Ethics Newsline®

“I hope I shall always possess firmness and virtue enough to maintain what I consider the most enviable of all titles, the character of an Honest Man.”

– George Washington (1^st U.S. president (1789-1797), 1732-1799)

From GreenPoint Financial Corp.:

“A new national Lou Harris study shows money is not the main motivator for America’s self-employed entrepreneurs and small-business owners. The driving forces for going into business for oneself are emotional, not financial.

“Strong personal desires for more freedom, independence, realizing one’s potential, being happy, and providing family security are cited as defining the American Dream by more than three-out-of-five entrepreneurs polled. Only slightly more than one-in-10 says getting rich defines the Dream. . . .

“Hurdles include the perception by nearly 3-of-4 entrepreneurs polled that ‘not being able to get credit when you need it’ is a chief concern. Key trade-offs include less vacation (61 percent), less sleep (52 percent), and less free time (56 percent). On the plus side, entrepreneurs gain more quality time with family (55 percent), money to spend (59 percent) and save (54 percent), and overall financial security (65 percent). They gain something else: more worries about work (64 percent) — reflecting the classic tradeoff of more money equaling more stress and less time for oneself.

“Stressed they may be, but overwhelmingly entrepreneurs like being self-employed even better than expected (77 percent) — but only 44 percent also go so far as saying they would never work for someone else again. . . .

“The Harris-GreenPoint study found that about one-third of self-employed entrepreneurs have an annual income of more than $75,000. Fully 60 percent of these self-employed entrepreneurs have a college education (compared to only 25 percent for the rest of the nation).”

PARIS
A French judge recommended last week that 30 more people, including the head of automaker Renault, be charged with complicity in spreading AIDS-contaminated French blood supplies in the 1980s.

Renault chairman Louis Schweitzer was an aide to former prime minister Laurent Fabius at that time.

The court wants Schweitzer and others investigated for their possible role in preventing the use of a U.S. test to screen blood supplies for the AIDS virus while a French firm completed development of a rival product, the Reuters news agency reported.

Last March, Fabius and former government minister Georgina Dufoix were acquitted of manslaughter charges in the case. Former health secretary Edmond Herve was convicted.

At least 3,600 people were infected with the AIDS virus due to the lack of screening. More than 1,000 of them have died, according to Reuters.

DURHAM, North Carolina
U.S. regulators last week lifted a ban on federally funded human experiments at Duke University Medical Center, saying the institution had submitted an acceptable plan to correct deficiencies in oversight.

The Office for Protection from Research Risks (OPRR), part of the National Institutes of Health, shut down Duke’s funding earlier this month after the facility repeatedly failed to address government concerns for the safety of human subjects, the Associated Press reported.

While the facility’s new plan “essentially addressed the concerns we presented to them,” OPRR official Tom Puglisi told the Reuters news agency, “they still have a significant amount of work to do in the near- and long-term to ensure protection of human subjects.”

Duke may now resume ongoing tests involving human subjects, but is prohibited from launching new experiments until a government review board finds evidence of reform, according to the AP.

WASHINGTON
The U.S. Senate last week ended a series of back-and-forth votes on gun control, giving final approval to a controversial bill that requires 72-hour background checks on all gun-show sales and funds efforts to clamp down on juvenile crime.

The passage of the sweeping juvenile-crime bill was nearly overshadowed by the controversy surrounding one of its amendments calling for background checks at gun shows and pawnshops.

Republican leaders had quashed an earlier draft of the amendment, sponsoring a series of less-stringent measures that suffered successive defeats because of political and public backlash.

In the end, vice president Al Gore cast a rare deciding vote, breaking a tie to defeat the last Republican version and approve a comprehensive amendment drafted by Democrats, the Associated Press reported.

The measure had sparked a week of vitriolic debate in the Senate, where lawmakers found themselves under heavy scrutiny after recent high-school shootings in Colorado and Georgia.

The gun control amendment passed as part of a juvenile-crime bill sponsored by Sen. Orrin Hatch (R.-Utah), which commits $1 billion annually for the next five years to fight youth violence, according to the Reuters news agency.

The legislation now goes to the House.

Should ethics be taught in the schools? Ten years ago, that debate generated a lot of clear-air turbulence. Now, in the slipstream of the shootings in Littleton, Colorado, the question is not whether but how. Evidence: the latest issue of Time, where a story titled “Character Goes Back to School” maps out methods of teaching rather than arguments pro and con.

Then should ethics be taught in the business schools? That this question is still relevant suggests that business schools in the United States may be at least a decade behind the leading-edge trends.

Those trends suggest that ethics matters greatly to the public. A Wall Street Journal survey in March, for instance, asked U.S. respondents to consider “some concerns in this country” and identify the one that was “of greatest concern” to them. Ranking third, at 18.1 percent, was “better and safer schools” (the survey was carried out prior to the Littleton shootings). Crime and violence stood second (19.1 percent). Topping the list: “weak family values,” which at 30.8 percent stood head and shoulders above the others.

The trends also suggest low expectations for improvement. In a USA Today/CNN/Gallup Poll last October, participants were asked whether they thought the “moral values of society” would be “better or worse” in 2025 than they are today. Sixty-two percent said “worse.” Only 31 percent said “better.”

Not surprisingly, then, the public wants ethics taught. When U.S. News and World Report conducted a survey in 1997, it found that “teaching children values and discipline” ranked first among the educational issues that participants felt were most important.

Wouldn’t it follow that schools of business should be riding these currents of public concern? Yet an article in the March issue of Business and Society Review, reviewing several studies of “the ethics of executives and of business school graduates, students, and … deans,” finds their conclusions “disturbing.” It cites, for example, a 1995 study by professors at Wright State University and the University of Dayton, who found that although business school students score themselves at an average of 84 on an ethical scale of 100, nearly half admit to cheating and lying. They also found that business school students, who think they are much less ethical than their parents, seem to recognize their need: A large majority express strong dissatisfaction with the coverage of ethics in their schools.

If there’s any comfort here, it’s that Americans aren’t alone. In a study titled “The Teaching of Business Ethics,” released in the United Kingdom today (May 24) by the Institute of Business Ethics (IBE), the situation in the 105 universities and 47 professional institutions surveyed is called “a hit and miss affair.”

On the “hit” side, business ethics is finally being offered in Britain — in 57 percent of undergraduate programs and 43 percent of graduate programs. And it’s seen to be growing. Most of the teaching has begun in the last five years, and there are widespread expectations that it will increase even more in the future.

More troubling is the “miss” side:

• Where ethics is taught in a program, the time devoted to it, on average, is less than seven hours.
• Students appear to be “receptive and willing to study ethics,” but they arrive with “a low level of awareness of the issues.”
• There are “virtually no lecturers in the subject” hired specifically to teach business ethics. Moreover, it is “very difficult to recruit appropriately qualified lecturers,” in part because there is “no adequate career structure” to develop specialists and provide advancement in the field.
• Where business ethics courses have developed, they trace their genesis to the enthusiasm of individual teachers.
• In professional programs — for accountants, engineers, marketers, travel agents, and so forth — the picture is even more sobering. “Most have yet to consider it seriously,” writes the report’s author, Julian Cummins, “and many do not regard it as an issue which needs addressing in professional course syllabi.”

What emerges from this report is a picture that looks very much like America several decades ago. If the analogy holds, the IBE’s first task will be to persuade the business and professional schools that ethics should be taught and that the public wants it taught. IBE’s chairman, Roderick Chamberlain, is already setting about to do just that. “Unless there is a greater commitment on the part of academic and professional institutions,” he says, “future managers will be ill-equipped to respond to the growing business pressure as well as media and customer interests in good standards of business conduct.”

And, he might have added, ill-equipped to participate in a global economy. In the transparency and worldshrink of the 21^st century, corporations are already finding that there’s no safe place to hide bad ethics. Given global communications, they can’t hide it in another country. And given information access through the Internet, they can’t hide it internally. Surely one of the top priorities of 21^st century business schools, on both sides of the Atlantic, will be to turn out managers who know how important it is to do nothing that needs hiding.

(c)1999 by Rushworth M. Kidder

When is a temporary worker simply an outside contractor whose services are purchased from another firm, and when does he or she become a de facto employee? That’s more than just a word-game; it’s a legal and ethical question that may have a major impact on high-tech and other industries, and it leads this week’s edition of Business Ethics Newsline, your guide to the news of the week with an ethical angle.

This is a heavy news week on the ethics beat; we follow up with two stories dealing with ethics and commerce: a call by a U.S. official for ratification of an anticorruption measure, and a speech at a business ethics conference claiming that ethics is good for the bottom line.

We follow with several stories from the international desk: a charge that the European Union is defying the World Trade Organization; a major fine levied against two international vitamin manufacturers; the establishment of a pact between U.S. and Mexican unions; problems with privacy issues in Canada; and charges that British immigration lawyers sometimes cheat their clients.

Next, two stories dealing with child labor: a complaint settled by Sears, and a report that children in developing nations are at risk when they work in mining industries.

We follow with two stories dealing with the world of high finance: fallout from a 1996 attempt to corner the copper market, and a truly unusual case involving charges and countercharges at Morgan Stanley.

Four stories this week deal with the communications industry: a measure to muzzle the press in Vietnam, a plea to remove bomb-making information from the Internet, a program involving donated cell phones, and a threat by a major newspaper to boycott the Indianapolis 500 after a reporter for Sports Illustrated was denied press credentials.

And we conclude our wrap of the week’s news in ethics with a story about the limits of exclusion: A housing development is in trouble because it refuses to sell to lawyers.

We finish up our edition of Business Ethics Newsline with three stories in our “Whatever Happened to…” department: follow-ups on gun control measures in the Senate, the ban on human-subject research at Duke, and the French tainted-blood case.

Have a productive, ethical week.

– Carl Hausman

SAN FRANCISCO
A federal appeals court last week ruled that a class-action lawsuit against Microsoft should be expanded to include thousands of Microsoft temp workers denied the right to purchase the profitable stock at a discount.

The suit originally included only a small number of temporary employees who had long-term assignments at Microsoft.

But a panel of three judges extended the definition to include more than 10,000 temp workers who may have been, in the words of the ruling, “common-law” employees of Microsoft and entitled to stock benefits, according to the New York Times.

Microsoft has argued that the employees were shopped out to the tech giant by temp agencies, and therefore have no right to Microsoft employee benefits, according to the Seattle Times.

Some analysts warn that the seven-year-old case, as well as a series of similar lawsuits against Microsoft, could have major ramifications for the tech industry, which relies heavily on temp workers.

“This is a broad decision, and it applies to all businesses,” computer-industry analyst Rob Enderle told the New York Times. “If you’ve got a temp worker putting in 20-plus hours a week, you better start considering him or her like you would a part-time worker.”

NEW YORK
U.S. business leaders were urged last week to take a stronger stand against corporate corruption by pushing for the passage of legislation designed to level the international playing field and weed out corruption.

Stuart Gilman of the U.S. Office of Government Ethics called on business leaders to demand congressional ratification of the languishing Inter-American Convention Against Corruption (ICAC), the Reuters news agency reported.

The ICAC was signed two years ago by Washington and the other members of the Organization of American States, but remains unratified due to political squabbling, Gilman said.

Speaking to leaders attending a business ethics conference last week, Gilman urged U.S. companies to put their corporate muscle behind the ICAC.

NEW YORK
Sticking to ethical standards may benefit businesses, Reebok chief executive and chairman Paul Fireman told U.S. business leaders last week at a conference on business ethics.

In his keynote address, Fireman said that since Reebok had instituted human rights reforms and safeguards at its overseas factories in 1988, profits and productivity had increased.

Fireman told business executives that democratizing Reebok’s Chinese factories and boosting Indonesian workers’ pay above the government’s minimum wage bolstered worker morale and corporate profits, according to a report from Reuters.

U.S. corporations must take a stand on ethics when doing business overseas, Fireman told the conference. “We must keep our own standards,” he said. “We carry our own ethical passport.”

DUBLIN
The European Union is threatening the authority of the World Trade Organization (WTO) by refusing to comply with WTO demands to open EU markets to hormone-treated beef, U.S. Agriculture Secretary Dan Glickman warned last week.

“In order for the WTO to work, its members have to respect its institutional authority,” Glickman told the World Meat Congress last week in Dublin. By repeatedly refusing to obey WTO rulings, he said, “the EU has put all this at risk.”

The EU again ignored a WTO ruling and deadline last week, insisting that they will not import hormone-treated beef while they still have doubts about its safety, the Reuters news agency reported.

The United States has asked the WTO for permission to impose $202 million in punitive damages against the EU in retaliation for its ban on hormone-treated beef.

Last week, Canadian trade minister Sergio Marchi said his country will follow suit and seek $48 million in punitive damages against the EU.

“Canada plays by the rules, and expects others to do so as well,” Marchi said in a statement, according to the Reuters report.

WASHINGTON
Two vitamin makers agreed last week to pay a record $725 million fine and plead guilty to charges of fixing worldwide vitamin prices for nearly a decade.

German-based BASF-AG agreed to pay $225 million, while Swiss firm Hoffman-LaRoche agreed to a record $500 million fine. A former Hoffman-LaRoche executive also agreed to pay a $100,000 fine and serve four months in U.S. prison, the Associated Press reported.

“The vitamin cartel is the most pervasive and harmful criminal antitrust conspiracy ever uncovered,” Justice Department antitrust chief Joel Klein said. “The criminal conduct of these companies hurt the pocketbook of virtually every American consumer.”

The companies admitted conducting a systematic campaign to fix global vitamin prices by controlling distribution and sales, rigging bids, and dividing the market for vitamin supplements from 1990 until 1999, according to the AP.

The Washington Post reports that a coalition of law firms is planning to launch a series of private lawsuits to recoup consumer losses from the conspiracy.

The Justice Department credited alleged co-conspirator Rhone-Poulenc, a French firm, with voluntarily aiding the U.S. investigation. Under the department’s Corporate Leniency Program, Rhone-Poulenc received immunity from prosecution by stepping forward to report its knowledge of the conspiracy.

LOS ANGELES
Two influential unions — one from the United States, one from Mexico — announced last week that they had formed a solidarity pact to boost union power when dealing with international corporations.

Service Employees International Union Local 1877 and Section 87 of Mexico’s telephone workers union said that they would back each other’s industrial actions against international employers.

The alliance is one of a growing number of cross-border agreements designed to strengthen the bargaining power of unions in the United States and Mexico, according to the Associated Press.

“It’s a growing phenomenon,” Cornell University labor relations professor Kate Bronfenbrenner told the AP. “As the economy has gotten more global, unions have understood their strength depends on international solidarity.”

Other recent international alliances include pacts between the Farm Labor Organizing Committee and Mexican workers, and between the Communications Workers of America and telecommunications workers in Mexico, France, and Germany, according to the AP report.

Special to Newsline from Canadian Correspondent Errol P. Mendes

OTTAWA
A research report funded by the federal Department of Industry indicates that customer-service staff at some of Canada’s leading retail and financial corporations are confused or do not understand their corporation’s policies on customer privacy, according to the Toronto Star.

For example, workers at some credit unions told investigators posing as customers that certain account information would not be shared with marketers, when in fact it would.

The Toronto Star also reported that the research study indicated that many service staff were not familiar with how privacy-related complaints were to be handled.

LONDON
Some immigration lawyers in the United Kingdom are defrauding their clients of millions of dollars, according to a new report published last week by the Scottish Legal Aid Board.

The report claims that many immigration law firms aggressively pursue clients, and sometimes provide bad advice at inflated prices to clients who do not speak enough English to sort out the details of the transaction.

The report recommends the adoption of a system to regulate and approve law firms for immigration work.

Twenty-five firms are currently under the supervision or investigation of U.K. authorities for alleged malpractice and overbilling of immigrant clients, according to the BBC.

CHICAGO
Sears, Roebuck and Co. agreed last week to pay a $325,000 fine to settle charges that the retailer violated U.S. child labor laws.

A U.S. Labor Department investigation of 71 Sears stores found that 44 of them violated federal laws by permitting 16- and 17-year-old workers to operate heavy machinery, including paper balers, forklifts, and freight elevators, the Associated Press reported.

The investigation also found several instances of 15-year-old workers logging more hours than allowable under federal law.

Sears admitted no wrongdoing in settling the case, but agreed to increase manager training about child labor laws, and to provide informational material to the parents of employees younger than 18, according to the Reuters news agency.

Labor secretary Alexis Herman praised Sears for its cooperation in the investigation, telling reporters that the nation’s second-largest retailer had “taken real leadership” in its efforts to reform its child-labor practices.

“I consider Sears to be a model” for other retailers, Herman said, according to the AP report.

Special to Newsline from Canadian Correspondent Errol P. Mendes

GENEVA
A new International Labor Organization report claims that exploitative use of child labor in small-scale mining operations in developing nations is on the increase.

According to the report, such unregulated mining employs vast numbers of men, women, and children in dangerous conditions, generating a workplace fatality rate up to 90 percent higher than in mines in industrialized countries.

Nations singled out for criticism included China, Tanzania, Guinea, and Peru.

The Toronto Star reported that miners in such facilities face greater risks of cave-ins, rock falls, poor ventilation, faulty equipment, and exposure to heat, cold, dampness, dust, and toxic fumes.

According to the Star, the author of the report, Norman Jennings, said that the Canadian Mining Sector can be a force for improving small mining operations around the world.

Jennings praised one Canadian company, Placer Dome, for trying to improve conditions in small-scale mining near one of its operations in Venezuela.

WASHINGTON
U.S. regulators last week accused Merrill Lynch of aiding a renegade Japanese copper trader in his attempt to corner the worldwide copper market in 1995.

The Commodity Futures Trading Commission (CFTC) complaint against Merrill Lynch charges the company with financing, advising, and profiting from the scheme, which sent copper prices crashing from $2,378 a ton to $1,880 in a single day in mid-1996, according to the Reuters news agency.

Merrill Lynch released a statement saying the charges are “without merit,” and a disappointment because the company cooperated with the CFTC in investigating the copper-market manipulation.

Last year, Japan’s Sumitomo Corp., which employed the renegade worker, agreed to pay a $125 million fine and establish a $25 million fund to compensate private investors who lost money in the crash.

The CFTC also announced charges against Global Minerals and Metals, a firm accused of helping Sumitomo arrange the copper manipulation, according to Reuters.

NEW YORK
Prosecutors last week dropped charges against a former Morgan Stanley Dean Witter investment analyst accused of trying to plant phony messages in the company’s email system after investigators said that Morgan Stanley secretly paid an informant $10,000 to set up the fired worker.

The New York district attorney’s office announced that it was dropping all charges against Christian Curry, a 25-year-old black man accused of trying to plant incriminating email messages in Morgan Stanley computers in order to bolster his discrimination case.

Curry last week announced he will sue Morgan Stanley for $1.35 billion for alleged discrimination and for his contention that the company tried to set him up, the Reuters news agency reported.

Morgan Stanley fired Curry in April 1998 for alleged expense-account abuses. Curry insists he was fired because of his race and because company executives thought he was gay, the Associated Press reported.

Curry was arrested last August, four months after his firing, and charged with forgery, coercion, and computer trespass after he allegedly hired a hacker to plant phony racist and homophobic messages on company computer systems, according to the Associated Press.

But the AP reports that the case began to unravel after it was determined that the hacker was really an undercover police officer, and a friend of Curry who put Curry in touch with the phony hacker was allegedly paid $10,000 by Morgan Stanley.