SAN FRANCISCO
Online journalists are becoming increasingly concerned about the often-hazy line differentiating the appearance of online news content from paid advertisements, according to a report from the Reuters news agency.

While the online industries’ ability to link news with so-called contextually related advertising content is often seen as an advantage, the ads are increasingly looking like news stories, confusing readers who often believe the solicitations are unbiased and independent.

Critics point to the example of Amazon.com, which recently disguised advertisements for books in the form of independent editorial book recommendations, according to Reuters.

Industry leaders, including the Internet Content Coalition, are pushing for the creation of guidelines that would require Web sites to clearly disclose how they differentiate advertising from editorial content.

BRUSSELS
The European Union announced last week that it will not appeal a ruling by the World Trade Organization (WTO) that EU import policy discriminates against American banana growers.

EU trade commissioner Leon Brittan met with U.S. government officials last week to discuss how the European Union could amend its policies to end the discrimination and avoid $191 million in punitive U.S. tariffs.

The talks were also scheduled to address looming trade disputes over noisy aircraft and hormone-treated U.S. beef, which was banned by the EU in 1988.

Last year, the WTO ruled that the EU ban was illegal, prompting U.S. warnings of as much as $250 million in punitive tariffs if the ban is not lifted, the Associated Press reported.

OVERLAND PARK, Kansas
The National Collegiate Athletic Association (NCAA) last week approved a final arrangement for disbursing a $54.5 million penalty awarded to coaches whose salaries were illegally capped.

The penalty stemmed from a class-action lawsuit contending that the NCAA’s 1991 decision to cap the salaries of 2,000-3,000 assistant coaches at $16,000 was an illegal attempt to freeze wages.

Under terms of the final arrangement, all NCAA schools — even those that did not employ restricted-salary coaches — will ante up between $60,000 and $240,000 to pay the $54.5 million penalty, according to the Washington Post.

“Try not to become a man of success, but rather a man of value.”

– Albert Einstein, (U.S. (German-born) physicist, 1879-1955)

From the American Management Association (AMA):

“A mixture of genders, ethnic backgrounds, and ages in senior management consistently correlates to superior corporate performance, according to an American Management Association survey performed in partnership with Business and Professional Women USA. . . .

“While larger companies were more likely to include at least one senior manager who is female, or under 40, or of non-European descent, smaller firms had a greater percentage of such individuals at the top table, and a greater likelihood that a majority of the senior managers were outside the white, male, over-40 model. Smaller firms were also far more likely to include a high percentage of relative newcomers (i.e., with the organization less than five years) among their senior executives. While small-company growth rates are often higher than those of larger firms, the survey data shows that within organizations of similar size, such factors as heterogeneity, open teams, and a hefty flavoring of youth still correlate strongly to better results. . . .

“Women hold a greater percentage of senior management posts in service firms (average: 17.8 percent) than in manufacturing companies (average: 12.9 percent). Women particularly predominate in such sectors as communications (average: 31.6 percent), and business and professional services, which includes software developers and business consultancies (average: 31.4 percent), and have greater-than-average representation on senior management teams in finance, insurance, and real estate. These are the same business sectors that outperformed the manufacturing sector in every category of organizational performance listed in the AMA questionnaire. Again, correlation is not causation, but women have certainly seized the opportunities for advancement offered in the service sector, and have prospered with that sector.

“Persons of African, Latin, and Indo-European descent have a higher degree of representation on senior management teams in smaller companies and in the service sector, which again tend to report better organizational outcomes than larger companies and manufacturers. . . .

“In the wider view, it is not the predominance of any one set but rather the participation of managers of varying gender, ethnicity, age, and experience that correlates to strong organizational performance. Where sub-sets are large enough to provide statistical reliability, the presence of ’some’ such managers on the senior management teams generally correlates to better performance than does an indicated presence of ‘none.’”

In pop-culture views of modern U.S. corporations, employees come off as a cynical lot. They see themselves as working for managers who manipulate underlings, fudge data, and lie to customers. Arriving at work, they believe they must leave their personal values behind, taking on a different, lower set. They’re constantly pressured to compromise their standards — and to look the other way when they see others being compromised.

How accurate is that description? You first need to ask something else: How will you determine an answer to that question? After all, you can’t simply ask employees, head-on, “Are you ethical?” It’s too easy for them to flash back an unthinking “Sure!” With a slightly more complex set of questions, however, you can get them to comment on those they work with — to assess, in other words, the ethical environment in which they operate.

What comes back is an encouraging read on the nation’s corporate moral barometer.

Take, for instance, a survey we’ve just completed at the Institute for Global Ethics with more than 1,000 employees from a major Midwestern corporation in the financial services sector. Two weeks ago, I reported on the values they identified. Now, looking at the ethical environment in which they operate, one thing is clear: The pop-culture view of corporate America is hopelessly flawed. At least at this firm (which, to preserve anonymity, we’re calling “XYZ, Inc.”), the barometer remains high, according to five different probes:

1. “Do you ever feel pressured by other employees to compromise [your company's] standards of ethical business conduct in order to achieve business objectives?” “Never,” said a healthy 59.6 percent, with an additional 26.5 percent saying “rarely.” We also asked whether “people at your level” felt pressured (”never,” 43.3 percent) or whether your boss did (”never,” 42.8 percent).

2. How about people working for your closest competitor? Nearly half the sample said they didn’t know about the ethics of their competition. But of the others, only 7.3 percent said their competitors “never” felt pressured to compromise. These respondents aren’t kidding themselves about the world. Yet despite the high standards held by their own company, they feel that can continue to compete in an environment that doesn’t always uphold those standards.

3. Another item asked if respondents sensed a difference between their own ethical standards at home and at work. The responses at XYZ were nearly unanimous: 87 percent saw no difference. This question was benchmarked by an earlier nationwide survey from the Ethics Resource Center (ERC), in which 68 percent of respondents saw no difference. Both numbers are strong: Fewer than a third of the nation’s employees, and little more than a tenth of XYZ’s, find any truth in the much-ballyhooed notion that corporate life turns its people into ethical Jekylls and Hydes.

4. “Do you believe that people above your level ‘look the other way’ and ignore unethical conduct by employees to meet business objectives?” At XYZ, 71 percent said “never” or “rarely” — a number that drops to 62 percent for the ERC’s nationwide survey. While that leaves a substantial number who say they do see bosses ignoring ethics, it’s by no means a majority. Most employees believe that those in charge pay attention to ethical lapses.

5. Do you agree, we asked, that “when choosing between doing what’s right and earning bigger profits, American business managers generally choose bigger profits?” The ERC reported that over 80 percent of their respondents agreed. At XYZ, the figure was only 46 percent. While the XYZ crowd could be accused of being blind to reality, it may simply be that, like most people, they’re seeing the world through the lens of their own rather uncynical experience.

6. Finally, a group of questions probed specific actions that would constitute unethical practice in the financial services industry, ranked on a scale of 1 (never) to 5 (fairly often). Here are three:

Caveats? Sure. Our respondents could all be lying to the surveyors. The instrument could be flawed. Or, worst case, they could all be so morally puerile that they don’t see unethical behavior even when they trip over it. But there’s enough internal consistency in the surveys, and enough external evidence from my conversations around XYZ, to suggest a less cynical answer. That doesn’t prove that America’s corporate ethics are above reproach. But it fatally wounds the argument that it’s a moral wasteland out there. There’s at least one company where ethics really is taken seriously, lived conscientiously, and practiced regularly.

(c)1999 by Rushworth M. Kidder

Is an illegally striking union directly responsible for employer losses? Is a movie producer liable for copycat crimes? How far do the limits of responsibility extend?

Those are intriguing questions, and they lead our edition of Business Ethics Newsline, your weekly guide to news with an ethical angle.

Our top story concerns an award that shocked many legal observers and may set a precedent for future strike cases: A judge awarded American Airlines a whopping settlement against its pilots union — a settlement far exceeding the net worth of the union.

We follow up with three stories about litigants who place the blame for violence on the shoulders of media: a claim that violent media spurred a schoolyard shooting, a robbery spree, and a murder of a man who embarrassed a talk-show guest.

And in a similar vein, we report on the latest U.S. city to file suit against gun manufacturers.

We have an interesting lineup of stories from the international desk: a corruption conviction against Pakistan’s former prime minister Benazir Bhutto; a Brazilian banking scandal; and possible antitrust charges to be brought by the European Union. We also have a domestic story revolving around an antitrust probe involving American Airlines.

The International Olympic Committee is the focus of two stories this week: a “morals clause” proposed for Olympic sponsor contracts, and a stern warning for the IOC from the U.S. Congress.

Other stories in the line-up this very busy news week: a settlement in a case where a plaintiff claimed a law firm tried to ruin his reputation; Canadian views about NATO’s involvement in Kosovo; news about the USDA and two discrimination and diversity issues (topics which are related to this week’s research report); and a daredevil parachutist who claims that a tabloid TV show not only reneged on a deal to pay for video of him jumping off the World Trade Center, but turned him in to police in order to record the arrest.

And we conclude with a follow-up on the guilty verdict in the Kevorkian case.

Have a productive, ethical week.

– Carl Hausman

DALLAS
In what some legal observers say is an unprecedented ruling, a federal judge last week ordered the union representing American Airlines’ pilots to pay $45.5 million in damages — a sum greater than the union’s total assets — for failing to effectively end the sickout it called earlier this year after a pay dispute with American.

U.S. district judge Joe Kendall imposed the award after two days of hearings, telling the Allied Pilots Association (APA) that “you pay for what you break . . . whether you can afford to pay it or not,” the Dallas Morning News reported.

The APA, with $38 million in assets, called the sickout over Presidents Day weekend, causing the cancellation of more than 6,600 flights when 2,400 of the airline’s 9,200 pilots called in sick.

Kendall ordered the pilots back to work, then found the APA in contempt when pilots were slow to return to their jobs.

The size of the award stunned some observers. “This is unprecedented,” Dallas labor lawyer William Keller told the Dallas Morning News. “This will cause union leaders to think twice before they become involved in an illegal strike.”

American estimates that the sickout cost the airline roughly $200 million, the Reuters news agency reported.

PADUCAH, Kentucky
The families of three girls killed by a fellow student during a 1997 schoolyard shooting spree announced last week that they will file a lawsuit against 25 entertainment companies, blaming the companies for teaching the shooter to be violent.

The families claimed that confessed shooter Michael Carneal, who was 14 at the time of the 1997 incident, was influenced by the companies’ products, including “The Basketball Diaries” film, two Internet porn sites, and the popular “Doom,” “Quake,” and “Mortal Kombat” computer games.

The suit claims that the violent media taught Carneal to be an “effective killer without teaching him any of the constraints or responsibilities needed to inhibit such a killing capacity,” the Reuters news agency reported.

Carneal was sentenced last December to life in prison with no possibility of parole for at least 25 years.

The companies named in the parents’ lawsuit include Time Warner, Polygram Film Entertainment Distribution, Nintendo, Sega, and Sony Computer Entertainment.

WASHINGTON
The Supreme Court last week gave the go-ahead for a Louisiana lawsuit charging the makers of the violent film “Natural Born Killers” with inspiring copycat crimes that left a Louisiana woman paralyzed.

Without comment or dissent, the Supreme Court upheld a Louisiana ruling that the 1994 film, directed by Oliver Stone, was not protected by First Amendment free-speech rights because it incited “imminent lawless activity,” the Reuters news agency reported.

Lawyers for Patsy Ann Byers say their client was shot and paralyzed in a botched robbery attempt by two people who had repeatedly watched “Natural Born Killers” before killing a Mississippi businessman and holding up Byers’ convenience store.

Artists, media groups, and the defendants’ lawyer, Theodore Olson, argue that the case puts an unfair burden on writers, publishers, and broadcasters, who cannot predict the reactions of the public.

PONTIAC, Michigan
Talk show host Jenny Jones testified last week that her program did not ambush guest Jonathan Schmitz, who shot and killed another guest after the man revealed a sexual fantasy involving Schmitz during a “Jenny Jones Show” taping.

Schmitz’s admirer turned out to be a gay man, Scott Amedure, who described a sexual fantasy involving Schmitz to the audience. Schmitz killed Amedure three days later.

Amedure’s family sued the “Jenny Jones Show” and its producer, Warner Bros., claiming they failed to investigate and anticipate the instability of Schmitz, who had a history of mental trouble.

Jones insisted that Schmitz was an adult who made an “informed choice” to appear on the show about secret admirers, the Associated Press reported.

Schmitz admitted killing Amedure and was convicted of second-degree murder in 1996, but the verdict was overturned because of a judicial error. His retrial is scheduled for August, the Associated Press reported.

CLEVELAND
Cleveland last week joined the growing list of U.S. cities suing gun manufacturers for the costs incurred in fighting gun violence and treating gunshot victims.

Announcing the lawsuit against 17 gun companies and trade associations, Cleveland mayor Michael White said that the industry “has failed in its duty to make a safer gun,” making gun violence easier and cleanup costs higher, the Associated Press reported.

New Orleans, Chicago, Miami, and Bridgeport, Connecticut, have launched similar lawsuits.

ISLAMABAD, Pakistan
Former prime minister Benazir Bhutto and her husband were convicted last week of corruption, disqualified from holding public office, and ordered to pay a fine of $8.6 million.

Pakistan’s Lahore High Court issued the ruling after a yearlong trial centering on charges that Bhutto and her senator husband Asif Ali Zardari exchanged contract favors for kickbacks from a Swiss company.

Bhutto denounced the verdict, telling the BBC that the court had been biased and the trial politically motivated.

Bhutto, leader of the opposition party to prime minister Nawaz Sharif, said she would appeal the conviction.

Bhutto has been twice elected and twice removed as Pakistan’s prime minister, both times on charges of corruption.

FRANKFURT
Automaker DaimlerChrysler last week admitted that it was under EU antitrust investigation for allegedly prohibiting its dealers in several European countries from selling cars to residents of other nations.

The German-U.S. automaker announced that legal proceedings against the company had begun, but denied any wrongdoing, the Associated Press reported.

The EU Competition Commission alleges that Daimler-Benz, which merged with Chrysler last year, violated EU antitrust rules by discouraging cross-border sales of Mercedes-Benz cars between 1985 and 1996.

The Commission says that Daimler-Benz barred dealers in Germany, Belgium, Spain, and the Netherlands from selling Mercedes autos to foreigners, who often cross international borders to find lower prices on autos, according to the Associated Press.

If found guilty, DaimlerChrysler could face fines of as much as $15.5 billion.

BRAS&IacuteLIA
Brazil’s banking sector was rocked last week by allegations of bribery and insider trading at the country’s Central Bank, prompting separate investigations by the senate and the federal police.

The Senate last week launched an official inquiry into charges that the Central Bank warned some Brazilian banks that it would devalue the country’s currency, the Reuters news agency reported.

Banks that were alerted were able to adjust their holdings and make large profits, while others collapsed, according to Reuters.

In a related story, the former president of Brazil’s Banco Marka told a weekly news magazine that he had paid a Central Bank employee $125,000 a month for confidential information on future Bank actions.

Banco Marka officials denied the allegations, and promised to cooperate with the police investigation, according to Reuters.

DALLAS
American Airlines last week began settlement talks with the U.S. Justice Department in order to head off a possible antitrust lawsuit stemming from allegations that American put the squeeze on a low-cost competitor, the Associated Press reported last week.

The probe dates back to 1996, when Vanguard Airlines, an 11-plane carrier based in Kansas City, Missouri, complained that American had used monopolistic tactics and predatory pricing to keep Vanguard from operating out of Dallas.

Vanguard counsel Brian Gillman told the Associated Press that after American had dropped its fares and upped its passenger capacity to force Vanguard out of its Dallas routes, American promptly raised its fares 85 percent.

In a statement released last week, American denied any wrongdoing, claiming its actions were simply a “well established competitive response.”

LONDON
The International Olympic Committee (IOC) last week announced that it would draft a new “morals clause” for corporate sponsors, allowing them to cancel their sponsorship contracts in the event of future ethics scandals.

IOC marketing director Michael Payne announced the new measure at a conference for U.K. sponsors.

Payne said the new clause would “give our partners an ‘out’ if there is an ethical lapse and we don’t move to fix it,” the Associated Press reported.

Corporate sponsors, which currently pay up to $50 million for advertising rights, have complained that the current IOC corruption scandal has hurt their investment in the Olympics.

WASHINGTON
U.S. lawmakers last week warned the International Olympic Committee (IOC) to step up its anticorruption reform measures or face punitive measures in the United States.

Senate Commerce Committee chairman John McCain blasted the IOC for fostering a “culture of corruption” and dragging its feet in adopting reforms, the Reuters news agency reported.

Congress wants the IOC to institute reforms suggested by Sen. George Mitchell, who led a panel investigating the bribes-for-votes scandal surrounding the 2002 Winter Games at Salt Lake City.

Congress is considering legislation that would bar U.S. corporate sponsorship of the Olympic games, strip the IOC of its tax breaks, and limit the IOC’s U.S. television profits if Mitchell’s recommendations are not adopted.

IOC vice president Anita DeFrantz defended her organization’s actions to date, insisting that the IOC will continue to study and adopt reforms in order to “regain the public’s trust,” according to Reuters.

NEW YORK
A New York law firm agreed to pay $50 million last week to settle charges that it tried to destroy the reputations of a law professor and his former business partners by naming them as defendants in a lawsuit.

The settlement ends a seven-year battle pitting University of Chicago law dean Daniel Fischel and his former Lexecon consulting firm against the law firm of Milberg Weiss Bershad Hynes and Lerach.

Milberg Weiss had named Fischel and Lexecon as defendants in a $1.2 billion racketeering lawsuit stemming from the collapse of the Lincoln Savings & Loan.

Fischel argued that while his Lexecon consulting group had helped prepare financial statements for the failed bank, Milberg Weiss had actually targeted Lexecon for revenge because of Fischel’s role in a 1988 case that cost the law firm a $200 million verdict, the Associated Press reported.

The settlement came a day after a federal jury awarded Fischel $45 million in compensatory damages. The settlement ruled out any future award of punitive damages and disallows an appeal by either party, according to the Associated Press.