The Baby Milk Scandal that came to light in the 1970s revealed the depths some corporations are willing to go to generate profits. Nestlé and other multinational milk companies enticed mothers in poor communities to use milk solution, by giving it to them for free. They did so using sales reps dressed up as nurses. The uniforms created the illusion the reps were experts, helping to convince the unsuspecting mothers that bottle feeding was better for their babies than breastfeeding.
The mother’s milk soon dried up after they started using the solution. And once the mothers were dependent on the milk, Nestlé charged them for it.
Like drug dealers enticing people with free access to drugs, only to make them addicted, the corporations created a demand where there wasn’t one. After all, what milk could be better than a mother’s?
From Nestlé’s perspective, the decision made business sense and allowed them to maximise returns on their product. As the mothers often couldn’t afford the solution, it also led to infant illness and death.
The backlash against Nestlé was ferocious and led to an international campaign to boycott their products.
The finger of blame was quite rightly pointed at Nestlé. But the uncomfortable reality is that there would never have been a scandal if the sales reps had refused to adopt exploitative sales tactics.
The question we need to ask ourselves is, why did they agree to do so? Particularly when the reps knew they were creating a dependency on a product these poor women didn’t need.
Obedience to authority
Stanley Milgram’s now-famous experiments in Obedience to Authority helps explain why.
Milgram conducted an experiment with 40 volunteers. As ‘teachers’ in an experiment, the volunteers would test ‘learners’ on a list of word pairs the learner has memorised.
The learner is in on the experiment, but the teacher doesn’t know this. To convince the ‘teachers’ the experiment is real, the experimenter leads them to a “shock generator”.
The shock generator has an instrument panel with a row of 30 toggle switches. The lowest switch is 15 volts (labelled “Slight Shock”). The switches go all the way up to 450 volts, with the highest switch labelled “XXX”.
The experimenter then leads the teacher into another room where they watch the learner get strapped into an electric chair and attached by electrodes to the Shock Generator.
Once the test begins and the learner starts making errors, the experimenter instructs the teacher to deliver a shock.
With each wrong answer, the experimenter instructs the teacher to deliver a more intense shock.
If you imagine a minority of the 40 volunteers would disobey authority and refuse to administer the shocks, you’d be wrong. Incredibly, 67% of volunteers continued to administer shocks up to 450 volts. Regardless of the fact they weren’t torturing the learner, they believed they were.
Disobeying isn’t an option
Milgram’s experiment showed that most people would cause pain to others when they’ve told to do so by an authority figure.
The human desire to obey authority helps explain, in part, why the sales reps agreed to sell the milk solution knowing it would cause harm to the mothers.
These sales reps were not evil, just as people who work for corporations now aren’t evil. Regular, run of the mill people work for corporations. These people go home after work, stress about bills, and have their own babies to look after.
People who work for corporations also aren’t psychopaths. And unless you are a psychopath, no one starts a career or goes into work, intending to do bad things to other people.
But place good people in an environment where they have to do bad things while representing a company, and people will comply out of a desire to obey authority.
The human desire to conform to norms compounds the issue. What would have been the consequences if the sales reps refused to wear the nurse’s outfits? Or, they refused to sell the solution?
Weighing up the options, the risk of not conforming would result in being labelled a bad apple. The benefit of conforming would likely be a performance-based bonus.
The benefit far outweighs the risk. Particularly when questioning authority within a business makes you a non-conformist, whose not ‘part of the team’.
So, people who may feel uncomfortable in obeying a decision will do so because the effects of not doing so could harm their career. When faced with such a dilemma, its little wonder good people do bad things.
The profit motive
The most important aspect of the scandal is not that the sales reps agreed to sell the solution. It’s that Nestlé formulated a strategy to make poor women dependent on milk solution in the first place. The sales reps may have complied in following orders, but they were not the ones that came up with the idea.
Nestlé made a business decision out of a desire to create a revenue stream and increase profits. And once they did, competitors felt compelled to follow suit because they would fall behind the competition and lose out as a result if they didn’t.
You may think, well this happened in the 1970s, strong corporate governance means this type of thing could never happen now.
But the structure and underlying motivations driving corporations remain the same. Corporations such as Nestlé are legally obligated to maximise profits for shareholders. Meaning companies, and with it, the individuals who work for them, remain focused on generating value through profits.
Every facet of a company is structured around the maximisation of profits. On an individual level, the most compelling indicator of success is how much money you make (or save) a business.
Profit is still the modus operandi of any corporation; if it is not, they will lose out to competitors and will soon become irrelevant in the market. And so everyone feels compelled to continue creating a demand for products, even when the product doesn’t create social value. Worse, some corporate behaviour creates profits by directly harming society or the environment.
The system needs to change
The underlying problem is the result of a key ingredient in the design of the system. So long as the profit motive is the driving force of business decisions, good people will continue to be placed in positions where they have to do bad things.
Our psychology compounds the issue. On the one hand, our desire to obey authority means we will do bad things without question. On the other, our willingness to conform makes it easier to let things go unquestioned and turn a blind eye.
The only way this dynamic will change is if profit maximisation is no longer the bottom line. In a world where the bottom line is society, and each company is mandated to create value for society, rather than profit from society, good people would no longer be forced to do bad things.
Because what is good for the company, is by default, beneficial for society. By changing this key ingredient, it would become counter-intuitive to make decisions that are detrimental to society because doing so would also be harmful to the company.
The issue is that because the profit motive is baked into the market, it seems unlikely corporate behaviour and the indicators driving performance will change any time soon.