Ethics Newsline®

“The surest way to corrupt a young man is to teach him to esteem more highly those who think alike than those who think differently.”

– Friedrich Wilhelm Nietzsche (German philosopher, 1844-1900)

From the American Federation of Labor - Congress of Industrial Organizations (AFL-CIO):

“According to Business Week, the average CEO of a major corporation made 42 times the pay of a typical American factory worker in 1980. By 1990, that ratio had more than doubled to 85 times the average factory wage and almost quadrupled again to a staggering 326 times more in 1997. If that rate of exponential growth were to continue, the average CEO would make the equivalent salary of more than 150,000 American factory workers in 2050.

“Defenders of runaway CEO pay argue that market forces are at work determining executive compensation levels and that CEOs are justly rewarded for increasing their company’s stock prices. But are America’s CEOs entitled to such lucrative pay deals based on their performance? In 1998, the business press headlines exploded with stories of pay for mediocrity:

“‘Pay for No Performance: CEOs were supposed to get top dollar only when they got top results. Now, many are getting top dollarno matter what the results.’
The Wall Street Journal, April 9, 1998

“‘Executive Pay: Stock options plus a bull market made a mockery of many attempts to link pay to performance.’
Business Week, April 20, 1998

“‘Did They Earn It? Sometimes there’s no connection between pay and performance.’
Forbes, May 18, 1998

“When it comes to executive pay, stock option grants appear to have the Midas touch. As the stock market has broken record after record, they have become an increasingly popular form of executive compensation. According to the executive compensation consulting firm Pearl Meyer & Partners, stock options make up two-thirds of a CEO’s pay, up from one-third in the 1960s.

“Instead of having to beat their competitors, CEOs with stock option-fueled compensation packages are graded on a curve: the rising stock market. As stock prices increase generally, even mediocre CEOs can realize large gains from their options. Human resources consultant William M. Mercer Inc. estimates that only a quarter of option grants awarded to CEOs contain any sort of link to performance, such as premium-priced or indexed stock options. . . .

“A recent research report by London-based economic advisor Smithers & Co. recalculated the profits of the 100 largest U.S. companies by adjusting for the value of their executives’ stock options. The study found that 11 firms went from profit to loss, and another 13 had their profits cut in half. In addition, the Investor Responsibility Research Center has found the average potential dilution of shareholder value from stock option plans is 9.2 percent for S&P 500 companies.

“Do American companies have to pay exorbitant CEO salaries because there just are not enough capable executives in the United States? Corporations abroad do not seem to have trouble motivating their CEOs with less stratospheric pay packages. According to the international human resources company Towers Perrin, the average CEO in the United Kingdom makes $645,540; in Japan, $420,855; and in Germany, $398,430 — far less than the average American CEO. When Germany’s Daimler-Benz acquired the substantially smaller American car producer Chrysler, Chrysler CEO Robert Eaton was making eight times the salary of Daimler-Benz CEO Juergen Schrempp. . . .”

SEATTLE
Retailing giant Wal-Mart last week agreed to drop its lawsuit charging Internet upstart Amazon.com with stealing Wal-Mart’s executives and trade secrets.

Under terms of the agreement, Amazon.com will reassign most of its former Wal-Mart employees to nonparallel positions and return some “old papers” brought to Amazon.com by former Wal-Mart workers.

Amazon.com was not required to admit any wrongdoing, and may retain the services of its chief information officer, former Wal-Mart executive Richard Dalzell, according to the Reuters news agency.

Wal-Mart had charged Amazon.com with stealing “thousands of Wal-Mart confidential documents,” brought to the company by Dalzell, according to the Associated Press.

Cynical, self-absorbed, alienated — everybody knows the stereotype of Generation X, the twenty-something children of the Baby Boomers. They vote less. They want more, and want it all now. They don’t have much loyalty. Their decision-making is summed up in the word "whatever."

Now a new report on moral leadership, released by the Kenan Ethics Program at Duke University, shatters that stereotype. Titled “The Content of our Character: Voices of Generation X,” it was prepared by a group reflecting a wide array of political views and backgrounds. It tackles our toughest social issues. Its core message: Ethical leadership is the key to our collective future. Most importantly, the 50 individuals who wrote it are virtually all in their twenties — graduate students, young professionals, community leaders, the "best and brightest" of Generation X.

In the spirit of full disclosure, I must declare that I’ve lent my name to this report, along with 17 others in the older generations. That’s not to say it’s a perfect document. Like most such reports, it reflects the peculiarities of its day. That day was August 28, 1998, when the panel convened in Durham, North Carolina. Remember the context: Only 11 days earlier, President Clinton had publicly confessed to his affair with Monica Lewinsky; American cruise missiles had been sent to demolish terrorist facilities in Afghanistan and Sudan; Russia had announced its intention to default on its debts, triggering a collapse in the U.S. stock market that would happen three days later.

As this group sat down, in other words, there were ethical issues howling outside every window. The report reflects those momentary concerns. It notes that "the example of Senator Joseph Lieberman, who publicly challenged the fitness of the president, provides a refreshing precedent for future leaders." It wallows in numbers and percentages about the markets. It explains the Y2K computer problem in almost sophomoric detail. It takes sides, praising the McCain-Feingold campaign finance reform bill.

In another few years, such particulars will be forgotten. To their credit, the report’s authors know that, and strive for something higher. And while the language at times wobbles between the truly soaring and the awkwardly flighty, it provides some phrases that deserve repeating.

"To revive the soul and refresh the conscience of politics, we must overcome the contagious cynicism that threatens participation by emerging young leaders," they say in their section on "America’s Politics." Under the heading of "America’s Markets," they note that "we affirm and support a socioeconomic paradigm that recognizes moral duty as a powerful influence on corporate behavior . . . . Put simply, values are profitable."

And they take it all personally. "We cannot ignore the personal responsibility that each and every one of us shares in promoting strong character and principles," they say. "The first step towards holding our leaders to higher standards is holding ourselves to higher standards."

It is, in other words, a fine and cheering read. The report ranges broadly across the spectrum of America’s most pressing problems, under the four headings of Politics, Markets, Civil Society, and Community. It brings the lens of ethics to bear on each one. And it delineates a powerful set of shared values that includes honesty, courage, equity, transparency, sustainability, accountability, human dignity, selflessness, and mutual responsibility.

Had this report been only half as good, in fact, it would still matter greatly. Why? Two reasons. First, it speaks in the authentic voice of a generation — and, more importantly, to a generation. Like an excellent student paper, its importance is not in any groundbreaking new ideas or amazing shafts of light. What matters is that those who wrote it really get it. This report rings with the true mettle of commitment. And the things to which they want themselves and their fellows to commit — values, ethics, and principled leadership — are without question the defining issues of our time.

Second, this report has reams to say to my generation, especially in the business community. These young people care deeply. They think independently. They work hard. They’re the kind of people you want to hire.

If, that is, they’re representative of their generation. The next step for the Kenan Ethics Center, I hope, is to turn these perceptions into a series of survey questions for all the twenty-somethings who, unlike many on this panel, did not go to Ivy League universities and aren’t Truman Scholars. My guess is that the views in this report are deeply shared. I think this coming generation cares about ethics in ways that far surpass their Baby Boomer parents. To verify that guess would be the best news of all.

(c)1999 by Rushworth M. Kidder

When is treating one group of consumers differently from another simply sensible business practice, and when does it cross the line into discrimination? That’s the thread running through our top stories this week in Business Ethics Newsline, your weekly guide to news viewed through the lenses of commerce and ethics.

Our lead story this week deals with a lawsuit alleging that a long-distance company discriminated against certain clients by refusing to connect an international call from an inner-city neighborhood that reportedly is a hotbed of calling-card fraud.

We follow with a report on President Clinton’s backing of a bill to eliminate what supporters claim is persistent discrimination against women because of pay inequities. Next, we have a story dealing with allegations of discrimination against banana growers affiliated with U.S. companies.

And we have an interesting report centering on claims by a watchdog group that banks unfairly double-charge customers for ATM services.

Two reports this week deal with freedom of the international press: the Iranian government’s displeasure with a newspaper flexing its muscles under the government’s partial press-freedom policy, and a Manila newspaper that apologized to the nation’s president after running an investigative feature about him — much to the dismay of some staffers who claim the paper is simply knuckling under to economic pressure.

Several interesting stories come from Britain this week: contention over a proposed link between teachers’ salaries and student performance, a report claiming British supermarkets overcharge customers, and a government agency that is considering classifying workplace stress as an occupational health hazard.

And we conclude our wrap of the news of the week with two domestic stories about sensitivities and sensibilities: a campaign to make New York City police be more polite to members of the public (including those they arrest), and a federal panel that revoked several of the Washington Redskins’ trademarks on the grounds that they were demeaning.

Our Canadian correspondent Errol Mendes files two ethics-related reports this week, one about workplace violence, the other concerning lawsuits related to alleged sexual abuse in church-run schools.

Our Trendlines department looks at several interesting ethics-related features: schools earning income from allowing businesses to undertake market research on campus; a fresh look at the relationship between ethics and keeping customers happy and loyal; and a researcher who says that more Americans than ever are defining who they are and what their life is about via the workplace.

And we conclude our report with two updates: one on a recent tobacco damage award, the other on Wal-Mart’s trade-secrets lawsuit against Amazon.com.

Have a productive, ethical week.

– Carl Hausman

LOS ANGELES
MCI WorldCom was sued last week for allegedly discriminating against minorities by blocking international calling-card calls made from inner-city neighborhoods — areas designated as high risk for calling-card fraud.

Darren Haylock launched the class-action lawsuit after he claimed MCI blocked the use of his calling card when he placed an international call from south central Los Angeles, a predominately black neighborhood.

According to court papers, an MCI operator told Haylock that his call would “not be allowed” because it was being made from an area that had a high level of calling card fraud, the Reuters news agency reported.

An MCI spokesman called the suit “totally without merit” but did not comment further.

WASHINGTON
President Clinton last week urged lawmakers to pass the Paycheck Fairness Act, a new bill designed to give working women more protection from pay inequities.

Clinton told supporters that the gap between men’s and women’s wages “is not just a woman’s issue” because working women often have families to support, the Reuters news agency reported.

The new Paycheck Fairness Act, introduced into Congress last month, would require the government to keep better data on pay inequities, and entitle women to sue discriminatory employers for unlimited compensatory and punitive damages.

Also last week, April 8 marked Equal Pay Day, inaugurated to focus attention on the pay gap faced by women, who on average earn about 75 cents for every dollar a man makes, according to 1998 government statistics.

WASHINGTON
The World Trade Organization (WTO) last week ruled that the European Union is discriminating against U.S. and Latin American banana growers, giving the go-ahead for $191.4 in punitive tariffs requested by the United States.

The approved sanctions — the largest ever authorized by the WTO — still fall short of the $520 million asked for by Washington, according to the Associated Press.

American banana companies have insisted that EU import policies favor banana growers from former British and French colonies in Africa and the Caribbean.

The WTO gave U.S. leaders ten days to narrow down the list of EU targets, which include Scottish cashmere, French handbags, and German coffee makers.

A spokesman for the EU trade minister said the trade bloc was studying a possible appeal, but had “no intention of dragging this out,” according to the Associated Press.

WASHINGTON
Many banks are hiking automatic teller machine (ATM) fees and unfairly exploiting consumers, according to a new report issued last week by the U.S. Public Interest Research Group (PIRG).

The consumer group’s “ATMs: Always Taking Money” report slams banks for imposing surcharge fees assigned to users who don’t have an account with the ATM’s bank.

Those surcharges unjustifiably boost the bank’s profit, PIRG claims, because the bank already collects a portion of the fee that customers must pay their own bank for using another firm’s ATM.

The American Bankers Association says the estimated $2.1 billion in annual ATM surcharge earnings actually helps consumers by allowing banks to subsidize an increasing number of ATMs in convenient locations, the Associated Press reported.

TEHRAN
Tehran’s revolutionary court last week banned the moderate pro-women newspaper Zan after the paper published part of a New Year message from the widow of the former shah, who was deposed in the 1979 Islamic revolution.

Faezeh Hashemi, owner of the newspaper and daughter of Iran’s ex-president Hashemi Rafsanjani, will be tried for publishing the message, according to a report from Reuters.

Zan staff announced that they would ignore the ban.

The incident is the latest press-versus-government skirmish since partial press freedom was instituted after moderate president Mohammad Khatami took office in 1997.

MANILA, Philippines
The top editors of one of the Philippine’s oldest newspapers resigned in protest last week after their paper’s owner apologized for allegedly libeling Philippine president Joseph Estrada.

In return, Estrada announced that he would drop his libel lawsuit against the Manila Times.

The Times last week published a page-one apology, saying it had erred when calling Estrada the “unwitting godfather” of an allegedly corrupt government contract, the Associated Press reported.

The apology sparked an in-house rebellion from several Times editors and writers, including the paper’s managing editor and editor in chief, who said the apology had been issued to head off punitive actions against other businesses owned by the newspaper’s corporate parent.

LONDON
Britain’s largest teachers’ association last week agreed to vote on holding a one-day strike to protest the government’s controversial plans to link teachers’ pay to the performance of their students.

The National Union of Teachers (NUT) approved the strike vote and warned U.K. education secretary David Blunkett that NUT teachers would refuse to cooperate with the government’s 1998 plan to restructure teachers’ salaries.

Under the government plan, teachers’ pay would be directly linked to peer appraisal, skills review, and their students’ performance on national tests and exams.

Education Secretary Blunkett told NUT delegates that he was willing to discuss how to best implement the plan, but that the proposal’s key principles were “nonnegotiable,” the BBC reported.

LONDON
Britain’s consumer watchdog agency last week recommended an investigation into the country’s supermarket chains, which it says may be grossly overcharging U.K. consumers.

After an eight-month investigation, the Office of Fair Trading (OFT) concluded that the high level of supermarket profits and prices “requires further investigation,” the BBC reported.

The antitrust Competition Commission will now investigate whether U.K. supermarkets, including industry leaders Asda, Safeway, Sainsbury, and Tesco, are overcharging consumers by not passing on suppliers’ price breaks.

Recent price comparisons have shown that U.K. consumers pay up to 45 percent more for supermarket goods than do their European and American counterparts, according to the BBC.

Supermarket representatives denied the charges and insisted that their pricing structures are fair.

LONDON
The U.K. government last week issued a report asking for public and corporate input on whether on-the job stress should be regulated under the country’s health and safety laws.

The new 30-page report by Britain’s Health and Safety Commission aims to stimulate discussion on workplace stress and about holding employers legally responsible for fostering stressful work environments, the BBC reported.

WASHINGTON
A U.S. government trademark panel last week ordered the cancellation of seven trademarks registered to the Washington Redskins football team, ruling that the trademarks were disparaging to Native Americans.

The panel’s decision comes after a seven-year fight by Native American groups to end the use of Indian-themed symbols by schools and sports teams across the United States.

Redskins spokesman Mike McCall told the Washington Post that the team plans to continue using its name, which he says “honors Native Americans,” and will appeal the ruling.

More than 600 of the 3,100 high school and college teams using Native American names, symbols, and mascots, have changed their names and logos, the Post reported.

Current legal challenges are underway against the Atlanta Braves and the Cleveland Indians.

NEW YORK
New York City mayor Rudolph Giuliani last week announced a new politeness campaign for the city’s police officers.

New police politeness measures include requests that police officers address individuals politely and apologize for causing inconvenience to people they stop.

Undercover agents will monitor police politeness, the Reuters news agency reported.

Giuliani’s new campaign follows large-scale protests over the shooting death of immigrant Amadou Diallo, an unarmed West African man shot 41 times by police last February.

Special to Newsline from Canadian correspondent Errol P. Mendes

OTTAWA
A former employee of OC Transpo, the Ottawa Transit company, went on a rampage last week, killing four of his former colleagues with a hunting rifle before killing himself.

The gunman, Pierre Lebrun, had been fired in 1997 after an incident involving an assault, but the union fought to have him reinstated and he subsequently obtained a management job, which he later resigned.

The incident fueled immediate debate over the precautions that establishments should undertake to either avoid or limit the harm from similar incidents, and about the propriety of reinstating employees with a history of violent behavior.

Special to Newsline from Canadian correspondent Errol P. Mendes

OTTAWA
Canadian native groups are launching lawsuits against the Christian churches that ran residential schools for Indian children, where it was alleged that sexual and physical abuse took place.

A spokesman for the Canadian Catholic Bishops said it was not unrealistic that many dioceses would go bankrupt if the claims were successful. The Catholic churches face at least 700 lawsuits.

A total of 1,800 suits by former students are expected to be filed against the Catholic, Anglican, and United Churches, along with the federal government.

The Canadian federal government set up the schools but contracted out their operation to the churches with the aim of assimilating native children into European culture.

Eager to avoid the spectacle of churches going bankrupt, the federal government, native groups, and the churches are seeking alternative dispute resolution models to work out the claims.

MONTCLAIR, New Jersey
An increasing number of corporations are paying schools to sponsor opinion polls, product research, and taste tests with their students — an alliance that worries some parents.

According to the New York Times, nonprofit and for-profit corporations are finding a willing audience in U.S. schools, many of which are swapping time with students for badly needed funds.

Such arrangements include:

• A New Jersey school that was paid $7,100 by a cable television channel in exchange for time to run weekly 30-minute focus groups with students for five months
• A Massachusetts school that received $600 in exchange for taste testing cereal and answering follow-up questions
• A Michigan elementary school that conducted taste tests and opinion polls in return for $2,000 to $4,000 a year

School representatives say the new arrangements bolster sagging budgets and educate students about making choices.

But some students and parents are raising concerns about the nature of the new arrangements, many of which swap school time for money, giving corporations a captive audience at the taxpayer’s expense, according to National Public Radio.