Ethics Newsline®

“No one can ask honestly or hopefully to be delivered from temptation unless he has himself honestly and firmly determined to do the best he can to keep out of it.”

– John Ruskin (English essayist, critic, and reformer, 1819-1900)

From PricewaterhouseCoopers:

“The potential for ethics violations remains a worry at most U.S. investment management firms, according to survey data released today by PricewaterhouseCoopers. Nearly three-quarters of those surveyed, 74 percent, said that personal trading, insider trading, and fraudulent financial reporting were areas of ‘high concern,’ and about two-thirds, 66 percent, feared conflicts of interest. . . .

“The survey, conducted as the basis of a report, Corporate Conduct and Professional Integrity in the Investment Management Industry, included responses from senior executives at 65 leading U.S. investment firms with a collective total of more than $1 trillion under management.

“Roughly 65 percent of respondents said their company conducted a periodic review of its ethics program. However, there were inconsistencies within firms about how and when such reviews were performed. As a result, most policy infringements were determined through back-end processes, such as audit examinations, and consequently the process was more detective than preventive.

“In fact, many firms discovered ethical problems from outside sources, such as regulators and clients. More than 40 percent of respondents indicated that regulatory inspectors uncovered policy infringements, and nearly 30 percent reported that infringements were identified through client complaints.

“‘It is easy to sacrifice ethics on the altar of investment performance,’ said Nolan. ‘Investment management companies need to be more aggressive in finding or anticipating ethical lapses. We hope that this survey will prompt firms to evaluate and, if necessary, strengthen their ethics programs.’”

NEW YORK
Television executives are being forced to ask new questions about their coverage of Hillary Rodham Clinton, whose probable Senate candidacy is complicating coverage of the First Lady’s official activities.

Television networks have traditionally attempted to balance the amount of coverage they offer all prospective political candidates.

But with Hillary Clinton heading for a likely Senate race, the networks are confronted with an editorial dilemma: how to keep coverage of the First Lady from spilling into unfair publicity.

NBC, which last week featured Mrs. Clinton in a segment on a music charity, was the latest network to struggle with Clinton’s likely New York candidacy for the Senate. NBC solved the problem by inviting Clinton’s probable opponent, mayor Rudolph Giuliani, to appear on the program, the Associated Press reported.

Federal law requires broadcasters to provide equal time and exposure to opposing declared candidates, although those provisions to not apply to coverage of bonafide news events. As the networks prepare for Hillary Clinton’s likely entry into the New York senatorial race, those requirements will raise a new set of concerns.

“This is a lot of uncharted territory” for television programmers, political consultant Jay Severin told the Associated Press. “We’ve never had a first lady who’s run for political office before. This is the first of many questions: Is this right? Is this fair? Is this appropriate?”

BATON ROUGE
Louisiana lawmakers last week approved a measure requiring the state’s schoolchildren to call teachers and school employees “ma’am,” and “sir,” and address them as “Mr.,” “Ms.,” and “Mrs.” when referring to them by name.

The new law applies to children enrolled in Louisiana schools from kindergarten through fifth grade. Additional grades will be added one year at a time, the Associated Press reported.

Enforcement measures will be left to local school boards.

Louisiana governor Mike Foster pushed for the bill’s approval, insisting that “it’ll make a difference,” that respect “becomes habitual,” according to the AP report.

But some critics say the attempt to legislate respect will not work because schools do not know how to enforce the law, and because many parents do not demand similar respect at home.

“Solstice,” says my dictionary, comes from the Latin sol, or “sun,” and sistere, “to stand.” It’s the point when the sun “stands still” in its progress away from the equator and pauses before turning back. This week, poised equidistant from winters past and coming, the time seems right to pause for reflection.

Someone asked me the other day whether the net effect of the Clinton impeachment scandal on the nation’s ethics had been positive or negative. That seemed a properly solstitial question. After all, his presidency stands at a midpoint: He’s about equidistant from his first public denial of the Monica affair (January 1998) and the election to replace him (November 2000). With the kickoff of vice president Al Gore’s presidential campaign last week, Clinton’s lame-duck season has officially begun.

So what about his moral legacy?

Let me hazard the view that it’s been positive. The upshot, I mean, not the behavior that produced what Gore described to reporters as “that awful year.” That was inexcusable. But the effect on the nation has been salutary. To see why, look at Gore’s announcement speech.

He hardly mentioned Clinton. True, he embraced many of his policies. On moral issues, however, Gore put a lot of daylight between himself and his boss. He promised to “marshal [the] moral leadership” of the presidency to “fight for America’s families.” He pledged to take his own “values of faith and family to the presidency.” And he observed that “it is our own lives we must master if we are to have the moral authority to guide our children.”

This man, remember, steadfastly defended a president who had hardly mastered his own life’s impulses. But that was then. At the time, the Clinton presidency seemed tottering toward collapse. If ever there were a time to rally the party faithful, that was it.

This is now. The heat of the moment has passed. Sober reflection has set in. And the man who will probably be the nation’s leading Democrat after the primaries has set a different moral tone.

Why is this so important? Because it contrasts so sharply with the moral positions we were asked to espouse last winter. We were led to believe Clinton’s behavior was a merely personal matter. We were assured it had no bearing on his public performance. Although several high-ranking military officers were punished during that time — for sexual encounters less bizarre than the President’s — we were told we should outgrow our prudery concerning the Oval Office. And we were warned that removing Clinton would set “an impossibly high standard” for future presidents.

Now, in hindsight, it seems weird that those arguments ever flew. We may have been right not to remove the President. But the reasons were more political than moral. The moral arguments proved so specious that even Gore now discards them. Of course, he’s saying, the standard for presidents must be high. Of course we deserve a president whose conduct in family and personal matters is above reproach. Of course a politician’s private life matters.

On this last point, Clinton’s sad imbroglio has produced its most positive effect. It’s now virtually impossible to make the case that one’s private life has no impact on one’s public career. Clinton showed us why. We’ve seen too much deception. We’ve witnessed what Gore told reporters last week was the “most upsetting” thing of all, the “wasted time.” So we’re less apt to flirt with the notion that private behavior can be hermetically sealed off from public action.

Which Gore well knows. His announcement oozed intimacy. He chose a small-town setting where he grew up. He brought his 87-year-old mother and his pregnant married daughter on stage beside him. And he promised a campaign focused on that most private of all institutions, the family.

Dangers? Perhaps. After Clinton, the press will have even more incentive to dig into private lives. In the short term, that could tar the innocent. In the long term, however, it could set a standard the opposite of “impossibly high.” Under that standard, politicians won’t automatically have a right to privacy. They’ll have to earn it. And they’ll do so by leading private lives so balanced and ordinary that no outsider will want to go there.

If the Clinton debacle leaves that residue, the time will not have been entirely wasted.

(c)1999 by Rushworth M. Kidder

The treatment of the disabled in the workplace is an issue that sparks vigorous ethical and legal debate, and is the subject of our two top stories in this week’s edition of Business Ethics Newsline, your weekly guide to news with an ethical angle.

At the top of our news, we have two stories about disability: a U.S. Senate vote to extend disability health-benefit payments even after recipients return to work, and a court decision mandating that employers actively work to find new in-house assignments for workers injured on the job.

We follow with a related story about another vulnerable group of employees, as we report on the International Labor Organization’s tough new stand on child labor.

Media ethics is the focus of five stories this busy news week: a new code of ethics from Gannett, a crackdown on the publishers of a book alleging corruption in Chile, allegations of repression of Moroccan journalists, controversy over a new film that satirizes religion, and a ban on tobacco advertising in the United Kingdom.

Next, some interesting stories from the international desk: a promise by Vietnamese leaders to crack down on corruption and bureaucracy, a British worker fired for Web surfing on company time, a dispute over unionization of Japanese auto plants in Canada, and a call for better disclosure on the part of publicly traded firms in Canada.

We have several law- and litigation-related stories this week: federal charges against a group of stockbrokers, a suit against Sears, and a price-fixing suit filed by independent gas station owners in Los Angeles.

Our report concludes with a look at an art museum’s decision to return a painting stolen by Nazis to the estate of its original owner; novel legislation requiring school students in Louisiana to address teachers as “Sir” or Ma’am;” and a Trendlines report on the problems faced by news organizations covering a First Lady who is also a probable Senate candidate.

Have a productive, ethical week.

– Carl Hausman

WASHINGTON
The U.S. Senate last week unanimously approved a measure allowing disabled people to continue receiving disability healthcare benefits even if they return to work.

Disabled workers currently face the difficult choice of staying unemployed in order to receive assistance for escalating health care costs, or finding work but losing federal assistance and relying on their employer’s insurance, which usually is nowhere near as comprehensive as federal disability coverage.

Under the new measure, disabled workers may retain their Medicare and Medicaid benefits even after returning to the workplace, the Associated Press reported.

Less than one-half of 1 percent of U.S. people receiving disability benefits return to work, according to the AP report.

The provision to integrate disabled people into the workforce still faces several Washington hurdles, including uncertain funding for the Senate’s five-year, $800-million program, and a similar stalled measure in the House.

DENVER
Employers must reassign disabled workers to vacant, suitable positions if possible, rather than simply firing them, a federal appeals court in Denver ruled last week.

The court, considering the case of a fired auto-parts worker, ruled that employers must do more than “consider” reassigning workers who become disabled while on the job, the Associated Press reported.

The court’s ruling overturns a lower-court’s decision, and upholds the complaint of Robert Smith, a now-deceased worker who was fired from his assembly job at Midland Brake after developing chronic illness from workplace exposure to chemicals, according to the AP report.

Midland Brake claimed it was unable to find a suitable job for Smith within his department, and fired him. The court last week upheld Smith’s complaint that Midland Brake violated the Americans with Disabilities Act (ADA) and was obligated to work harder to reassign the disabled worker.

The ADA forbids workplace discrimination against people who, with reasonable accommodation, can perform adequately.

“If no reasonable accommodation can keep the employee in his or her existing job,” the court ruled, then the ADA “may require reassignment to a vacant position as long as the employee is qualified and it does not impose an undue burden on the employer.”

GENEVA
The International Labor Organization (ILO) and its 174 member nations last week agreed to take immediate action to end the most dangerous and degrading forms of child labor.

The ILO’s new Child Labor Convention requires ratifying nations to fight forced child labor, child labor involving exposure to dangerous equipment or substances, and children’s exploitation in prostitution and pornography, the Associated Press reported.

The ILO estimates that more than 250 million children, ages 5 to 14, are forced to work in morally corrupting and physically hazardous jobs in developing nations.

President Clinton quickly declared his support for the convention, announced at the ILO’s annual meeting last week in Geneva, pledging to push for quick congressional ratification for the measure.

Clinton last week ordered U.S. government agencies to review their contracts with international suppliers to ensure that purchased goods were not produced with child labor.

Sen. Tom Harkin (D.-Iowa) has reported that government agencies purchased $57 million of goods produced by child labor in 1997.

In an address to the ILO, U.S. Labor secretary Alexis Herman underscored the importance of the new convention, the Reuters news agency reported.

“As we expand trade,” Herman told ILO member nations, “we must ensure that our workers and employers are competing in a world economy premised upon a fundamental and universal set of rights and standards.”

ARLINGTON, Virginia
Publishing giant Gannett last week issued a set of ethical guidelines for its 73 daily newspapers.

Gannett’s new “Principles of Ethical Conduct for Newsrooms” forbids “lying to get a story, misstatements of identity or intent, fabrications, plagiarism, misleading alterations of photographs, and slanting of the news,” according to a company statement.

Gannett said that company executives began drafting the guidelines last March in response to the public’s growing distrust of the media, as well as a scandal at Gannett’s Cincinnati Enquirer newspaper last year.

The Enquirer published a story accusing Chiquita Brands International of abusing Latin American banana growers. As a result of concerns over the Enquirer’s investigative methods, the paper retracted the story, fired the reporter, and paid Chiquita more than $10 million, the Reuters news agency reported.

SANTIAGO
Chilean police last week arrested two publishers of a book charging corruption and abuse of power by Chile’s justice system, the BBC reported.

The arrests were the latest government attempt to quash the spread of “The Black Book of Chilean Justice,” a 342 page book published last April, which accuses several of the country’s leading judges of corruption.

Chilean authorities, who say the book may violate Chile’s security laws by insulting high officials, have seized all but a few copies of the book, which is now circulating underground in a photocopied version and on the Internet, according to the BBC report.

The author of the book, Alejandra Matus, fled the country fearing arrest, the BBC reported.

TANGIER, Morocco
Journalists faced increasing repression last year in Morocco, according to a new report released last week detailing allegations of the country’s intimidation of journalists.

The National Press Union said that 52 journalists were threatened, beaten, or abused by Moroccan security forces and officials in 1998.

The National Press Union criticized Moroccan leaders for failing to curb suppression of the press, but also accused some journalists of plagiarism and corruption, the BBC reported.

NEW YORK
Film producers Bob and Harvey Weinstein last week warned the Catholic League that they would hold the religious group liable for any violence or damages caused by the League’s planned protest of the soon-to-be-released film, “Dogma.”

“Dogma” is a religious satire that tells the story of two renegade angels critical of Catholic church laws, a foul mouthed 13th apostle, and a Catholic woman who works at an abortion clinic, the Reuters news agency reported.

The New York-based Catholic League has threatened to protest the film.

Producers Bob and Harvey Weinstein bought the rights to the film from Miramax in order to shield Miramax and its corporate parent, the Walt Disney Co., from controversy, the Reuters news agency reported.

Lawyers for the Weinsteins sent a letter last week to the Roman Catholic group, writing that Miramax intends to hold the League “fully accountable for any wrongdoing, injury, or damages it causes.”

Catholic League president William Donohue issued a statement calling the company’s warning “fascistic,” and pledging to protest the film “with even more vigor,” according to the Reuters report.

LONDON
The U.K. government last week announced that it would ban tobacco advertisements on billboards, newspapers, and store windows two years before an EU-wide ban is set to begin.

Health minister Tessa Jowell said the United Kingdom’s preemptive ban was part of the government’s strategy to stop tobacco companies from selling their products to young people, the BBC reported.

“There is very clearly a link between tobacco advertising and rates of smoking,” Jowell told the BBC. “If advertising did not work, I don’t think the tobacco companies would be spending something [like] $160 million a year on tobacco advertising.”

Tobacco proponents, including the Tobacco Manufacturers Association, blasted the U.K. plan, warning that it might not stand up to legal challenges.

HANOI
Senior Vietnamese officials last week promised to work on problems faced by foreign firms trying to do business in Vietnam, where companies often butt heads with corruption and restrictive regulations.

Wolfgang Bertelsmeier, who heads the World Bank’s International Finance Corporation in Vietnam, last week helped mediate a discussion among Vietnamese officials and foreign business leaders, which he said resulted in “very positive” steps, the Reuters news agency reported.

The half-day meeting between the government and foreign business representatives resulted in promises to launch two working groups that will address issues in the banking and legal sectors.

Vietnamese officials also pledged to work harder to improve the country’s business climate, according to the Reuters report.

Critics contend that government restrictions have hurt foreign efforts to enter Vietnam, impeded foreign firms’ ability to hire workers, discriminated against foreign companies, and spawned rampant corruption.

LIVERPOOL
A U.K. tribunal last week upheld the firing of an office manager for using her office computer’s Internet connection to surf the Web in search of vacation deals.

Twenty-nine-year-old Lois Franxhi, fired from her job at Focus Management Consultants, had argued that she had used the Internet primarily during her lunch breaks, and for less than two hours over four days, the Telegraph reported.

Franxhi told the tribunal that her boss at Focus Management knew of her extracurricular Internet use, and tacitly condoned it, firing her only after discovering that she was pregnant.

The tribunal rejected Franxhi’s claims of sexual discrimination and unfair dismissal, charging her with misconduct and ruling in favor of Focus Management, according to a report from the BBC.

The ruling, which does not set a legal precedent under U.K. law, should nevertheless serve as a red flag for employers who have not yet formulated a clear Internet-use policy, according to the U.K. Federation of Small Businesses.

The BBC reports that personal use of the Internet during work hours could be costing employers as much as $4 million a year.

TORONTO
The Canadian Auto Workers (CAW) union last week complained that two Japanese-owned auto plants in Canada are intimidating their workers to keep them from unionizing.

The CAW insists that workers at the plants, one owned by Toyota and the other by Honda, are receiving competitive wages but inferior benefit plans, and are subject to more health and safety risks than unionized workers, the Reuters news agency reported.

CAW president Buzz Hargrove claimed that the workers have been frightened by management claims that a vote for a union would endanger their jobs.

Officials at both plants deny those claims. Honda Canada vice-president Jim Miller insists that his workers have no interest in joining the CAW.

“People are still aggressively interested in working” at our nonunion facility, Miller told Reuters. “If fear and intimidation were part of the equation, I don’t think they’d be lined up to seek employment.”

Special to Newsline from Canadian Correspondent Errol P. Mendes

OTTAWA
The Toronto Stock Exchange (TSE) last week issued a warning to listed companies that it wanted more public disclosure when rumors are driving stock prices up if such rumors are true in whole or in part.

The TSE warned that it would take appropriate action even though listed companies are not required to clear up rumors under securities laws in Canada, according to a report in the Globe & Mail.

The TSE cited the example of the takeover by Merrill Lynch & Co. of one of the largest independent brokerages in Canada, Midland Walwyn Inc., a year ago, according to the Globe & Mail.

Rumors were rife about the takeover before it actually happened and the stock price of Midland Walwyn dramatically increased although the company refused comment on the rumors.

Merrill Lynch admitted no wrongdoing during the investigation of the takeover by the TSE, but according to the Globe & Mail report, it has agreed to pay nearly $24,000 to the Investor Learning Centre of Canada to promote investor education on good market practices.

NEW YORK
Federal prosecutors last week charged at least 85 stockbrokers with manipulating stock prices and bilking investors of more than $100 million.

The indictments, unsealed last week in New York, target an alleged conspiracy of rogue traders, unlicensed brokers, and South American and Russian mob members who are charged with running the scams for eight years, beginning in 1991, the Associated Press reported.

The indictments claim that the brokers would solicit investors’ funds to drive up the prices of little-known stocks, then sell their own shares in those stocks. As the brokers withdrew their personal funds, the stock prices would crash, leaving investors with heavy losses.

The federal charges, which include racketeering and money laundering, could result in sentences of up to 20 years in prison, the Reuters news agency reported.