foods and attacked its rival Wild Oats Markets on Internet sites. Some of Mr. Mackey&apos;s postings from 1999 to 2006 claimed that Wild Oats was overvalued and poorly run. This year, Whole Foods announced it would buy its rival for about $565 million, but federal antitrust regulators won an injunction temporarily blocking the deal. Whole Foods said it had been contacted late Monday by staff members of the Securities and Exchange Commission. The company said it planned to cooperate with the investigation. The company also said its board formed a special committee to investigate Mr. Mackey&apos;s postings. http://query.nytimes.com/gst/fullpage.html?res=9B04E0DB1731F93BA25754C0A9619C8B63 Clearly the company’s CFO and legal team pressured him to do so. He was not, on a personal or professional level, apologetic, instead defending his actions on the basis of First Amendment rights. Anyone who has taken (and passed) high school civics knows that the First Amendment is not absolute or universal. You can’t lie in advertising. You can’t lie if you’re sworn in in a court proceeding. And you can’t lie (in any clever way) about your position and financial interest in a company. He also claimed that it was standard Internet behavior to use a pseudonym online, but that just doesn’t apply to the CEO of a publicly held company making material statements about the company, and about a competitor, Wild Oats, that Whole Foods was in the midst of acquiring. Someone, again, probably his legal team, took away his blogging rights for close to a year, but as soon as he could blog again, he began complaining that he should have had more freedom of speech. If I was CMO of the company, John Mackey would never have been allowed to blog again, or to launch a browser. This is a case where the CEO of a brand highly respected and beloved by some consumers, lost some of its allure and I would speculate, some of its market cap.
The Federal Trade Commission (FTC) has finally stepped up and issued new regulations affecting commercial use of social media. Specifically, the agency now requires bloggers to disclose relationships with sponsors, whether the blogger is paid or merely receives “free” products and services; and for celebrities to disclose their paid relationships with sponsors. The FTC’s updated Endorsement Guides (PDF) define those circumstances under which disclosure must be made, removing what many thought were gray areas of the law. The new rules went into effect December 1, 2009, and violators can be fined as much as $11,000. The pending changes to the guidelines have been made available for public comment for some time, and were discussed in detail by J. Thomas Rosch, Commissioner of the FTC, in a talk (PDF) given June 25 in Washington, DC. The new regulations include extensive examples of situations that require disclosure, and recognize the difficulty of regulating social media given that endorsements and testimonials may not come from the company or its employees, but from individual consumers. “An advertiser’s lack of control over the specific statement made via these new forms of consumer-generated media would not automatically disqualify that statement from being deemed an ‘endorsement’ within the meaning of the Guides. Again, the issue is whether the consumer-generated statement can be considered ’sponsored.’” The FTC also recognizes, for example, “the ‘near-endless’ variety of possible relationships between bloggers and the companies about whose products they blog.” The new Guides document is 81 pages long. For a briefer and more readable discussion by the FTC of the challenges it faced (and the process it followed) drafting these new regulations, check out Rosch’s speech (PDF), which includes this example. “an advertiser hires a blogger to test out and then review a new body lotion. The advertiser does not make any specific claims about the lotion’s ability to cure skin conditions, and the blogger doesn’t ask the advertiser whether there is any substantiation for such a claim. Yet, in the online review, the blogger writes that the lotion cures eczema and recommends the product for that condition. Under the facts set forth in new Example 5, both the advertiser and blogger would be subject to liability for false or unsubstantiated statements made by the blogger’s endorsement.” “Payola,” which transformed into blogola with the rise of social media, is one of the most difficult to detect, difficult to define forms of online consumer deception and some would argue, thought not I, that there is nothing wrong with some of the current practices whereby sponsorships are not disclosed. I believe the FTC has done a good thing defining which practices are acceptable, which are not, and who is responsible for a breech. Removal of all of these mysterious connections between sponsors, bloggers and celebrity endorsers is absolutely required for social media to reach its absolute effectiveness as a corporate marketing tool.
The European Union’s Unfair Commercial Practices Directive enacted in May, 2004, already bars companies from “falsely claiming or creating the impression that the trader is not acting for purposes relating to his trade, business, craft or profession, or falsely representing oneself as a consumer” which could certainly seem to cover and other social media sins. EU regulations affect all companies doing business in the EU, regardless of the location of the company’s headquarters. http://europa.eu/rapid/pressReleasesAction.do?reference=IP/04/658&format=HTML&aged=0&language=EN&guiLanguage=en
Hoping to pre-empt the FTC and other regulators, consumer companies have formed the Future of Privacy Forum and introduced this symbol to alert online consumers when, how and why their private information is being shared. The icon would automatically appear on a company’s site when an information exchange takes place, such as Facebook sharing your information with Yahoo, and allow consumers to click to find out more. I have not seen this icon anywhere, but I am always hopeful and encouraged by efforts to inform consumers. Keep in mind of course that self-regulation isn’t always effective. For more details, see the New York Times http://www.nytimes.com/2010/01/27/business/media/27adco.html
Here is my Social Media Love Manifesto, which I wrote and put in a wiki after I found myself being combative and aggressive when responding to other blogs and leaving comments on other blogs. It has thus far proved a dismal failure.
Here are a few privacy and ethics resources that I have found useful.
• Understand the Medium Social media is unique in online marketing. Unlike the static web site, a blog or community allows users to create content. Commenting capability allows online “conversations” but can sometimes degrade into schoolyard name-calling. Certain sites use private data to provide enhanced services. The etiquette in the social media/social networking world is complex. In order to design effective social media programs, it is critical to know as much as possible about the medium. • Respect Privacy Underlying social media is the ability to share personal data and to use it to find others with similar interests, professions, backgrounds, etc. Users trust companies and organizations to only use their data in ways in which they have been fully informed and have approved. Facebook in particular continues to make mistakes in the administration of its privacy policies, resulting in a loss of consumer trust. • Identify Yourself Let people know your name and company name in your social media activities. Include this information in your Twitter profile and on your Facebook page, YouTube channel, etc., so that they know you represent the company, and they know who you are, so that you are personally identifiable and accountable. • Tell the Truth There is no percentage in lying. The truth is out there. People respect organizations that tell the truth, even when it’s not flattering, and by contrast, they dislike companies that get caught being deceptive. Failing to tell the truth can damage a company’s reputation and create a scandal that lives on much longer than the sting of having to tell an uncomfortable truth. And being untruthful can be illegal, exposing the company to possible monetary penalties. • Disclose Affiliations There’s nothing wrong with earning money as an affiliate marketer (getting paid to refer people to another company’s web site, for example), or by being paid to endorse a company or its products and services. That’s a part of how business is done. It is wrong, however, to do so online without disclosing your relationship with another company. It’s also prohibited by the FTC endorsement rules mentioned earlier in the presentation, and could result in a fine as high as $11,000. • Protect Reputations It is important for a company to behave in a way that protects its reputation. This means that the company must conduct itself honestly, ethically, legally, and with the best interests of its customers, employees, shareholders, and the environment in mind. Any social media communications or initiative should be conducted with this in mind. Ask yourself, does this have the potential to harm our reputation? The reputation of our customers? Our business partners? Consider these things before you communicate. Once an initiative has turned into a problem, it is impossible to maintain a company’s reputation after the fact, and companies that do conduct themselves appropriately, need never try to spin the story when they are caught behaving in an inappropriate way. I attend a regular lunch of veteran corporate communicators and PR people. We were sharing ethics case studies and all agreed that the last thing we would ever want is for one of our companies/clients to become a business school case study. Don’t let it happen to your organization either. • Do the Right Thing The best time to deal with ethical concerns is when a social media program is in its formative stage. If you’re developing a social media program or plan, check it thoroughly for possible ethical situations. Is it legal? Does it comply with company policy? Is it fair to consumers? Does it involve something new, like the use of a new kind of technology, that might require additional insight from corporate counsel? Don’t let inappropriate strategies and marketing techniques creep into your plan. When they are kept out at the beginning, it reduces the messes that will have to be cleaned up later. • Be Kind Be nice to people in all of your online interactions. It’s just as easy to be kind as to be arrogant or mean-spirited. Recognize that people are entitled to opposing points-of-view. Extend and extra courtesy. Spend a little more time than needed providing customer service. Replace something no longer in warranty. Listen to consumers. Don’t slam competitors. Make the world a better place. It’s not only a good thing to do for the world, it’s good for your brand. People will see you do this, as they have seen other leading companies who truly understand social media, and they will gain affinity for your company. Many of them will purchase from you, and recommend you to friends. • Know and Follow the Law Know and follow online marketing law, particularly that set by the FTC and COPPA. To not do so exposes the company to legal risk, and reputational risk, and of course any initiative built on a faulty legal foundation will be a failure. Another reason to know the law is so that when you take a stand, you are doing so from a position of knowledge and power. Ethics is a difficult subject with many interpretations, but to some people, the law is more exact. When urging others to behave ethically, knowing applicable law may be the strongest persuader you have. • Take a Stand We’re still in the early days of social media, so some of the people in your company designing social media programs may not be fully informed when it comes to social media ethics and law. If you hear something that bothers you, or something you jus know is illegal or unethical, you may be the only gatekeeper preventing the company from embarking on poorly conceived venture. You may have to speak up. Speaking up isn’t confrontational. You don’t have to mention your concerns in front of a large group, and don’t assume the role of social media ethics champion. But you could take someone aside or give them a call and let them know your concerns and suggest they look into the issue. You could offer to document your concerns. And if it’s important enough, you might have to go up the chain of command to be heard.
by Being Good
Presentation to Haas School of Business
October 20, 2010