Vantage Point

Profits over principles?

Selling technologies for political repression

The Wall Street Journal reported that Moammar Gadhafi’s crackdown on Libyan dissidents relied on advanced technology supplied by a French company to monitor people’s online activities. The Journal also said that Gadhafi agents tapped private phone conversations using equipment bought from a South African firm. In Bahrain, officials intercepted the text messages of human rights activists through devices acquired from a German conglomerate and maintained by two other European companies. The Mubarak regime listened in on Egyptians’ Skype calls by means of a tool made by a British firm. Across the Middle East and North Africa, governments censor the Internet utilizing software developed — and regularly updated — by companies based in Canada and the U.S.

American tech firms are bidding to work on what will become the largest video-surveillance system in China, which rights advocates believe is meant to deter political dissent. And it is likely there have been many other such collaborations. Before dismissing the corporate executives who pursue such deals as amoral opportunists, we should grant that there are defenses they could — and often do — give for their actions. The real issue, of course, is whether any of those arguments is ethically sound.

One common justification is that what the company did was legal, that it didn’t violate any explicit regulations. This is the defense offered by the South African firm that furnished eavesdropping technology to Gadhafi. When questioned about the transaction, a spokesman stated that the company sells only “to governments that are internationally recognized by the U.N. and are not subject to international sanctions. . . . The relevant U.N., U.S., and EU rules are complied with.” The speaker seems to imply that, because the firm’s dealings with the Libyan government were legal (which some international lawyers might dispute), they were ethical —and so the company acted responsibly. But, as anyone who has been victimized by shady practices well knows, not all unethical business conduct is illegal. “No laws were broken” is not a moral defense.

Another familiar rationale is that sellers of products are not responsible for how buyers use them. This was the line taken by a representative of a leading American technology firm interested in the Chinese video-surveillance project. Apparently referring to Chinese assurances that the system was intended only for conventional law enforcement, he told the Wall Street Journal, “We take them at their word as to usage. . . . It’s not my job to really understand what they’re going to use it for. Our job is to respond to the bid that they’ve made.” But we all know that one cannot absolve oneself of responsibility for abetting wrongdoing just by denying such responsibility. From a moral point of view, what matters is whether the seller knows — or should know — that the buyer plans to use the product to inflict undeserved harm on others.

There is no question that firms actively marketing surveillance or censorship technology to totalitarian governments know what those customers will do with it. Disingenuous declarations like “We take them at their word” don’t pass the straight-face test.

A more respectable argument appeals to the good of the company. In fact, on some versions, it is an expressly ethical argument, which runs as follows. Managers of a company have a fiduciary obligation to serve the best interests of the investors, and selling privacy-invading technologies to despotic governments may in fact be what is best for the firm and its investors. On this argument, such deals are not only ethical, but managers might be faulted for passing up such lucrative opportunities. This sort of defense is suggested by public comments by an executive for another U.S. company hoping to work on the Chinese surveillance system. Asked about the possibility that software sold to the Chinese government might be misused, he admitted, “We do have concerns. ...On the other hand, we want to do business there.” In the end, he said, his company has “to manage the risk against the gain.”

The latter remark is revealing and points to just what is defective about this kind of argument. Apparently, this manager’s “concerns” about possible misuse of his company’s product are only about the risk that might pose to the company, a risk his firm has to manage “against the gain” —to the company. What about potential victims of the misuse? The problem here is that the duty to seek financial returns for investors is not absolute, always trumping other obligations. Rather, it is limited by corporate managers’ ethical and legal obligations to other stakeholders —including people they know will be unjustly harmed by their customers’ expected use of the products. Conscientious management entails earning profits for investors in ways consistent with responsibilities to other people affected by the company’s actions. To focus only on the risks and gains for the company, while ignoring the risks and harms to other stakeholders, is ethically untenable.

It isn’t realistic to expect Western technology companies not to do work for nondemocratic governments. But corporate leaders committed to conducting business ethically will take care in evaluating prospective transactions. Drawing on widely shared, commonsense beliefs about moral behavior, the following are considerations that should inform managerial judgments about which types of cooperation with authoritarian governments are morally defensible.

First, the U.N.’s Human Rights Council recently released its “Guiding Principles on Business and Human Rights,” based on extensive research and consultation with stakeholder groups. It includes as a foundational principle, “Business enterprises should respect human rights.” The document goes on to say that this responsibility requires corporations to “avoid causing or contributing to adverse human rights impacts...” This counsel echoes other important expressions of international norms, such as the “OECD Guidelines for Multinational Enterprises: Recommendations for Responsible Business Conduct in a Global Context.” Ethical technology companies will heed such principles, taking care that sales of their products do not contribute to human rights violations.

Second, it is morally perverse for Western firms - from countries where basic freedoms are protected by law - to assist autocratic governments in depriving their citizens of those very same freedoms. Apart from the plain hypocrisy, these companies’ leaders violate a principle that is a cornerstone of most of the world’s great moral traditions, helping do things to others they would not want done to themselves. Responsible managers will not take actions they would condemn as unjust if they were on the receiving end.

Finally, commercial activities that invite severe criticism from the media, civil society, and other stakeholders can damage a company’s reputation and — potentially — its bottom line. Recall, for example, the withering denunciations of Yahoo for giving the Chinese government user information about a dissident journalist, who was promptly imprisoned. More recently, BP has paid dearly for repeatedly ignoring safety issues. In all such cases, management fails in its fiduciary responsibility to its shareholders. In this age of the Internet and 24/7 mass communications, ethical leadership includes avoiding the reputational risk connected with behavior for which the company cannot provide a credible public defense.