Ethics Newsline®

“The fame of men ought always to be estimated by the means used to acquire it.”

– François de la Rochefoucauld (French writer, 1613-1680)

“If the economic imperative is to develop what we call the knowledge economy, the social imperative is to develop a modern, responsible notion of citizenship.”

A tract from a civic-action group? A report from a conference of well-meaning reformers? Advice from an academic thinker?

You could be forgiven for thinking so. The sentence rings with broad strategic chords. It sets forth a well-balanced analogy. And it has an insistent tone, an almost utopian prescription for success.

In fact, the words are from British prime minister Tony Blair, in an interview September 5 with The Observer newspaper in London. The immediate context included news that two 12-year-old girls in South Yorkshire had become pregnant, bolstering Britain’s unfortunate record for having the highest teenage pregnancy rate in Europe. His concern: parents, children, morality, and responsible behavior.

But the larger context also mattered. In the last several years, issues of moral and ethical concern have been steadily climbing up the British agenda. In the schools, there is increased talk of the need for values education. In business, executives are more energized by ethical concern — or so it can be assumed by the presence of a five-week series on “Ethical Business” in the prestigious Financial Times newspaper, launched on August 5. Government circles, too, have been exercised by moral questions as comprehensive as Northern Ireland and as personal as the improper loans accepted by former Cabinet minister Peter Mandelson.

But the phrase from Mr. Blair that stuck — and that has reverberated in the London press since — was his call for a new “moral purpose” for the young. Here’s how he put it:

“We need to find a new national moral purpose for this new generation. People want to live in a society that is without prejudice, but is with rules, with a sense of order. Government can play its part, but parents have to play their part. There’s got to be, if you like, a partnership between Government and the country to lay the foundations of that moral purpose.”

Predictably, those words were red flags to the bulls of public commentary. Some accused him of trying to impose a national morality. Some thought he was merely moralizing. Some saw him muscling into the private domain of family life. Some said he should leave this kind of conversation to the clergy.

Give him credit, however, for what he managed to do. In the context of debate over national policy, he linked two words that are usually kept separate: “moral” and “purpose.” Why is that such an achievement? Because public conversations about a nation’s purpose are usually couched in more ordinary terms. The typical adjectives are “economic,” “social,” “political,” or “global.” For each of these, we have a language, a set of conceptual frameworks, and a standing army of discussants.

Yet it can be argued that, as the world races pell-mell into the new millennium, the most meaningful debate surging around our first-intensity, high-leverage, defining issues will be the moral debate. The risk is that, as the new century pitches hardball concerns at us, we will have only a whiffleball language with which to respond. And on one thing, linguistic theory is perfectly clear: that without a language for interpreting the objects and events of our world, we simply don’t identify, or even notice, the bulk of what passes before us.

Can you quibble with Blair? Sure you can. Do “we need to find” this new moral purpose for the new generation, or do the young need to find it for themselves? Should Government be in “partnership” with the country, or is the relationship best described as something less intrusive — a stimulus, an encouragement, even a willingness to get out of the way? Is it really a responsible notion of “citizenship” that’s needed, or should that politically charged word be recast into “family” or “community” or even “individuality”? And should Blair himself be saying these things, or should the call come from some other high-profile voice or from a broad coalition of grassroots voices?

All good questions. But credit him for daring to put “moral purpose” on the table. The challenge for his government, of course, will be to continue with policies, appointments, and decisions that strike the majority as ethically sound. He’s raised the stakes. But by helping the public in Britain to begin to use a new language for public discourse, he’s also pointed them toward a new framework for judging his success.

It’s an experiment the world should watch with great interest, because it’s relevant to all of us.

(c)1999 by Rushworth M. Kidder

New technologies raise ethical issues that would have been unimaginable even a decade ago, and this week’s edition of Business Ethics Newsline features two lead stories dealing with daunting digital dilemmas: first, whether U.S. businesses should have the right to sell encryption software abroad; and second, the intriguing question of whether Internet shoppers in Country “A” should have the right to sue Web merchants in Country “B” — but have the case tried at home in Country “A.”

We follow with four stories related to litigation and court settlements: the nullification of an award for punitive damages against Ford Motor Company; IBM’s settlement of a suit charging that the firm misled workers eligible for early retirement; the case of a Canadian journalist jailed for writing an article critical of the Malaysian judiciary; and a federal court decision holding that U.S. courts do not have jurisdiction over WW-II-era slave-labor cases.

Next, four stories about ethics and commerce: testimony from the chairman of the Securities and Exchange Commission alleging that day-trading firms often engage in shady marketing; charges from HUD secretary Andrew Cuomo that mortgage lenders discriminate against blacks and Hispanics; a call for closer supervision of corporate auditors in Canada; and an investigation into allegations of market-rigging by Austrian banks.

And we follow with two items from the science and medical ethics desk: a study group’s recommendation that the federal government reverse its position on stem-cell research, and an apology from a Canadian university president for his lobbying efforts on behalf of a drug company.

We conclude this wrap of the news in ethics with a story about a movement to get children out of the risky business of making surgical instruments in Pakistan, two “Trendlines” reports about stresses facing British workers and problems with depression faced by U.S. workers, and a “Whatever Happened to” follow-up on promises by the airline industry to improve the quality of customer service.

Have a productive, ethical week.

– Carl Hausman

WASHINGTON
The Clinton administration last week announced that it would reverse position and permit U.S. firms to sell advanced encryption technology overseas in a move that is seen as a victory for high-technology industries, Internet users, and privacy advocates.

Currently, U.S. firms can sell encryption software, which makes coded Internet transmissions virtually unbreakable, only to preapproved industries abroad. The new measure would remove most such restrictions, opening the international market to U.S. firms’ most advanced products.

The move was heralded by the high-tech industry as a long-overdue concession to the realities of the marketplace, and by privacy groups who contended that businesses and individuals have a right to secure their data regardless of where they live.

U.S. firms have complained that the current ban has hobbled the U.S. high-tech industry, preventing domestic firms from competing with foreign companies that sell encryption software and face no restrictions on sales.

But law enforcement officials gave the Clinton about-face mixed reviews, arguing that it opens the door to secret communication among terrorists and spies, according to the Associated Press.

The new law would permit export of advanced scrambling technology after a one-time review of the product, but would prohibit sales to seven nations suspected of supporting terrorism — Iran, Iraq, Libya, Syria, Sudan, North Korea, and Cuba.

GENEVA
U.S. Commerce secretary William Daley last week warned that a proposed European Union law allowing Internet shoppers in the EU to sue foreign companies in the courts of the shoppers’ home nations could cripple the expected boom in ecommerce.

Current law allows lawsuits only in an online vendor’s home country, according to the Reuters news agency.

The EU proposal would potentially permit suits in any country where the seller’s site can be seen.

Daley told the United Nations’ World Intellectual Property Organization that the change “could have a chilling effect” on the growth of ecommerce, according to the Reuters report.

The EU draft legislation could be approved as early as December.

MODESTO, California
A California judge last week threw out a $290 million punitive-damage verdict against Ford Motor Co. because of jury misconduct, and ordered a new trial on charges that the automaker deliberately hid a design flaw that led to the deaths of three people.

Stanislaus County Superior Court judge Roger Beauchesne ruled that two jurors injected highly emotional and secondhand information — a violent dream, and hearsay evidence of Ford misconduct taken from a TV program — into the deliberations.

The case stemmed from a 1993 accident in which three family members were killed when their 1978 Ford Bronco overturned on the highway. Plaintiffs accused Ford of ignoring research evidence showing that the Bronco’s fiberglass roof was susceptible to collapse under such circumstances.

Ford argued that its design met federal safety standards at the time, and that the accident was the fault of the drivers involved, the Associated Press reported.

A jury ruled against Ford last July, penalizing the automaker $500,000 in compensatory damages, and $290 million in punitive damages.

Ford, which now faces a new trial on the punitive damage counts, is also considering an appeal of the compensatory damages, according to the AP report.

LEXINGTON, Kentucky
IBM last week agreed to pay $15.5 million to settle charges that the computer giant misled a group of retiring workers into leaving IBM just months before improving the company’s benefits package.

The payout will go to roughly 340 workers formerly employed at IBM’s Lexington-based information services division. The workers, who retired in 1990, will receive between $2,000 and $150,000 each, the Associated Press reported.

The workers took early retirement in 1990 when IBM was trying to downsize its Lexington workforce.

IBM allegedly told the workers that taking leaves of absence prior to leaving the company would not increase their retirement benefits.

But months after they retired, the suit contended, IBM improved its benefits program and workers who took leaves would have benefited.

The workers filed suit in 1992, alleging that they had been deceived by IBM, and would have been eligible for the boost in benefits had they not followed IBM’s advice, AP reported.

IBM spokeswoman Jana Weatherbee called the settlement “reasonable,” saying that it was preferable to continuing to battle the charges in the courtroom.

KUALA LUMPUR
The Canadian government last week condemned Malaysia’s recent imprisonment of a Canadian journalist who wrote a critical article about the Malaysian judiciary as an unwarranted attack on freedom of expression.

Murray Hiebert, the local bureau chief for the Far Eastern Economic Review, owned by Dow Jones & Co., last week began serving a six-week sentence on contempt-of-court charges related to a January 1997 story that Hiebert wrote about the litigious nature of Malaysia, focusing on the wife of a Malaysian judge who sued a school because her son was dropped from the school’s debating team.

Canadian foreign minister Lloyd Axworthy has threatened to request a review of Malaysia’s actions at an upcoming human-rights meeting this month in New York, the Reuters news agency reported.

The Malaysian government’s action has also been criticized by the United States and an alliance of 30 Malaysian nongovernmental organizations.

NEWARK, New Jersey
U.S. courts do not have the power to settle claims against firms accused of exploiting slave laborers provided by the Nazi regime during World War II, two U.S. federal judges ruled last week.

In separate rulings, the judges dismissed class-action lawsuits against three firms, including U.S. automaker Ford Motor Co., which operated a plant in Germany during the World War II era, and German electronics giant Siemens AG, the Los Angeles Times reported.

Ford and Siemens are accused of forcing more than 100,000 prisoners to work in inhumane conditions. Germany’s Degussa AG is accused of processing gold stolen by the Nazis from Holocaust prisoners, and producing the poisonous gas used in Nazi death camps.

U.S. district judge Dickinson Debevoise ruled that while German firms clearly committed atrocities, postwar treaties mandate that nations, not courts, take up the issue of reparations, according to the Times.

In a separate ruling, U.S. district judge Joseph Greenaway Jr. dismissed a class-action case again Ford, saying that the statute of limitations rendered claims against the automaker invalid.

The rulings have refocused attention on pending international agreements over restitution payments by the German government and German firms. U.S. deputy Treasury secretary Stuart Eizenstat estimates the value of eventual payouts to be roughly $8 billion to $9 billion, according to the Times.

Eizenstat said that last week’s rulings will test the moral fiber of German firms, which have “denied any legal liability in U.S. courts, but have clearly indicated their moral responsibility,” reported the Associated Press.

Plaintiffs’ lawyers have said that they will appeal both judges’ rulings, according to the Times.

WASHINGTON
Federal regulators have found a disturbingly high number of irregularities at the nation’s day-trading firms, Securities and Exchange Commission (SEC) chairman Arthur Levitt told the Senate Governmental Affairs Committee last week.

Levitt noted that an SEC sweep of 30 day-trading firms revealed 10 instances of possible wrongdoing, including deceptive marketing techniques and improper loans among individual day-traders, according to the Reuters news agency.

Day-trading firms have come under fire on a wide range of charges, most frequently involving unscrupulous promotion of get-rich-quick schemes, understating investors’ risk, and encouraging questionable loan practices.

The Senate panel’s review of day trading follows a scathing report released in August by the North American Securities Administrators Association that concluded that most day-traders lose money.

WASHINGTON
Despite some progress, home-mortgage lenders continue to discriminate against blacks and Hispanics, Housing and Urban Development (HUD) secretary Andrew Cuomo charged last week.

Cuomo said two recent studies show that banks continue to be biased against minority loan applicants, and that the home ownership gap between whites and minorities is widening, the Associated Press reported.

In one study, the Urban Institute sent white and minority applicants with nearly identical credit histories and financial data to mortgage lenders. The Institute’s report claimed that the lenders turned away a disproportionate number of minority applicants.

In another study, the Association of Community Organizations for Reform Now claimed that nearly twice as many blacks and Hispanics as whites were denied loans last year.

HUD figures show a similar gap in home ownership rates, with 73 percent of white families, but only 46 percent of black families and 45 percent of Hispanic families as homeowners.

Virginia-based Consumer Bankers Association spokesman Fritz Elmendorf admitted that while “there hasn’t been a catch-up there’s been very impressive progress” in fighting loan discrimination.

Cuomo used the reports to back his campaign against congressional efforts to cut funding for enforcing federal laws prohibiting housing discrimination, according to the AP report.

Special to Newsline from Canadian correspondent Errol P. Mendes

TORONTO
The chairman of the Ontario Securities Commission (OSC) urged directors of corporations to more closely supervise corporate auditors to ensure that financial statements are not pumped up to meet market expectations.

David Brown asserted that companies are using “creative accounting” to bloat earnings in the short term, thereby endangering the health of the marketplace in the long term.

Increasing fear of disappointing the market and seeing stock prices tank is the motivation for such creative accounting, Brown said.

Brown noted that the OSC has been examining specific instances and that there is a strong likelihood that action would be taken against individual companies. Such action could include halting a company’s trading privileges, issuing a reprimand, or forcing a company to withdraw or amend disclosed financial reports.

The Commission has also established a “continuous disclosure” team that will monitor companies’ regular financial reports. However, Brown emphasized that it is the duty of every board of directors and the boards’ audit committees to ensure that “creative accounting” does not take place.

BRUSSELS
European Union officials last week began a preliminary investigation into charges that eight Austrian banks conspired for years to fix rates, fees, and banking commissions.

The banks under investigation collectively control half of Austria’s deposits and loans, the Associated Press reported.

EU investigators say they have identified 300 meetings at which bank officials discussed fixing prices and rates. Under EU fair-trading laws, such actions would be illegal and punishable by heavy fines.

The banks have two months to answer the charges in writing, after which they can attend a meeting with EU investigators, who will then determine the validity of the allegations, according to the AP report.

The banks under investigation are Bank Austria AG, Erste Bank AG, Raiffeisenlandesbank Niederoesterreich Wien, Postsparkasse, Landeshypothekenbank Niederoesterreich, Bank fuer Arbeit und Wirtschaft AG, Oesterreichische Volksbanken AG, and Raiffeisen Zentralbank AG.

WASHINGTON
The government should reverse position and make federal funds available to scientists doing research on stem cells, highly adaptable cells taken from human embryos, a bioethics panel advised last week.

The National Bioethics Advisory Commission (NBAC) took up the debate last November at the request of President Clinton.

Last week, the collection of lawyers, doctors, ethicists, and other experts said in a report that the current ban on using federal funds for stem-cell research is counterproductive, according to the Los Angeles Times.

“In our view, the ban conflicts with several of the ethical goals of medicine and related health disciplines, especially healing, prevention, and research,” the Commission said in its report.

Proponents of stem-cell research say that the cells, which can be manipulated to form any human tissue, promise revolutionary treatments for mental illness, tissue transplants, and failing organs.

But critics argue that using the cells, which are taken from embryos discarded after in-vitro fertilization procedures, is immoral.

The NBAC said that open funding of the research would ensure transparency of stem-cell research and lead to greater gains. The group also said that embryos should only be donated, not bought or sold, and that donors should receive counseling, according to the Times.

President Clinton, who has been reticent about reversing the federal ban on funding embryo research, thanked the NBAC for its work, but declined to say whether he would endorse the change, the Reuters news agency reported.

Special to Newsline from Canadian correspondent Errol P. Mendes

TORONTO
According to a report in the Globe & Mail, the president of the University of Toronto, Robert Prichard, has apologized to the University’s executive committee for sending a lobbying letter to several Canadian federal ministers and the prime minister at the request of drug manufacturer Apotex Inc.

The letter urged the federal government to give a 30-day extension to a review of drug-patent protection regulations that would have benefited Apotex Inc.

In his apology to the University’s executive committee, Mr. Prichard admitted that he wrote the letter because the proposed new legislation might make it financially impossible for Apotex to fulfill its $20 million donation to the University’s new Center for Cellular and Bimolecular Research.

The Globe & Mail report discloses that other universities and hospitals were also approached by Apotex Inc. to do the same lobbying and that several had complied. A University of Toronto medical researcher, Dr. Nancy Olivieri, whose negative research results on an Apotex drug resulted in a battle against the University and the company, commented that “it seems to me that many people here believe that science is for sale.”

ISLAMABAD, Pakistan
The International Labor Organization (ILO) last week announced a new $500,000 campaign aimed at getting Pakistani children out of the dangerous business of making surgical instruments.

U.S. firms hunting for inexpensive surgical equipment are largely responsible for funding the trade, which employs an estimated 7,000 child workers in hazardous conditions, the Associated Press reported.

The children work with toxic chemicals, and handle dangerous cutting, heating, grinding, and sandblasting equipment for an average monthly wage between $5.50 and $28.

The ILO and UNICEF have earmarked $500,000 to set up a monitoring agency, send children to school, and increase awareness of the dangers faced by the child workers.

While some human-rights groups have called for a boycott of Pakistan’s surgical-instrument manufacturers, ILO analyst Antero Vahapassi said such drastic measures are “unjustified,” since the industry has shown a willingness to end child labor and cooperate with the ILO.

An estimated 3.3 million children under the age of 14 work in Pakistan, according to the AP report.

LONDON
Britain’s white-collar workers will enjoy increasing prosperity over the next decade, but at the expense of more stress, poor family relationships, and increased childcare costs, the Salvation Army warned in a report issued last week.

The group’s study, “The Paradox of Prosperity,” says that more workers will be living alone, self-employed, working long hours to pay for child- and eldercare services, and turning to drugs and alcohol for relief, the BBC reported.

According to the study, the technology revolution will also produce a dangerous side effect by 2010: widening the skills gap between the poor and rich, who will see the disparity in their incomes widen tremendously, the BBC reported.

WASHINGTON
Depression is taking a toll on the U.S. workplace, costing an estimated $44 billion in lost productivity, according to a new report released last week.

Human-resource managers at more than 400 firms responded to a survey on workplace depression conducted by the Society for Human Resource Management and the National Foundation for Brain Research.

Fifty-six percent said that depression was hurting their firm’s productivity — slowing workers down, worsening the caliber of work, and causing increased absences, reported the Associated Press.

While 98 percent said that their workplace offered health-care benefits covering mental illness, only 60 percent of managers said that they had taken steps to actively help depressed workers.

The report recommends that firms train human-resource managers on how to approach depressed workers, offer confidential screening, and provide independent counseling for workers who may be resistant to sharing troubles with in-house personnel, according to the AP report.

WASHINGTON
U.S. air carriers last week continued their campaign to restore the industry’s tarnished image, announcing detailed plans for improving customer service.

New measures include informing customers when a flight has been overbooked, providing timely information on canceled and delayed flights, and upping the coverage for lost luggage, the Associated Press reported.

The airlines have been scrambling to regain consumer confidence after a spate of flight troubles, workers’ strikes, and damning reports on passenger bumping crystallized public anger.

Washington lawmakers had threatened to regulate the industry unless it came up with a plan for correcting its problems.

Last week’s announcement, intended to stave off such regulation, met with mixed reviews in Washington, according to the AP report.

While some lawmakers said the industry should be given time to reform itself, others dismissed the provisions as a mixture of toothless, largely unenforceable measures and passenger protections already covered by federal law.

The airlines must implement the new plans by December 15.