715
THE ORGANIZATIONAL ENVIRONMENT AND ETHICAL CONDUCT IN OCCUPATIONAL MEDICINE* DONALD L. MARTIN, Ph.D. Research Professor, Law Economics Center University of Miami Coral Gables, Florida
M/[Y reaction to The Social Challenge to Business by Dr. Robert W. Ackerman and to many statements made this morning is puzzlement. I am confused about whether corporations are asked to respond to something called social demands in a survival mode, that is, as a response to threats of government intervention and private boycott, or whether they are asked to respond to social demands in some sort of innovative mode, i.e., because such responses are inherently good business. Moreover, it appears to me that the assertion of corporate failure to respond to social demands is made as if the words "social" and "collective" reflect a set of homogeneous wants within society rather than a collection of conflicting interests. Many issues that are characterized as social are, of course, political issues. What kind of environment do you want to live in? Pollution questions. How safe from invasion do we want to be? Military questions. How healthy do we want our neighbors to be? Health and safety questions. All of these are collective questions that are usually answered through government, our instrument for collective action. We want the government to come up with policies that we may define as the rules of the game that all of us must obey. We impose these rules of the game upon ourselves as an answer to social demands. Minimum wage laws, safety regulations, and health ordinances may be interpreted as expressions of social demands made on different segments of society. Corporations as well as others have been responding to, for example, minimum wage legislation in a predictable manner for some time. I think *Presented at a Conference on Ethical Issues in Occupational Medicine cosponsored by the New York Academy of Medicine and the National Institute for Occupational Safety and Health and held at the Academy June 21 and 22, 1977.
Vol. 54, No. 8, September 1978
716
D.L. MARTIN
716DL.
these responses have been predictable mainly because the rules of the game are spelled out clearly. If we are talking about social demands in the context of rules of the game, a survival mode, then the social responsiveness of business should not be discussed in terms of failure or success. Corporate social responsibility should be judged, as should noncorporate responsibility, in terms of adherence to the laws promulgated by our social institutions. But if we refer to social responsiveness in terms of corporate initiatives on collective issues that reflect individual discretion by corporate leaders, an innovative mode, then I think we are really in trouble. The reason we are in trouble is that we have essentially collective questions being answered by private individuals, and we can be sure that those questions will be answered in a variety of ways. We could have the Fortune 500 answering the same social or collective question about pollution in 500 different ways. A corporation may believe that it is socially responsible, i.e., acting in good conscience for society when it selects its own pollution policy. I do not think that is the kind of responsiveness we are really interested in, simply because we could experience a great deal of chaos that way. We could experience chaos because the actions of such corporations can affect third parties that have not had an opportunity to participate in collective decision making. If this criticism is applicable to pollution policy, it is also valid for developing policies concerning occupational health and safety. It is also unclear as to the valuation system firms should use to determine which social demand is worth responding to. Should the criterion be one that identifies the social demand that threatens the greatest cost to the firm if it is not met? Or should it be one that identifies the demand that does the most good for nonowners of the firm? There can be a great conflict between these criteria. Accepting social responsibility requires an additional burden on management, as Dr. Ackerman suggests. How are these burdens to be financed? Is it not the case, when one gets down to the bottom line, and Dr. Ackerman does eventually get down to the bottom line, that we are talking about modifying the goal of the corporation? The goal of the corporation, make no mistake, is to enhance the wealth of its owners. The tradeoff is more social responsibility, less wealth. How are those firms going to survive? Is there not a conflict here? These kinds of questions are not addressed carefully enough in the social responsibility thesis. Dr. AckerBull. N.Y. Acad. Med.
ORGANIZATIONAL ENVIRONMENT
717
man's thesis is that management will respond to the appropriate incentives once the goals and constraints of an organization are spelled out. Once top-level management decides to commit itself to some social demand, it will structure the incentives so that lower-level managers will respond positively to that particular social demand. I have no argument with that hypothesis. That is good economic theory. But if profits and wealth are penalized in the pursuit of a social demand, who can we expect to supply goods to the community? The problem with Dr. Ackerman's thesis is that he has not identified the people who will pay for those social goals. Surely, the owners of the corporation will not. They will quit being owners. Perhaps the taxpayers will pay. In fact, Dr. Ackerman's kind of socially responsive organization must ultimately be supported by the state, either directly or indirectly, and that is the conclusion of the Social Challenge to Business. Ultimately, the corporation, in becoming socially responsible, will transform itself into a social rather than a private institution. Instead of observing discretionary behavior by managers in the form of racial discrimination or sexual discrimination, one will begin to observe managerial discretion in terms of financial issues. Managers will trade off the wealth of the firm to achieve a certain level of social responsiveness because they are rewarded for such behavior. The only way that behavior can be financed, however, is through collective action, i.e., taxation. And so the direction of the socially responsive organization that undertakes social innovation at the expense of profits is toward state subsidy. I want to turn to some questions dealing with ethics in occupational medicine. In reading the ethical code of the American Occupational Medical Association (AOMA), I was struck by such statements as "physicians ought to accord the highest priority to the health and safety of the individual in the work place." What does this mean? "The highest priority of health and safety," is written as if there are no trade-offs, as if it does not cost anything. If this particular goal, this highest priority in health and safety, is achieved, is it not the duty of the occupational physician to come to grips with what it would cost to achieve it? The individual who is going to pay for that highest priority in health and safety will be the employee-the very one occupational physicians want to help. But that cost is hidden. It is usually the case that such priorities are expressed as though desirable in and of themselves and the question whether the employee wants the highest priority is ignored. Vol. 54, No. 8, September 1978
718 718
D.L. MARTIN
There has been a lot of discussion, of course, about a conflict of interest between the physician and his employer, the corporation. But is there not also a conflict of interest between the physician and the patient? There is an inverse relation between the level of safety from injury from death and earnings of employees. If that kind of trade-off exists and if all are committed to the highest priority for health and safety, all are really committed to a compensating differential in pay that employees will have to accept if they are to work in your firm. So a key element in this ethical code, an ethic that you demand of yourselves, may be an element that conflicts with the interests of the people you are trying to help. The code also suggests that the physician continually assess the work environment. How does one do that without spending money? Who pays for that? I do not want to tire you by continually raising this question of cost, but it faces you all the time. Health is a trade-off, just like anything else. It is an economic good that people buy. Somebody must pay for it. Another question very similar to the first is what does "maximum obtainable health" mean? This expression may be found in section six, page four of the Principles of Ethical Conduct, which was proposed by Donald Whorton, Morris Davis, and Ephraim Kahn as an alternative to the code adopted by the AOMA.* Has anyone asked what that means? What does one have to trade off to get maximum obtainable health? Finally, I want to direct attention to the conflict of interest between the corporation and the occupational physician. It has been suggested that occupational physicians ought not to be owners of corporations, that they should not share in stock options, because of a conflict between health and profit. But that is looking only at one side of the issue. I am sure that we could all conjure up instances where it would clearly be inconsistent with the financial position of the corporation for the occupational physician to pursue some medical interest of his own. However, by the same argument, a physician owner of a corporation also has an incentive to seek out potential threats to the wealth of his corporation. For example, let us say that the organization is liable for certain minimal health and safety levels for its employees. If it drops below those levels it could be fined, or perhaps involved in an expensive law suit. The physician owner of the corporation has an incentive to find those potential areas of conflict and to reconcile them to preserve or to increase the wealth of the firm as well as *Whorton, D., Davis, M., and Kahn, E.: Proposed Principles of Ethical Conduct for Physicians Providing Occupational Medical Services. Submitted to the AOMA Committee on Ethical Practice in Occupational Medicine via William Morton, 1976.
Bull. N.Y. Acad. Med.
ORGANIZATIONAL ENVIRONMENT
719
the health of its employees. When he is prohibited from being an owner, not only is he denied the negative kinds of conflicts of interest, but also the positive actions that he could take that would enhance the firm's wealth and employee health. Which effect is more detrimental to employees and owners? There is also a question whether the physician should be responsible to make health hazards and risks known to the employees-his potential patients. It has been said that it is unethical to keep this information from them. If there were perfect certainty in the world I would support such an ethic, but there is no perfect certainty. Physicians can make many kinds of errors; we can all make them. In statistics and economics they are called type one and type two errors. In a type one error we reject a true statement, a true hypothesis, and in a type two error we accept a false statement. Now if one lives in a world of uncertainty, how does one know which error is more costly to make? Let us say that one tells an employee that there is a health hazard from asbestos, and he acts on that. But it turns out, in this particular instance, that the hazard is actually minimal to him, that there is only a 5% chance that he will be harmed. However, he quits the job based on uncertain information and goes to some lower-paying job and incurs a loss in the move. This is a type two error. We have accepted the false hypothesis that this industrial hazard could be very costly to him, and we were wrong. A type one error rejects a true hypothesis. No one told the employee that asbestos is dangerous to him. This choice may also be costly to the employee. There are other situations where one could fail to tell the employee something and the cost to him could be so small that the harm done will be less than if he acted on the information were it given to him. How does one know that it is his responsibility to reveal all information about potentially hazardous situations? If we had perfect certainly, the answer would be obvious. In saddling our colleagues with an ethical code that requires them to do something without thinking about it, we may make it very costly to the employee. That could be interpreted as a conflict of interest between the organization and the employee.
Vol. 54, No. 8, September 1978
THE ORGANIZATIONAL ENVIRONMENT AND ETHICAL CONDUCT IN OCCUPATIONAL MEDICINE* DONALD L. MARTIN, Ph.D. Research Professor, Law Economics Center University of Miami Coral Gables, Florida
M/[Y reaction to The Social Challenge to Business by Dr. Robert W. Ackerman and to many statements made this morning is puzzlement. I am confused about whether corporations are asked to respond to something called social demands in a survival mode, that is, as a response to threats of government intervention and private boycott, or whether they are asked to respond to social demands in some sort of innovative mode, i.e., because such responses are inherently good business. Moreover, it appears to me that the assertion of corporate failure to respond to social demands is made as if the words "social" and "collective" reflect a set of homogeneous wants within society rather than a collection of conflicting interests. Many issues that are characterized as social are, of course, political issues. What kind of environment do you want to live in? Pollution questions. How safe from invasion do we want to be? Military questions. How healthy do we want our neighbors to be? Health and safety questions. All of these are collective questions that are usually answered through government, our instrument for collective action. We want the government to come up with policies that we may define as the rules of the game that all of us must obey. We impose these rules of the game upon ourselves as an answer to social demands. Minimum wage laws, safety regulations, and health ordinances may be interpreted as expressions of social demands made on different segments of society. Corporations as well as others have been responding to, for example, minimum wage legislation in a predictable manner for some time. I think *Presented at a Conference on Ethical Issues in Occupational Medicine cosponsored by the New York Academy of Medicine and the National Institute for Occupational Safety and Health and held at the Academy June 21 and 22, 1977.
Vol. 54, No. 8, September 1978
716
D.L. MARTIN
716DL.
these responses have been predictable mainly because the rules of the game are spelled out clearly. If we are talking about social demands in the context of rules of the game, a survival mode, then the social responsiveness of business should not be discussed in terms of failure or success. Corporate social responsibility should be judged, as should noncorporate responsibility, in terms of adherence to the laws promulgated by our social institutions. But if we refer to social responsiveness in terms of corporate initiatives on collective issues that reflect individual discretion by corporate leaders, an innovative mode, then I think we are really in trouble. The reason we are in trouble is that we have essentially collective questions being answered by private individuals, and we can be sure that those questions will be answered in a variety of ways. We could have the Fortune 500 answering the same social or collective question about pollution in 500 different ways. A corporation may believe that it is socially responsible, i.e., acting in good conscience for society when it selects its own pollution policy. I do not think that is the kind of responsiveness we are really interested in, simply because we could experience a great deal of chaos that way. We could experience chaos because the actions of such corporations can affect third parties that have not had an opportunity to participate in collective decision making. If this criticism is applicable to pollution policy, it is also valid for developing policies concerning occupational health and safety. It is also unclear as to the valuation system firms should use to determine which social demand is worth responding to. Should the criterion be one that identifies the social demand that threatens the greatest cost to the firm if it is not met? Or should it be one that identifies the demand that does the most good for nonowners of the firm? There can be a great conflict between these criteria. Accepting social responsibility requires an additional burden on management, as Dr. Ackerman suggests. How are these burdens to be financed? Is it not the case, when one gets down to the bottom line, and Dr. Ackerman does eventually get down to the bottom line, that we are talking about modifying the goal of the corporation? The goal of the corporation, make no mistake, is to enhance the wealth of its owners. The tradeoff is more social responsibility, less wealth. How are those firms going to survive? Is there not a conflict here? These kinds of questions are not addressed carefully enough in the social responsibility thesis. Dr. AckerBull. N.Y. Acad. Med.
ORGANIZATIONAL ENVIRONMENT
717
man's thesis is that management will respond to the appropriate incentives once the goals and constraints of an organization are spelled out. Once top-level management decides to commit itself to some social demand, it will structure the incentives so that lower-level managers will respond positively to that particular social demand. I have no argument with that hypothesis. That is good economic theory. But if profits and wealth are penalized in the pursuit of a social demand, who can we expect to supply goods to the community? The problem with Dr. Ackerman's thesis is that he has not identified the people who will pay for those social goals. Surely, the owners of the corporation will not. They will quit being owners. Perhaps the taxpayers will pay. In fact, Dr. Ackerman's kind of socially responsive organization must ultimately be supported by the state, either directly or indirectly, and that is the conclusion of the Social Challenge to Business. Ultimately, the corporation, in becoming socially responsible, will transform itself into a social rather than a private institution. Instead of observing discretionary behavior by managers in the form of racial discrimination or sexual discrimination, one will begin to observe managerial discretion in terms of financial issues. Managers will trade off the wealth of the firm to achieve a certain level of social responsiveness because they are rewarded for such behavior. The only way that behavior can be financed, however, is through collective action, i.e., taxation. And so the direction of the socially responsive organization that undertakes social innovation at the expense of profits is toward state subsidy. I want to turn to some questions dealing with ethics in occupational medicine. In reading the ethical code of the American Occupational Medical Association (AOMA), I was struck by such statements as "physicians ought to accord the highest priority to the health and safety of the individual in the work place." What does this mean? "The highest priority of health and safety," is written as if there are no trade-offs, as if it does not cost anything. If this particular goal, this highest priority in health and safety, is achieved, is it not the duty of the occupational physician to come to grips with what it would cost to achieve it? The individual who is going to pay for that highest priority in health and safety will be the employee-the very one occupational physicians want to help. But that cost is hidden. It is usually the case that such priorities are expressed as though desirable in and of themselves and the question whether the employee wants the highest priority is ignored. Vol. 54, No. 8, September 1978
718 718
D.L. MARTIN
There has been a lot of discussion, of course, about a conflict of interest between the physician and his employer, the corporation. But is there not also a conflict of interest between the physician and the patient? There is an inverse relation between the level of safety from injury from death and earnings of employees. If that kind of trade-off exists and if all are committed to the highest priority for health and safety, all are really committed to a compensating differential in pay that employees will have to accept if they are to work in your firm. So a key element in this ethical code, an ethic that you demand of yourselves, may be an element that conflicts with the interests of the people you are trying to help. The code also suggests that the physician continually assess the work environment. How does one do that without spending money? Who pays for that? I do not want to tire you by continually raising this question of cost, but it faces you all the time. Health is a trade-off, just like anything else. It is an economic good that people buy. Somebody must pay for it. Another question very similar to the first is what does "maximum obtainable health" mean? This expression may be found in section six, page four of the Principles of Ethical Conduct, which was proposed by Donald Whorton, Morris Davis, and Ephraim Kahn as an alternative to the code adopted by the AOMA.* Has anyone asked what that means? What does one have to trade off to get maximum obtainable health? Finally, I want to direct attention to the conflict of interest between the corporation and the occupational physician. It has been suggested that occupational physicians ought not to be owners of corporations, that they should not share in stock options, because of a conflict between health and profit. But that is looking only at one side of the issue. I am sure that we could all conjure up instances where it would clearly be inconsistent with the financial position of the corporation for the occupational physician to pursue some medical interest of his own. However, by the same argument, a physician owner of a corporation also has an incentive to seek out potential threats to the wealth of his corporation. For example, let us say that the organization is liable for certain minimal health and safety levels for its employees. If it drops below those levels it could be fined, or perhaps involved in an expensive law suit. The physician owner of the corporation has an incentive to find those potential areas of conflict and to reconcile them to preserve or to increase the wealth of the firm as well as *Whorton, D., Davis, M., and Kahn, E.: Proposed Principles of Ethical Conduct for Physicians Providing Occupational Medical Services. Submitted to the AOMA Committee on Ethical Practice in Occupational Medicine via William Morton, 1976.
Bull. N.Y. Acad. Med.
ORGANIZATIONAL ENVIRONMENT
719
the health of its employees. When he is prohibited from being an owner, not only is he denied the negative kinds of conflicts of interest, but also the positive actions that he could take that would enhance the firm's wealth and employee health. Which effect is more detrimental to employees and owners? There is also a question whether the physician should be responsible to make health hazards and risks known to the employees-his potential patients. It has been said that it is unethical to keep this information from them. If there were perfect certainty in the world I would support such an ethic, but there is no perfect certainty. Physicians can make many kinds of errors; we can all make them. In statistics and economics they are called type one and type two errors. In a type one error we reject a true statement, a true hypothesis, and in a type two error we accept a false statement. Now if one lives in a world of uncertainty, how does one know which error is more costly to make? Let us say that one tells an employee that there is a health hazard from asbestos, and he acts on that. But it turns out, in this particular instance, that the hazard is actually minimal to him, that there is only a 5% chance that he will be harmed. However, he quits the job based on uncertain information and goes to some lower-paying job and incurs a loss in the move. This is a type two error. We have accepted the false hypothesis that this industrial hazard could be very costly to him, and we were wrong. A type one error rejects a true hypothesis. No one told the employee that asbestos is dangerous to him. This choice may also be costly to the employee. There are other situations where one could fail to tell the employee something and the cost to him could be so small that the harm done will be less than if he acted on the information were it given to him. How does one know that it is his responsibility to reveal all information about potentially hazardous situations? If we had perfect certainly, the answer would be obvious. In saddling our colleagues with an ethical code that requires them to do something without thinking about it, we may make it very costly to the employee. That could be interpreted as a conflict of interest between the organization and the employee.
Vol. 54, No. 8, September 1978
