Ethics Newsline®

Official results of the vote on the Belfast peace accords, held on Friday, May 22, 1998, in both Northern Ireland and in the Republic of Ireland are given below. A 50-percent “yes” vote was required for passage of the accords.

by Rushworth M. Kidder

Don’t look now, but there’s a Business Values War a-brewing.

It’s like the Family Values War, in which each side uses that maddeningly inexact phrase to beat the other upside the head in a “my-values-are-better-than-your-values” tiff.

Here, however, the stakes are more economic than social. And the protagonist is Bill Gates, chairman and CEO of Microsoft Corporation.

“How ironic,” huffed Mr. Gates in response to lawsuits filed last week by the U.S. Justice Department and a bevy of state attorneys general, “that in the United States–where freedom and innovation are core values–these regulators are trying to punish an American company that has worked hard and successfully to deliver on these values.”

We’ll get to his core values in a moment. First, some context.

This certainly is a major antitrust case, seeking to rein in the apparently monopolistic power of Microsoft. But it’s not like the case of Standard Oil, a firm that produced commonplace and comprehensible things–kerosene and gasoline–before Teddy Roosevelt’s trustbusters broke it up in 1911. And it’s not like Big Tobacco, the other feds-versus-firms standoff in the news today, whose products are downright dangerous.

Microsoft, by contrast, doesn’t sell necessities to the general public. And it doesn’t make things that kill. It invents benign things that few can fathom–software programs–and sells them to people who dearly want them. So many people use them, in fact, that Microsoft has established a de facto communication standard.

So why break it up?

That’s the vexing question. Ethically, of course, it’s wrong to use overwhelming economic force (as Microsoft allegedly is doing) to crush out rivals whose only sin is seeking to compete. It’s often done. But it’s morally wrong–and it feels wrong to us because we admire the little guys who sometimes get crushed, and because we prize competition.

But it’s also wrong to impede the creative energies that produce breakthrough systems–especially when the frontier is so untraveled that nobody can guess what’s next. Along this frontier, breakthroughs don’t always come from little guys starving in a garage. They often arise because you have the financial luxury to think outside the box, build for the long haul, and find a sure market for the results. For that, size can be key. So we admire big guys who make things happen, and we value concentration.

Result: a right-versus-right dilemma. We want the goodies that Microsoft’s Windows operating systems provide. But we want to preserve competition. That public confusion provides a perfect arena for this new and befuddling Values War.

Never mind that Mr. Gates runs his rhetoric up the flagpole of “American” patriotism. Never mind that he invokes the Puritan ethic in talking about how hard the company has worked. The real complication comes in his reference to the “core values” of “freedom and innovation.” Sounds good, doesn’t it? But what exactly does it mean?

Freedom, with its overtones of liberty and independence, resonates well in this patriotic context. But if it’s not reined in by some higher values, it can veer swiftly into licentiousness and excess. Similarly, innovation can be put to good or bad ends: A pocket calculator helps both the greengrocer on the corner and the drug dealer in the ally.

Put more formally, these two values can lead either to ego-centric or socio-centric ends, supporting either selfishness or altruism. Why? Because they’re what philosophers call “instrumental” or “operational” values. They aren’t ends in themselves. They’re means to other ends–ends that are usually described as “intrinsic” or “terminal” values. Only if those other ends are high and noble, then, will freedom and innovation reflect such intrinsic core values as truth, compassion, or responsibility.

This confusion of the operational with the intrinsic is one of the slickest weapons in the Values War. It lets us seem to talk about core values. But it blurs the vision and muddles the logic. Despite the fact that any amount of evil can be perpetrated in the name of freedom and innovation, these words are so positively charged that we think we must approve them uncritically. After all, who could be against these things?

Answer: the public. For “innovation” it’s beginning to read “wiliness.” For “freedom” it’s starting to think “permissiveness.” Sorry, Mr. Gates: You’ll need to put some really core values on display, and demonstrate how Microsoft is honoring them, to win this Values War.

That question, something of an anthem of self-interest, is a central theme ofseveral stories in this week’s Newsline.

While no one disputes the necessity of acting in reasonable self-interest, thetop of this week’s news in ethics centers on the delicate balance betweenreason and overreaching. A complex story about a U.S. satellite firm,President Clinton, and the Chinese government tops our report, as charges flyin Congress claiming that Clinton allowed the export of U.S. satellitetechnology to China after his campaign received donations from the Chinesegovernment and the head of the satellite company.

An equally complex story revolves around the antitrust suit lodged againstMicrosoft Corporation. As we report, Microsoft is headed to court to maintain what the company claims is its rightto bundle its proprietary browser in the Windows 98 operating system. Criticsclaim Microsoft has exceeded the limits of reasonable self-interest and isdetermined to monopolize the market for software that navigates the Web.

Throughout Europe and Asia the limits of self-interest are being tested asstrikes disrupt commerce and services.

In other news from the world of ethics, France is engaged in an experiment totake hours of the work week away from some and give them to others–shortening the maximum number of hours to 35 in hopes of curbing unemployment.

In Washington, a three-year sting operation resulted in indictments againstseveral South and Central American banks last week. The Justice Departmentcharges them with money laundering for drug cartels.

Three stories this week deal with suits brought against major corporations. Amissile inspector was given a settlement from Hercules, Inc., in awhistleblower suit. The Justice Department joined a whistleblower suit againstseveral major oil firms. And General Motors was found partially liable forfailing to correct what plaintiffs in a personal-injury case alleged was afatal design flaw.

We conclude our report with stories that follow up on the ethical angles topast major news events. The official licensing agency for the late PrincessDiana is suing the Franklin Mint for allegedly trying to capitalize on herimage. And basketball player Latrell Sprewell, who made headlines lastDecember after choking his coach, last week filed an action claiming that theNational Basketball Association unfairly penalized him.

And in a new feature this week, we follow up on past Newsline articles,updating you on the outcome of stories. This week: the outcome of an actionagainst bookseller Barnes and Noble for selling books containing photos ofnude children.

OAKLAND, California
Basketball player Latrell Sprewell, suspended fromleague play after choking his coach, filed a $30 million lawsuit last weekagainst the National Basketball Association (NBA), charging the organization with violatinghis civil rights, engaging in racial discrimination, and creating an illegalmonopoly in U.S. basketball.

After throttling coach P. J. Carlesimo last December, Sprewell was fired by histeam, the Golden State Warriors, and suspended from NBA play for one year. InMarch, an arbitrator reinstated Sprewell to the Warriors and reduced hissuspension to the remainder of the 1997-98 season.

Sprewell still says the “punishment does not fit the crime” and is suing theNBA for lost salary and punitive damages, alleging that the joint penaltiesimposed by the NBA and the Warriors violated the NBA players’ CollectiveBargaining Agreement. In addition, Sprewell says the NBA’s lockhold onprofessional basketball made it impossible for him to find work during hissuspension, a penalty that he says was made unfairly severe because he isblack.

The NBA dismissed Sprewell’s allegations as “absurd.” NBA commissioner DavidStern told Reuters that “Latrell Sprewell is not a victim.”

WASHINGTON, D.C.
The relationships among President Clinton, a U.S. satellitefirm, and the Chinese government ignited controversy last week over thepresident’s decision to let Loral Space & Communications Ltd. export acommunications satellite to China and assist in its launch.

Critics of the president charge that the deal was payback for politicaldonations from Loral’s president and from the Chinese government. The chargeswere denied by the White House and by Loral.

Export of satellite technology to China touched off controversy because somefear it could be put to military use.

House speaker Newt Gingrich last week called for creation of a committee toinvestigate the allegations.

LONDON
The Princess of Wales Memorial Fund, the agency that raises money forthe late Princess Diana’s charities, last week sued the U.S.-based FranklinMint, charging the memorabilia maker with violating intellectual propertyrights by producing the “People’s Princess Doll,” modeled after the Princessof Wales.

The Fund, granted exclusive rights to use the late Diana Spencer’s name,image, and likeness, says that Franklin Mint’s unauthorized 16-inch doll willsully the fund’s image and undermine donations to the official fund.

The suit, filed in Los Angeles, compared the Franklin Mint to “vulturesfeeding on the dead.”

Officials of the Franklin Mint did not immediately comment when contacted lastweek by the Philadelphia Inquirer newspaper.

PARIS
In a move intended to cut high unemployment and create new jobs,France’s National Assembly voted last week to reduce the nation’s legal work week from 39 to 35 hours.

The government has earmarked more than $1 billion as bonuses for businessesthat implement the 35-hour work week ahead of the three-year phase-in schedule. Plan backers claim the short work week will spread existing jobs among morepeople, curbing the 12-percent unemployment rate that is blamed for many ofFrance’s social ills, the Associated Press reported.

Many business leaders opposed the reduction, claiming that it will cut profitmargins and raise unemployment in the long run.

WASHINGTON, D.C.
A U.S. District Court judge ruled last week that Microsoftmust face a September trial on antitrust charges brought by the JusticeDepartment and state attorneys general, denying the software giant’s requestfor a full seven months to prepare its case.

At the same time, Judge Thomas Penfield Jackson ordered that Microsoft may forthe time being sell an unaltered version of Windows 98.

The Justice Department had sought a ruling forcing Microsoft to either pullits own Web browser out of the Windows 98 operating system or include abrowser manufactured by a rival company. Government attorneys claimed thatincluding the browser in Windows amounted to an unfair and unethicaladvantage for Microsoft in the lucrative market for browsers–programs thatallow consumers to easily navigate the World Wide Web.

HOLLYWOOD, Florida
A jury last week ordered General Motors to pay $33million to the family of a passenger killed in 1991 when the 1983 OldsmobileCutlass in which he was riding burst into flames after a crash, affirming theplaintiff’s claim that GM engineers failed to fix a design flaw by installinga gas-tank shield.

GM said it would appeal the verdict, claiming the vehicle was safe and the”improper evidentiary rulings” tainted the verdict.

The jury assigned 55 percent of the blame for the death on GM and theremainder on the driver of the pickup truck that lost the trailer it was pulling.The runaway trailer struck the auto.

BRUSSELS
A series of recent strikes has disrupted commerce and services inseveral European and Asian countries, highlighting the growing cost ofcontention between workers and their employers, reports the BBC and AssociatedPress.

• In Russia, coal miners, gold miners, and scientists staged massive strikesthroughout last week, blocking off roads and railways to protest wage arrearsand unpaid pensions. In what appears to be the most potentially damagingstrike, coal miners blocked the Trans-Siberian railway to protest six monthsof unpaid wages.

• In India, state-hospital workers turned away hundreds of sick people during a 12-day strike, opening their doors again only after the governmentagreed to better pay and work conditions.

• And in France, the European Union stepped in to prevent further shippingactions by disgruntled truckers who have blocked roadways and ports,disrupting international commerce and putting some U.K. haulage firms out ofbusiness. The EU agreement requires member governments to ensure shippingroutes are opened within five days from the start of a labor dispute.

SALT LAKE CITY
A defense contractor last week agreed to a $55 millionsettlement with a whistleblowing former employee who alleged that the missilemaker falsified inspection records for nine missile systems, including theTrident, ICBM, and Titan missiles.

Missile inspector Katherine Colunga was fired by Hercules, Inc., in 1987, andtwo years later brought suit against her former employer, charging Herculeswith inadequate safety inspections of its missiles, including those carryingnuclear warheads.

Colunga’s suit was filed under the terms of the False Claims Act, which allowsindividuals to sue contractors on behalf of the federal government, even if–as in Colunga’s case–the government declines to join the suit.

Hercules paid nearly $5.5 million in March to settle a separate actionalleging that Hercules managers were overbilling the federal government,according to the Associated Press.

WASHINGTON, D.C.
The Justice Department last week announced it would join asuit brought by a group of independent whistleblowers against Texaco, Inc.,charging the petroleum giant with underpaying royalties for oil taken fromfederal and Native American lands.

The Justice Department had previously joined similar civil suits againstAmoco, Burlington Resources, Conoco, and Shell, all of which were accused ofundervaluing purchased oil to evade an estimated $2 billion in federalroyalties.

The U.S. Department of the Interior permits private companies to extractminerals and petroleum from federally owned land as long as royalties are paidbased on the resources’ fair market value.

Texaco denied the charges and promised full cooperation with the JusticeDepartment, Reuters reported.

Such whistleblower suits allow private parties who claim that firms orindividuals are cheating taxpayers to sue on behalf of the government and askthe U.S. government to join in the suits.

FRANKLIN, Tennessee
One of three pending obscenity cases against Barnes &Noble Bookseller was settled last week when a Tennessee store agreed to placebooks containing photographs of nude children on higher shelves–at least five-and-one-half feet from the floor.

Three southern Barnes and Noble outlets were indicted recently on chargesrelating to child pornography over the sale of three books, The Last Day ofSummer and Radiant Identities by Jock Sturges and The Age of Innocence by David Hamilton.

There has been no announcement yet on whether the other two Barnes & Noblestores in Tennessee and Alabama will follow suit and end their respectiveindictments on charges of distributing “material that may be harmful tochildren” by raising it out of their reach.

In a week that saw government antitrust suits against Microsoft, Congressional testimony on lax security on government computers, and even a satellite snafu that caused two days of pager outages, the Administration is putting forward a new security directive aimed at countering “cyberthreats to the nation’s electronic infrastructure.”

The directive comes on the heels of last year’s report from the Presidential Commission on Critical Infrastructure Protection (PCCIP). However, controversy has emerged over the policy and how much authority it would give the FBI and Justice Department versus a broader public-private sector effort that the presidential commission had urged.

Impact on U.S. business may be great: 80 to 90 percent of this electronic infrastructure is privately owned. However, the threat to the U.S. public may be just as great:

“A personal computer and a simple telephone connection to an Internet service provider anywhere in the world are enough to cause a great deal of harm,” a report by the PCCIP cautions. “The right command sent over a network to a power generating station’s control computer could be just as effective as a backpack full of explosives, and the perpetrator would be harder to identify and apprehend.”

Liberty means responsibility. That is why most men dread it.

–George Bernard Shaw (1856-1950)