Ethics Newsline®

LONDON
U.K. employees are the most overworked in Europe, according to two new reports highlighting the “long-hours culture” of Britain’s workplaces.

More than 10 percent of U.K. workers are logging more than 48 hours per week — a violation of the new European Working Time Directive, according to an Institute for Personnel Development (IPD) survey of 8,000 workers.

While some attribute the long hours to heavy workplace pressure, others say they clock the overtime out of “sheer love for the job,” the BBC reported.

But both groups said that the long hours had negatively impacted relationships at home, and had caused them to make mistakes while on the job.

Britain’s leading trade union last week called for a reexamination of Britain’s implementation of the Working Time Directive, warning that government plans to cut red tape may weaken workers’ protections.

A report last week from the Trades Union Congress showed that U.K. employees logged an average of 44 hours per week — four to five hours more than workers in most other European nations, the BBC reported.

ATLANTA
Home Depot, the world’s largest lumber retailer, last week announced that it would no longer buy products made from wood cut in endangered ancient forests, and would use its clout to push for similar change industrywide.

The move away from ancient-growth products, which will be completed by the end of 2002, will affect product lines from lumber to doors to broom handles, the Reuters news agency reported.

Home Depot CEO Arthur Blank said the retailer would absorb any immediate increase in prices due to the new policy, and urged other retailers to stop using ancient-growth forest products, Reuters reported.

Blank also pledged to promote the expanded use of products made from “certified” lumber, a designation given to wood that is grown, harvested, and manufactured in an environmentally sound manner.

WASHINGTON
U.S. universities have traditionally been forced to navigate a rigorous and lengthy application process in their hunt for funding for scientific experiments.

But “pork-barrel academics” — the use of lobbying to acquire earmarked funds directly from Congress — increasingly has replaced the old-school application process, the New York Times reported.

With the help of paid lobbyists, U.S. universities have secured over $7 billion directly from Congress since 1980, including $797 this year alone, according to the Times report.

Critics claim the new practice is damaging scientific research by making funding more a factor of political connections than of the scientific merit of the research.

“The concern is that we jeopardize the long-term knowledge base of the country by spending money in a political rather than a scientific way,” former Rep. Robert Walker (R.-Penn.) told the Times.

But proponents argue that the traditional application process takes too long, has too much red tape, and disproportionately favors a handful of prestigious schools.

“Ignorance, when voluntary, is criminal, and a man may be properly charged with that evil which he neglected or refused to learn how to prevent.”

– Samuel Johnson (English lexicographer, critic, and poet, 1709-1784)

Last week, as Turkey searched for earthquake victims, the world searched for lessons. What made this quake so devastating? What can prevent a recurrence?

The first question is not hard to answer. From top officials to apartment dwellers, Turks point to shoddy construction. Now, as their reinforced concrete buildings lie about in shards, it’s visibly clear that in many cases the reinforcement rods were too small and the concrete too sandy. The government has begun questioning contractors accused of skimping on materials and evading regulations.

But that doesn’t answer the second question. What allowed such building practices to flourish? The answer lies in one word: corruption. Cement and iron rebar are expensive. They are also largely invisible to consumers. Cheating on materials is one of the easiest ways to funnel money into the pockets of builders, inspectors, and public officials.

All of which brings us face to face with a stark reality about corruption. It is not, as international agencies and multinational businesses once thought, merely a petty annoyance. It’s not just another kind of tax, fee, or cost of doing business. As Turkey has proved, corruption kills. It kills massively, broadly, and swiftly. And like many public-health problems, it disproportionately kills the poor.

But it doesn’t happen in a vacuum. Last week, amid headlines about the quake, two other overseas stories came to light in the New York Times. In one, international agencies suspect Bosnian authorities of stealing more than $1 billion in public monies and relief funds. In another, the Russian mafia appears to have used the Bank of New York to launder as much as $10 billion since early last year.

Both Bosnia and Russia get significant international aid. Such aid is often meant to create infrastructure, expand health care, and build homes for ordinary people. Instead, these funds are apparently flowing into the coffers of the powerful. Yet such theft typically spawns little outrage from those who give it. “That’s just the way things are in those countries,” we say with a shrug.

Turkey helps us understand the murderous indifference behind that shrug. And Bosnia and Russia help us grasp the scale of the problem. Because of corruption, how many Bosnians and Russians now live in dangerously poor buildings? How many are deprived of prosperity and consigned to deteriorating health? How many more disasters will it take to convince us that the real killer is corruption?

Fortunately, multinational lending institutions are increasingly recognizing this fact. They are urging developing nations to establish anticorruption units. These fledgling efforts deserve support from the West — not from some goody-goody sense of moralizing, nor to impose “Western values” on the world, but because corruption kills.

That support can come in numerous ways. Transparency International, the Berlin-based anticorruption organization, does a masterful job in raising awareness about corruption. Needed next are training programs for government officials and corporate executives, judicial efforts to expose and punish corruption, and educational outreach to the next generation — all delivered within the developing countries themselves.

Just as important, however, is a change of thinking among multinational corporations and Western governments. They need to slam down on international corruption with the same determined ruthlessness they’re beginning to bring to sexual harassment, racial discrimination, environmental pollution, and child labor abuses. It’s no longer enough to avoid fraud, bribery, and cheating in their own ranks. They must seek to insure that none of their funding is ever again used in the deadly service of corruption.

If that seems too much to ask, consider this. With the growth of a worldwide media, and an increasing clamor among poorer nations for a greater share of economic benefits, international corruption has long been poised to become a top agenda item in the 21^st century. Now, as the enormity of its damage becomes known, companies that tolerate corruption could become subject to a public backlash as fierce as that now visited on firms that profited from other killers, like tobacco or asbestos. The events in Turkey are stripping the disguise from corruption and exposing its deadly reality. Companies planning to survive in a global arena won’t want to be on the wrong side of such public outrage.

(c)1999 by Rushworth M. Kidder

Financial institutions handle enormous amounts of money, and with that task come heavy legal, regulatory, and ethical responsibilities. Our top stories this week in Business Ethics Newsline deal with three separate probes involving financial institutions and companies: alleged money laundering at a major U.S. bank, the International Monetary Fund’s demand for a probe of allegedly improper payments made in Indonesia, and a settlement involving life insurance policies that plaintiffs claim were misrepresented to them.

We follow with several interesting stories relating to personnel issues: a continuing case involving charges of racial abuse, an age-discrimination case, a top government lawyer’s advice regarding terminations, and a story about what is arguably the worst way to receive a pink slip — by email.

Two stories come from the health beat this week: a Canadian controversy over the source of HIV-tainted blood, and a report claiming that drug donations are sometimes simply a way for drug companies to clear out their warehouses.

And from the international desk come reports about the crisis of confidence in Argentina’s Ethics Office, the British government’s ultimatum to the privatized rail system, and a survey in Britain showing many working women fear that having children will harm their careers.

We conclude with four stories from our “Whatever Happened to…” file: the ouster of a Canadian business executive; the investigation into paparazzi and the car crash that killed Princess Diana; sanctions against the Purdue University basketball program; and the ongoing dispute between Boeing and federal regulators.

Have a productive, ethical week.

– Carl Hausman

NEW YORK
The Bank of New York last week announced that it was cooperating with U.S. officials investigating bank accounts allegedly used by Russian mobsters to launder about $10 billion.

The U.S. Attorney’s office is currently probing $4.2 billion in recent bank transfers that investigators believe are linked to an account owned by a notorious Russian gangster, according to a report in the New York Times.

The Bank of New York issued a statement claiming that no customer or bank funds had been lost, and that “there are no allegations of wrongdoing by the bank.”

But the Times reported that the Bank of New York has suspended two senior officers, both of whom are married to Russian businessmen, for their suspected roles in the money-laundering operation.

Investigators have also questioned why the bank failed to notice and report the unusual volume and rapidity of transactions involving the suspicious accounts. The Bank of New York filed only one so-called “suspicious activity report” with federal authorities — after the investigation began, according to the Times.

Investigators warn that the Bank of New York allegations may represent only one instance of increased penetration of venerable finance houses by Russian syndicates.

JAKARTA
The International Monetary Fund (IMF) last week demanded that Indonesia quickly and publicly investigate charges that a senior government official used his power to win a lucrative contract.

The growing scandal, which is rocking already shaky confidence in the Indonesian economy, centers on a $75 million payment made with government money to a private firm controlled by an official of president B.J. Habibie’s ruling party.

The scandal has already sparked public outrage and renewed charges of cronyism and government corruption, reported the Associated Press.

Habibie’s opposition has denounced the president’s party as corrupt, and Habibie’s party has threatened to drop him from the ballot in November’s presidential elections unless he resolves the scandal quickly.

Analysts warn that the scandal may be merely the beginning of a long list of corrupt deals to be uncovered as the probe continues, according to the AP report.

The IMF spearheaded a $45 billion bailout of Indonesia’s economy, which suffered the most severe damage from the recent Asian meltdown and consequent widespread rioting throughout the nation.

PITTSBURGH
Metropolitan Life Insurance Co. last week agreed to set aside as much as $1.7 billion to settle charges that the nation’s No. 2 life insurer conned customers with deceptive sales practices for 15 years.

Plaintiffs accused MetLife of misleading policyholders into purchasing more expensive insurance products under the pretense that their rates would not rise, the Reuters news agency reported.

Plaintiffs charged that they were “churned,” a practice in which customers are sold a bigger policy at the same monthly cost as the old one — without being told that the cash value of the old policy would be tapped to pay for the new one.

When policyholders complained about hidden fees, they were told to either pay up or lose their coverage, according to the class-action lawsuit.

MetLife vice president of public relations Kevin Foley denied that his firm had any knowledge of wrongdoing, and said that the settlement “ends the issue” for MetLife, the Associated Press reported.

The settlement, which is scheduled for court examination in December, covers seven million current and former MetLife clients who held active policies between 1982 and 1997.

Earlier this year, the nation’s leading life insurer, Prudential Insurance, said that it had set aside $2.6 billion, and paid out $1 billion so far to settle similar charges, according to the Reuters report.

MARIETTA, Georgia
A black worker at Lockheed Martin Aeronautical Systems’ plant in Marietta last week charged the firm with failing to stop racist abuse after he allegedly found a noose draped over his desk.

Lockheed mechanic Joe Banks says finding the noose is the latest in a series of racial incidents at the company’s Georgia facilities.

Company president Tom Burbage told the Reuters news agency that he will not tolerate racism at Lockheed facilities, and that he has launched an internal investigation and hired an independent investigator to examine Banks’ complaint.

Two years ago, Banks lost a lawsuit against Lockheed Martin on similar charges, after claiming that he had received a threatening note from the Ku Klux Klan white supremacist group, Reuters reported.

INDIANAPOLIS
An electronics company that awarded different severance packages to laid-off employees based on their age agreed last week to pay $7.1 million to settle federal age-discrimination charges.

The Equal Employment Opportunity Commission (EEOC) had charged Indiana-based Thomson Consumer Electronics with violating federal laws prohibiting different treatment of employees based on their age.

In 1997, Thomson closed down its Bloomington television plant and cut staff at its Indianapolis facility. Younger workers were given more money to compensate for the delay in receiving their pensions, while workers over the age of 55 received no bonus since they could access their pensions immediately, the Associated Press reported.

EEOC commissioner Paul Steven Miller said that the differing plans constituted “discriminatory and unlawful” treatment, and warned that the EEOC will continue to prosecute such cases.

Thomson spokesman Richard Knoph denied that his company had intended to hurt its older employees, and noted that more than 80 percent of the plants’ unionized workers had ratified the deal.

“What we thought was the right thing was perceived by some as the wrong thing,” Knoph said. “We steadfastly believe that no age discrimination occurred. It’s important that our employees know that,”

Last week’s $7.1 million settlement will be distributed to 800 former Thomson workers, according to the AP report.

WASHINGTON
A senior attorney with the U.S. Equal Employment Opportunity Commission (EEOC) last week urged employees to become more familiar with their rights when facing layoffs at the workplace.

EEOC attorney Robert Gregory told Reuters that many laid off workers, particularly seniors, are being asked by employers to waive their right to sue in return for a cash payment.

Stressing that his views are separate from his post with the EEOC, Gregory warned that such agreements are sometimes illegal and invariably nonbinding if the layoffs violate federal antidiscrimination laws.

Gregory notes that workers who are offered a cash payment in return for waiving their right to sue have 21 days to consider the deal, seven days to change their mind after they sign, and the legal right to know the ranks and ages of others being laid off.

But Gregory and other analysts say that the cash payments often make sense for both newly unemployed and cash-poor workers as well as their employers, who often prefer paying more up front to eliminate potential lawsuits later.

OKLAHOMA CITY
Companies should think twice before using email to deliver bad news to their employees, several human-resource advisors and employment-law experts said last week in an interview with ZDNet.

Their remarks follow the June firings of 1,450 people by an Oklahoma finance firm, which sent out the pink slips via email shortly before filing for bankruptcy itself.

John Challenger, CEO of an outplacement-services firm in Chicago, told ZDNet that using email to reach workers is attractive to employers because email announcements stem in-house rumors by broadcasting the information instantly and widely, and create a paper trail that can be used in the case of subsequent lawsuits.

But Challenger and other analysts warn that using email to deliver bad news hurts a company more than it helps, often causing a drop in employee morale and allowing recipients to feel even more angered by the impersonal treatment.

Face-to-face delivery of bad performance reviews and dismissals is still the best way to go, employment-law expert Allan Weitzman told ZDNet. “I always tell companies that [using email to deliver bad news] is not a good idea.”

Special to Newsline from Canadian correspondent Errol P. Mendes

OTTAWA
Canadian authorities are investigating allegations that a U.S. firm suppressed information that blood-clotting products imported to Canada were contaminated with HIV, the virus that causes AIDS.

The Ottawa Citizen reported that Armour Pharmaceuticals Co. suppressed information in 1985 that the heat treatment of its blood-clotting products, which were subsequently exported to Canada, did not work well enough to eliminate HIV.

The paper reports that a New York scientist, Dr. Alfred Prince, had conducted laboratory tests on behalf of Armour on its heat treatment of the blood-clotting products for hemophiliacs and had concluded that it did not work well enough to eliminate the virus.

Armour, according to the Citizen, refused to allow Dr. Prince to publish his findings.

The Citizen reports that at least seven Canadians who used the Armour blood-clotting product in 1987 developed the AIDS virus unexpectedly and that some have died.

Implicated in this growing controversy are also the federal Canadian regulators who, according to the Citizen report, were given warnings that the blood products may not have been safe, but allowed them to remain in circulation.

The Royal Canadian Mounted Police have been asked to investigate the actions of Armour and its officials for possible violations of the criminal law of Canada.

BOSTON
U.S. pharmaceutical companies are donating large quantities of useless and nearly expired drugs to refugee camps around the world, according to a report by international health experts at Harvard.

The report says that many U.S. firms are dumping old and unneeded drugs into refugee camps in an effort to clear warehouses of nearly expired product and win U.S. tax breaks, according to the BBC.

Harvard researchers found that nearly one-third of recent U.S. drug donations failed to meet shelf-life guidelines set by the World Health Organization (WHO), which oversees global refugee services, the BBC reported.

Such donations hurt rather than help refugees by forcing host governments and relief agencies to pay for destroying the drugs, a WHO spokeswoman told the BBC.

The Harvard survey, which examined roughly 17,000 medical shipments to 129 countries between 1994 and 1997, singled out U.S. companies as the most common violators of the WHO guidelines.

BUENOS AIRES
Argentina’s Ethics Office, established two years ago to stamp out corruption, is viewed by the public as one of the most corrupt institutions in the nation, according to a Gallup poll surveying the perceived corruption of the country’s public institutions.

The poll found that labor unions, the Customs Service, the judicial system, and the Ethics Office were rated, in that order, as the most corrupt institutions, the Reuters news agency reported.

The results of the survey are a bitter pill for the administration of president Carlos Menem, who created the Ethics Office at the behest of the U.S. government to rein in corruption among Argentine politicians.

Corruption topped respondents’ list of the nation’s most important issues, ranking second only to unemployment, according to Reuters.

LONDON
U.K. regulators last week warned Railtrack, the firm that owns and maintains the tracks, stations and signals of Britain’s rail system, to dramatically improve its service or face stiff fines.

Railway regulator Tom Winsor told the BBC that Railtrack delays, chiefly track and signal difficulties, had crippled Britain’s heavily used rail system for “far too long.”

“The time has come to take action to make the privatized railways treat the traveling public with the same respect as they treat their shareholders,” Winsor told the BBC.

Winsor’s comments follow several recent reports damning the rail industry for persistent inefficiency, contributing to significant delays and passenger frustration.

Regulators gave Railtrack eight months to cut delays caused by technical problems by 12.7 percent, or warned that the company could face millions in fines, the BBC reported.

Railtrack officials insist that they are working hard to improve service, but say that the government’s demands are too severe to be practical.

LONDON
More than one-third of Britain’s working women fear that having a baby will hurt their career, according to a new study released last week.

The survey of 3,000 first-time pregnant women found that a third worked harder than usual during their pregnancy to convince bosses that they were pulling their weight, the BBC reported.

Thirty-seven percent said they believed that having a baby would likely cost them pay raises and promotions, and 42 percent admitted that they were uncomfortable calling in sick because of their pregnancy.

SEATTLE
Boeing Co. last week agreed to settle two lawsuits filed by federal regulators after the aerospace giant refused to cooperate with government reviews of Boeing facilities in three states.

Regulators accused Boeing of blocking routine audits of its plants in Arizona and Kansas, as well as impeding the government’s investigation of alleged racial discrimination at Boeing’s Seattle facilities.

The government filed suit in July.

Boeing responded by arguing that the government’s demands were unreasonable and beyond the scope of Boeing’s data, the Reuters news agency reported.

Last week’s settlements require Boeing to reverse position and surrender documents and data requested by federal investigators looking into Boeing’s treatment of minority workers in Seattle and Arizona.

Boeing spokesman Larry McCracken said his company decided to settle “in the interests of preserving our ongoing relationship” with the government, Reuters reported.