Ethics Newsline®

“To let oneself be bound by a duty from the moment you see it approaching is part of the integrity that alone justifies responsibility.”

– Dag Hammarskj&oumlld (Swedish economist and philosopher; U.N. Secretary General (1953-1961); 1961 Nobel Peace Prize Laureate, 1905-1961)

From the Annenberg Public Policy Center:
Media and the Developing Mind
Washington, DC (May 4, 1999)

“A national survey of parents in computer households released today suggests that parents are deeply fearful about the Web’s influence on their children. The study shows 78 percent are ’strongly’ or ’somewhat’ concerned that their children might give away personal information on the Internet, and an equal percentage fear children might view sexually explicit material. Nearly two-thirds of parents (64 percent) believe the Internet can cause their children to become isolated, while only 35 percent say the Internet can have a community-building influence. Half of the parents interviewed (49 percent) claim using the Internet might interfere with parents’ ability to teach values and beliefs, and 42 percent believe too much Internet use can cause children to develop antisocial behavior.

“Meanwhile, parents also believe that the Internet is an essential tool with positive potential: 59 percent feel children without Internet access are at a disadvantage compared to their peers; 75 percent say the Internet is a place for children to discover fascinating, useful things; and 72 percent say the Internet helps their children with their schoolwork.

“‘Parents are juggling the dream and the nightmare of the Internet at the same time,’ said Joseph Turow of the Annenberg Public Policy Center and author of the report.

“The survey also finds that 32 percent of American parents with online connections are using filtering software, a sign that a substantial proportion of parents are taking active strides to shield their children from what parents consider harmful content. . . .

“The two-part Annenberg report also contained an analysis of one year of news stories about the Internet drawn from twelve major newspapers nationwide. The study shows that news reports describe the Internet as a Jekyll and Hyde phenomenon, a place where crime, sexual predators, and potentially objectionable materials abound, but at the same time a necessary tool for children. Sex crimes regarding children were featured in one of every four articles about the Internet. Two of every three stories focussed on the negative aspects of the Internet, mainly sex crimes, pornography, and privacy invasion.

“‘The press’ portrayal of the Internet is particularly significant because it directly reflects the attitudes of parents, and it may help create them.’ Turow added. “

WASHINGTON
The U.S. House of Representatives last week overwhelmingly approved new bankruptcy laws, making it harder for consumers to default on their credit card debt, and requiring credit card companies to operate with greater transparency.

The reform legislation includes provisions requiring credit card companies to clearly disclose the length of introductory interest rates, as well as how long it will take consumers to pay off their balances if they only make the minimum monthly payments, the Associated Press reported.

The White House has threatened to veto the legislation, which it says is too arbitrary, according to the AP.

Similar bankruptcy reform legislation is under consideration in the Senate.

PONTIAC, Michigan
A Michigan jury last week found the producers of the “Jenny Jones Show” partly responsible for the murder of guest Scott Amedure, ordering the Time Warner subsidiaries to pay $25 million in damages.

Amedure was murdered by Jonathan Schmitz in 1995 after confessing a homosexual crush on Schmitz, at a “Jones Show” videotaping on secret crushes.

Amedure’s lawyers argued that the “Jenny Jones Show” designed the confession to ambush Schmitz, without properly ensuring his mental stability.

Schmitz, who shot Amedure to death three days later, had a history of mental problems, according to the Associated Press.

The jury’s 8-1 verdict includes $5 million for Amedure’s pain and suffering, $20 million for the loss to his family and society, and $6,500 for funeral expenses.

“Jones Show” producers plan to appeal the verdict, which they say will have a “chilling effect” on media, according to CNN.

MONTREAL
A group of Canadian firms was fined nearly $700,000 last week for conducting a campaign of telemarketing scams, pressuring people to purchase merchandise in order to receive nonexistent prizes.

American Family Publishers (no connection with the U.S. firm of same name), Publishers Central, and First Canadian Publishers pleaded guilty to false and misleading advertising charges stemming from the bogus scams.

Under Canada’s recently amended Competition Act, the groups’ president, Vijay Sharma, was fined nearly $70,000 and convicted of a criminal offense, the Reuters news agency reported.

Canada’s Competition Bureau commissioner Konrad von Finckenstein said the conviction and fine should “shout a loud and clear message” that the government will vigorously fight phone scams, Reuters reported.

Now and then an event comes along of such magnitude that, almost single-handedly, it shifts the direction of an entire nation. That’s happening with the school shootings in Littleton, Colorado. Historians may well find, in this sad episode, the lever that shifted character education — the teaching of positive values and character traits to young people — into high gear.

Case in point: Last week, in a most curious place, a most unlikely source sounded a most unusual entreaty, as follows:

"Why not . . . beginning in preschool, moving through kindergarten and grades one through five, for at least one half hour each day, teach children how to live a life that is both decent and worthy? Why not summon the best minds in education and child behavior to construct a course which could be called “What is Right and What is Plainly Wrong?” (In high school or college, this course would doubtless be labeled ‘Ethics’ or ‘Moral Judgments.’)"

The place: the Senate Commerce Committee, a body not famous for venturing into pedagogy and moral philosophy. The speaker: Jack Valenti, president of the Motion Picture Association of America, an industry under siege for the gore and mayhem it regularly portrays. The occasion: an examination of the role of the entertainment industry in relation to the Littleton shootings.

Set aside the cynical spin, favored by those who think Mr. Valenti was simply downloading his problem onto the schools rather than addressing what’s wrong with the movies. Whatever his motives, his strategy suggests that he thinks character education has some traction with the public. In that, he’s right: People are increasingly asking schools to look hard at teaching responsibility, respect, and compassion.

His is a laudable entreaty, with one giant flaw: The schools aren’t quite up to the task.

That’s the implication arising from a report titled "Teachers as Educators of Character: Are the Nation’s Schools of Education Coming Up Short?" It is forthcoming from the Character Education Partnership, a coalition of organizations and individuals describing itself as "fostering the teaching and modeling of positive character traits within our nation’s schools" — an organization where (in the interests of full disclosure) I sit as an advisor. Based on a survey completed by more than 200 deans of teacher education programs around the country, conducted by the Center for the Advancement of Ethics and Character at Boston University, the report sends at best a mixed message:

• More than 90 percent of these educational leaders support the idea of character education — with 97 percent disagreeing that "character education is not the responsibility of the schools." As the report’s authors put it, "the momentum in American education has shifted . . . the idea of schools contributing to character formation has once again been accepted by those who train our nation’s teachers."
• Yet only 24 percent said that character education is "highly" emphasized in their course offerings. And when you look just at public colleges and universities — which train three-quarters of the nation’s teachers — the number drops to less than 7 percent.
• Overall, only 13 percent of these leaders pronounced themselves "satisfied" with their school’s efforts at teaching character education. As the authors observe, "it appears that character education is largely the result of isolated efforts by individual professors and is not generally addressed in a systematic, comprehensive fashion."
• When schools do teach character education, they tend to emphasize the building of caring relationships in the classroom, or the creating of opportunities for community service that emphasize "hands-on" experience. Far fewer teacher-education programs see character education as a process of cognitive development that teaches moral reasoning.
• Yet nearly two-thirds of these educators favor, albeit cautiously, a move to legislate character education as a requirement for teacher certification.

Bottom line? It would seem that while the spirit is willing, the flesh is weak. Jack Valenti’s plea reflects, in cameo, the nation’s search for an answer to Littleton. Trouble is that when you "summon the best minds in education and child behavior" to look at character education — as Valenti proposed, and as this survey begins to do — you get a fuzzy answer. The gatekeepers of the teaching establishment aren’t against it. They just don’t see it being done very well.

Which may help explain the growth of the business ethics movement in U.S. corporations. If ethics matters (as corporations increasingly realize), and if the schools aren’t providing much background in it, particularly on the moral reasoning side (as this report suggests), there’s little alternative but to do it yourself.

The future? Look for corporations to become more involved with character education programs. The public increasingly favors such programs. Teachers are willing to do them. Employers need recruits who have been through them. Many corporations have experience designing and delivering them. And if they’re mandated but not funded — the probable outcome–who but corporations can help bear the additional costs?

(c)1999 by Rushworth M. Kidder

Setting a fair price is a difficult ethical and legal issue because of the blurriness of lines between sharp business and price gouging, or between reacting to the market and colluding with the market.

Several of our lead stories in this edition of Business Ethics Newsline concern fair-pricing issues.

From Philadelphia, we have an article and links about the largest antitrust criminal fine in history levied against a German firm accused of fixing prices. From New York, we cover the start of a probe into allegations of price fixing in the underwriting of initial public offerings. From Washington come two stories about the implications of charging different prices to different purchasers, one dealing with medicine, the other with newspapers. And from Brussels comes a report about allegations of cross-border price restraints in the auto industry. Also, two stories from Japan touch on issues related to free trade.

In other news from the world of ethics, we bring you a report and links about a growing crisis in the workplace: violence, and the degree of an employer’s responsibility for it.

Also this week, two stories about lying and cheating: fudged sales figures from an auto firm, and students in an ethics class who were caught stealing answers.

We follow with two stories dealing with the ethics of online commerce: a report on new measures to jumpstart European business on the Internet, and a jump in sales of ‘Net-monitoring software in the wake of speculation that the Internet was in some way responsible for the Columbine shootings.

On the discrimination front, we have two stories: how Eastman Kodak Co. settled a shortfall in pay to women and minorities, and the PGA Tour’s appeal of a verdict allowing a handicapped golfer to play tournaments using a motorized cart.

And we conclude our wrap of the week’s news in ethics with a report about the NRA’s annual meeting held in uncomfortable proximity to the site of the Columbine shootings, a dispute over executive compensation in South Africa, and two stories about business ethics in Canada.

We bring you two follow-ups in our “Whatever Happened to…” feature: a verdict in the Jenny Jones case, and bankruptcy legislation in the U.S. House of Representatives.

Have a productive, ethical week.

– Carl Hausman

PHILADELPHIA
Record antitrust fines were levied last week against a German firm for its part in a scheme to fix prices and divide the world market for graphite and carbon products from 1992 until 1997.

SGL Carbon Aktiengesellschaft agreed to pay $135 million, the largest criminal fine in antitrust history, and plead guilty to antitrust conspiracy charges.

SGL Carbon’s CEO Robert Koehler also agreed to pay $10 million, a record antitrust fine for an individual, according to the Associated Press.

The company was part of an alliance that agreed to illegally boost prices, cut discounts, divide the world market, and withhold technology from competitors, according to government charges.

SGL Carbon, already facing civil litigation from Canadian and U.S. clients, has filed for Chapter 11 bankruptcy protection.

NEW YORK
The U.S. Department of Justice last week requested records from many of Wall Street’s leading brokerages in an investigation of alleged price fixing in the lucrative business of underwriting initial stock offerings (IPOs).

The government’s inquiry follows a private investor lawsuit charging 28 firms with conspiring to inflate underwriting fees, according to the Reuters news agency.

The business of helping firms go public pulled in $12.5 billion in 1997, the Associated Press reported.

The firms asked to supply information on how they determine prices for IPO underwriting include Goldman, Sachs & Co.; Lehman Brothers Holdings Inc.; Salomon Smith Barney; Donaldson, Lufkin & Jenrette Inc.; Morgan Stanley Dean Witter & Co.; and Merrill Lynch & Co.

WASHINGTON
Washington lawmakers are considering a new bill prohibiting drug manufacturers from charging different prices to individual cash-paying consumers and large-volume buyers such as health maintenance organizations (HMOs).

More than 100 House members have signed on to the Prescription Drugs for Seniors Fairness Act, a bill that would force pharmaceutical companies to stop discounting drug sales made to large-volume customers, such as HMOs and health insurers, the Reuters news agency reported.

Consumers, including senior citizens, have complained that when they pay cash for a prescription they are charged as much as 112 percent more for drugs than are HMOs and insurers.

But drug manufacturers and some industry analysts say the price differential is legal and acceptable market practice, since it allows drug companies to move massive amounts of product, eventually reducing end-cost for consumers, according to Reuters.

WASHINGTON
The Supreme Court last week refused to dismiss a lawsuit charging a newspaper company with discriminating against its distributors by charging them different prices to purchase papers.

Distributors of the St. Louis Post-Dispatch argue that the Pulitzer Publishing Co.’s price schemes violate federal law, which prohibits discriminatory pricing if it injures interstate commerce and competition.

Pulitzer contends that it can legally charge different prices, because the distributors have clearly defined service areas and are not in direct competition, the Associated Press reported.

The high court’s decision sets the stage for a trial next year in St. Louis.

BRUSSELS
General Motors last week announced that it would fight EU allegations that the company’s Opel subsidiary violated antitrust laws by forbidding auto dealers in the Netherlands from selling discounted cars to foreign consumers.

GM Europe spokesman Stefan Weinman told the Reuters news agency that GM believes it has “done nothing wrong and that these allegations must be based on a misinterpretation.”

EU antitrust laws forbid European firms from discriminating against consumers who cross international borders in an effort to find bargains on big-ticket items, such as cars.

The EU’s formal warning to GM — the first step in an antitrust investigation — marks the third time this year that auto companies have come under scrutiny for their cross-border sales practices, according to Reuters, which reports that investigations are pending against Renault and DaimlerChrysler.

WASHINGTON
The United States and Japan last week announced a preliminary cooperative antitrust accord designed to facilitate international investigations of anticompetitive practices.

U.S. attorney general Janet Reno praised the agreement as “an important first step” that could lead to a more comprehensive policy later, the Reuters news agency reported.

Justice Department antitrust chief Joel Klein said that while the cooperation agreement was “soft,” it still “has teeth to it,” enabling the countries to work together to fight anticompetitive practices.

WASHINGTON
Japanese prime minister Keizo Obuchi last week pledged to reduce trade barriers between Japan and the United States, winning praise from President Clinton and tentative applause from U.S. industry.

After meeting with Clinton, Obuchi promised to reduce the regulatory red tape faced by U.S. companies trying to access the Japanese market, pledging specific cooperation for U.S. telecommunications, lumber, and pharmaceutical firms, the Associated Press reported.

While hailing Obuchi for taking “very strong steps,” Clinton insisted that the Japanese stop dumping cheap steel into the U.S. market — a contentious trade issue inflamed by the recent Asian economic crisis.

The U.S. trade deficit with Japan soared to $64 billion last year, the second-highest on record, according to the Associated Press.

CHARLOTTE, North Carolina
A jury last week found a North Carolinian company negligent in failing to protect its employees from a violent coworker, ordering the company to pay nearly $8 million to the families of two men killed in 1995.

Plaintiffs’ lawyers argued that officials at a Union Butterfield tool distribution plant ignored threats made by James Floyd Davis, an employee fired after a string of violent incidents, the Associated Press reported.

Davis returned to the Union Butterfield plant, killing four employees in May, 1995.

“This verdict shows that companies cannot ignore a real, credible threat of workplace violence,” insisted plaintiffs’ lawyer David Kirby, according to the Associated Press. Management knew of the threat, “yet they did nothing to protect their employees,” Kirby said.

The jury denied damages to the families of two other murdered employees, a decision that lawyers said was likely motivated by the jury’s belief that the men — a foreman and an executive — were partly responsible for failing to protect the plant from Davis’ attack, according to the AP.

DETROIT
General Motors Corp. last week admitted falsifying its Cadillac sales data in order to beat rival automaker Lincoln in retaining the U.S. luxury auto sales title, which had been held by GM for 49 years.

Following an internal audit prodded by press investigations, GM admitted inflating last December’s U.S. Cadillac sales by nearly 5,000 units, the Reuters news agency reported.

GM spokesman Jim Farmer said that “appropriate disciplinary action” had been taken against an undisclosed number of “overzealous individuals” who had falsified data, according to Reuters.

GM also apologized to Lincoln for depriving the company of celebrating its 1998 marketplace win.

SAN DIEGO
Twenty-five business students at San Diego State University (SDSU) were flunked last month after cheating on a test given in their business ethics course, the university’s Daily Aztec paper reported last week.

Lecturer Brian D. Cornforth failed roughly a third of his business ethics students after catching them using answers culled from a test given to a preceding session of the class, the Associated Press reported.

“There’s nothing worse than cheating,” SDSU judicial officer Julie Logan told the Daily Aztec. “It devalues the diploma you receive, and it hurts all the students.”

BRUSSELS
The European Parliament last week passed legislation intended to increase EU electronic commerce by delineating the responsibilities of member countries and European companies.

Among the new law’s provisions:

• Companies selling goods online are governed by the regulations and consumer-protection laws of the country in which they are based
• Consumers should have the ability to refuse junk email
• Internet service providers (ISPs) must work harder to combat copyright violations and libel
• ISPs and phone companies are not liable for unknowingly storing or transmitting illegal material

Lawmakers hope the new law will boost the number of European companies doing business online.

Recent figures show only 2,000 EU companies courting consumers online, compared to nearly 7,000 U.S. firms, the BBC reported.

BELLEVUE, Washington
Software makers reported a surge last week in sales and trial downloads of software designed to monitor children’s use of the Internet.

Net Nanny climbed to the No. 2 spot on Netscape’s Software Store sales portal, and distribution of evaluation copies of Net Nanny and rival CYBERsitter rose 10 to 15 percent, the Associated Press reported.

The sharp rise comes two weeks after the school shootings in Littleton, Colorado, which investigators say may have been influenced by violent Internet content.

Some critics warn that while filters may be a good first defense, they should not be seen as a fix-all.

David Sobel, general counsel for the Washington, D.C.-based Electronic Privacy Information Center, told the Associated Press that filters may be “a quick fix to a very complicated problem,” because they can accidentally block access to reputable sites and reduce vital dialogue between the community, parents, and their children.