Ethics Newsline®

For more information, see this week’s Research Report.

“Men trust their eyes rather than their ears; the road by precept is long and tedious, by example short and effectual.”

– Seneca (Roman statesman and philosopher, circa 4 B.C.E. - 65 C.E.

From the AFL-CIO:

“While much of what has been said and written about today’s economy focuses on the opportunities it offers the up-and-coming generation, most young workers today have a far different view. They see the new economy as one in which there are sharp disparities in income, stemming largely from corporate America’s failure to share the rewards for success, and they have little trust in today’s employers. And for the three-quarters of young workers who do not have college degrees, the future is even more uncertain. But far from cynical about the new realities they face, today’s young workers are optimistic, determined to work hard, and willing to adapt to meet the needs of a changing economy — so long as employers are willing to do their part to meet the needs of working families. . . .

“‘In many ways, today’s young workers share the same values, work ethic, and expectations held by previous generations, but they face a world far different than the one their parents knew,’ said AFL-CIO president John J. Sweeney. ‘They are hopeful about the future, and about their ability to meet their own economic and financial goals, but that’s because they have confidence in themselves — not their employers.’

“Unlike older workers, most of whom believe upward mobility is no longer possible in a world where employers are not loyal to their employees, 58 percent of younger workers believe they can get ahead with hard work and a good education. And 77 percent say they are hopeful and confident about their ability to meet their financial goals for the future. But at the same time, young workers have lost confidence in employers to treat their employees fairly: Only 42 percent say they trust employers quite a bit, while 57 percent say they have just some or not much trust in employers.

“‘Today’s young workers are willing to forge a new deal with employers, in which they forgo security in exchange for a greater share of the rewards of a growing economy,’ said Amy Dean, executive officer of the South Bay AFL-CIO in northern California. ‘But after just a few years of experience in the workforce, they come to realize that employers are not meeting their end of the deal.’

“As they embark on their work lives, a 56 percent majority of young workers between the ages of 18 and 24 say they would rather have a job with advancement potential than one with job security. But as they grow older, their hopefulness is replaced by disillusionment. Most workers between the ages of 25 and 29 say employers fall short when it comes to sharing profits with employees (62 percent), offering policies that help working families (61 percent), showing concern for employees and not just the bottom line (60 percent), and providing cost-of-living raises (58 percent.) And by the time they reach their early 30s, young workers have come to view the economy as one that fails to adequately reward all who contribute to its success: Fully 70 percent of workers between the ages of 30 and 34 say that the most important goal for the economy is to ‘make sure everyone, not just CEOs, gets their fair share. . . .’

“Young workers say today’s jobs need improvement in four key areas: family-friendly policies, health care and retirement security, opportunities for advancement, and raises and rewards. Most favor new rules requiring employers to provide basic health and pension benefits (85 percent), strengthening equal-pay laws for women (84 percent), expanding the Family and Medical Leave Act to provide paid leave (82 percent) and cover more employees (79 percent), increasing the minimum wage (76 percent), and limiting companies’ abilities to replace full-time jobs with part-time jobs that pay less (71 percent).

“Young workers see education as a key tool for survival in the new economy, but they also see a fundamental need to hold corporations to a higher standard. Today’s younger workers think both employers and government should play a greater role in improving access to education and training, but they also know that the inequities in the economy can’t be solved by education alone. Fully 58 percent of young workers — up from 44 percent in 1996 — say new laws should be passed to hold corporations to a higher standard of responsibility in the way they treat their employees. . . .”

by Errol P. Mendes

On January 31, 1999, in a speech to the most powerful representatives of international business in Davos, Switzerland, the secretary-general of the United Nations (UN) called for a global compact between the UN and the international business community to embrace support and enact a set of core values in the areas of human rights, labor standards, and environmental practices. These areas were chosen by Kofi Annan because they are areas in which universal values have already been defined by international agreements, including the Universal Declaration of Human Rights, the Conventions and Charter of the International Labor Organization, and the various UN Environmental Conferences and agreements. They were also chosen because, in the view of the secretary-general, they are the weak points of the global market and the multilateral trade regime. In the area of human rights, Mr. Annan urged the international business community: “You can make sure that in your own corporate practices you uphold and respect human rights, and that you are not yourselves complicit in human rights abuses.”

These principles are based on similar principles found in the International Code of Ethics for Canadian Business, established by a group of private-sector companies in Canada. The author was one of the principal drafters of the Canadian Code who also assisted the Office of the Secretary-General in the formulation of the human-rights principles in the Global Compact.

After meetings between Mr. Annan and the leaders of the largest private-sector organization in the world, the International Chamber of Commerce (ICC), on July 5, 1999, the ICC in a joint statement with the secretary-general accepted the challenge of a global compact and expressed their readiness to cooperate with the UN in this common endeavor.

How can international business deal with the human-rights challenges of the global compact put forward by the secretary-general? The answer, while complex, is also an exercise in basic moral reasoning.

First, there are few people or organizations who would expect international business to duplicate the role of Amnesty International or Human Rights Watch. What is expected of business is that within their sphere of influence, they can lead by example.

The secretary-general gave some sound case studies: “Don’t wait for every country to introduce laws protecting freedom of association and the right to collective bargaining. You can at least make sure your own employees and those of your subcontractors enjoy those rights. You can at least make sure that you yourself are not employing underage children or forced labor, directly or indirectly. And you can make sure that, in your own hiring and firing policies, you do not discriminate on grounds of race, creed, gender, or ethnic origin.”

However, more difficult is the notion of noncomplicity in human-rights abuses. In this part of the global compact, we need to start a dialogue with corporations doing business worldwide to develop a dossier of best and worst practices. The following practices, it is suggested, would clearly constitute complicity in human-rights abuses, and therefore put corporations in violation of any global compact in the area:

• Exerting pressure on governments to crack down on certain parts of society that may be opposed to some of the corporation’s activities leading to executions, torture, and other forms of human-rights abuses. There have been many allegations of such corporate complicity across the world, most notably in Nigeria, India, and Indonesia.
• Bribing and corrupting local officials to abuse the land tenure and other rights of local citizens. Again, there is a plethora of allegations against corporations around the world concerning such bribery and corruption.
• Contracting or agreeing with governments and local officials to utilize army or police personnel to use strong-arm tactics that violate human rights for site and personnel security, or to encourage forced labor on projects. Again, there are many allegations of such corporate complicity around the world.
• Encouraging rebel groups to use child soldiers or inflict civilian casualties in order to gain access to mineral wealth. There are allegations that such complicity may be rife in the war-torn parts of Africa, where there also happens to be abundant mineral wealth.

These are a few examples of the flesh that could be put on the bones of the new global compact between the UN and the international business community in the area of human rights. However, this area needs more examples of best practices to be followed and worst practices to be avoided — proffered by the international business community itself — if the Global Compact of human rights principles is to become an effective guide for international business.

(c)1999 by Errol P. Mendes

The duty not to cause harm is a fundamental ethical principle, and the focus of our lead stories this week in Business Ethics Newsline.

At the top of our report is a story about alleged corner cutting and corruption and its resultant harm: the hunt for contractors charged with putting up shoddy, uninspected buildings that became deathtraps when the Turkish earthquake crumbled their foundations.

Next, a story about fines leveled at Ford Motor Co. in the aftermath of a deadly plant explosion.

This week’s news contains an extended series of stories about labor and workplace issues: a strike by Detroit teachers; work-condition conflicts in the United Kingdom; disputes over the use of foreign languages in U.S. workplaces; changes in composition of the U.S. labor market; an honor role of companies that are working-mother friendly; reports of a widening pay gap between management and labor; and a warning that a popular new type of pension plan may violate age-discrimination laws.

From the international desk we have several stories dealing with various aspects of business and governance: a French protest that was targeted at a McDonald’s restaurant, a surprising ruling in Norway holding that sellers of real estate may discriminate based on purchasers’ races, and a report claiming Canada is a prime venue for money laundering.

We conclude our wrap of the news with three stories about ethics in the world of high-tech: Amazon.com’s decision to modify a controversial program that some claimed was an invasion of privacy, a call by major Web retailers for a global code of conduct in ecommerce, and a report that U.S. software piracy is growing.

And we wrap up this issue with a follow-up from our “Whatever Happened to…” file about the Major League umpires who ejected themselves from the game and now want back in.

Have a productive, ethical week.

– Carl Hausman

ISTANBUL
Istanbul governor Erol Cakir last week announced that he had begun legal proceedings against Turkish contractors accused of using shoddy construction techniques that added to the death toll from last month’s earthquake.

Cakir said that his administration was “making a great effort” to locate contractors whose buildings collapsed in the devastating quake that killed more than 13,000 people and left 600,000 homeless.

Turkish newspapers have begun listing the names of contractors whose buildings collapsed and asking for readers’ help in tracking them down, CNN reported.

The stark juxtaposition of intact buildings and demolished ruins has infuriated survivors, who blame the buildings’ collapse on unscrupulous contractors, accused of skimping on structural reinforcements, mixing sand into the concrete, and building on unsuitable land.

Many buildings were not inspected and lacked proper permits, the BBC reported

Kadem Karaagac, secretary of the Istanbul Town Planners’ Association, warned that while the anger may be justified, local governments may also be to blame, according to CNN.

“The contractors are guilty, but we can’t make them the scapegoats,” Karaagac said. “The local authorities did not make sure regulations were implemented.”

DETROIT
Ford Motor Co. last week agreed to pay $1.5 million in fines to the Michigan Occupational and Safety Administration for a series of safety violations that contributed to a deadly blast at a Ford facility last February.

The explosion of a boiler at the Rouge assembly and parts complex killed six workers and seriously injured 14 others, the Detroit News reported.

A joint report from Ford and the United Auto Workers (UAW) union concluded that the explosion was caused by an inadvertent gas buildup in a boiler and was the result of safety violations, equipment misuse, and procedural mistakes.

In addition to the $1.5 million civil fine, Ford will spend $5 million on burn care at area hospitals, health and safety measures at the company, and a UAW scholarship to honor the killed workers.

Ford executive James Padilla said that the tragedy has focused the “company and employees on the need for a higher awareness of safety procedures,” the Reuters news agency reported.

Ford has also offered to pay more than $30 million to settle private lawsuits related to the explosion.

DETROIT
Detroit’s public school teachers last week voted to go on strike, forcing the district’s 172,000 schoolchildren to wait while teachers and school officials wrangle over a range of pay and workplace issues.

The simmering dispute boiled over last week after the teachers’ union refused to accept an extension to their teaching contract.

The teachers are demanding pay raises, a reduction in red tape, more classroom resources, and smaller class sizes — demands largely supported by Detroit-area parents, the New York Times reported.

Recent figures show that Detroit’s teachers earn roughly $10,000 less than the Michigan average, that Detroit spends $4,000 less per student than elsewhere in the state, and that less than one-third of the district’s students actually graduate, CNN reported.

Detroit’s mayor and governor, who wrested control of the ailing school district from an unpopular school board earlier this year, insist that they are working as hard and as fast as they can to improve school conditions.

But teachers say more needs to be done, and that a proposal to link teachers’ pay to students’ performance is unfair, according to CNN.

State officials warn that layoffs and stiff fines may result if the strike, illegal under Michigan law, continues through this week.

LONDON
Fourteen percent of U.K. workers who voluntarily opted out of legal provisions limiting the length of their workweek felt compelled to do so because of employer pressure, according to a new poll released last week.

The findings have sparked renewed criticism of government plans to relax provisions limiting the U.K. workweek, according to the BBC.

Under current law, the European Working Time Directive limits the workweek to 48 hours, but allows employees to voluntarily opt out of the program.

The U.K. government is considering steps to make such opt-outs easier, a move criticized by Trades Union Congress head John Monk.

Monk says that easing the restrictions would make it harder for U.K. workers to withstand employers’ pressure and the long-hours culture of the British workplace.

The Confederation of British Industry countered by noting survey results showing that of those who had opted out, 80 percent were happy with their decision, according to the BBC.

LONDON
Workplace stress is taking its toll on British workers, leading many to alcohol, insomnia, illness, and fights with coworkers, according to a new study released last week.

The government-sponsored survey found that 64 percent of U.K. workers felt on-the-job stress, causing more than half to lose sleep, and more than one-quarter to become ill.

Twenty-eight percent said that job stress had spurred them to get into fights with coworkers, the BBC reported.

The report, which suggests that taking at least one break a day could reduce workers’ stress, noted that less than one-fifth of respondents took a lunch break every day.

NEW YORK
Working Mother magazine last week unveiled its annual list of the best 100 companies for working moms — noting that many firms are finding that it is good business to be family-friendly.

The magazine singled out 10 firms — Bank of America, Cigna, Deutsche Bank, Fannie Mae, Eli Lilly, Lincoln Financial Group, IBM, First Tennessee Bank, Lotus Development, and Prudential Financial Services — as especially progressive and helpful.

“Companies are really listening to what their employees have to say,” said Working Mother executive editor Deborah Wilburn. “It’s not so much, ‘What are the hours that you’re in the office,’ but ‘Are you getting the job done?’”

Companies that made the list offer policies that include helping employees screen new nannies, providing free baby formula to new mothers, and providing backup child- and elder-care services, the Associated Press reported.

WASHINGTON
The pay gap between U.S. executives and factory workers widened dramatically during the past decade, according to a report released last week by two pro-labor groups.

The report found that workers’ average pay rose 28 percent to $22,952 between 1990 and 1998. During that same period, executives’ average pay rose 481 percent to $10.6 million, the Reuters news agency reported.

If production workers’ pay had kept a similar pace, the yearly wage would now be $110,339, the report claimed.

That pay disparity — more than ten times greater than in Britain, and more than 20 times greater than in Japan — is corrosive to workplace morale, warns study sponsor Chuck Collins, codirector of United for a Fair Economy.

“There’s a big fairness problem here,” report co-author Sarah Anderson told the Associated Press. “While the headlines are saying the economy is doing so wonderfully, the benefits of that are not being spread around equitably.”

But critics of the report, including Conference Board executive Charles Peck, dismiss the pay gap as a distortion caused by executives’ stock options, which can fluctuate in value over time.

“Obviously there is a considerable distinction between the lowest and the highest paid, and my reaction to that is, ‘So what? It’s a market-driven society,’” Peck told the Associated Press.

LOS ANGELES
A new and popular type of pension plan may violate federal antidiscrimination laws, according to a confidential Internal Revenue Service (IRS) memo revealed last week by the Los Angeles Times.

The growing controversy centers on so-called “cash-balance” plans, which cut benefits for workers with many years of service while increasing incentives for younger workers to leave before retirement, thereby cutting a company’s overall costs.

Forty members of Congress have petitioned the Labor Department and the Equal Employment Opportunity Commission to investigate cash-balance plans for compliance with federal age-discrimination laws.

Lead critic Rep. Bernie Sanders (I-Vermont) leaked the confidential 1998 IRS memo, claiming that “if the rate of accrual goes down as workers get older, then the plan violates the law.”

Such plans have recently been adopted by more than 300 U.S. companies, including IBM, the Associated Press reported.

IBM spokeswoman Jana Weatherbee told the AP that the new plan was an adjustment to a changing market.

“We still spend the same amount of money on our people,” Weatherbee said, “but we shifted some money from the pension plan to cash compensation and stock options. The predominant work model today is that you don’t spend your whole career at one company.”

PARIS
The U.S. burger chain McDonald’s, an international symbol of all things American, last week said that it was dropping its lawsuit against French farmers who destroyed a company restaurant last month during an anti-United States demonstration.

The farmers ransacked the McDonald’s outlet to protest a series of U.S. tariffs imposed on French food products after the European Union refused to lift an import ban on hormone-treated U.S. beef.

The EU says that the beef may be unhealthy, while U.S. authorities insist it is safe. Last summer, the World Trade Organization ordered the EU to end its ban, and approved U.S. tariffs after the EU refused.

McDonald’s and other U.S.-based businesses have been caught in the middle of the trade war ever since.

McDonald’s criticized the farmers’ riot as misguided, but said that pursuing its civil lawsuit would likely make matters worse, according to the Reuters news agency.

“I am convinced that this decision will soothe a climate that satisfies no one and does not encourage dialogue,” McDonald’s France president Dennis Hennequin said in a statement.

OSLO
Norway’s Supreme Court ruled last week that the country’s antidiscrimination laws do not cover real estate agents who sell private property, and who can legally refuse to sell or rent to people based on their race, nationality, or income.

The controversial decision stemmed from a 1998 case targeting a real-estate brokerage whose rental listings designated properties as “only for whites” and “foreigners unwanted,” the Associated Press reported.

Norway’s Institution Against Public Discrimination (IAPD) sued the brokerage, charging that the listings were illegal and overtly discriminatory.

Last week, the Court ruled in favor of the brokerage, saying that Norway’s 1972 antidiscrimination laws do not apply to the rental of private property.

IAPD representative Jesper Hansen told the Associated Press that his organization would appeal the decision.

Special to Newsline from Canadian correspondent Errol P. Mendes

TORONTO
A leading Canadian financial editorial writer, Neville Nankivell, is claiming that Canada is one of the easiest jurisdictions in the world in which to launder the proceeds of organized crime.

Examples cited by Mr. Nankivell include the recent massive U.S. money-laundering probe of a bank in New York involving the Russian mafia, which has Canadian links.

The Russian Mafia had also created YBM Magnex International Inc. as a money-laundering vehicle, according to Nankivell, who says that YBM Magnex is now in liquidation, delisted on the Toronto Stock Exchange, and facing class-action lawsuits by former shareholders who lost $635 million in the fraud.

In addition, a national task force called the Criminal Intelligence Service Canada has also recently reported that older crime syndicates, such as those from Sicily, and Asian-based criminal groups are continuing to infiltrate legitimate businesses to launder the proceeds of drug trafficking, prostitution, illegal gambling, and other criminal activities.

Nankivell is urging the government to speed up passage of tough anti-money-laundering legislation.

The draft legislation being prepared by the Canadian government would include mandatory reporting of suspicious financial transactions by banks and other financial institutions, foreign exchange bureaus, and even casinos.

Noncompliance could result in heavy fines and jail terms.

The proposed legislation would also give customs officials the right to seize large undeclared amounts of cash or equivalents at the border. Lawyers and accountants would also have to report suspicious transactions carried out by clients, or face severe penalties.

SEATTLE
Internet retailer Amazon.com last week responded to privacy concerns by agreeing to allow businesses and consumers to opt out of the company’s new “Purchase Circles” tracking program.

The program uses consumers’ zip codes and email addresses to tally sales, listing the 10 most popular items at 3,000 businesses, nonprofit organizations, universities, military branches, and geographic areas.

Amazon.com launched the program two weeks ago, touting purchase circles as a convenient way for users to shop for gifts by demographic appeal, the Associated Press reported.

For example, the AP reported, prospective buyers could determine which were the most popular books at Harvard, or the most frequently purchased CDs in Miami.

But privacy-rights groups and some employers cried foul, criticizing the program as an invasion of consumers’ privacy.

Amazon.com defended the program as innovative and consumer-friendly, noting that clients’ precise identities could not be traced through the program, and that businesses with less than 200 employees were exempted in order to reduce workplace suspicions over controversial purchases.

But Amazon.com executive Warren Adams last week said that the firm would nevertheless alter the program, giving consumers the option of keeping their purchases private, and allowing businesses to nix the listing of employees’ buying habits.

NEW YORK
Six major U.S. high-tech and media firms joined forces last week to push for greater uniformity in worldwide ecommerce policies, as well as a code of conduct for Web retailers.

The companies — Microsoft, IBM, America Online, Time Warner, Visa, and Dell Computer — warn that without a standard, consumers worldwide may be reluctant to spend money via the Internet.

The firms’ alliance, the Electronic Commerce and Consumer Protection Group, will lobby for strengthened consumer protection worldwide and a unified approach to ecommerce, the Associated Press reported.

Among the group’s major concerns is the need for a unified set of rules governing credit-card purchases that would provide the same protections to consumers in the United States and abroad.

NEW YORK
U.S. employers must have a good reason to bar their employees from speaking foreign languages at the workplace, or they could likely face a discrimination lawsuit, the Associated Press reported.

Such lawsuits, targeting English-only policies in the workplace as a violation of federal antidiscrimination laws, are becoming more numerous as the United States absorbs a growing number of non-English workers.

The U.S. Equal Employment Opportunity Commission (EEOC), which helps workers to challenge unfair working conditions, says that the number of lawsuits over English only policies has tripled over the past three years.

Under federal law, employers can require English-only policies if they can prove that the mandate is a “business necessity,” required to ensure workers’ and customers’ health or safety.

Otherwise, the policy is likely illegal and could be added to the list of 91 English-only lawsuits already filed this year alone, the AP report warns.

WASHINGTON
Minority rights and high-tech know-how will be the dominant workplace issues in the next half-century, the U.S. Labor Department said last week in a new report on predicted job trends.

The report, detailing expected changes to the U.S. workplace by the year 2050, warns that a massive influx of minority workers will substantially alter workplace demographics in the United States.

Currently, one-fourth of U.S. workers belong to minority groups; by 2050, that proportion is expected to skyrocket to one-half, the Associated Press reported.

“When one out of two workers will be a person of color,” warned Labor secretary Alexis Herman, “pay discrimination, lingering gaps in skills, opportunity, and jobs matter to us all.”

The report also projects that a continuing boom in high-tech jobs will require more educated workers, that workers will demand more flexible schedules, and that disabled people will become better integrated into the U.S. workplace, according to the AP.