Ethics Newsline®

“Let him who expects one class of society to prosper in the highest degree, while the other is in distress, try whether one side of his face can smile while the other is pinched.”

– Thomas Fuller (English clergyman and author, 1608-1661)

From PricewaterhouseCoopers:

“Graduating business students around the world are seeking career development and personal growth while expecting to balance work and life responsibilities according to PricewaterhouseCoopers’ second International Student Survey. Students rate career development (56 percent) and personal growth (55 percent) as their first and second life priorities with attaining a balance between work and personal life as their most important career goal.

“Though 57 percent of the respondents state that balancing work and personal life is their primary career goal (up from 45 percent two years ago), they don’t believe that this desire competes with their long-term career development and personal growth goals. The question is not whether personal development is more important than career, but rather how these goals can be achieved in tandem. . . .

“While students all over the world make balancing work and personal life their top career priority, they are willing to work hard for it. The survey found that on average respondents expect to work at least 47 hours a week at their first jobs.

“In addition to balancing career and personal life, 42 percent of the students rate a company’s reputation for offering a good future career reference as “crucial” when choosing their first employer and they anticipate making an average time commitment of four and a half years to that employer. The factors that most frequently would motivate the respondents to extend their anticipated time commitment to their first employers include a higher salary, ability to balance work and life, and rapid promotion. . . .”

By now, the old saw that “business ethics is an oxymoron” feels staler than last week’s croissant. As ethics has increasingly gone corporate, the question of whether business ethics is possible has faded. In its place are two far more compelling questions: where, and how? Is business ethics going global, or is it still largely a U.S. activity? And wherever it is, how is it put into practice?

Addressing these questions, a new report from the Conference Board, a leading nonprofit business organization founded in 1916, finds that:

• Efforts to institutionalize business ethics principles are “no longer largely a U.S. phenomenon.”
• The most important “business justification” for a code of ethics is that it establishes “core principles for global operations” based on “fixed reference points” that transcend cultures.
• The mandatory inclusion of ethics in MBA programs will have a positive effect.
• Ethics programs are widely seen as most useful when they involve not merely a compliance structure or a tally of virtues but “an ethical decision-making framework for all regions” in which a company operates.

The report, “Global Corporate Ethics Practices: A Developing Consensus” (Research Report 1243-99-RR), reflects a two-year process by the Conference Board that included an organizational meeting of the Working Group on Global Business Ethics Principles (in which full disclosure requires me to say that I participated) and five regional meetings around the world. It also included a survey of companies in 22 countries, with more than half of the respondents from non-U.S. firms. Written by the Conference Board’s Ronald E. Berenbeim, the report builds on his earlier research (in 1987 and 1991) to flesh out a picture of a global ethics movement that is robust, rapidly maturing, and commanding increased attention at the highest corporate levels.

Some key points:

• Creating a code of ethics now involves the CEO about 95 percent of the time (versus 80 percent in 1987). More astonishing is the rapid growth of involvement by boards of directors, from 21 percent in 1987 to 78 percent today.
• In 1991, codes were simpler, focusing primarily on purchasing and proprietary information. This report identifies 13 separate topics covered, including bribery and improper payments, conflict of interest, receiving and giving gifts, discrimination, environment, and sexual harassment.
• Asked about monitoring codes of ethics, 77 percent of companies say their boards are significantly involved in this kind of reinforcement, with 25 percent able to identify a board committee devoted to ethics and business conduct. In addition, 52 percent of the companies responding have ethics officers or persons with similar responsibilities.

But the real value of this report lies in Berenbeim’s astute analysis of his data. Focusing on the justifications that companies give for having a code, for example, he teases out four arguments, which he labels “instrumental” (codes bring bottom-line success), “compliance” (codes set forth dos and don’ts), “stakeholder commitment” (codes focus on the company’s relationships with various dependent groups), and “values” (codes establish principles, behaviors, and “habits of mind” essential to being a good employee). Compliance (once popular in the United States) and stakeholder commitment (once popular in Europe) are both declining. U.S. companies now rely heavily on the instrumental justification, while European firms turn to values. Only values, however, is found as a strong justification in all five of the regions surveyed (United States, Europe, Canada, Latin America, and Japan).

That’s a meaningful finding. Too often, corporate ethics programs founder on the shoals of cultural differences — the belief that each region is so individual that no set of crosscutting values can be found. This report suggests that corporations are finding a commonality of values that justifies ethical behavior — and are keen to manage global diversity according to these unifying principles.

If the report is to be criticized, perhaps it will be because of its focus. It zeroes in on how to create a code — and then on how to do the essential work of training, without which any code degenerates into last year’s window-dressing. True, it’s a report on code building. But a code, like a strategic plan, has a life cycle. Codes need periodic refreshing. Their core principles should remain immutable. But their examples change with the decades, as does the relevancy of their language. This report admits the obvious: Firms that have built codes will sooner or later be rebuilding. Doing so, it takes the lead as the essential companion to any executive team charged with making ethics matter.

(c)1999 by Rushworth M. Kidder

The fair treatment of people of differing races and genders is one of the more visible issues of corporate ethics, and the theme of our lead stories in this week’s edition of Business Ethics Newsline.

At the top of our report is a story about a sexual-harassment verdict against DaimlerChrysler, a decision in which a Michigan jury ruled that the carmaker did not do enough to correct a visible pattern of abuse.

We follow with stories about President Clinton’s call for lawyers to achieve diversity in the ranks of their own workforce; a controversy over a corporate CEO who served on the board of a group opposing affirmative action; and the elevation of a woman CEO to one of the more visible helms in U.S. business — computer-products manufacturer Hewlett-Packard.

On the subject of high tech, we follow with stories about legislation limiting liability from the Y2K programming glitch and an anti-”spam” measure proposed to Congress.

And we have two reports concerning allegations of fraud — with Medicare funds, and in multinational trade.

From the international desk comes an interesting array of stories this week: a hearing into why cars in the United Kingdom are so expensive; a call for the U.K. government to help pay for mandated family leave; a repetitive-strain-injury verdict returned against a London bank; an accusation that Coca-Cola is stifling competition in European markets; a ruling mandating that automakers recycle cars at no cost to the EU consumer; a controversy over commerce in the aftermath of Sierra Leone’s civil war; and a court decision freezing Greenpeace’s bank account until a judge decides whether the group is liable for shipping delays caused by a protest.

We conclude with two reports about media ethics: a look at the free-speech tug-of-war in Iran, and a “Whatever Happened to…” update about the fate of the reporter who wrote the discredited expose about Chiquita Brands International.

Have a productive, ethical week.

– Carl Hausman

DETROIT
A Michigan jury last week ordered DaimlerChrysler to pay $21 million in damages to a female employee who charged the automaker with failing to stop persistent sexual harassment.

Linda Gilbert, hired by Chrysler in 1992, claimed that company employees sexually harassed her for five years, sending her lewd photographs and cartoons, telling rude jokes, and urinating on her chair.

Gilbert’s lawyer, Geoffrey Fieger, claimed that “Chrysler did nothing to investigate or provide adequate remedial measures to end the harassment,” the Reuters news agency reported.

DaimlerChrysler assistant general counsel Judith Pickering contended during the trial that the automaker sent warnings to employees, transferred Gilbert to another department as she requested, and tried to investigate the complaints even though Gilbert routinely refused to provide offenders’ names.

Gilbert “should not be able to both shield the offender and be compensated for the offense,” Pickering said in a statement.

“Holding a company liable for the isolated acts of anonymous coworkers sets an impossible standard and a dangerous precedent,” Pickering warned. “Under these new rules, every bad joke or overheard remark can become the basis for a multimillion dollar lawsuit.”

The jury awarded Gilbert $20 million in punitive damages and $1 million for medical expenses to treat alcohol and drug use allegedly caused by harassment-induced stress, the Associated Press reported.

DaimlerChrysler said it will appeal the ruling.

WASHINGTON
President Clinton last week urged U.S. lawyers and legal institutions to tackle racial discrimination by taking concrete steps toward greater community involvement and racial diversity in their ranks.

During a White House event, Clinton asked lawyers to tackle “our time’s most stubborn obstacles to equal justice: poverty, unemployment, and … discrimination,” the Associated Press reported

In response, the American Bar Association announced a new initiative to provide financial assistance and mentoring for law students and young lawyers.

In addition, several prominent law firms last week agreed to assign each of their lawyers to 50 hours, or 3 percent of billable time, to pro bono work, according to the AP report.

ATLANTA
Facing a boycott, the chairman of baked-goods company Flowers Industries last week resigned from the board of the Southeastern Legal Foundation, a conservative group working to end affirmative-action programs.

Amos R. McMullian’s resignation from the controversial group followed a threat by the Georgia Black Chamber of Commerce to boycott Flowers Industries products, which include Keebler, Cheez-it, Famous Amos, Nature’s Own, and Mrs. Smith’s.

The issue came to a head after the Southeastern Legal Foundation said it would sue Atlanta to halt the city’s programs to help women- and minority-owned businesses, according to the Associated Press.

The group previously sued the state of Georgia to end school busing programs and race-based admissions requirements at state colleges.

PALO ALTO, California
Hewlett-Packard Co. last week named Carleton “Carly” Fiorina as the high-tech company’s new president and CEO — the first woman in history to head one of the so-called Dow 30, the thirty companies that are included in the Dow Jones industrial average.

The Associated Press reported that HP’s decision was viewed by many as a milestone in women’s efforts to crack the highest level of glass ceilings.

But Fiorina downplayed the importance of her gender, insisting that her “gender is interesting, but really not the subject of the story here,” according to the Associated Press.

“If someone believes they are limited by their gender, race, or their background, they will become more limited,” Fiorina told the Newark Star-Ledger, according to the AP report.

Fiorina, chosen over several in-house candidates, is expected to help propel HP into the Internet age, bringing a fresh perspective and an outsider’s insights to the high-tech giant.

Fiorina, a former executive at AT&T and Lucent Technologies, will assume her post at year’s end.

WASHINGTON
President Clinton last week signed into law the so-called Y2K Act, giving U.S. businesses limited protection from lawsuits aimed at exploiting computer problems caused by year-2000 programming glitches.

The new law gives companies 90 days to fix Y2K-related problems, limits the scope of plaintiffs included in Y2K class-action lawsuits, and restricts the size of damages awardable in such suits.

Congress overwhelmingly passed the legislation, despite White House and consumer-watchdog worries that the law would protect big business at the expense of consumers, the Associated Press reported.

Clinton gave the measure lukewarm endorsement last week, saying that it would help eliminate frivolous lawsuits, speed up legitimate complaints, and allow high-tech companies to fuel the economy.

But at the same time, Clinton issued a statement warning that regulators “will be watching to see whether the bill’s provisions are misused” by parties seeking to escape liability for irresponsible actions, according to the AP report.

WASHINGTON
Rep. Gary Miller (R.-Cal.) and a group of anti-spam organizations last week presented the U.S. Congress and the Federal Trade Commission with a database of nearly 200,000 email messages they hope will help regulators track down Internet con artists and other “spammers.”

The groups say that spam, the nickname for unsolicited commercial email messages, is bogging down the Internet and ruining consumer confidence in online commerce, ZDNet reported.

The collected spam consists mostly of pornographic Web site advertisements, get-rich-quick solicitations, and recruitment offers from spam companies.

Miller has proposed new legislation — the “Can Spam Act” — that would crack down on spam operators, allowing Internet service providers to hold spammers liable for up to $25,000 a day in damages related to sending junk email through their systems.

According to a press release from the anti-spam group ChooseYourMail.com, Miller says the bill is a win-win arrangement, allowing Internet companies to police themselves without Washington interference, and freeing regulators to focus on other offenses.

WASHINGTON
Health care firm Olsten Corp. and its Kimberly Home Health Care subsidiary last week agreed to pay $61 million to settle charges that the firms defrauded Medicare.

Regulators allege that the companies colluded with the nation’s largest health care provider, Columbia/HCA, to disguise various ineligible expenses as management fees, reimbursable under Medicare provisions, the Associated Press reported.

The government’s charges stemmed from a whistleblower lawsuit filed by Olsten’s former vice president, Donald McLendon, who accused Olsten of filing fraudulent cost reports, according to the Associated Press.

In a related story, earlier this month the House Commerce Committee held hearings on the extent of Medicare fraud, reviewing reports from the General Accounting Office and the Department of Health and Human Services (HHS).

Both reports said that government contractors, hired to ensure that health care providers’ charges were accurate, committed widespread fraud, falsified documents, and ignored valid claims.

HHS deputy inspector general George F. Grob reported that his department’s investigations into contractor fraud have resulted in nine civil settlements, two criminal convictions, and 21 pending investigations, the Associated Press reported.

Special to Newsline from Canadian Correspondent Errol P. Mendes

CALGARY
One of North America’s largest fertilizer companies, Agrium Inc., is suing two former employees on charges of defrauding the company of millions of dollars and charging kickbacks over the purchase of a raw material from the West African country of Togo.

In a lawsuit filed in Calgary, the company alleged that the two former managers, Wayne Pocha and Douglas C. Milne, falsified documents, faked contracts, diverted payments, took secret commissions, and engaged in bribery and fraud in the negotiation for the purchase of phosphate rock from a state-owned company in Togo.

In an affidavit, Pocha categorically denied all the allegations.

LONDON
U.K. automakers were criticized last week for their failure to show up at a public hearing on manufacturers’ retailing practices.

Instead of attending themselves, Britain’s leading automakers sent lawyers as delegates to the meeting, the BBC reported.

The public hearing was intended to give automakers an opportunity to explain why U.K. consumers pay more than other EU consumers for automobiles, according to the BBC.

A 1998 European Commission survey showed that 57 of 76 autos cost more in the United Kingdom than in other EU nations. Only one model retailed for less in Britain than elsewhere.

Automakers have said that the price difference is caused by U.K. regulations, which keep less expensive, less safe, and more polluting models out of Britain.

But many critics contend the price scheme is simply illegal market manipulation.

The EU’s Competition Commission is halfway through its nine-month investigation of U.K. automakers’ pricing. The Commission’s recommendations are expected by mid-December.

LONDON
Small businesses in the United Kingdom need government help to cope with an expected broadening of employers’ parental-leave obligations, the British Chambers of Commerce (BCC) said last week.

The group is worried about a new EU-proposed directive that would give employees the right to take up to three months of unpaid leave until their children are eight years old, the BBC reported.

The BCC says that the new law could cripple U.K. businesses by leaving them without experienced workers for long periods at a time, causing inefficiency and increased temporary-worker expenses.

The BCC asked the U.K. government to compensate companies for the costs of increased parental leave, as it currently does for maternity leave, according to the BBC report.

The group also wants the government to require workers to request leave one month ahead of time and be limited to one month’s absence at a time. Also, the BCC wants an explicit definition of the conditions that would merit emergency leave.

LONDON
A U.K. appeals court last week ordered Midland Bank to pay nearly $95,000 to five former employees who claimed they suffered wrist and neck pains due to speeded-up working conditions.

The women charged that Midland Bank increased their work load and forced them to do repetitive typing work too quickly and with insufficient work breaks, causing severe neck, arm, wrist, and hand pain, the BBC reported.

Midland Bank claimed that the workers’ health problems — called Repetitive Strain Injury (RSI) — were psychosomatic.

The court held that recent scientific data validates the existence of RSI, and that Midland Bank was aware of the risk to the workers.

That decision “should strike fear into employers,” who have long rejected RSI claims as illegitimate, employment-law expert Tom Jones told the BBC.

RSI could rank as one of the most harmful industrial diseases of the 1990s, causing more than 10 million sick days and $3 billion in lost profits each year in the United Kingdom alone, according to the BBC report.

BRUSSELS
EU antitrust investigators last week raided Coca-Cola offices in Europe, seizing company documents in a probe of claims that the beverage giant has been paying incentives to retailers to keep competitors’ products off store shelves.

EU Competition Commission head Karel Van Miert said that such incentives would be illegal, according to the Associated Press.

“Let me make it quite clear that a dominant company on any market cannot indirectly bully competitors by pushing its customers to buy less of the competitors’ products,” Van Miert said.

Coca-Cola officials, including Coke chairman Douglas Ivester, denied any wrongdoing.

The new investigation comes as the soft-drink manufacturer is recovering from a health scare over contaminated Coke products in Belgium and France earlier this month.

BRUSSELS
The European Union last week approved legislation requiring automakers to recycle cars at no cost to the owners.

The so-called “End-of-Life Vehicle” directive orders EU automakers to recycle all cars in Europe, whether made there or not, by the year 2006.

Cars sold after Jan. 1, 2001, are immediately subject to the new law, the AP reported.

Automakers stridently protested the new legislation, which they say unfairly burdens manufacturers, and fails to address the lack of markets for recycled tires, glass, and polymers, according to a report from the Reuters news agency.

Automakers estimate that the new program will cost roughly $10 billion, most of which will eventually be passed on to consumers.

Special to Newsline from Canadian correspondent Errol P. Mendes

LONDON
The Globe & Mail is reporting that the peace accord in Sierra Leone, which ended one of the most savage civil wars in the world, recommended that all mining concessions be terminated.

Several Canadian and U.S. mining companies could be affected, including DiamondWorks Ltd. of Vancouver; American Mineral Fields Inc. of Dallas; Rex Diamond Mining Corp. of Toronto; Africa Diamond Holdings Ltd. of Calgary; and Nord Resources of Albuquerque, New Mexico.

According to the Globe & Mail report, a senior vice president of Nord Resources, Ray Jenner, asserted that the entire war had been fought over diamonds.

The same report asserts that other players with an interest in the country include businessmen with ties to the “military consultants” Sandline International, as well as Rakesh Saxena, a Thai businessman who is fighting extradition on charges relating to a banking scandal and who is linked to the financing of a 1997 countercoup in Sierra Leone.

With thousands of civilians killed and maimed, many by conscripted child soldiers during the eight-year civil war, the cease-fire agreement between the government and the Revolutionary United Front proposes that a commission will manage the country’s natural resources for the benefit of the people of Sierra Leone.

BARROW, England
A U.K. exporter of nuclear fuel last week convinced a Dutch court to freeze the assets of Greenpeace International in hopes of recovering money lost due to a protest by the conservation group.

British Nuclear Fuels Limited (BNFL) asked the court to consider assessing damages against Greenpeace, which blocked a BNFL vessel from sailing, causing a 12-hour delay, the BBC reported.

BNFL released a statement saying that while it “is not seeking to bankrupt Greenpeace in any way, or curtail their legal activities,” the company needs to be compensated for the delay.

Greenpeace claims its protest at the Barrow shipping port was justified due to the nature of the BNFL cargo, nuclear fuel destined for Japanese reactors.

Greenpeace, other environmental groups, and the leaders of many Caribbean nations have blasted BNFL and its French partner, COGEMA, for their plans to ship the plutonium-laden cargo across the seas.

The groups fear that the nuclear cargo could cause environmental contamination, spark possible hijacking attempts, and lead to nuclear proliferation, according to the BBC report.

Greenpeace released a statement decrying the Dutch decision to freeze its bank accounts as an “obscene miscarriage of justice” that diverts attention away from the French, British, and Japanese governments, which approved the controversial shipments.