Ethics Newsline®

“Truth is the nursing mother of genius. No man can be absolutely true to himself, eschewing cant, compromise, servile imitation, and complaisance without becoming original.”

– Margaret Fuller (U.S. critic and reformer, 1810-1850)

From the Pew Research Center for the People and the Press:

“Across all mediums — print, television, radio, and the Internet — the news media share public misgivings about their watchdog role. More of the news media today than just a few years ago say the press drives controversies rather than just reports the news in the way it covers the personal and ethical behavior of public figures. . . .

“. . . Lack of credibility is the single issue most often cited by the news media as the most important problem facing journalism today. Alarm about faltering credibility is far more prevalent in the current survey than in a comparable 1989 Center survey. Moreover, the press itself says that the loss of public trust is a leading cause of declining news audiences. . . .

“Most members of the news media concede that they are out of touch with the public, and they blame themselves more than the public for declining audiences. News media executives and journalists view the public not as uninterested or uninformed, but as feeling overloaded by news and information.
“But Americans do not share this view. Two-thirds of the public says they like having so many information sources available; only 28 percent say they feel overloaded.

“The press also points to its loss of credibility with the public as a major reason for losing readers, viewers, and listeners. About half of news media executives and journalists rank lack of credibility with the public as a major reason for declining audiences. This represents a significant jump since 1989, when only one-third of the press said this.”

Special to Newsline from Canadian Correspondent Errol P. Mendes

OTTAWA
The National Post last week reported that the federal ethics counselor who reports to the Prime Minister, assured a Parliamentary Committee that prime minister Jean Chrétien did not breach the government’s conflict of interest code by assisting a businessman in his riding (local district).

The businessman, Yvon Duhaime, who had undisclosed criminal convictions and was in financial difficulties at the time, obtained almost $690,000 in federal grants and loans.

Duhaime obtained the funds to expand a money-losing hotel that he had purchased from a partnership that included the PM.

Several years ago, my wife and I were tooling along a country road in a rental car when the dreaded blue flashing lights appeared in our mirror.

We pulled over, and in a moment a police officer appeared at my window. I handed him my license and the contract for the car, which indicated I would be returning it at an airport in three days’ time. As he wrote up the ticket, he explained that I had to appear in person at the courthouse in a nearby city in exactly five days and pay about $120. Or, he added, as a courtesy he could take my money right then and deliver it for me. Which would I prefer?

Thousands of miles from home, squeezed by the schedule, I paid on the spot.

If, as you were reading this story, you began to suspect it happened in another country, you were right. It was in Costa Rica. What tipped you off? Probably the bit where cash passed through the car window — cash that, I was pretty sure, would never make its way to any courthouse.

In the United States and Canada, we’re curiously free of this kind of official shakedown. It’s hard to put ourselves in the mindset of those who live, hour by hour, with endemic corruption. Yet North American companies operating overseas often see corruption as the greatest single challenge to ethical business practice. So it’s useful to know what other countries think about this problem. Do they notice it? Do they care? Why do they think it happens?

A survey of 14 Latin American countries and the United States casts useful light on these questions. Conducted in March for the Wall Street Journal and 11 Latin American newspapers by Corporación Latinobarómetro and by MORI-USA, it focuses primarily on attitudes toward the free market and government’s economic role. But lurking in the responses is a tantalizing reading of the moral barometer in these nations:

• “Has corruption increased or decreased in the last few years?” A sobering 78 percent say it’s “increased a lot,” with another 10 percent saying “increased a little.” The countries topping the trend are Venezuela, where 94 percent say “a lot,” along with Argentina (90 percent), Paraguay (89 percent), and Costa Rica (89 percent). Lowest number: Chile, though at 54 percent, it’s still a concern.
• But maybe corruption, though increasing, is no big deal? Not true: To the question, “How serious is the problem of corruption in this country,” 69 percent say “very serious,” with another 26 percent saying “somewhat serious.” Again, Venezuela tops the list, with 89 percent saying “very serious.”
• A related question asks whether elections are “clean” (a 39 percent response from the 14 Latin American countries) or “fraudulent” (52 percent). Here, too, Venezuela ranks high, with 67 percent agreeing that they’re fraudulent. Cleanest elections: Uruguay, Chile, and Costa Rica — the latter country, by the way, giving the lie to the notion that corruption and electoral fraud inevitably go hand in hand.
• But perhaps the most penetrating ethical insight arises when participants are asked for “Reasons why people do not pay their taxes.” The top answer is “Because taxes are too high” (46 percent). But then, searching for explanations, participants zero in on three values-based answers — “Because of corruption” (44 percent), “Lack of honesty” (43 percent), and “Lack of civic conscience” (33 percent) — before moving to other explanations.

For executives with interests in particular countries, there’s a wealth of data to mine here, available in the Wall Street Journal’s Web report. But the big picture is also useful. This is a region of the world where corruption is seen to be very serious and sharply increasing, where elections are widely seen as fraudulent, and where people tend to view their fellows as dishonest and lacking in the community commitment that builds civil society.

The challenge facing ethical companies seeking to do business in Latin America, then, is significant. What should they do?

An answer may lie in another question asked in the survey. When asked, “In one word, could you tell me what ‘democracy’ means to you?” respondents in the United States said “freedom” eleven times as often as they chose the next most popular answer, “equality.” Respondents in Latin America, by contrast, chose these two answers in almost identical numbers.

What does that mean? Do Latin Americans feel a far greater need for equality than their counterparts in the United States? Are they concerned that unequal access to the economy is widening the gulf between haves and have-nots? Is that sense of a gulf linked to corruption, which is a form of regressive taxation that impacts most severely those least able to bribe and extort? Does a community built on corruption, then, necessarily degrade the sense of equality? Conversely, does a community that prizes equality erode the foundation of corruption?

If so, one of the strongest anticorruption tools a foreign company can bring is a strong working culture of equality and its concomitants, fairness and justice. In the United States, wedded as we are to freedom, we may too easily overlook this “other” definition of democracy and the powerful role it can play. Which is why it’s helpful to be reminded, by values-based data like this, of other points of view.

(c)1999 by Rushworth M. Kidder

The World Wide Web may be one of the most significant innovations in the history of commerce. But it also — by its very nature — poses a threat to consumers’ privacy. Data can be mixed and matched, “massaged,” and distributed to thousands of new destinations with the click of a mouse.

Privacy and ethical conduct on the Web are the subjects of our two top stories this week in Business Ethics Newsline, your weekly guide to news with an ethical angle. We capsulize and link you to a report on privacy policies posted on companies’ Web sites, a move that may forestall imposition of government regulation. We also cover a story about growing Internet fraud in the United Kingdom.

Next, two major ethics-related domestic stories: a Justice Department antitrust suit against American Airlines, and a decision by the federal government to temporarily suspend funding of human-subject research at Duke University because of what the government claims are inadequate patient protections.

We follow with two stories about the intersection of sports and ethics: GM’s announcement of a major sponsorship deal for the scandal-tarnished Olympics, and corporate sponsors who have told the Tour de France, the world’s most noted bicycle racing event, to clean up its drug problem.

President Clinton figures in our next two stories: one, a report on his call for corporations to invest in the inner-cities, and the other dealing with his efforts to push gun-control legislation through the Senate.

And we conclude the news wrap with stories about two court victories for Big Tobacco, a look at unions in Hong Kong, and the war on drugs in Bolivia.

In our Trendlines feature this week, we take a look at the effort by U.S. high-tech firms to forge their corporate characters by helping Kosovar refugees, a collegiate ethics pledge, and stress on the job in Canada.

And we conclude Newsline with several follow-up stories that pick up the threads of the news: a look at the Bre-X mining scandal aftermath, a settlement in the Flynt obscenity case, a new lawsuit relating to the CNN/Tailwind story, and an investigation that cleared the Canadian prime minister of conflict-of-interest charges.

Have a productive, ethical week.

– Carl Hausman

WASHINGTON
Nearly two-thirds of Internet business sites are providing visitors with privacy policies, according to a new survey released last week by Georgetown University.

The report shows a surge in privacy policy disclosures since last year, when a government study found that only 14 percent of sites adequately explained their privacy policies, the Associated Press reported.

Government regulators, wary of stifling electronic commerce, had warned the industry to beef up those numbers through self-policing, or face regulation from Washington.

Christine Varney of the industry’s Online Privacy Alliance says that the new numbers show that companies can take care of the problem themselves.

“The last thing we need to do now, since this is working, is to have government intervention in the marketplace,” Varney told the AP.

But with less than 10 percent of online business sites offering more than bare-bones, no-options privacy policies, some critics say more needs to be done.

“The bottom line is not whether there’s a privacy policy, but is there privacy protection,” said Marc Rotenberg of the watchdog Electronic Privacy Information Center.

The Georgetown survey of 364 commercial Internet sites was funded by companies doing business online, including IBM, America Online, Microsoft, and Compaq.

LONDON
Fraud is likely to surge in the United Kingdom, fueled by a rise in electronic commerce and the advent of the euro currency, according to a report issued last week by the U.K. Fraud Advisory Panel.

“Companies embarking on ecommerce must take control,” panel head and former government fraud advisor George Staples told the BBC.

Staples points to the spike in reported Internet fraud in the United States, where complaints shot up more than 600 percent in one year, reaching 7,750 in 1998.

The Fraud Advisory Panel was launched in 1998 by the Institute of Chartered Accountants to advise U.K. companies on dealing with fraud.

WASHINGTON
The U.S. Justice Department last week launched an antitrust lawsuit against American Airlines, saying that American’s efforts to put low-cost competitors out of business were predatory and illegal.

The government investigation centers on American’s hub at the Dallas/Fort Worth airport, where three low-cost airlines went out of business after stiff price wars with American, according to a report from the Associated Press.

The Justice Department says that American initially increased its flights and dropped its fares, temporarily sacrificing profits in order to win customers from the rival airlines. But after the smaller airlines closed down, the Justice Department claims, American returned its flights and fares to their original levels.

Justice Department antitrust chief Joel Klein told reporters that American’s actions crossed the line from fair competition to predation. “American knew this strategy would be costly and pursued it only in order to drive out the new carriers so it could return to its monopoly pricing,” said Klein, according to the AP report.

American Airlines, which dominates at Dallas/Fort Worth with a 70 percent share of the airport’s passengers, issued a statement denying any wrongdoing and claiming that the government’s charges “are unwarranted and go against the very essence of free market competition.

DURHAM, North Carolina
The U.S. government last week suspended almost all federally funded research on human subjects at Duke University Medical Center, saying the research facility had failed to ensure the safety of its subjects.

The move followed Duke’s failure to correct deficiencies in protecting human subjects identified by the federal Office for Protection from Research Risks (OPRR) last December, the Washington Post reported.

In its report, the OPRR faulted Duke for lax oversight, insufficient record keeping, inadequate patient consent forms, and conflict of interest on the part of Duke’s Institutional Review Board, which is charged with ensuring the soundness and ethics of Duke experiments, according to the Associated Press.

Duke’s chancellor for health affairs, Dr. Ralph Snyderman, issued a statement characterizing the problems as administrative, and emphasizing that the OPRR found no evidence that human subjects had been harmed.

The Duke medical center, which receives roughly $175 million a year from the federal government, could have its suspension lifted if it corrects the OPRR charges by June 1, according to the Reuters news agency.

DETROIT
General Motors last week announced a $1 billion, 10-year sponsorship deal with the U.S. Olympic Committee, a move that Olympic supporters say should quell doubts about U.S. corporate support for the scandal-laden games.

GM’s sponsorship secures the company’s exclusive rights as official vehicle-maker to the U.S. team for the next five Olympics, and shuts other U.S. automakers out of advertising slots during NBC’s 2000 Olympics coverage, the Associated Press reported.

General Motors said it will also sponsor a “Team Behind the Team” joint campaign with the United Auto Workers Union, supplying $3.5 million to purchase cars for the families of U.S. Olympic hopefuls.

GM’s move follows pullbacks by some corporate sponsors and a growing lack of confidence in the Olympics on the part of many corporations.

Olympics sponsor John Hancock announced last week that a company-sponsored poll had found that public support for the Olympics and its sponsors has dropped sharply since the Salt Lake scandal, a claim dismissed as biased and inaccurate by Olympics representatives, according to the AP.

PARIS
Tour de France sponsors Coca-Cola and the Spanish watchmaking firm Festina announced last week that they would drop their sponsorship of the cycling event if its drug-tarnished reputation does not improve.

The announcements follow a drug sweep last week during which Paris police detained 15 people, including several prominent cyclists, suspected of using or distributing performance-enhancing drugs, the Associated Press reported.

During questioning, Belgian cyclist Frank Vandenbroucke and French cyclist Richard Virenque both said that they had received drugs from a man suspected of participating in a drug-supply network.

But both men insisted that they believed the drugs were legal, according to the Associated Press.

The flare-up has refocused attention on last year’s Tour de France scandal, which erupted after Virenque’s Festina cycling team was found with a cache of banned anabolic steroids.

The scandal sparked international efforts to crack down on the use of performance-enhancing drugs by professional athletes.

ATLANTA
President Clinton last week urged U.S. corporations to invest their dollars in low-income areas, punctuating his appeal with a tour of Atlanta’s Sweet Auburn Market, located in a revived inner-city neighborhood.

Clinton urged a group of business leaders to consider buttressing the infrastructure of underserved communities across the United States, communities that have largely been left behind despite the booming U.S. economy.

The trip was part of Clinton’s “New Markets” initiative, which would provide businesses with tax credits and other incentives to invest in poorer communities, the Reuters news agency reported.

The CEOs included in the microsummit came from companies including Citigroup, Bell South, American Airlines, Delta Airlines, Goldman Sachs, Aetna, AT&T Wireless, and Rite Aid, according to the AP.

WASHINGTON
Republican leaders in the U.S. Senate last week reversed their original vote and approved a new measure requiring gun vendors to run background checks for firearm sales at gun shows.

The new bill requires 24-hour background checks on sales at gun shows, where unlicensed vendors may currently sell and trade firearms freely and without background checks.

Originally, the Senate had voted down a mandatory background-check measure and approved a bill endorsing voluntary checks. But after pressure from President Clinton and a barrage of calls from angry constituents, the Senate opted to reconsider the measure, according to the Reuters news agency.

Critics say the new version’s demand for background checks to be completed within 24 hours is unrealistic, and that the bill provides new loopholes for criminals to obtain guns, CNN reported.

Continued negotiations on the bill are expected to resume this week.

KANSAS CITY, Missouri
Brown & Williamson Tobacco was acquitted last week of any responsibility for the death of a longtime smoker whose family had sued the company for negligently producing a dangerous product.

The jury assigned Brown & Williamson “zero percent fault,” ruling that smoker Charles Steele willingly discounted the known dangers of cigarettes, the Reuters news agency reported.

The acquittal follows a similar victory for Big Tobacco in Tennessee last week, where a jury cleared three tobacco companies — Phillip Morris, Brown & Williamson, and R. J. Reynolds — of responsibility in the deaths of three smokers.

HONG KONG
Union membership is on the rise in Hong Kong, where workers are increasingly worried that the Asian financial crisis may result in lost jobs or lower wages.

More than 23,500 people have joined Hong Kong’s unions in the past two years, and seven new unions have applied for recognition in the past six months, the Associated Press reported.

But while the unions’ numbers may be climbing, their power remains questionable, especially as the Asian financial crisis causes companies to downsize and cut pay.

Hong Kong law recognizes unions, but not their collective bargaining rights, effectively permitting management to ignore union demands at the bargaining table, according to the AP.

The Hong Kong Confederation of Trade Unions, which represents 140,000 workers, says that the unions’ lack of bargaining rights has created a system that unfairly favors management, which has traditionally been able to rely on a vast pool of workers to fill a relatively small number of jobs.

LA PAZ
Bolivian president Hugo Banzer has made substantial progress in his pledge to crush his country’s coca industry by the end of his term in late 2002, according to a report last week from the New York Times.

CIA satellite images show a 25 percent drop in coca acreage last year alone in the Chapare region, which supplies 90 percent of Bolivia’s coca base. That pace has quickened this year, according to the Times.

“Bolivia has the potential of becoming the first country ever to stop producing illegal drugs,” U.S. ambassador Donna Hrinak told the Times in La Paz.

Despite Banzer’s progress where a series of Bolivian presidents and more than $500 million in international funds have largely failed, many hurdles remain, including remote villagers’ traditional reliance on income from the lucrative coca crop.

Banzer’s “Dignity Plan” has tried to end that dependence, convincing some villagers to accept government funds and assistance with growing alternative, legal crops, or face “forced eradication” and penalties, the Times reported.

While past presidents frequently capitulated to public demonstrations against coca eradication, Banzer’s administration has resolutely insisted on the change. “We decided we could not compromise on the principle that no Bolivian family should live off crime,” interior minister Guido Nayar Parada told the Times.

SAN JOSE, California
Silicon Valley has been rallying its resources and expertise to help meet the demand for keeping track of the roughly 716,000 Kosovar Albanians displaced by the Yugoslav war, according to a report last week by the Associated Press.

The AP profiles the relief efforts of several high-tech companies, including Cisco Systems, which answered a U.S. government request to patch together Macedonian Internet connections to help reunite separated refugee families.

Other efforts from Silicon Valley’s upstarts and monoliths, such as eBay, Microsoft, and IBM, include online auctions, equipment donations, and technical expertise.

Santa Clara University business professor Marty Calkins says that the Kosovo crisis has helped fledgling companies establish both a marketplace conscience and identity. “With these actions,” Calkins told the AP, “they’re establishing corporate characters.”

NORTH MANCHESTER, Indiana
A growing number of college graduates are signing on to align their ethics with their careers, reports the Associated Press in a profile of the Graduation Pledge Alliance at Indiana’s Manchester College.

The college organization — along with groups on 29 other U.S. campuses — encourages students to sign a nonbinding pledge to “explore and take into account the social and environmental consequences of any job I consider or any organization for which I work.”

The pledge, begun 12 years ago in California, gathered a scant number of signatories in the late 1980s, but is experiencing a revival as graduates’ priorities shift from money and power to family and ethics — a trend reflected in a recent survey of MBAs conducted by Duke University, according to the AP.

Christine Miller, a pledge signatory and chemist, convinced her company to decline a contract that she felt would violate her ethics. “I look at it like you have a job for a while,” Miller told the AP, “but you have to live with yourself forever.”

Special to Newsline from Canadian Correspondent Errol P. Mendes

OTTAWA
The President of the Canadian Business and Economic Roundtable on Mental Health, Bill Wilkerson, says that there will be a 50 percent increase in disability claims in Canada in the next decade due to stress on the job.

According to a report in the Ottawa Citizen, he asserted that in the North America Free Trade area, it will cost $60 billion annually to pay for disability relating to depression alone.

In Canada, Health Canada has stated the annual estimated costs of mental disabilities is probably underestimated at nearly $5.5 billion.

Mr. Wilkerson proposed that a crucial step to alleviate the problem is to train supervisors and make them accountable for resolving work-overload problems of employees they supervise.