• Only 37 percent of employees say they feel comfortable reporting on-the-job misconduct; but senior managers believe otherwise – 60 percent of executives say employee comfort levels are high when reporting ethical problems.

• Only 55 percent of employees say they don’t feel pressured to cut corners on ethics; but again, senior managers think otherwise – 74 percent of executives say there’s little workplace pressure to bend or break ethical rules.

• Union workers, in particular, are less pleased than other employees with the effect of workplace pressure on ethics; and union employees are not impressed with management integrity.

• Senior managers, meanwhile, overwhelmingly (81 percent) believe ethics are used in daily decision making; but workers say that isn’t so – 43 percent say ethics are routinely overlooked.

Start with the obvious. First, the business community has a huge stake in the success of schools, both to educate employees’ children and to develop a future workforce.

Second, schools are somewhere. Except for a few virtual organizations, they have (in Shakespeare’s words) “a local habitation and a name.” So it’s not enough for businesses to support school without supporting its own local schools.

Third, schools are woven into a seamless web of patterns and expectations. The murders last week occurred at Westside Middle School in Jonesboro, Arkansas. But the impact is nationwide. No school, no business can safely say, “That’s not my concern. That happened over there.” These days, “there” is here.

So the question is, What can business do? The natural impulse is to seek more information. Who are these two boys, ages 13 and 11, and what led them allegedly to murder four students and a teacher? Where did they get the guns? Where did they get the hatred? Is there a pattern involving similar killings in West Paducah, Kentucky, and Pearl, Mississippi? Or involving teenage gangs, or television violence, or the younger ages of sexual attraction, or parents absent from home?

Good questions, all. But we can’t wait for answers. In schools, as in business, tough calls have to be made even without complete information. The question is not, “How will we help next year, when the reports are in?” It is, “What can business do right now?”

Three things–and a fourth for the long haul.

• Recognize that schools need help. They’ve been cut adrift from their communities. The truism that it takes a village to raise a child is not complicated. It means that the entire community has an investment in every child–if only so that the world’s next Mitchell Johnson and Andrew Golden never materialize. Schools have kids for a shockingly few hours each day. What kids do with the rest of their time should be of intense, abiding interest to us all.

• Promote better parenting. We don’t need more research to know about families fracturing at unnerving rates, kids having kids, financial pressures deepening, family networks imploding. Nor do businesses have to wait for schools to ask for help. Right on their own property, businesses can create programs to help their own workers be better parents.

• Communicate directly with kids. When was the last time your business invited an entire group of kids to a program or a site visit? It’s not enough to cream off the top–getting the best kids to fairs, parades, or contests. Most businesses do lots of things that would engage even the surly, the shy, and the cynical.

The fourth? Understand that what’s failed, at bottom, is society’s willingness to impart moral and ethical values to its youth. Fearing a backlash, or not wanting to impose, we don’t talk to them enough about responsibility, respect, compassion, honesty, and fairness. Nor do we model them enough.Yet those five values were the things most missing from those two young boys in Jonesboro. Skills they had. They were good shots. They planned carefully. They probably could read, write, and compute. But what they lacked turned out to be the most important thing schools can teach: character.

Can business make a difference here? Yes, indeed. There’s a growing national movement for character education. It needs help, both in resources and in influence. Do your local schools focus on character? Do they need help doing it better–more programs, more mentors, more service projects, more teacher support? Are the local houses of worship, boys’ and girls’ clubs, scout troops reaching the populations that need help? If not, can your expertise in marketing and communications make a difference?

Questions, yes, lots of questions. And one more from that 1960s civil rights song “Blowin’ in the Wind”: “How many deaths will it take ’til he knows / That too many people have died?”

Here in the Jonesboro of our soul, we can’t afford to wait for that next death.

(c)1998 by Rushworth M. Kidder

Corruption and economic troubles often coexist in a vicious cycle, a circularrelationship evident in several of our top stories this week. At the top ofthe news is a report from the United Nations that says the founderingeconomies of Asia make criminal activity such as money laundering anattractive option. At the same time, bribery becomes the tool of choice togrease the introduction of such enterprises.

In Japan, the relentless drive for increasing profits in the face of ateetering commodities market was highlighted in the sentencing of a broker whonearly toppled world copper exchanges with fraudulent trades.

In the Philippines, a nation racked in recent years with economic andpolitical upheaval, unproven allegations have been lodged against thegovernment of President Fidel Ramos, claiming that Ramos fixed the award of aland development contract in return for kickbacks that fueled his party’scampaigns.

In the United States, issues relating to money, honesty, and ethics emerged inseveral major stories. A new survey reported that 41 percent of respondents inlarge- and medium-size companies witnessed recent acts of sexual harassment,bribery, theft, lying, or falsification of records. In California, a softwarefirm is being probed by the Commerce Department, which claims that the companyhas skirted export regulations to supply unbreakable encryption software toforeign markets, where it could be used for espionage or other crimes. And inWashington, a former business partner of the late Commerce Secretary Ron Browntestified that Brown had complained to her that the White House was usingpassage on trade missions as a reward to big donors.

But the week’s news in ethics also has a positive spin. In New York, the CEOof soft drink giant PepsiCo donated a year’s salary to a scholarship fund.And in Arizona, the notoriously staid IBM has gotten into the business ofhacking–using a team of what it calls “ethical hackers” to break theelectronic defenses of client companies before the crooks do.

Have a productive, ethical week.

–Carl Hausman

PHILIPPINES
The economic troubles of many Asian nations, coupled withineffective law enforcement, have fueled a massive increase in bribery,corruption, and fraud, according to a new United Nations report.

While the report covers the years 1990 to 1994, U.N. official Edwin Bael saidthe trend is still in motion and likely to accelerate. Speaking last week toa three-day Asia Regional Ministerial meeting on organized crime, Bael saidcash-poor and poorly protected Asian nations are attractive to moneylaunderers who use legitimate-appearing businesses to hide the trail of–or”wash”–dirty money.

Organized crime typically sets up money-laundering operations by “making surethe gears of action are well greased by bribery and corruption,” Bael said,noting that this further erodes the strength of already weakened economies.

TOKYO
A mild-mannered family man who stunned the financial world byadmitting his role in a massive commodities fraud that rocked copper marketsworldwide was sentenced last week to eight years in prison for fraud andforgery.

Yasuo Hamanaka faces further criminal and civil actions in London and theUnited States.

Hamanaka’s series of fraudulent transactions cost his employer, the Sumitomobrokerage of Japan, more than $2.6 billion in 1996.

While passing sentence on Hamanaka, judge Yoshifumi Asayama said the roguetrader’s series of “vicious, complex” crimes would not have been possiblewithout the Sumitomo brokerage’s lax supervision and obsession with profits.

Judge Asayama said Sumitomo “put too much emphasis on profits” and “lacked asense of crisis management.”

MANILLA
The Philippine Center for Investigative Journalism hasunearthed details of a 1985 land deal in which government officials allegedlyawarded a land development contract in return for bribes and kickbacks, and, ina development that captured national attention, a key figure stepped out ofthe shadows last week to shed light on the incident.

Arturo Trinidad, a former board member of the agency that awards developmentcontracts, told reporters that Philippine president Fidel Ramos personallygave the order to fix the award of the contract to a Thai-Filipino company,Amari Coastal Bay Resources Corp.

Newspaper reports claim that Ramos then used part of the proceeds to fund hisparty’s 1995 electoral campaigns.

While Ramos said he did push the award of the bid to Amari, he denied thereports of politically motivated kickbacks.

Trinidad told the Philippine Inquirer newspaper he decided to step forwardafter more than a decade because “my conscience tells me not to remain quiet.”

INDIANA
A survey of 2,000 workers at medium- to large-size U.S. companiesfound that 41 percent of respondents say they have some knowledge of ethicalor legal violations at their company in the past two years.

Walker Information, an Indianapolis-based research firm, said that sexualharassment was the most frequently reported transgression, followed in orderby telling lies in reports or falsifying records, conflicts of interest, andtheft.

SWITZERLAND
In what appears to be a subtle sidestep of export regulations,a California firm plans to market “keyless” encryption software overseas in ajoint venture with a Swiss firm–even though there is a ban on exportingsoftware that does not provide a government “key” to decode encryptedtransmissions over the Internet.

Network Associates of Santa Clara, California, released a European Version ofits program “Pretty Good Privacy” in a venture with Swiss Subsidiary cnlabSoftware.

While it is legal for software companies to market keyless encryption programsin the United States, the Commerce Department bans their export because it fears thatsuch software–which scrambles an Internet transmission into a virtuallyunbreakable code–would be an enormously powerful tool for internationalespionage, drug trade, and other crime.

The U.S. government mandates that encryption software sold abroad contain a”key” that will allow the government, using an appropriate court order, todecode the transmission.

The Commerce Department last week began an investigation into the venture.

Network Associates claims that the deal is within legal boundaries because thesoftware was compiled from existing codes in Europe and no codes or programswere exported from the United States.

WASHINGTON, D.C.
A former business partner of the late commerce secretaryRon Brown testified last week that Brown was upset that the Clinton WhiteHouse sent donors along on U.S. trade missions as rewards for largecontributions.

Nolanda Hill told a D.C. court that Brown was angry that the purpose ofCommerce trade missions had been “perverted” by the White House. Hilltestified that Brown believed that seats on the trade missions should bereserved for firms with contracts under negotiation in the respectivecountries, and for representatives of small and minority-owned businesses.

She also testified that she believed President Clinton knew that the trademissions were being used for fund-raising.

Hill was a reluctant witness in a lawsuit brought against the CommerceDepartment by a conservative group that seeks the release of documents thatallegedly show that Brown tried to delay the release of documents relating totax charges until after the 1996 election. Hill is under indictment forallegedly siphoning money from her business and failing to pay taxes on it.

Former commerce secretary Brown was killed in a plane crash in 1996 while on atrade mission to Croatia.

PHOENIX
IBM staged a demonstration of computer hacking at a computer tradeshow here last week, showing off its dream team of “ethical hackers” who canbreak into computer systems and steal or tamper with data–but only to allowclient companies to mend the electronic gates before the real hackers breakin.

The computer giant’s Global Security Analysis Lab charges $15,000 to $45,000to find chinks in a company’s electronic armor.

A recent survey by the Computer Security Institute in San Francisco says that64 percent of American businesses, schools, and government agencies surveyedreported cyber security breaches in the last 12 months–a 16 percentincrease over last year.

Computer hacking has become an increasingly visible threat to corporatesecurity and public order–and with the increase in computer literacy amongthe young it has literally become child’s play. In Massachusetts, federalprosecutors recently reached a plea settlement with a juvenile charged withhacking into a regional airport, disabling the control tower’s power and phonesystem for more than six hours. In Washington, the Pentagon was hacked by fiveteenagers, working together from terminals in Israel and California.

NEW YORK
PepsiCo chairman and CEO Roger Enrico last week announced that hewill give all but $1 of his 1998 salary to a scholarship fund for what hecalled front line workers and unsung heroes–”the route salespeople,merchandisers, technicians, warehouse employees, and truck drivers.”

Enrico’s move will add almost $1 million to Pepsico’s scholarship fund. Buthe will still retain his $1.8 million annual bonus from 1997.

The contribution was lauded by Georgetown University professor Robert Bies, aspecialist in corporate leadership. “It is very unusual,” Bies told theWashington Post, “for a CEO, especially one at a company of this magnitude andvisibility, to give up his salary for a philanthropic purpose.”

From Walker Information, Released 3/23/98

In recent years, many corporate leaders have encountered trouble for letting workplace pressure, poor judgment, and, in some cases, greed prevail in the course of doing business. In the end, situations involving ethics, compliance, and business practices can cost corporations hundreds of millions, sometimes even billions of dollars. Consider the following:

• Columbia/HCA –The nation’s largest hospital company remains under federal scrutiny, in part for possibly inflating the seriousness of patient illnesses to get larger payments from Medicare and Medicaid. So far, three executives have been indicted for Medicare fraud, and more are expected. Since the probe began, the company’s stock has dropped more than 40 percent, revenues are down, and the company reported a stunning $1.3 billion fourth-quarter loss in 1997.
  –St. Petersburg Times, Feb. 26, 1998

• Prudential–This insurance company may end up paying more than $2 billion to settle sales fraud allegations made by policyholders. Prudential customers say they were duped when sales agents persuaded them to trade old life insurance policies for newer, more expensive ones without telling them the old policies would lose their value. The company also admitted agents falsely told some customers that premium bills would stop coming after a certain number of years while the company continued to bill them.
  –The New York Times, March 3, 1998

• Mercury Finance–The practice of overstating profits for four years came to a screeching halt in 1997 after the media got wind of it. The company saw its stock plummet $2.3 billion, virtually overnight.
  –Business Ethics, March – April 1997

• Salomon Brothers–When four top-level executives at this company failed to report unlawful activities on the government trading desk in 1991, the company suffered losses estimated at $1 billion. The executives lost their jobs.
  –Harvard Business Review, March – April 1994

• Texaco–Taped evidence of executive-level race discrimination cost this company $176 million to settle a lawsuit, driving home the importance of workplace diversity.
  –Business Ethics, March – April 1997

• Archer Daniels Midland–A guilty plea in a 1996 worldwide price-fixing scandal cost the agribusiness company $100 million, among the largest criminal antitrust fines in history. A former ADM executive also was fined $11.4 million and sentenced to nine years in jail for his role in conspiring to fix the prices of livestock feed supplement.
  –Boston Globe, March 5, 1998

• Sears Auto Centers–When this company was inundated with complaints from consumers and attorneys general in more than 40 states in 1992, questionable management practices were put in the public spotlight. What’s it take to clarify the difference between unnecessary service and preventive maintenance? For Sears, an estimated $60 million in lawsuit settlements.
  –Harvard Business Review, March – April 1994

• Genentech–The biotech company’s CEO was ousted in 1995 for trying to secure a $2 million personal loan as part of a business deal.
  –Business Ethics, March – April 1998

• W.R. Grace–Allegations of sexual harassment cost this company’s CEO his job in 1995. Directors fired him after hearing evidence of his actions.
  –Business Ethics, March – April 1997

• Bausch & Lomb–1994 earnings at this company fell 54 percent after managers played fast and loose with accounting principles and ethics. Business Week reported that the CEO had “Blind Ambition,” leading him to push too hard for profits.
  –Business Ethics, March – April 1997

• Mitsubishi–This automaker has agreed to pay $9.5 million to settle a sexual harassment suit brought by 27 female employees, while negotiations continue with more than 300 other women who allege the same type of misconduct occurred at an Illinois assembly plant.
  –The Detroit News, Aug. 30, 1997

“A healthy living company will have members . . . who subscribe to a set of common values and who believe that the goals of the company allow them and help them to achieve their own individual goals. Both the company and its constituent members have basic driving forces: They want to survive, and once the conditions for survival exist, they want to reach and expand their potential. . . . If corporate health falters, the priority should be on mobilizing the maximum human potential, on restoring or maintaining trust and civil behavior, and on increasing professionalism and good citizenship.”

–From The Living Company: Habits for Survival in a Turbulent Business Environment, by Arie de Geus (Harvard Business School Press, 1997)

In the old days, he wouldn’t have made anyone’s Dirty Dozen list. Interior Secretary Bruce Babbitt was too sincere, too earnest–too nice. That’s the impression I came away with when, in the early 1980s, I interviewed then-Governor Babbitt in his office in Arizona. It was reconfirmed during a dinner in Washington just prior to his appointment to Interior in 1993. Nothing flashy, nothing profound. But not a man to tell lies, even little white ones.

Yet here he stands, the latest target of an independent counsel investigation. Last week a panel of three federal judges appointed white-collar-crime specialist Carol Elder Bruce to probe his relationship to the Democratic Party’s 1996 fundraising practices. The question: Did Babbitt intentionally mislead the Senate Governmental Affairs Committee last October when he denied trading an official decision for a political contribution?

At issue was a case in which three Wisconsin tribes had applied for a license to operate a new casino. Neighboring tribes already active in gambling lobbied to stop the newcomer. Babbitt eventually denied the new license. Shortly afterwards, the neighboring tribes contributed $230,000 to the Democrats.

Was there a connection? No, says Babbitt. And if this were all the case involved, we’d have to leave it there until Ms. Bruce found more to say. Yet whatever she finds, Babbitt gets hammered. Win or lose, he faces big legal bills, bigger hassles, and a smirched reputation. So it’s worth noting an almost overlooked detail: Innocent or guilty, Babbitt brought this on himself. How? Through prevarication. A lobbyist has testified that Babbitt told to him he’d been pressured by the White House to make the decision quickly. Babbitt admits he said that. But he told the Senate committee that he made up that explanation just to get the lobbyist off his back.

Okay, so he fibbed. Big deal, we might say–akin to the little white lies people tell all the time. Aunt Melba asks, “Don’t you like my dress?” Why upset her by saying it looks like window-drapes from a dumpster? A telemarketer interrupts dinner and asks, “Is your wife home?” Why spend more than three seconds fending off the invasive caller? Such fudging keeps the peace. It protects family time. Besides, there are no consequences.

Or so we’ve all been led to believe–Babbitt, too, it seems. To his credit, he was shamefaced when he admitted to the committee that he’d weaseled the lobbyist–as though he knew, deep down, that even small falsehoods aren’t right. But after all, little lies are inconsequential, right?

Wrong. To see why, let’s give him the benefit of the doubt. Let’s assume he’s pure as the driven snow, unsullied by any sleaze oozing from the White House. Then ask why he is being reputationally and financially harrowed. Answer: because a lobbyist had something to say, based on what Babbitt now says was an untruth. Had that lie never occurred, it’s quite possible Babbitt would not now be under investigation.

The point? There really is such a thing as truth. Of course we sometimes fail to reach it. Of course, despite our best intentions, we sometimes stumble into compromise. But we’ll never even get close to truth if we adopt the principle that lies, even little ones, are okay in some circumstances. How will we know which circumstances are which? Which of our lies will pass harmlessly and whitely by, and which will publicly go gray-brown in our hands?

Babbitt, even if innocent, has given us a parable for our times. The lesson: Low-grade private deception can escalate into high-leverage personal disaster. Maybe, in other words, there’s no such thing as little white lies–in business, on campuses, to the tax-man, among friends, between lovers. Maybe they’re all dangerously beige. Maybe truth matters more than we thought.

(c)1998 by Rushworth M. Kidder

What did they know, and when did they know it? That question, a standardinvestigative query of lawyers and reporters, is becoming a central theme innews about ethics worldwide. In London, that question is being asked in a caseinvolving tobacco companies’ knowledge of the harmful effects of smoking.Cases around the globe are focusing on whether the industry continued to denya link between smoking and cancer after they knew that the evidence wasconclusive.

Past statements and documents dominate another court case with an ethicaldimension–this one dealing with age discrimination. Several formerexecutives for the Gerber Products Company claim they were fired because oftheir age, and point to documents and speeches from a recent national meetingat which, they claim, the “mature” sales force was cited as a corporateliability.

The media are the foci of several stories in this week’s edition of Newsline.In London, a cash infusion may revive what is widely viewed as a responsible,centrist paper competing against scandal sheets and politically dogmaticdailies. In New York, a recent report by a research organization finds newsorganizations are increasingly feature-oriented and slanted in their coverage.In Puerto Rico, a major newspaper is suing the government for allegedlycanceling advertising contracts in retaliation for critical stories. And inCalifornia, an association representing independent booksellers has sued twomajor book chains, charging them with carving secret deals with publishers andunfairly restraining competition.

Does a leader’s moral character have any bearing on his fitness to conductofficial duties? That question dominated many of the headlines, but as wereport in this week’s Newsline, the public seems to be weighing in with aresounding “Who cares?”

And a story out of New Jersey puts a fine point on the moral implications offine print–”You’re a Winner” sweepstakes notifications that weren’t exactlywhat they seemed.

Have a productive, ethical week.

–Carl Hausman

LONDON
The tobacco industry has come under fire in a London court, where ina development paralleling similar revelations in the United States, olddocuments appear to show that Britain’s largest cigarette company knew –decades ago — of the link between cancer and smoking.

A 1970 internal memo from the archives of British tobacco company Gallaher,Plc, upholds the conclusions of a U.S. study released that year that linkedlung cancer and cigarette smoking. Gallaher officials now claim that thememo stated a temporary and quickly abandoned position.

Gallaher is defending itself against civil suits seeking damages on behalf of43 British lung cancer victims.

NEW YORK
Lawyers for former Gerber Products Company sales executives lastweek sought to institute a class action suit against the baby food maker forage discrimination in the firing of more than 300 salespeople who were 40 orolder.

Gerber contends that the firings were due to a reorganization of its salesforce.

But plaintiffs argue that speeches delivered and written material distributedat Gerber’s 1997 national sales meeting show that Gerber characterized its”mature” sales department as a liability.

LONDON
Irish tycoon and media magnate Tony O’Reilly last week announced hispurchase of Britain’s struggling Independent newspaper, claiming that the cashinfusion into the highly regarded paper will restore unbiased journalism to acity dominated by scandal-sheets and dogmatic liberal and conservativepublications.

In an interview with the New York Times, O’Reilly said his revival of the Independent was based on the need for “an independent voice, neither right norleft, a voice for inquiring, skeptical Britons.”

In a surprising move, O’Reilly appointed former British Governor of Hong KongChris Patten to the Independent’s board. Patten was at the center of a recentstorm of controversy involving Rupert Murdoch, owner of the rival LondonTimes. Murdoch also owns a publishing company that yanked Patten’s book,allegedly because Patten was critical of Chinese officials and publication ofthe book would endanger Murdoch’s media interests in China. The Murdoch-ownedTimes was also criticized for being slow to report the story involvingPatten’s book.

NEW YORK
A recently released study by a journalism research organizationindicates that a trend away from hard news coupled with a tendency for newsorganizations to slant their reporting is changing the complexion ofjournalism.

According to the Project for Excellence in Journalism, funded by The PewCharitable trusts, there is a “pervasive shift toward featurized and people-oriented approaches to the news, away from traditional news accounts.” Theproject’s report faulted newspapers as well as broadcast news organizations,and also found that “the news media are dividing into market-based niches,with a result that a citizen’s perception of society can vary greatlydepending on the source of news.”

SAN JUAN
Puerto Rico’s largest newspaper has sued the island’s governor,claiming that he used his position to exact revenge against the paper forpublishing a series of articles critical of the government.

The publication El Nuevo Dia charges that Governor Pedro Rossello canceled government advertising contracts with the paper worth $500,000 monthly afterstories appeared charging the Rossello administration with corruption andmismanagement.

Rossello said last week that the decision was made simply because advertisingin other papers proved to be more cost-effective.

El Nuevo Dia also charges that the paper’s sister company, a cement plant, hasbeen the target of several unwarranted government probes. A lawyer for thenewspaper parent company argued that “the greatest modern threat to the FirstAmendment is to squeeze regulated industries because of the editorial contentof sister companies.”