Ethics Newsline®

“To rule is not so much a question of the heavy hand as the firm seat.”

– Jos&eacute Ortega y Gasset (Spanish philosopher, writer, and statesman, 1883-1955)

Skim the recent literature on business management, and you’ll probably spot a trend: Values-based management is "in." Read more carefully, and you’ll spot a conundrum: "Values" means "anything that matters deeply to you."

Do you want an environment where fairness and honesty prevail? Then you’ll manage by those values. Do you want an atmosphere where corner cutting, humiliation, one-upmanship, and the dread of being downsized keep everyone on their toes? Then those are the values you’ll promote.

Which makes a simple point: Ethics is all about values, but not all values are ethical. It goes without saying that companies striving to operate ethically will practice values-based management. But unless they define their values as ethical ones, they can’t be certain that their management practices will foster greater ethical behavior.

You’d think, then, that a company wanting to promote ethical management would simply set forth its ethical values and tell employees to manage by them. But that’s trickier than it sounds. Ethics is not like OSHA training. A company running safely needs to be sure that everyone obeys the safety rules. Whether or not you mentally buy into the rules is immaterial: You comply, because that’s a requirement. Ethics, by contrast, is complex, nuanced, and personal. If you don’t believe in the ethical standards, it’s hard to be anything more than a perfunctory employee.

So a company with genuine ethical aspirations needs to build ethical buy-in. One of the best ways, we’ve found, is by asking the employees themselves to identify the values that ought to define the ethical standards of their firm.

Consider a survey we’ve just finished. Last year, we asked more than 1,000 employees of a major company in the financial services sector (we’ll call it XYZ Inc.) to tell us about their ethics and values. More than a century old, based in the Midwest, XYZ Inc. is rapidly expanding here and overseas. It is, in other words, an almost textbook case of a U.S. firm going global — and asking itself what values it wants to bring into its next century of operation. Though the survey was proprietary, we have XYZ’s permission to share the data anonymously.

We started with a list of 13 values: compassion, fairness, freedom, generosity, honor, humility, preservation of nature, respect, respect for elders, responsibility, social harmony, tolerance, and truth. Pick the five, we said, that you feel are most important to you. Later in the survey, we gave them the same list again, with instructions to choose the five values that "should guide the formation of an ethics program" at their company.

Here’s what they told us, by percentage and number of response:

These top four values were so strongly held that the fifth choice in the “Personal” column, “freedom,” got only 40 percent — while under the “Company” column the next highest was “compassion,” with only 31 percent. And not only were they strong, but they were consistent: At XYZ Inc., the values employees held at home were exactly the ones they wanted to bring into their business environment. In fact, they felt even more strongly about them at work than at home: Every one of these values rises in importance as you move from the "Personal" to the "Company" column.

Also important are the things this survey didn’t find. While women were slightly more likely than men to choose "respect," and employees over 50 somewhat more likely to choose "truth," and U.S. employees a bit more likely than international employees to choose "responsibility," there were no obvious trends here. These values, it seems, are universally held across XYZ Inc.

Even more significant, perhaps, is what the survey told us about the merger of two corporate cultures. We sampled 715 employees from the original XYZ Inc., and another 405 who joined during the year in an acquisition. Differences? Hardly any.

Which bodes well for the future of this firm. Whatever the differences in corporate culture between the two parts of this newly blended company, the values are solidly aligned. And when more than 80 percent of the employees agree on those values — and feel no pressure to check their personal values at the door as they arrive each morning and suit up with a different set — that’s a strong sign that values-based management will probably translate into ethical practice.

(c)1999 by Rushworth M. Kidder

A major concern of the law and of ethics is making up for some wrong — setting a situation right and giving injured parties what’s due them. Several of our top stories in this week’s edition of Business Ethics Newsline deal with this dilemma.

At the top of our report is a story about another major verdict against a tobacco company, a decision that some observers say signals a new attitude on the part of U.S. juries toward awarding such damages.

Next, a report on the aftermath of the Olympic scandal: According to sources close to the negotiations, Olympic sponsors want the organizing committee to make up for the event’s loss of luster with additional advertising rights and other marketing opportunities.

From our international desk comes a report about the Nigerian president-elect’s visit to the United States — part of his campaign to restore confidence in a nation riddled — and nearly ruined — by corruption.

We follow up with three stories dealing with the intersection of ethics and technology: IBM’s mandate that Web sites carrying its advertising disclose their privacy policies; a verdict relieving the Weather Channel from liability for failing to predict a storm; and Colgate-Palmolive’s decision to end animal testing for some of its products.

And we conclude our wrap of the week’s news in ethics with three stories on various aspects of business practice: a report on bottled water; a European Union claim that some paper companies conspired to fix prices; and a petition by an Amazon tribe that claims a U.S. businessman has no right to patent a plant used in their sacred rituals.

Our Canadian correspondent, Errol Mendes, files two dispatches this week, one concerning international debt relief and the other about a truly universal problem: stress on the job.

Our Trendlines feature links you to two features dealing with ethics: a look at corruption in small companies, and a story about how the medical profession is struggling to keep ethical advances accelerating at the same pace as technological achievement.

This week’s edition concludes with three follow-up stories from our Whatever Happened to… file: a spat over noisy U.S. aircraft, a shipment of toxic waste that predictably no one wants, and Latrell Sprewell’s discrimination suit.

Have a productive, ethical week.

–Carl Hausman

PORTLAND, Oregon
Cigarette maker Philip Morris last week was ordered by an Oregon jury to pay a record $81 million to the family of a man who died after smoking the company’s signature-brand Marlboros for 42 years.

The verdict was the largest ever awarded in an individual’s lawsuit against a tobacco company, and included $800,000 in compensatory damages and $79.5 million in punitive damages.

Analysts say the size of the verdict shows juries’ increasing willingness to hold cigarette makers responsible for the health risks posed by cigarettes, the Reuters news agency reported.

Philip Morris plans to appeal the ruling, which comes six weeks after the company was ordered to pay $51.5 million in a similar case in California, which it will also appeal.

NEW YORK
Corporate sponsors are asking Olympic organizers to make concessions — such as additional advertising space and venues — to make up for the Salt Lake City bribes-for-votes scandal, according to the Associated Press.

The AP quoted anonymous sources who attended meetings held last week between sponsors and marketing representatives of the International Olympic Committee (IOC).

The 11 biggest corporate sponsors of the Salt Lake Olympics were assured that reforms were in place. But they received no promises about the “compensatory items of marketing value,” according to the AP.

WASHINGTON
Nigerian president-elect Olusegun Obasanjo traveled to the United States last week to assure government and business leaders that Nigeria would work to stamp out corruption in order to win badly needed foreign investment.

He met with United Nations secretary-general Kofi Annan on Tuesday, and with President Clinton on Wednesday.

During his meeting with President Clinton, Obasanjo promised to work for peace and stability in the troubled nation, the BBC reported.

Obasanjo has acknowledged that his country will have to stanch fraud and drug trafficking before regaining investors’ confidence, but declined to outline specific plans until he takes office at the end of May.

President-Elect Obasanjo also asked the United States to consider forgiving part of Nigeria’s $30 billion in foreign debt, which Obasanjo says is further crippling Nigeria’s ability to devote funds to fighting corruption, the Associated Press reported.

NEW YORK
IBM announced last week that it would toughen its stand on Internet privacy by pulling its advertisements from Web sites that lack an adequate privacy policy statement for consumers.

IBM spokesman John Bukovinsky told CNET that IBM hoped to use its “financial leverage” to push Web site operators to implement privacy policies, telling customers where, when, and how information about them is collected and used.

Bukovinsky estimates that only 30 percent of the 800 sites advertising IBM products currently have such a policy.

IBM announced that it would phase in its new privacy policy, demanding compliance from sites in the United States and Canada by June 1.

The company has $60 million earmarked for Internet advertising in 1999, and is second only to Microsoft in Internet advertising.

MIAMI
A federal judge ruled last week that weather forecasters are not liable for the accuracy of their predictions, dismissing a $10 million lawsuit filed by the family of a man who died in a storm that was not predicted by the Weather Channel.

U.S. district judge James Paine dismissed the case, ruling that a weather forecast is merely a “prediction of indeterminate reliability,” the Reuters news agency reported.

In his ruling, Paine wrote that holding weather forecasters responsible for their predictions could extend their liability to “farmers who plant their crops based on a forecast of no rain, construction workers who pour concrete or lay foundation based on the forecast of dry weather, or families who go to the beach for the weekend.”

The fisherman’s family had argued that the Atlanta-based Weather Channel, which failed to announce a coming storm front visible to its staff, had misled 58-year-old Charles Cobb into believing that the weather would be good, Reuters reported.

Cobb and a friend died when a sudden storm overtook their 12-foot aluminum boat off the Florida Keys in 1997.

NEW YORK
Colgate-Palmolive Co. announced last week that it will call an immediate halt to animal testing for the company’s adult personal care products, including toothpaste, deodorants, shampoos, shaving cream, and fragrances, the Associated Press reported.

Colgate said the move was a “positive step forward” and would not interfere with product safety.

A company statement noted that 98 percent of its product testing is currently conducted without the use of animals.

NEW YORK
Bottled water may not always be more healthy than what comes out of the tap, according to a new study released last week by the National Resources Defense Council (NRDC), a New York-based environmental watchdog group.

A series of independent tests sponsored by the NRDC revealed widespread irregularities in the purity and origin of bottled water in the United States, where annual sales have tripled over the past decade to an estimated 3.4 billion gallons, the Reuters news agency reported.

The NRDC study examined 103 brands of bottled water available in the United States, and found that “between 25 and 40 percent of bottled waters are repackaged municipal tap water that may or may not have been subjected to additional treatment.”

The report also cited the occasional presence of bacteria and contaminants in bottled water samples.

The NRDC report urges the government to restore public confidence in tap water by cleaning up municipal water supplies, and impose regulation on the bottled water industry, which largely operates under an “honor system” in most states, Reuters reported.

The International Bottled Water Association (IBWA), responded by claiming the NRDC report was a scare tactic, and that “for the past 37 years … there have been no confirmed reports in the United States of illness or disease linked to bottled water.”

BRUSSELS
The European Union’s Executive Commission last week sent notices to 25 companies it believes have conspired to artificially inflate European prices for paper used to print newspapers and magazines.

The notices mean that the EU may impose fines and settlements for damages unless the companies cited can prove their innocence.

The European newsprint market was rocked by severe price hikes from 1989 to 1995, driving some publishers out of business, the Associated Press reported.

Finnish-Swedish paper giant Stora Enso, one of the companies targeted by the Commission’s probe, denied any wrongdoing, saying the price increases “took place in accordance with supply and demand,” according to the Reuters news agency.

WASHINGTON
A coalition of Amazon tribes last week petitioned the U.S. government to revoke a U.S. businessman’s patent on a variety of the ayahuasca plant, a species of vine held sacred by the tribes’ shamans.

The tribes’ complaint stems from a 1986 patent on the ayahuasca vine obtained by Loren Miller, a U.S. businessman whose company manufactures plant-based pharmaceuticals and cosmetics.

Since learning of the patent in 1995, the tribes have charged Miller with “biopiracy” and exploiting traditional Amazon knowledge of the plant for his own benefit.

“Commercializing an ingredient of our religious and healing ceremonies is a profound affront,” a representative of the tribes told the U.S. government last week, the Reuters news agency reported.

More than 400 Amazon tribes value the ayahuasca vine for its medicinal and hallucinogenic properties, which are often employed in religious ceremonies, according to Reuters.

Researchers believe it may hold promise for treating mental illness.

Special to Newsline from Canadian correspondent Errol P. Mendes

WINNIPEG
Canadian Prime Minister Jean Chrétien will propose a form of conditional debt relief for the Third World to the Group of Eight during its June Summit in Cologne, Germany.

In a speech in Winnipeg, the PM said he will propose that debt relief and new World Bank and International Monetary Fund loans should be tied to developing countries improving their living standards, rather than buying weapons to oppress their own people and destabilize their neighbors.

Predicting that one of the major sources of conflict in the world in the next century will be the disparity between the rich and poor of the world, the PM also called on the G-8 to forgive all debt owed by what is technically known as the Heavily Indebted Poor Countries.

He also called for the review of cases of extremely poor countries that have been ineligible for debt relief if those countries have been hit with “unexpected shocks” such as the Honduran natural disaster.

Finally, the PM suggested that 10 million ounces of gold from IMF reserves be sold to help heavily indebted countries that promise to use the loans for human development purposes.

Special to Newsline from Canadian correspondent Errol P. Mendes

TORONTO
A new poll commissioned by the Canadian Institute of Stress found that nearly half of Canadians feel stressed out all or most of the time at work.

Pollara Inc., which conducted the poll, suggested that technology was the cause of the increased anxiety, effectively ensuring that people never leave work due to the use of cell phones and pagers.

The Institute also blamed uncertainty and lack of control over their job performance in the workplace for high levels of employee stress.

NEW YORK
Small companies run by a founding CEO and a weak or inexperienced board of directors are especially prone to financial fraud and collapse, according to a new study.

Examining a random selection of 200 fraud cases prosecuted by the Securities and Exchange Commission between 1987 and 1997, the researchers found that the company’s CEO was personally involved nearly 75 percent of the time.

Computer and software companies were particularly vulnerable. They accounted for one in six cases of reported fraud, according to the Associated Press.

CHICAGO
The Associated Press last week reported on the growing concern among many doctors that medical technology is outpacing medical ethics, leaving doctors unprepared to meet the ethical demands of modern medicine.

“Much of the challenge of our era is bringing our ethical compass up to date to match our technical expertise,” Dr. Linda Emanuel, director of the American Medical Association’s Institute for Ethics, told the AP.

The list of challenges is long, including physician assisted suicide, fertility treatments that may lead to multiple births, animal-organ transplants into humans, and the harvest of reproductive cells from dead family members.

“In all matters touching life, the problem is that there have got to be limits,” Richard McCormick, a professor of Christian ethics at the University of Notre Dame, told the AP. “We have responsibilities. The question is drawing the line at the proper place.”

BRUSSELS
The European Union announced a one-month delay of its controversial ban on noisy U.S. airplanes, allowing further negotiations and forestalling a possible trade dispute with the United States.

The EU ban forbids the use of older U.S. planes fitted with “hush kits” to reduce noise pollution. EU legislators say the planes are still too noisy, too inefficient, and too polluting to meet EU standards.

U.S. officials have blasted the ban as discriminatory, saying that it favors newer European aircraft over older commercial U.S. planes, which have been retrofitted with hush kits and new engines to meet international noise standards.

The U.S. government, which has threatened a retaliatory ban on the Concorde jet, insists that the EU measure would cost U.S. businesses between $1 billion and $2 billion, the Reuters news agency reported.

The United States wants the EU to join in crafting new international standards that would eliminate the need for the EU ban, now scheduled for implementation at the end of April.

SIHANOUKVILLE, Cambodia
Three thousand tons of toxic waste were shipped back to Taiwan last week after being illegally imported and dumped a few miles from Cambodia’s only seaport.

The mercury-laden waste was discovered near Sihanoukville last December, sparking riots and panicked evacuations that resulted in four deaths.

Taiwan’s Formosa Plastics apologized for secretly dumping the toxic waste, but refused to accept responsibility or pay compensation, the Associated Press reported.

The incident has sparked charges of government corruption in Cambodia, where more than 100 officials were suspended under suspicion of accepting $3 million in bribes for approving the illegal dumping, according to the BBC.

Plans to import the waste, along with 1,000 tons of contaminated soil, to the United States were abruptly canceled after tests showed higher toxicity levels than the U.S. importer had previously reported.

SAN FRANCISCO
A federal judge last week dismissed basketball player Latrell Sprewell’s discrimination lawsuit against the National Basketball Association (NBA) and his former team, ruling that Sprewell’s attempt to choke his former coach had warranted his punishment, the Reuters news agency reported.

Sprewell attacked Golden State Warriors coach P.J. Carlesimo during a practice in December 1997. The Warriors terminated the last three years and $24 million of Sprewell’s contract, and the NBA suspended him for one year.

An arbitrator reduced Sprewell’s suspension to 68 games and ordered him reinstated on the Warriors, which promptly traded him to the New York Knicks.

Sprewell, who is black, sued the NBA for $30 million, contending that his punishment was overly severe and racially motivated.

Sprewell plans to appeal last week’s ruling, which also orders him to pay the NBA’s legal costs, according to the Associated Press.