Universities should operate in an ethical and socially responsible manner

I was first really exposed to the concept of what social responsibilities a university has when I was a student at Monash University in the early 1970s. The issue was the University’s decision to allow the napalm-producing company, Honeywell to use the Monash Careers and Appointments office facilities on campus to conduct interviews and recruit potential graduates. I was reminded of this dispute the other day for two reasons. First, I did a radio interview for the national broadcaster (ABC) where I was asked about the decision by the Newcastle City Council (my local council) to divest itself of fossil fuel investments (see story – Newcastle Council abandons fossil fuel investments). This is a global trend. This was a shock to some, given that Newcastle is the largest coal exporting port in the world and there are major coal mines nearby up the Hunter River valley (the river flows into the Pacific Ocean at Newcastle). Second, around the same time, we learned that the University of Newcastle, my homeinstitution, had awarded a lucrative contract to Transfield Services, who hold the contracts to provide welfare and garrison support services in the offshore prisons (detention centres) which the Australian government established to ensure that asylum seekers who try to reach Australia by boat never reach the mainland. These prisons house families including young children for lengthy periods. There is strong evidence that the detainees incur mental illnesses and other health issues from the isolation. There have also been allegations against Transfield staff in relation to rapes and sexual assaults on detainees. These instances raise questions about the responsibilities of public institutions such as universities to operate according to acceptable community standards which makes the decision by the University of Newcastle (NSW) to enter into a commercial arrangement with Transfield rather odd indeed.

The Newcastle City Council decision was based on a shift in its strategy to “preferentially invest in activities that are environmentally and socially productive”. As a local citizen opposed to the Coal industry I applauded their decision but in the interview, as a professional economist, I focused on the employment effects, which will be insignificant.

By way of history, Honeywell was “the largest producer of anti-personnel weapons and components … it is the inventor and sole source of random time-delay fuses which permit fragmentation bombs to explode at irregular intervals after they are actually dropped, killing and injuring those who come to aid the wounded from the initial bombing … Honeywell also manufactures … phosphorus bombs and mines, dart firing machine guns, … and napalm bombs” (from ‘Zapping the Viet Cong by computer’, New Scientist, March 30, 1972, page 686).

Need I remind readers that:

Napalm is a highly sticky inflammable jelly which clings to anything it touches and burns with such heat that all oxygen in the area is exhausted within moments. Death is either by roasting or by suffocation. Napalm wounds are often fatal (estimates are 90 percent). Those who survive face a living death. The victims are frequently children.

(from Zinn, H. (1997) The Zinn Reader: Writings on Disobedience and Democracy, Seven Stories Press.)

One manifestation of the resistance to the corporate involvement in distasteful and inhumane activities at the time was the formation of the so-called – Honeywell Project – which was a “peace group” from Minnesota which “waged a campaign to convince the board and executives of the Honeywell Corporation to convert their weapons manufacturing business to peaceful production”.

The Monash University student occupation of the Careers and Appointments Office facilities demonstrated that organisations (such as Universities) were tainted if they directly participated in activities or used their resources to further the commercial interests of companies that were producing profit-generating goods and services that breached accepted boundaries of decency and social responsibility.

Once the University allowed Honeywell officials onto campus to ease their recruitment process and reduce the company’s costs of hiring the educational institution became part of the sordid corporate venture.

John Locke clearly taught us in his ‘Second Treatise of Government’ that tacit consent is consent after all. It might be ‘silent’ but it remains a signal that authority has been given to another to pursue action.

That is what the student protests were about.

The other big social responsibility and ethical issue in that era that I recall universities having to deal with was whether to allow tobacco companies to fund academic research even if the research was not directly related to the health impacts of smoking.

Most universities wisely determined that they would be severely compromised if they accepted such funding and did not do so and many developed official policies deeming that they would not accept funding from tobacco related sources for research. These policy stances were principled and correct, in my view.

In this era of neo-liberal smokescreens, there is a lot of hot air created about so-called ‘corporate social responsibility’.

The creation of social responsibility charters has been largely an attempt to avoid government regulation. It is part of the self-regulating market myth – leave it alone and it will behave itself and deliver optimal (as in the text book) outcomes.

The extent to which companies engage in corporate social responsibility appears mostly to be limited by how much money they can make from it and doesn’t limit their activities very much at all.

Apparently, companies that operate in labour markets and resist unionisation and pay poverty wages are ‘helping economic development’. That sort of thing.

Everyone knows that certain business practices are illegitimate and so the smokescreen goes up to make corporations appear to be responsible citizens.

We have green badges on products now which apparently signal they are good for us and the environment yet the corporations still pushes a message (via advertising etc) for us to buy ever more of the good, when it is the scale of production and consumption that is the environmental problem as much as it is the act of consuming the product and disposing of its waste.

So I don’t buy (excuse pun) the notion of corporate social responsible in a deregulated economy.

To force companies to behave ethically or sustainably we have to increase the regulative umbrella via government. But consumers also have power and I have advocated that progressives should deploy direct action when let down by their governments in this regard.

Direct action against targetted corporations that we wish to damage (in order to send them bankrupt or alter their behaviour) includes focused collective action such as boycotts, protests, supply chain disturbances, etc. Social media is an essential tool to spread the awareness of these types of actions.

If all progressively-minded people stopped purchasing certain products then it would start to change corporate behaviour.

This was partly the strategy that the Honeywell Project deployed way back against the weapons monster it wanted to shut down.

Please read my blog – Time for progressives to adopt more direct actions – for more discussion on this point.

But universities are not corporations despite the efforts of the bloated management layers that define the modern academic institution in this neo-liberal era to cast them as such.

Universities have different goals and are accountable to society at large not to some group of private shareholders. Here I am using the concept of a university in the public institution sense, although one might say that the general points made also apply to ‘private’ institutions.

Trying to behave like a private, profit-seeking corporation will surely undermine the capacity of a university to fulfill its essential charter which includes its teaching and research activities, its protectorate responsibilities regarding knowledge, its community outreach responsibilities, and its preservation of free speech functions.

These functions which define the mission of the university haven’t really changed at all over the centuries and are alien to those that define a profit-seeking corporation.

But does the concept of ethical and social responsibility apply to a university? One might say obviously, but then what does it mean?

Clearly, I could write several books about the topic and others have.

Certainly academics are required to behave ethically and there are heaps of rules governing what we can and cannot do. In the US, for example, the American Association of University Professors – Statement on Professional Ethics – and believes that “membership in the academic profession carries with it special responsibilities.”

The dangers of corrupting academic processes through engagement with the corporate world were borne out clearly in the excellent 2011 investigative movie – Inside Job.

Director Charles Ferguson said the movie was about “the systemic corruption of the United States by the financial services industry and the consequences of that systemic corruption.”

We learned how a bunch of economists had been paid significant sums of money by the financial sector to write reports, parading as independent academic research, which stated that the deregulated financial markets were performing well and there was no risk of a collapse.

The classic case was the report by Columbia University professor (Frederick Mishkin) on Iceland. Charles Ferguson wrote that Mishkin “was paid $124,000 by the Icelandic Chamber of Commerce to write a paper praising its regulatory and banking systems, two years before the Icelandic banks’ Ponzi scheme collapsed, causing $100-billion in losses. His 2006 federal financial-disclosure form listed his net worth as $6-million to $17-million.”

Mishkin later altered the report’s title from ‘Financial Stability in Iceland’ to ‘Financial Instability in Iceland’ when his role was exposed and claimed that the original reference to ‘stability’ was a typographical error in his CV. I haven’t met anyone yet who believes that story.

Please read my blog – Wrong is still wrong and should be disregarded – for more discussion on this point.

Universities also teach courses on ethics and social responsibility, which suggests that the institution itself should behave consistently in all of its activities, independent of the legal requirements on it as a public institution.

Universities also educate the future leaders of our nations in both the public and private spheres who will be making significant decisions that impact on all of us. That role suggests that the institution itself has to set standards of behaviour that we want to permeate into the greater society.

Universities define so-called ‘graduate attributes’ that they aspire to embed in their students upon completion and they typically include statements about ethical behaviour, social responsibility, social justice, and diversity.

My own university talks about ‘global citizenship’ in this regard. These are not prescriptive rules which state what is right and wrong. Rather they are aspirations that graduates will go out into the world and behave according to accepted norms of decency and to be able to appreciate what is right and wrong etc.

I don’t intend to conduct a detailed discussion of ethics or moral behaviour. There is a useful framework summarised by the Santa Clara University’s Center for Applied Ethics – Approaching Ethics – which might guide our thinking a bit.

The inescapable conclusion is that universities – as institutions in their own right – should behave ethically and in accord with community standards in all aspects of their operations.

On March 22, 1970, the conservative journalist – Irving Kristol – wrote an article in the New York Times Magazine – ‘What Business Is a University In?’ which noted that:

No university is merely a ‘community of scholars’. In order for such a community to exist and survive, it needs to be buttressed by an organizational component, by an administration which manages money and real estate and employees and relations with the world outside.

A given university thus cannot appeal to the notion of neutrality in the non-academic functions to justify decisions taken. In all these support functions, the institution intrinsically participates in the wider community, for example, through its employment, waste disposal, and procurement strategies and decisions.

The literature uses a concept of ‘social injury’ and it is most recently applied to the fossil fuel industry. Universities around the world are embracing the concept as they engage in so-called divestment of their investment portfolios.

For example, the Board of Governors at McGill University, which has been at the forefront of the divestment movement declares (Source):

… the term “social injury” means the grave injurious impact which the activities of a company is found to have on consumers, employees, or other persons, or on the natural environment. Such activities include those which violate, or frustrate the enforcement of rules of domestic or international law intended to protect individuals against deprivation of health, safety, or basic freedoms, or to protect the natural environment …

There are other definitions but this one is pretty comprehensive. It is about advancing public good. That is the core business for any university.

Most universities will develop statements of their social and ethical responsibility. The idea that universities have these responsibilities permeates the teaching and research activities and extends, obviously, to the conduct of a university in terms of its community, its labour force, and how it spends its money.

The divestment actions focus on ethical investment. In the current period it is largely about fossil fuels.

But there have been other issues entertained by universities. For example, there have been movements arguing that universities should divest from owning assets in the, then apartheid regime of South Africa (Source). There have also been campaigns urging universities to divest their assets held in Israeli companies as a show of support for the Palestinian people and/or an objection to the illegal Israeli occupation of Palestinian territories (Source).

There is now a WWW site devoted to this issue – Fossil Free – Divest from Fossil Fuels. It maintains a database of organisations (of any type) that have committed to divesting from fossil fuel assets.

Its motivation is outlined as:

If it is wrong to wreck the climate, then it is wrong to profit from that wreckage. We believe that educational and religious institutions, governments, and other organizations that serve the public good should divest from fossil fuels.

See also – Go Fossil Free – which is a local Australian organisation of the campaign.

This UK Guardian article (May 19, 2015) – The rise and rise of the fossil fuel divestment movement – describes the role that student and staff groups are playing in “persuading their universities to withdraw their money from fossil fuels – the richest companies in the world”.

This campaign is “the fastest growing divestment campaign in history, surpassing those targeting the tobacco industry and apartheid in South Africa”.

The decision by the Newcastle City Council to divest its fossil fuel assets is part of this global initiative.

But there is no doubt that there is widespread recognition that universities have a role to play in shaping the wider community outcomes along ethical and socially responsible lines.

Some might argue that worrying about associations with companies that might create ‘social injury’ is not part of the core business of the university and should not come into decision making that is designed to advance that core business, including using financial resources effectively.

For example, why should a university spend more than it has to on, say cleaning services, because the current cleaning contractor (in this age of out-sourcing) has dubious labour market practices, when those services are not the core business of the university?

The answer is, of course, simple. Will that association have an impact on any dimension of the core business? Repute? Staff morale? Student affiliation and alumni loyalty? etc.

The damage to the financial state of the institution from the fall out from say a loss of reputation (and the resulting decline in student demand for places) or a fall in staff morale (which might lead to costly exits or less effective performance) might clearly outweigh the procurement savings by going with the disreputable supplier of the cleaning services.

So while an activity might be peripheral to the core business there are many reasons why dangerous associations should be avoided and never entertained.

Which brings me to the second reason I was thinking about the Honeywell occupation at Monash in the early 1970s.

There was a press release on June 26, 2015 from Transfield Services – Transfield Services enters tertiary education market – which details how:

Transfield Services has signed a five year $88 million integrated facilities management and property services contract with the University of Newcastle, delivering on its strategy to enter new growth markets.

The scope of work with the University of Newcastle will initially focus on providing integrated facilities management and property services across its metropolitan and regional campuses in New South Wales and will commence in July 2015. There is a provision to extend this scope of work to provide capital and upgrade works.

There is a picture accompanying the press release of two students looking very happy carrying books while they walk in the fresh air with greenery and trees in the background. Almost idyllic.

What is the issue here?

Australia has a policy of mandatory detention of refugees including young children in harsh prisons that they have created on Nauru and Manus Island (in Papua New Guinea).

There were violent riots in February 2015 at the Manus detention centre and a 23 year old Iranian refugee, Reza Berati was murdered, allegedly by officials overseeing the centre.

Transfield Services was awarded the contract from the Australian government to run the so-called “‘welfare and garrison support services’ offshore” on Manus Island (in March 2014). It has held the Nauru contract since the centre there was re-opened in August 2012.

The UK Guardian article (August 31, 2015) – Transfield named Coalition’s ‘preferred tenderer’ for Manus and Nauru centres – says that:

The firm’s stewardship of both contracts since has been controversial. Thirty-three asylum seekers on Nauru have alleged rape or sexual assault and a further five say they have been asked for sexual favours in return for contraband. Some of those allegations have been made against Transfield staff. The company has said it has counselled, disciplined and moved some staff for inappropriate behaviour.

Further, the UK Guardian article (May 19, 2015) article – Nauru inquiry: Transfield unable to answer basic questions about operations reports that during the official enquiry into these allegations:

Senior executives of Transfield Services, the Australian company running the detention centre on Nauru, have been unable to answer basic questions about its operations on the island and allegations of sexual assault …

The Federal Senate Select Committee inquiry into the abuses found that the “detention centre at Nauru is badly run” yet Transfield still secured a contract renewal (Source).

The inquiry concluded that conditions in the detention centre were “not adequate, appropriate or safe” for the refugees.

The inquiry heard evidence that asylum seekers are forced to live in “mould-infested, substandard and unsafe living quarters” which are administered by Transfield Services.

So why would an Australian university want to enter into a commercial agreement with a firm like that?

Surely such an association violates even the most basic conception of the ethical and social responsibility that the University of Newcastle (NSW) has to its staff, students and broader community.

On August 21, 2015, the Fairfax press reported – Transfield in the heart of hot debate on ethical investment – that:

Two of Australia’s biggest superannuation funds have dumped shares in Transfield Services citing concerns about human rights inside the offshore asylum seeker camps the company runs for the Australian government, while at least half a dozen other industry funds are conducting a review.

HESTA divested on August 18, 2015 and NGS Super followed suit on August 25, 2015. But they weren’t the first. First State Super divested in July 2015 and Christian Super in March 2015.

Here is – HESTA’s media statement on the divestment.

They say that according to their “well-established environmental, social and governance (ESG) … policy, if a company is identified as not complying, directly or indirectly, with international laws, standards or guidelines, we may consider divestment of any such companies”.

They said:

A number of independent non-government organisations have found that the mandatory, prolonged, indefinite, and non-reviewable nature of detention at asylum seeker processing centres breaches the fundamental principles of international human rights law.

This site – HESTA Divest – is a valuable learning resource. It also contains a list of recent news reports and editorials about the Transfield role in the detention centres and whether it is ethical to support his company in any way.

This news report from the ABC (September 10, 2015) – Newcastle uni urged to rethink five-year contract with Transfield – discusses the scandal that has surrounded the decision by the University to engage Transfield.

Even if the University rejects that it has broader social obligations to avoid associations with companies of this ilk, the reputation argument remains.

I am not privy to any of the details surrounding the decision making that led to this astounding and wrong decision but I strongly doubt that the University risk managers conducted a comprehensive analysis of the estimated monetary consequences of the fall out on the revenue of the institution.

So merely taking the lower price tender without the estimates of the fallout costs (if that was indeed the case) does not, in my view, constitute due diligence in the outlay of public funds.

But this is the economist in me writing.

The University, in my view, cannot escape its broader social and ethical responsibilities and should never have entertained a tender from such a company.

Appeals to blind tenders etc, which might be used as a defense (there has been no defense as far as I know as yet) also don’t cut it.

How can an organisation correctly appraise risk if it doesn’t know the nature of those tendering that it is considering?

Actions to take:

1. I urge you to write to the Vice Chancellor of the University of Newcastle – Caroline McMillen – expressing your views on this – Caroline.McMillen@newcastle.edu.au

2. Please sign the Change.org petition and voice your concerns at:

End Transfield contract now

You might think this is just a local Newcastle (NSW) issue. But these sorts of associations all add up to undermine our global well-being.

This is a global issue!


The University of Newcastle says that (Source):

Equity of access to higher education is a fundamental part of the University of Newcastle’s “DNA”.

Which means it recognises it accepts a wider responsibility to ensure that students from disadvantaged backgrounds are enabled to participate in tertiary education and enjoy the benefits of such, when they otherwise might be excluded on financial grounds etc.

It also has a global implication – to defend the weak, to safeguard the vulnerable, and to provide opportunities and hope for those with little of either.

Providing financial gains to a company that is at the centre of one of the cruellest human rights practices is not consistent with a ‘DNA’ claim to ‘equity of access’ or anything else.

The article in the Newcastle newspaper (September 11, 2015) – OPINION: Uni has hypocrisy in its DNA – presents a different view.

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That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.

This Post Has 7 Comments

  1. The offshoring of illegal immigrant detention is a product of successive governments attempting to comply with the letter of the Refugee Convention.
    This convention was signed in the aftermath of WW2 when there were millions of displaced persons in Europe. The global population was about half what it is now.The world is now extremely overpopulated and this convention is obsolete. The era of mass migration is now over.
    The Australian government,of whatever political complexion, should recognise this fact and withdraw from the convention.

    Illegal migrants must be detained and that detention should be in Australia. Offshore detention is offensive to the Pacific nations which have been bribed to host these facilities. Offshore detention is also very expensive.

    Transfield is simply making a commercial decision to provide services to the detention centres. If off shore detention offends some then the federal government should be the target or is that too hard for self-righteous academics?

    The BDS movement directed against Israel is also sourced in universities primarily.It seems that the presence of the sole democracy in an extremely troubled region,the Middle East,is very offensive to some in the academic community. It is strange that,in the interests of fairness, they don’t direct their ire as well at the likes of Saudi Arabia,the Gulf states,Turkey etc etc ad nauseum.

    I read some of the pronouncements of the academic community on The Conversation and other sites. There are exceptions,as always,but my overall impression is one of puerile conceit.
    No wonder our students are hitting the drugs.

  2. Except for the description of Israel as a democracy, I largely concur with Podargus.

    Indeed, it is bizarre here in Germany as also in Australia that labour market economists are spectacularly absent from the touchy-feely Gutmenschen-campaign to conflate

    1. those eligible for asylum as politically persecuted, with
    2. those afforded protection as war refugees, with
    3. economic migrants
    4. social welfare migrants, i.e. colonists into the EU welfare states

    Because one might think that e.g. Prof Mitchell would be interested, perhaps in regard of the creation of a Marxian reserve army of labour, in why the group most in favour of ongoing immigration into the EU is CEOs. It is tragic that opposition to TPP and TTIP/CETA fails utterly to see the linkage to the migration/invasion issue.

    I can only imagine that labour economists, being university academics, are contaminated by the emotionalised (neo)liberal “humanitarian interventionist” groupthink at Western universities: after all, the strongest support for the Nazi government in Kiev in Germany is found in the Green party, who in turn are strongly supported by presstitute journalists and by academics.

    The current flood into the EU and esp. Germany, is a “pull factor” as well as being a “push”: by world comparison, Germany pays such high social welfare benefits to all asylum seekers that the PMs of both Serbia and Albania recently called on (US agent of influence) Merkel to cut benefits in half and more.

    But the current US migration weapon directed against the EU rival serves the US pursuit of Sir Halford McKinder’s geopolitics as outlined in the famous 1904 lecture – “he who controls the Heartland (essentially Russia with 50% of global minerals) controls the World Island (Eurasia); he who controls the World Island controls the World”.

    To Washington’s joy, an EU riven by civil wars or at least ongoing ethnic migrant tensions off a base of an increasingly unqualified and integration-hostile Muslim workforce cannot form the single economic zone from the Channel to the Pacific proposed by Putin. Although with the average wage of Brazil, EUR15k rather than the current German 40k, it would still be attractive to US and German CEOs.

    Mogherini’s recent call in June for more political Islam in the EU ought to have rung alarm bells, but did not.

  3. Transfield is simply making a commercial decision to provide services to the detention centres. If off shore detention offends some then the federal government should be the target or is that too hard for self-righteous academics?

    The way I read the article Bill is targeting both the government and the businesses promoting what most of us would label as ethically challenged practices.

    Without soldiers there can be no wars. Transfield have disgraced themselves no matter which way you look at it.

  4. Professor Mitchell,

    One of my concerns that arises time and again when reading about corporations is that what drives the decision makers in these corporations to commit acts that are deemed immoral and/or illegal in the first place? Are there particular incentives in place in society or is it basically human nature?

  5. My former Phd student roomie once suggested to me that anyone can become rich all they need is a conscience by pass operation.

  6. Podargus, targeting corporations is a very valid strategy. Yes politicians shou,d also be targeted but elections take years before they can impact but corporations and their profit motive can be responsive to pressure. It’s a valid argument that Bill is proposing.

    Humans in these companies are making the most direct decisions to do these evils and as such I would argue are also more directly accountable.

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