Question: Which of the following is a bigger threat to the United States–foreign nations working against us or young Americans without education, job prospects, or connections to mainstream American life?
Young Americans without education . . . 74% Foreign nations working against us 18% Don’t know 8%
by Rushworth M. Kidder
Are mega-mergers unethical?
This is the month to ask. The gorilla, of course, was Citicorp and Travelers Group. If approved, it would bring banking and insurance together into Citigroup, the nation’s largest financial services company.
Then came news of Nationsbank and BankAmerica, merging to create the first coast-to-coast bank, and of BankOne and First Chicago NDB, blending into the fifth largest bank in the nation. And on April 16 came word from Canada of the marriage of Canadian Imperial Bank of Commerce and the Toronto-Dominion Bank–announced just three months after the Royal Bank of Canada and the Bank of Montreal decided to merge.
Much of the ethical commentary surrounding these mergers focuses on competition. That’s not surprising. If mergers create monopolies, we ought to worry. One of the core moral values on everyone’s list, after all, is fairness. Monopolies can tilt the playing field so far as to squelch fair and equitable access to resources–an obviously unethical result. But are April’s mergers anticompetitive? Not necessarily. Many commentators, so far, tend to feel that economies of scale will create downward pressure on the costs of services and the access to resources. That pressure may well offset any price spirals or exclusionary practices that could come from a bank exercising a new-found monopolistic muscle.
But competition is not the only ethical issue here. More subtle and complex is the vulnerability of large-scale systems in a technological age. To see why, put together the bank-merger announcements with two other bits of recent news: the tale of a collapse, on April 13-14, of an AT&T data network, and the story, announced April 21, of hackers invading Pentagon computers.
Had the AT&T breakdown occurred with a small local provider, few people would have noticed. But the AT&T mainframe relay network reportedly has about 40 percent of the market. The breakdown took 26 hours to correct–and it was a full week before AT&T engineers were able to announce the cause.
And had the group known as Masters of Downloading broken into a local high-school system, few heads would have turned. In fact, they claim to have penetrated the Defense Information Systems Network, a colossus that controls U.S. military satellites.
By itself, the AT&T breakdown is not necessarily an ethical issue. It could have arisen from innocent human error or sheer mechanical failure. But it could also have been caused by an ethical collapse.
More sobering is the Pentagon attack, which was no accident. That the group seems only to have wanted to call attention to loopholes in the system is comforting. That they could easily have been terrorists with no moral constraints is deeply troubling.
What’s this got to do with mega-mergers? It’s all in the term “mega.” What makes us vulnerable is the interaction of unethical action with sheer size. That’s the explanation underlying some of the most chilling world-class disasters of the past 15 years–Chernobyl, the Challenger, the Exxon Valdez, the Barings Bank. In each of those cases, a few unethical decisions were megaphoned, amplified, and leveraged by new and high-powered technologies into catastrophic consequences–none of which could possibly have had world-class effects fifty or a hundred years ago, when the systems were so much smaller. The decisions themselves, sadly enough, were perhaps no different from unethical choices made by executives and managers a century ago. But that’s not the point. These days, the potential for a single unethical decision to have immediate, devastating, and global results is immense.
And the key is scale. Suppose the world’s next Nicholas Leeson–the 29-year-old trader in Singapore whose deceptive practices sparked the conflagration that brought Barings Bank to bankruptcy–goes to work for your local bank. Suppose it goes belly-up. That’s too bad. But it’s not a world-class tragedy.
But what if he goes to work for an 800-pound gorilla like Citigroup? He’s very smart. He’s got immense technological capacity on his desk. And he’s working in a flattened management structure that, in an effort to save overhead and bolster the bottom line, has removed the oversight he might have had a few years ago. If Citigroup goes belly up, that’s more than too bad. That’s got real domino potential. That reverberates through financial markets around the world.
Mergers, in other words, are risky. But so are lots of worthwhile things. The ethical stand, here, is not to oppose all mergers–just as it’s not to oppose all computer-based data or defense systems. It is to make the case that risk needs to be managed. The 21st century will be filled with very large systems run by very smart people. Now, more than at any earlier time, it is vital that those people be very ethical. You can almost phrase it as a law: As scale grows geometrically, the necessity for ethics grows exponentially.
Any merger that does not give high priority to serious, sustained efforts in corporate ethics and values-based hiring poses a moral risk that society, for good reason, may finally decide outweighs all the economies of scale.
(c)1998 by Rushworth M. Kidder
The idea that a person can be held accountable for what he or she says is along-standing principle of ethics and the law, and is a central issue in thisweek’s news of the world of ethics.
A case that could realign the foundations of workplace law was brought beforethe Supreme Court last week and tops this edition of Newsline. At issue iswhether demonstrable damage to one’s career is necessary to bring a sexualharassment claim, or if the overture and the threat of retaliation are enough.Many cases hinge on this question, including the one brought by Paula Jonesagainst President Clinton.
And in a case that profoundly affected workplace antidiscrimination law, afollow-up criminal trial will determine questions relating not only to whattwo former executives of Texaco said about minorities, but whether theyactively sought to hide evidence in the case.
In Croatia, a nation beset by turmoil, the question of press accountability forits statements comes center stage this week. We bring you the story of theCroatian government’s libel suit against a reporter who published details of acorruption probe against the government’s cabinet ministers.
A court case with far-reaching implications for domestic free speech issues isalso part of our report this week in a follow-up story. The libel suit against Internet serviceprovider America OnLine was halted by a federal judge, who ruled that AOL isnot responsible for the content of the messages it carries.
Two stories this week highlight controversial claims that business andgovernment say one thing but do another. In California, a group of lawyerscharges that shoe and apparel manufacturer Nike is misleading consumers bycondoning sweatshop conditions in Asia but using a public relations campaignto cover them up. And a leading charity accuses the British government offueling third-world skirmishes while claiming to adhere to a strictly ethicalforeign policy regarding arms sales.
In other ethics news of the week, we look at a conflict in the United Kingdom, whereSpanish commercial fishermen violated limits on the size of their catch,highlighting a growing controversy over opening British waters to othermembers of the European Community who must observe difficult-to-enforce limitsif the scarce resources in British waters are to be preserved.
Ethics is center stage in another story from England, this one centering on aBritish-Dutch petroleum firm’s efforts to publicly rate itself on itscorporate ethics.
And in Washington, the Federal Communications Commission is taking action onan ethical ill of the information age–”slamming,” the process of switchingconsumers’ long-distance carriers without their knowledge.
Finally this week, we report on a story that also revolves around theresponsibility one takes for statements–as a research scientist earns aprison term for dropping a rat tail into a pack of french fries, claimingMcDonald’s put it there, and trying to extort hush money from the restaurantchain.
–Carl Hausman
LONDON
An international charity has charged that British arms manufacturersare fueling conflicts worldwide despite British claims that it has curtailedweapons exports and established an ethical foreign policy.
Oxfam accuses more than a hundred British firms of fueling conflicts indeveloping nations at an annual profit of more than $1 billion.
Oxfam’s report, titled “Small Weapons, Wrong Hands,” blasts British foreignpolicy as “lax, secretive, and dishonest,” and faults the U.K. Department ofTrade and Industry for having a bias against curbing arms sales because of themassive profit involved.
A spokesperson for the government disputed those figures and told London’sThe Independent newspaper that the government has made significant progress inarms export control.
WHITE PLAINS, N.Y.
Two Texaco executives are back in court facing criminalcharges of destroying evidence in a landmark case revolving around workplacediscrimination at Texaco.
Richard Lundwall and Robert Ulrich, both former employees of Texaco’s financedepartment, are charged with destroying documents relating to a civil claimbrought in 1994 by black employees who charged that they were denied parity inpay and promotion.
Texaco paid $176 million in 1997 to settle that case after audiotapes showedkey executives using racial slurs.
Prosecutors allege that Lundwall and Ulrich were hostile to the investigationand deliberately hid and destroyed relevant documents in order to frustratethe probe.
Lawyers for the pair claim that Texaco’s lawyers gave their clients inadequateinstructions regarding which documents to turn over to investigators.
SAN FRANCISCO
A group of California lawyers is using state consumer laws tosue Nike, Inc., for allegedly misleading the public about the treatment ofcontract workers in Vietnam, China, and Indonesia.
The suit charges that Nike mounts “sweatshop” operations and continues toviolate the human rights of more than 450,000 Asian workers, despite companydirectives and public relations material proclaiming fair treatment of thoseworkers.
Nike, the world’s largest shoe maker, has repeatedly denied charges of workermistreatment, and points to a 1992 code of conduct and a 1993 “Memorandum ofUnderstanding” which Nike said have clearly demonstrated that the firm doesnot tolerate mistreatment of workers.
Plaintiffs in the civil case further allege that Nike has “willfully misled”consumers and failed to tell Californians the truth about business practices. The suit seeks damages on behalf of the citizens of California and calls for a”corrective” advertising campaign.
LONDON
Twelve Spanish fishing companies pleaded guilty last week to catchingthree to four times their monthly limit and were fined more than $1.6 millionfor overfishing in British waters and depleting endangered species there.
The incident is expected to spark further friction between the United Kingdom and otherEuropean Community nations over fishing rights. British fishermen have chafedunder laws passed in 1992 granting fishing rights in British waters to otherEU members.
The latest incident fuels the British claims that many of the competitors forthose limited resources are dishonest.
WASHINGTON, D.C.
In a decision that has widespread repercussions on thelegal and ethical responsibilities of Internet service providers, a federaljudge last week dismissed America OnLine from a lawsuit brought against AOLand on-line gossip columnist Matt Drudge.
Judge Paul Friedman ruled that Internet service providers are shielded fromliability from material they disseminate.
The case was brought last year after Drudge published–and later retracted–a report carried on an AOL page alleging that White House aide SidneyBlumenthal had a history of spousal abuse.
America OnLine argued that requiring Internet service providers to assumeresponsibility for their content would chill free speech and discouragecompetition in the electronic information marketplace.
The judge allowed the personal suit against Drudge to continue.
WASHINGTON, D.C.
In a case that could shift the landscape of U.S. workplacelaw, the Supreme Court last week took up a case challenging the assumptionthat provable damage to a victim’s career must be part and parcel of a sexualharassment claim.
The case before the high court involves a woman who alleges her boss attextile giant Burlington Industries Inc. advised her that sex with him couldadvance her career and refusal could stall it.
But despite her claim that she refused the proposition, she was promoted oneyear later–on the recommendation of the supervisor she rebuffed.
The Supreme Court must now decide whether an unfulfilled threat constitutessexual harassment. Under current precedent, sexual harassment plaintiffs mustprove that workplace harassment hurt their careers or constituted a continuinghostile work environment.
Among the cases that could be affected by a new criterion is that of PaulaJones, whose case was dismissed when a federal judge ruled that then-governorClinton’s alleged harassment did not harm her career.
A decision is expected before the court recesses in July.
ZAGREB, Croatia
A Croatian journalist has been acquitted of libel chargesafter he and his newspaper published a report alleging widespread corruptionin the Croatian government.
A judge here ruled that journalist Davor Butkovic and the Globus newspapercould not be held liable for quoting the report written by a third party, theNew York-based consulting and investigations firm Kroll Associates.
The case assumed significance in the world information marketplace because theCroatian government has used libel prosecution as part of a crackdown ondissent, filing more than 500 lawsuits against the country’s independent mediain the past few years.
Butkovic welcomed the verdict but told the Associated Press that his acquittal”by no means implies that the situation with media freedom is significantlyimproved.”
LONDON
Petroleum giant Royal Dutch Shell gave itself mixed marks in itsfirst report card on the firm’s business ethics and social responsibility,vowing to clean up problems relating to bribery and pledging to become moresensitive to the environment.
The report claimed that Shell fired 23 employees for bribery in 1997, althoughit did not identify individuals.
Shell also announced that it is withdrawing from the Global Climate Coalition,a Washington-based lobbying group opposed to the greenhouse gas emissionrestrictions proposed at the recent worldwide climate summit in Kyoto, Japan. The move was characterized in the report as evidence of Shell’s emergingsensitivity to environmental issues.
The report also promised new standards for measuring Shell’s performance,inviting readers’ suggestions on how to integrate profitability and corporateethics.
HAUPPAUGE, N.Y.
A New Jersey man was sentenced last week to two-and-a-half yearsin prison for planting contaminants in foods and trying to extort hush moneyfrom McDonald’s and Coca-Cola Co.
Dr. Michael Zanakis, a research scientist, was convicted in February of mailfraud, wire fraud, and extortion.
Zanakis claimed to have found a fried rat tail in his son’s McDonald’s frenchfries and demanded $5 million from McDonald’s to keep the complaint quiet. But prosecutors charged that Zanakis took the tail from his medical researchlab and fried and planted it himself.
Last year, Zanakis took $4,600 from the Coca-Cola Company after plantinggrease in a can of Coca-Cola Classic and threatening to go public.
Zanakis’s lawyer told the Associated Press that his client will appeal thesentence.
WASHINGTON, D.C.
The Federal Communications Commission last week exacted anunprecedented penalty against a telecommunications firm that contributed toone of the emerging ethical problems of the information age–duping confusedand information-choked consumers into switching long-distance service, aprocess known as “slamming.”
The FCC took away the operating license of the Fletcher Companies, the first suchinstance of such revocation, and fined the firms more than $5 million.
Fletcher’s companies allegedly switched consumers’ long distance carriers byforging names on authorizations or hiding a request to switch long distanceservices to one of Fletcher’s companies in the fine print of sweepstakesentries. In the process, the Fletcher-operated companies bilked consumers ofmillions in unauthorized switching charges, according to the FCC.
The FCC vowed to get tough on slamming after receiving more than 20,000complaints last year.
On April 17, 1998, at the National Press Club in Washington, D.C., the Center for Congressional and Presidential Studies of the American University held a conference called “Political Advertising in Election Campaigns.” Top scholars and political consultants from around the country presented work on political advertising–most notably on negative advertising.
The effects, “good” and “bad,” of negative advertising are the subject of much recent debate. Conventional wisdom says that while the public rightly hates negative political advertising, such ads work and so they will always be with us. Inside the political science community, however, a different sort of conventional wisdom holds sway: Negative ads help the political process. And they work. So they will always be with us.
Each side of this debate appears to have data to support its position: Studies alternately seem to show that either political attack advertising depresses voter turnout or a good, heated campaign tends to increase it. There does not yet seem to be consensus on where all the data points.
Into this scene comes new research, presented at the conference and titled “The Effectiveness of Negative Political Advertising: A Literature Review,” done by Dr. Richard Lau (a political science professor at Rutgers University) and Dr. Lee Sigelman (a political scientist at George Washington University). They are among the top thinkers in this field.
Lau and Sigelman have been synthesizing all of the existing research on the subject of negative political advertising in an effort to draw conclusions that are independent from any particular study methodology. This work may have the effect of helping to make sense out of all the competing studies.
They set out to test conventional wisdom, to see what the data really says. In other words, Lau and Sigelman set out to test the following model statement: Negative ads work, even though voters hate them, and they tend to disenfranchise the electorate.
The results, depending on what side of the debate you are on, are surprising. Among Lau and Sigelman’s findings:
Overall, the scholars find conventional wisdom only to be partially correct:
Our review . . . concludes that negative ads are probably liked less than positive ads, but they are not reliably any more memorable, and there is no good evidence that they are any more effective than positive ads. . . . However, there is a reasonable chance that, at least in some circumstances, the widespread use of negative political advertisements has consequences that most of us would consider unhealthy for democracy. . . .
Of these conclusions, the most surprising–but the one in which we have the greatest confidence, based on existing research–is that negative political ads are no more effective than positive political ads.
For more detailed excerpts of the paper, see the Project on Campaign Conduct site.
–Brad Rourke
–Dr. Samuel Johnson (1709-1784), as quoted in The Columbia Dictionary of Quotations (1993, Columbia University Press)
Do you think your teenager lies to you a lot of the time, some of the time, hardly ever, or never?
| A lot | 7% |
| Some of the time | 47% |
| Hardly ever | 40% |
| Never | 6% |
| Don’t know/no answer | 1% |
by Rushworth M. Kidder
With the news of an accord in Northern Ireland, we’re on the verge of a diplomatic hat trick for this past decade. The Berlin Wall came down in 1989. South Africa voted for peace in 1994. If the people of Erin ratify this accord in the May 22 referendums, three of the most intractable conflicts in the world will have been sorted out in nine years.
How did this latest one happen? And what lessons does it hold for negotiators in business and elsewhere?
Three things, I think, came together to make it work: patience, pressure, and principles.
Patience. As an American journalist writing from Northern Ireland in the early 1980s, I remember being brought up short by an Irish colleague. “You Americans,” he said in substance, “think everything can be negotiated in a week. You think all you have to do is get the parties around the table talking and you can settle things. Ireland’s not like that.” Fortunately, the key negotiator in this latest accord, former Maine senator George Mitchell, wasn’t your typical Yank. He had learned boundless forbearance, both as a Mainer and as senate majority leader. Dedicating himself to the Irish task for two full years, he dispelled the American reputation for impatience: He listened carefully, kept a low profile, and never gave up.
Pressure. But Mitchell tempered patience with firmness. He set an Easter week deadline and, with unsleeping persistence, compelled the parties to meet it. In this he was not alone. President Clinton’s commitment to resolve the Irish issue, and his 1994 invitation to Sinn Fein leader Gerry Adams, provided crucial momentum. Similarly, Tony Blair put the Ulster issue at the top of his agenda after his election as Britain’s prime minister in May of 1997. And the Irish taoiseach, Bertie Ahern, threw his support into the negotiations–despite having to take time off to attend his mother’s funeral in the final days. With Blair and Ahern at the negotiating table in Belfast, and Clinton phoning key parties in the wee hours of the White House morning, the pressure was relentless, authoritative, and precisely applied by individuals at the highest levels who were seen to be making personal sacrifices.
Principles. But a look at the 67-page peace agreement itself reveals something else equally significant. Among the first issues addressed under the heading of “Declaration of Support” were the shared core values upon which the parties agreed. Fortunately, the negotiators ignored the modern-day cynics who scoff at the idea that people can hold common principles. Instead, this accord articulates a kind of code of ethics built on such values as “reconciliation,” “tolerance,” and “mutual trust.” It states unequivocally that “we are committed to partnership, equality, and mutual respect as the basis of relationships.” And it proclaims its “total and absolute commitment” to “peaceful means of resolving differences,” and its “opposition to any use or threat of force by others for any political purpose.”
This point about core values looks deceptively simple. In fact, the agreement on shared principles is the crux of the matter. In diplomacy, as in business, proposed partnerships and acquisitions often seem to have everything shipshape. When they sink, it is often on the shoals of the discovery that, at bottom, the entities have different values. Build consensus on values, and the relationship can tolerate wide differences at the strategic and operational levels. Fail to align the values, and no amount of managerial goal setting or tactical cooperation can keep things afloat for long.
Little wonder, then, that so many multinational firms these days are taking hard looks at their codes of ethics, with an eye to identifying values their international partners can share. The Irish accord is built on just that kind of foundation. It will be tested–surely by the voters and perhaps, sadly, by the terrorists. But the fact cannot be reversed that it laid down, for all history to see, the values upon which all parties agree. Hat trick or no, it sends a powerful moral message of hope.
(c)1998 by Rushworth M. Kidder
The relationship of a government to the governed is a central topic inethics, and a theme in this week’s Newsline.
What obligations does a private citizen have to protect the interests of thegovernment? Topping the week’s news in ethics is a story about a worker whosued on behalf of the United States government, claiming that his employerdefrauded the military by hiding defects in the Bradley Fighting Vehicle, acombination tank and troop transport that has a troubled history of durabilityand safety. The case was brought under the False Claims Act, legislation thatallows whistleblowers and the government to join forces in litigation.
How far should the government intrude into business? Three stories in thisweek’s issue revolve around that question. In Australia, the government findsitself coping with a massive dock strike that tests the limits of business toreplace a unionized workforce. In France, disgruntled farmers facing lowprices want a subsidy from the government, while the government claims it hasalready given enough. And in Vietnam, a difficult ethical question centers onthe relationship of information-hungry businesspeople to the gatekeepers ofinformation–local officials who sometimes find their willingness to partwith that information lubricated by questionable cash payments.
In other news, the ethical dilemma of asking some people to shoulder a riskfor the greater good of the society was put to the test in an usual case–shipping Vietnam-era napalm through several states in order to eventuallydispose of it. As we report, napalm is a substance few of us want in our backyards, and the unwanted cargo train became something of an incendiary FlyingDutchman, a shipment doomed to forever seek a friendly port.
Obligations of a firm to its neighbors and employees dominate two stories thisweek. In one, a major petroleum firm has agreed to check the safety ofstorage tanks and mount a major cleanup if significant problems arediscovered. And Ford Motor Credit Co. last week was hit with a $660-millionlawsuit by a group of current and former employees who claim they were discriminatedagainst in pay and promotion.
Finally, we report on a woman who, if nothing else, is a survivor. ImeldaMarcos, who with her late husband Ferdinand came to personify greed andcorruption, is back in public life and making a run for the Philippinepresidency.
Carl Hausman
SAN JOSE, California
The company that manufactures the troubled BradleyFighting Vehicle, an amphibious military tank that has performed far belowexpectations, was hit with a $310 million judgment last week after a federaljury concluded that the firm lied about the Bradley’s safety flaws.
A spokesperson for FMC Corp. called the verdict “outrageous” and vowed to appeal.
The suit against FMC was brought by whistleblower Henry Boisvert, whoinitiated the action under the False Claims Act, legislation allowing workerswho believe their employers are defrauding the public to sue on behalf of thefederal government.
Boisvert was fired by FMC after questioning FMC’s claims about the Bradley andalerting the government.
Although the U.S. Justice Department declined to join Boisvert in the suit, 70percent of the award will go directly to the U.S. Treasury. The remainderwill go to Boisvert and his attorneys.
Jury foreman Francisco Nazario told reporters that the jury concluded that FMCconcealed pertinent information about the Bradley.
“They said it could swim across rivers,” Nazario said, “when the evidenceshowed that actually it didn’t fully do what [FMC] claimed it would do.”
CHICAGO
The Amoco Corp. last week agreed to pay $2.6 million to the State ofIllinois for not fully cooperating with regulators who charged the firm withviolating regulations on underground gas storage tanks, and to clean up thosetanks if an inspection finds they need repair.
While agreeing to the settlement, Amoco continued to deny the charges.
As part of the settlement, Amoco will investigate the condition of undergroundtanks and effect repairs if, as the state alleges, more than 60 percent areunsafe.
The State of Iowa won a similar case against Amoco in 1996, collecting $10million in cleanup costs.
