“Character is a byproduct; it is produced in the great manufacture of daily duty.”

– Woodrow Wilson (28^th U.S. president (1913-1921), 1856-1924)

From the Business Software Alliance and the Software & Information Industry Association:

“The results of a fourth annual independent study on global software piracy were released [last week] by the Business Software Alliance (BSA) and the Software & Information Industry Association (SIIA), the two leading trade associations for the software industry.

“The study estimates that, of the 615 million new business software applications installed worldwide during 1998, 231 million — or 38 percent — were pirated. This represents an increase of 2.5 million more applications than were pirated in 1997.

“Revenue losses to the global software industry due to piracy were estimated at $11 billion. North America, Asia, and Western Europe accounted for the majority (80 percent) of revenue losses.

“The ten countries with the highest dollar losses due to software piracy are (in rank order): the United States, China, Japan, Germany, the United Kingdom, France, Brazil, Italy, Canada, and Russia. Total losses for these countries were $7.3 billion, or 67 percent of worldwide losses.

“In terms of piracy rates, the study estimates that more than nine in ten business software applications in Vietnam (97 percent), China (95 percent), Indonesia (92 percent), and Russia (92 percent) are pirated. . . .”

Ever wonder where the next generation of ethical employees will come from? Ever worry that the young have vanished into a moral swamp? Let me tell you about Adam E. Chaves.

Adam is a student at Mount Wachusett Community College in Gardner, a hard-working community in the furniture-making belt of central Massachusetts. For him, six $20 bills are a lot to sacrifice — though not as much as his sense of integrity. And thereby hangs this tale.

“I worked at Shaw’s Supermarket,” Adam writes. “As I was outside in the parking lot wheeling grocery carts back into the lobby, I saw a small boy, about five years old, running across the lot with an ear-to-ear smile. He was holding money in his hand and was clearly excited about being given the responsibility for holding such a large quantity.”

Adam kept close behind him to watch out for cars, since the lad was not. As he ran toward the entrance, “one bill after another slipped from his grasp and fell onto the ground. I ran to pick up the money and noticed that each one was a twenty-dollar bill. I had gathered up a total of $120.”

Finding that money, he writes, was “a great thing for me, since I was struggling to pay my tuition.” But he adds: “I didn’t even debate with myself about what I should do. I grew up being taught to do the right thing for myself and for others.”

So he yelled at the boy to stop, gave him back the money, and told him to put it in his pocket so he wouldn’t lose it again.

In an age riveted by a different sort of young person — Eric Harris, Dylan Klebold, and the others who have pulled the triggers in episodes of school violence — we need to hear about Adam Chaves. His employer needs to know him better, too. He’s the kind of person that customers want to find when they come through the door.

But the story continues. Happy with his decision, Adam told a coworker what had happened. “She gave me an absolutely incredulous look, and told me I was ‘nuts’ for not keeping the money.” She told him she certainly would have kept it. She even asked him who the little boy was — information he did not divulge.

That interchange really set Adam thinking. “How could a person steal from a little boy — or anyone, for that matter?” he writes. “For the rest of that day, this question about such unethical conduct bothered me.” It led him, he says, to “a hard and terrible truth,” which was that “many people live their lives breaking the law, not following the rules. What made me the saddest was that I knew many people like this — friends, classmates, and relatives.”

Adam’s assessment comes right out of the trenches of his own experience. Unfortunately, it tends to confirm the view about the next generation held by many adults — like the CEO of a small manufacturing firm I spoke with a while ago. What, I asked him, do you most want from the schools? He told me three things, in priority order. “First, if I hire someone, will they show up? Second, if they show up, will they rip me off? Third, can they read and write and compute?” If schools care only about the third, he told me, I get a worthless employee. If they handle only the first two, I can remedy the third.

Behind Adam’s tale, then, is a vast question: What should our schools be teaching? How do we address the topics that really matter to tomorrow’s employers — the questions not only of math and literacy, but of ethics and character?

With one small gesture, Mount Wachusett Community College has found a way. Through the Office of Academic Affairs, dean Frank DeSorbo has sponsored a student essay contest on the topic of “Morality and Ethics in the 21^st Century: Myth or Reality.” For prizes, he’s offered three $500 tuition scholarships. One of them went to Adam Chaves for the essay from which I’ve been quoting.

Even on the sternest financial calculation, then, Adam did it right. His sacrifice of $120 repaid him more than threefold. But he gained something far more important: the recognition that lots of people are good.

How? It wasn’t until the next day, he writes, when “yesterday’s emotions” had worn off, that he came to this different and rather startling conclusion. “In today’s society,” he writes, “it is mostly the criminal and immoral acts which are addressed by the news. We barely ever seem to notice the moral and ethical people. They always seem to be the silent ones, the people in the shadows who never receive their due credit.”

In the end, he says, he realized that, despite the sobering example of his coworker, there were “just as many moral as immoral people.”

That strikes me as the message Adam would want us to remember. Looking at the next generations, we too easily see the ethical voids, the moral lapses. Adam reminds us of the other side. As he says, “I grew up being taught to do the right thing for myself and for others.”

Adam, it’s good to know you’re out there by the thousands.

(c)1999 by Rushworth M. Kidder

A congressional report issued last week accused China of stealing nuclear secrets by piecing together a “mosaic” of information gathered not only through espionage, but also by legal and open channels.

The issue of how much information should be public in a public society is a difficult one, and is one question posed by our lead story this week in Business Ethics Newsline, your guide to news with an ethical angle.

We follow with another story about China, this one dealing with an initiative to protect Chinese workers that was endorsed by several major U.S. corporations.

We continue with several other stories involving the ethics of commerce: an insider trading case, charges of manipulation of profit figures, allegations that a toy retailer tried to bully competitors out of the market, and the establishment of a panel to help minorities at a firm facing a discrimination suit.

Next, several stories from the international desk: a promise from Nigeria’s president that he will crack down on corruption, controversy over a prosecutor’s contention that the War Crimes Tribunal has jurisdiction over NATO, and the continuing dispute over the future of commercial whale hunting.

Rounding out our news recap are two stories dealing with science — a report on stem-cell research, and a story about alleged misrepresentation in some scientific reviews of a drug — followed by a roundup about new suits against gun makers, and a report and links to a new accord on sports and ethics.

From our “Whatever Happened to…” department come several follow-ups: the conclusion of a dispute over whether a city bus department must carry noncommercial advertising; a Supreme Court verdict on reporter ride-alongs that wind up on private property; a decision in the case of a Boston College professor who banned men from her classroom; and an apparent conclusion to an international dispute over the content of Canadian magazines.

Have a productive, ethical week.

– Carl Hausman

WASHINGTON
In a report that may have far-reaching effects on ethical and legal aspects of scientific information exchange, congressional investigators last week said that China has taken advantage of weak U.S. security to steal nuclear weapons secrets for at least two decades.

China used a so-called “mosaic” approach to piece together information about nuclear warheads, the neutron bomb, and satellite technology. According to the report, this was accomplished not only through espionage, but also by “rigorous review of U.S. unclassified technical and academic publications, and extensive interaction with U.S. scientists and Department of Energy laboratories,” according to the Reuters news agency.

The report’s chief author, Rep. Christopher Cox (R.-Calif.), said that China “has mounted a widespread effort to obtain U.S. military technology by any means, legal or illegal.”

The Cox report upholds allegations that two U.S. companies, Hughes Electronics and Loral Space Communications, revealed sensitive satellite secrets to the Chinese last year due to lax security precautions, Reuters reported.

The report, which asserts that the spying extends back to the Carter administration, sparked congressional criticism of U.S. attorney general Janet Reno and national security advisor Sandy Berger.

In reaction, the Senate last week added an amendment to the pending defense authorization bill that would bolster U.S. nuclear lab security, authorize FBI background investigations of lab employees, and tighten security at foreign launches of U.S. commercial satellites, the Associated Press reported.

China angrily denounced the report as an attempt to sour U.S. perceptions of China, and to shift attention away from the accidental U.S. bombing of the Chinese embassy in Yugoslavia.

WASHINGTON
Mattel, Reebok, and Levi Strauss announced last week that they had joined a campaign urging international businesses to push for human-rights protections for Chinese workers.

The three companies, which help employ more than 100,000 Chinese workers who subcontract for suppliers, are the first to officially adopt what the program’s lead sponsor, the International Labor Rights Fund (ILRF), says is “the first set of business-endorsed human-rights principles in China.”

The ILRF argues that companies can make more money by ensuring the health and happiness of overseas workers, who often suffer abuse, long hours, substandard wages, and dangerous conditions, the Reuters news agency reported.

“In the short-term, there may be a slight (financial) benefit by ignoring workers’ well-being,” Mattel spokesman Sean Fitzgerald told Reuters. But “in terms of the long-term interests of a brand, a company, there is no benefit whatsoever.”

The companies hope to convince other U.S. and international firms to join the ILRF campaign, enact internal safeguards for Chinese workers, and push Chinese authorities for stricter enforcement of existing legal protections.

NEW YORK
The U.S. Securities and Exchange Commission (SEC) last week sued 25 people accused of making $1.3 million by using insider information revealed by an IBM secretary.

The lawsuit is the latest attempt by regulators to resolve the case against Lorraine Cassano, an IBM secretary who allegedly learned of IBM’s plans to launch a hostile takeover attempt of Lotus Development Corp. in 1995.

The SEC alleged that Cassano revealed the information to her husband, who told friends, who then told others in a rapidly expanding chain of people who bought Lotus stock and profited when the takeover was announced, the Reuters news agency reported.

A series of investigations and lawsuits resulted in the latest SEC lawsuit, as well as 11 guilty pleas and convictions related to the case. Cassano, her husband, and two others have settled with federal prosecutors, agreeing to pay fines and settlements, but admitting no wrongdoing, according to Reuters.

SAN FRANCISCO
Database software maker Informix Corp. announced last week that it would pay $108 million to settle lawsuits claiming that it inflated sales figures to boost stock prices, and traded on insider information.

The settlement is more than twice the value of the company’s 1998 profits.

A Securities and Exchange Commission (SEC) investigation of Informix revealed that the company had overstated its profits by more that $240 million from early 1995 to late 1997, according to the Associated Press.

When Informix made the information public, stock prices plummeted, prompting a series of investor lawsuits.

Subsequent investigations revealed that two Informix executives, former CEO Phillip E. White and former CFO Howard Graham, sold more than $15 million worth of stock before the admission, the AP reported.

Informix’s former auditor, Ernst & Young, admitted no wrongdoing, but agreed to pay $34 million to settle related charges, according to the AP report.

WASHINGTON
Toys R Us agreed last week to pay $40.5 million in cash and toys to settle an action by state attorneys general charging that the retailer coerced toy makers into boycotting competing retailers.

According to the 1997 lawsuit, Toys R Us threatened to pull toy makers’ popular products from store shelves if the companies sold their products to large-volume retailers, including Costco and Sam’s Club, the Associated Press reported.

Mattel and the Little Tikes toy company, named as co-defendants, also agreed to pay $9.5 million to settle the lawsuit, launched by 44 states, the District of Columbia, and Puerto Rico. The Federal Trade Commission filed similar charges in 1996.

Toys R Us denied any wrongdoing, but settled the case to avoid a costly and protracted legal battle, according to a company statement.

As part of the settlement, Toys R Us will donate $27 million in toys over the next three years to the U.S. Marine Corps for its “Toys for Tots” program, according to the AP report.

Another toy company, Hasbro, settled with the states last year, agreeing to donate $5.9 million in cash and toys to the “Toys for Tots” program.

ATLANTA
Coca-Cola, facing a discrimination suit, last week announced the creation of the Diversity Advisory Council, a coalition of employees who will help minorities within the company.

The Diversity Advisory Council is headed by Carl Ware, Coke’s senior black executive, and charged with maximizing what Coca-Cola’s CEO called “the benefits of diversity in [Coca-Cola's] work force,” according to the Associated Press.

The move comes one month after four former and current Coke employees sued the soft drink maker for alleged discriminatory practices in pay, promotions, evaluations, and firings, the AP reported.

Plaintiffs’ lawyers have asked for class-action status for the lawsuit, potentially enlarging the pool of plaintiffs to include the company’s 1,500 black workers.

Coke chairman and CEO M. Douglas Ivester has denied the discrimination charges, but says that he hopes that the new council, as well as planned meetings with minorities, will “open the lines of communication with all constituencies,” according to the AP report.

Special to Newsline from Canadian Correspondent Errol P. Mendes

OTTAWA
In an interview printed in the Ottawa Citizen, the new President of Nigeria vowed to “crack the whip” against corruption in his country.

When asked how he would deal with the army that has come to depend on “patronage” and the fruits of the oil economy, president Olusegun Obasanjo said that practices that the country wishes to get rid of, must be visibly punished.

Obasanjo also said he would set up an anticorruption body that would be empowered to seek and search and recover Nigerian money and property worldwide that had been obtained by corruption.

Special to Newsline from Canadian Correspondent Errol P. Mendes

OTTAWA
U.N. tribunal chief prosecutor Louise Arbour, a Canadian judge who played a major role in the indictment last week of Slobodan Milosevic for atrocities in Kosovo, stirred controversy last week with a suggestion that the War Crimes Tribunal had jurisdiction over NATO’s actions in the Balkans and that there could be investigations for attacks that killed civilians.

U.S. congressional representative Lester Munson reacted with disbelief and amazement when told of the comment.

According to a report in the National Post, Mr. Munson called Judge Arbour’s comments “ludicrous.”

Other observers have suggested that the Canadian War Crimes Prosecutor was only attempting to establish her neutrality in the conflict.

GRENADA, West Indies
The International Whaling Commission (IWC) met last week to discuss the future of whale conservation and the viability of commercial whale hunting, a hotly debated subject among member nations.

New Zealand, Australia, and Brazil last week urged the IWC to strengthen protection for struggling whale populations by declaring nearly all waters south of the equator off limits for whale hunting, the Associated Press reported.

Japan, Norway, and several island nations expressed outrage at the proposal, insisting that most whale populations no longer need IWC protection and should be hunted for their meat.

The IWC debate coincides with a growing controversy over a separate proposal by the Mexican government and Mitsubishi to expand salt-making facilities in a Mexican nature preserve and whale nursery.

WASHINGTON
Research using tissues from human embryos and fetuses is justified despite troubling ethical questions, according to a draft report made public last week by the government’s National Bioethics Advisory Commission (NBAC).

Congress banned using federal funds for such research in 1994 under heavy pressure from interest groups, which contended that fetal tissue research was immoral.

The NBAC says it is time to overturn that ban, claiming that the potential benefits of research using stem cells — special kinds of cells found in embryos that can develop into other varieties of cells — outweigh the moral uncertainties.

Stem cells are thought to hold the key to possible treatments for Alzheimer’s and Parkinson’s diseases, USA Today reported.

“Any taint that might attach from the source of the stem cells diminishes in proportion to the potential good which the research may yield,” the draft states, according to a report in the Washington Post.

The NBAC says that ending the ban — but only on embryos donated from infertile couples undergoing in-vitro fertilization treatments — will lead to more rapid progress and greater transparency.

The NBAC’s final draft is expected next month.

DALLAS
Wyeth-Ayerst Laboratories, manufacturer of one component of the diet drug combination dubbed “fen-phen,” was sued last week for allegedly underwriting, sanitizing, and rigging scientific reviews of the obesity treatment that has since been removed from the market after being linked to heart ailments.

Dr. Albert Stunkard, whose review of fen-phen was published in the American Journal of Medicine in February 1996, alleges that Wyeth-Ayerst secretly paid for ten reviews of the drug, including his, and attempted to purge researchers’ findings of fen-phen’s flaws, according to a report from the Associated Press.

Stunkard called Wyeth-Ayerst’s actions “deceptive” and disturbing, telling the Dallas Morning News that he would not have conducted his review of fen-phen had he known about the drug maker’s involvement.

Wyeth spokesman Doug Petkus defended his company’s underwriting of the reports, insisting that while it is “common practice” for drug makers to “have some input in the initial development” of scientific reviews, the “author has the last say.”

Wyeth says the published reports were verified by peer review and are good science, according to the AP report.

LOS ANGELES
Los Angeles and San Francisco last week filed lawsuits against the gun industry, accusing gun makers of knowingly and irresponsibly allowing guns to fall into the hands of children and criminals.

The suits charge that firearms manufacturers violated California’s consumer-protection and public-nuisance laws by knowingly flooding the market and selling to dealers with lax security measures, creating a surplus of guns that often fall into the hands of criminals, the Reuters news agency reported.

The lawsuits also accuse gun makers and industry groups, including Smith & Wesson, Colt Manufacturing, and the National Shooting Sports Foundation (NSSF), of failing to equip guns with adequate safety devices and making it easy for criminals to disfigure or erase serial numbers.

NSSF spokesman Doug Painter dismissed the charges as groundless and politically motivated. “The basic charge that our industry in some fashion encourages illegal sales is absolutely false,” Painter told Reuters. “This entire effort fails to recognize that the sales of our products are regulated throughout the distribution chain.”

The lawsuits consolidate the complaints of California’s two largest cities with neighboring cities and counties.

The actions are the latest in a nationwide series of suits by cities to recoup the costs of gun violence.

SCOTTSDALE, Arizona
Nearly 50 prominent sports and education leaders met last week to formulate and endorse the “Arizona Accord,” a statement affirming the positive role that sports can play in building character.

The Arizona Accord, drafted by a coalition of sports groups, universities, and the U.S. Olympic Committee (USOC), says that “sports can and should enhance the character and uplift the ethics of the nation.”

The statement calls for widespread reform, including recognition among sports organizations that athletes and coaches must act ethically both on and off the field, and maintains that student-athletes’ education and character must play a more prominent role in recruitment practices.

The Arizona Accord was drafted under the sponsorship of the Josephson Institute of Ethics, the Character Counts Coalition, and the USOC, and underwritten by a grant from Johnson & Johnson.

PHOENIX
The Supreme Court ruled last week that the city of Phoenix can legally refuse to sell advertising space on city buses to groups whose messages are noncommercial.

Two groups — one religious, and one focused on free-speech rights — had challenged the Phoenix policy, arguing that it suppressed First Amendment rights.

The Court turned away the case without comment, effectively upholding a lower court ruling that Phoenix’s refusal to accept political and religious ads was a legitimate business decision, and not unjust discrimination, the Associated Press reported.

WASHINGTON
The Supreme Court ruled last week that journalists cannot accompany police officers onto private property without the permission of the property owner.

The ruling stems from two lawsuits challenging the constitutionality of media ride-alongs where journalists join police officers on patrol, raids, and searches, the Washington Post reported.

Media groups say that the presence of journalists keeps police officers honest and the public informed.

But the Supreme Court unanimously ruled that even if ride-alongs have potentially beneficial effects, the public’s Fourth Amendment right to the sanctity of private property outweighs the media’s watchdog role, the Post reported.

While critics condemned the ruling as a stifling of press freedoms, media analyst Bob Steele told the Christian Science Monitor that it may actually have a redemptive effect on journalism. The ruling, he said, “will require news organizations to be more thoughtful, more creative, and more responsible in seeking meaningful information.”