The Ethical Tipping Point

We hear a great deal these days about ethics. But, when does an acceptable practice tip over into an unethical practice?

Recently I was with a group of Chief Executives and one was in the stationery business. He was describing to me how the local supermarket chain had said to them that they no longer wanted to deal in small individual items such as pens, pencils and rubbers and would rather bundle products together and sell them in packages. The supermarket asked if they would put bundled products together and let them test it on the market. The Chief Executive was delighted. He was telling us that he had twenty thousand dollars of stock that was no longer moving and said he could incorporate it into the bundles and shift all his dead stock.

This is quite a common practice these days. If you go into a hardware store and want to buy a washer, nut and bolt or a single caster you would invariably have to buy a packet of items, many of which you will probably never use.

As we enter the era of environmental awareness, this raises the question, ‘how ethical it is to sell in this manner’. Should we be required to buy things that we do not need or want? Of course, our Chief Executive would say that if he had not been able to sell these products by mixing them with other products, he would have eventually had to throw them away and that would have been environmentally unfriendly and costly to his business. He would argue that at least this way some of the products would have been used or people would have found a way to make use of them.

There are at least two sides to every story but the question we raise there is, when does an acceptable practice tip over to an unethical practice?

Let us look at the banking industry as another example. I recently read that the banking industry is now actively targeting people with poor credit rating as they see this as a very profitable market to focus on. Targeting this market enables them to charge higher premium and earn higher revenues. Your first reaction may be that this is unethical because the banks are targeting the people who can least afford to make the repayments and adding to their burden by making the interest rates very high.

Of course, the bank will reply that they are taking a greater risk with these groups of people and so the higher risk requires them to charge a higher rate. They may even point out that this group of people would only go to unscrupulous loan sharks who would charge even higher rates and the consequences of not repaying the loan could be harmful in more than one way. Looking at it from this point of view the bank is almost painting itself as providing a service to the community in more ways than one.

The truth is, the bank cannot be held responsible because individuals will not control their own finances and spending habits, and get themselves into a position where they have a poor credit rating.

Let us take another sector of the financial services industry. At this moment in time, Investors are getting together and buying life insurance policies from elderly people who are needing some cash.

Imagine a situation; an elderly person needs a hip replacement operation, or needs to carry out some repairs on their home, or simply needs extra cash because their pension is not providing them with the necessary income to live. This person may have a hundred thousand dollar life insurance policy that matures on the death of the policyholder. If they cashed in this policy with the insurance company they would receive a few thousand dollars as a payout. Along comes a group of Investors who will offer them forty thousand dollars and will take over the policy from them.

Are these Investors crossing the ethical boundary yet? Is this form of investment ethically incorrect? At face value it would appear that the Investors were taking advantage of the circumstances the elderly people find themselves in. However, if you take another point of view the Investors would point out that they are providing a service for these elderly people. They are taking the risk on how long the person will live and they are providing much-needed cash for people that would otherwise not be available.

What happens when these Investors actively target individuals? For example, in some areas of the country, or even the world, life expectancy of certain individuals is very low. For example, there are areas of cities where young black males life expectancy is not beyond thirty-five due to gang-land warfare etc. These are poor areas of cities where drugs and crime are a way of life. In these areas Investors pay the young males a couple of thousand dollars to take out insurance policies and sign them over to the Investor. The Investor will make the monthly payments and cash in the policy when the young person eventually dies.

Now, you say, the Investor has crossed the ethical boundary. However, once again the Investor will point out that the people have choices and they are providing instant cash to individuals who may well need the cash to help them get out of a situation they are currently in. They will also be quick to point out that they are taking the risk because the person may live significantly longer than thirty-five.

At what point does it become unethical to pay someone for their life policy? Where is that point, where it is acceptable to give people necessary cash that they desperately need? We know that for many of these people the cash will probably not be used in a constructive manner but rather fuel a drug habit because the young man in the ghetto will probably waste the money on drugs. However, one in ten may use it as a means to get himself out of the ghetto and get himself an education, or may use the money to pay for his mother’s operation.

Is it the Investors responsibility to decide how the person will spend the money? You can hardly expect the Investor to make the decision, and in this day of equality you can hear the screams of people that will say it is not fair and they have the right to participate in the offer.

There is no simple answer and in many cases no single line that can be drawn to define what is ethical and what is unethical. In many cases the service being provided is good or even excellent. However, the person taking advantage of the service may not be capable, or responsible enough, to be able to use the service effectively. Who’s responsibility is that?

In recent years there has been an explosion of Motivators who put on programmes about personal development. The most famous of them all is probably Anthony Robbins. These people provide excellent, and even powerful, seminars which can be very beneficial to the attendees.

However, the truth is, many people have put themselves into serious debt and under a financial burden that has crippled them for years by signing up to these programmes. They buy the concept of ‘an easy way to be successful’.

Who is at fault? The seminar organisers that make the promises? They will argue that they don’t promise or guarantee anything. To a degree that is true. However, they do ‘dangle a carrot’ that is so inviting that some people, get ‘sucked in’.

The truth is that if you are capable and are able to apply what is taught, you can make significant changes. To many the capability means further support which, if and when available, is a further cost.

So the question becomes, is it worth the price being asked?  In other words, is it worth being in debt to learn what these people are offering, especially if the debt now makes it even harder to achieve? It is at this point that the ethics question starts to appear! Where is the tipping point that makes the practice go from being ‘acceptable’ to being ‘unethical’?

The coaching business is full of people offering training to be a coach and promising large incomes for being a coach to others. The speaking business is also full of people offering to help people become speakers, with promises of large earnings. The truth is, really successful coaches and really successful speakers are in a minority. There is no room in the market place for the thousands that join these programmes to earn a substantial income, even if they all had the ability to do it.  However, people join these programmes by the thousands every year. They take out loans and get themselves into debt in the blind belief that they will make so much money that they will be able to pay this back and be wealthy beyond their wildest dreams!

Can we blame the providers of these programmes or are they blame free because they can point to the one or two people that have been able to apply what they have learnt and gone onto be successful? Does the results of the few justify the debts of the many, just because they were the wrong people in the first place?

The ethical tipping point is wrapped in cloud or mist. Hard to see and even harder to judge because it depends on where you are standing. One person gave me their definition of their ethical tipping point. This person said, I ask myself if “I can sleep with a clear conscience at night?”.

Until next time, thanks Paul


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