Ethics Newsline®

“I would rather have people laugh at my economies than weep for my extravagance.”

– Oscar II (King of Sweden (1872-1907) and Norway (1872-1905), 1829-1907)

From the Conference Board:

“While corporate contributions have been hard hit by mergers, company giving has become part of virtually every major corporation’s business strategy, according to a new study from the Conference Board.

“Despite record corporate profits and record lows in inflation and unemployment, U.S. corporate contributions had declined to 1.1 percent of pretax income by 1997. In 1986, U.S. contributions stood at 2.36 percent.

“‘The frequency of corporate mergers will undoubtedly accelerate the contributions decline,’ says Sophia A. Muirhead, senior research associate in the Conference Board’s Global Corporate Citizenship Center and author of the Conference Board study. ‘But, corporate giving, once viewed as an ill-advised practice, has evolved during this century and is now a government-embraced, integral component of corporate accountability to society.’

“The study, Corporate Contributions: The View from 50 Years, shows how corporate giving has evolved from the 1870’s to today. Fifty years ago, it was illegal to make gifts for nonbusiness purposes, while contributions — including many noncash gifts — are now predominantly business-driven.

“‘One major development has been gradual management acceptance of corporate contributions over the past half century,’ says Muirhead. ‘Contributions budgets are now regarded as no different from budget allocations for wages, raw materials, advertising, and other sources of corporate expense.’

“Although the total volume of corporate giving has skyrocketed during the past five decades, the proportion of giving in relation to profits has seesawed and has lately been on a downward trend. When measured as a percentage of pretax profits, U.S. corporate contributions declined from 2.3 percent in 1986 to 1.1 percent in 1997. While the proportion declined, the attention companies pay to giving has grown and the gifts themselves have diversified.

“Increasingly, companies are finding new ways to contribute to their communities by donating products and equipment, lending executive talent to nonprofit organizations, and expanding opportunities for direct employee involvement in volunteer and nonprofit work. …

“Companies are now appending strategic philanthropy to a broader notion of corporate citizenship that is not dependent on contributions alone. As corporations expand globally, they face intense competition, varying cultural and business values, resource limitations, and a need for new relationships with other businesses, governments, and global communities. Firms have begun to recognize that their economic, environmental, and social capital have powerful impacts on communities worldwide.

“In response to the new contexts for conducting global business, companies, including BP Amoco, Monsanto, and Royal Dutch/Shell, are implementing programs that recognize this global impact. Seeking to strengthen business ties and preserve their ‘license to operate’ from communities, governments, environmentalists, and other stakeholder constituencies, these companies are placing greater emphasis on corporate citizenship activities that do not depend exclusively on philanthropy.

“Embedded in the corporate citizenship themes that are gaining wider corporate focus today are interrelated goals of business responsiveness, community participation, and reputation enhancement and management. Through citizenship initiatives, leading companies are seeking to better integrate employees into the communities in which they work, demonstrate responsiveness to consumers and investors, build employee and customer loyalty, earn community trust and credibility, and encourage investor confidence….

When disaster strikes others, we invent ways to give aid. Its one of our deepest moral instincts.

Yet when the aid is offered, the regulatory framework kicks in. Its one of our most stubborn bureaucratic impulses.

And as war-ravaged Kosovo and quake-shattered Turkey demonstrate, bureaucracy can trump morality — leaving real people freezing in the dark without food.

Molly and George Greene know something about that. Shes president and hes CEO of General Engineering Laboratories in Charleston, South Carolina, a large analytical laboratory specializing in environmental engineering and consulting.

In October 1998, George was driving to Atlanta when he heard radio reports on the devastation in Honduras caused by Hurricane Mitch. Because his daughter Jeni had worked there teaching English as a missionary, he recalls, "it was more than just something in the news." Yearning to help, he emailed the episcopal bishop in Atlanta to ask how. Back came the question: Can you donate six portable water-treatment units, to provide drinking water where floodwaters have polluted the usual sources?

Calling around, George quickly discovered that nobody made such things. Bottled water, yes. Individual treatment units, yes. Massive mobile systems, yes. But something you could haul in a pickup truck across makeshift roads to remote areas? Nothing was on the market.

But George holds a Ph.D. in chemical engineering. Designing things was his business. So, using off-the-shelf filtration components, commonly available pumps and pipes and drums, and volunteer help from his own staff, he designed and built one on a wooden palette in a day and a half. It produced 10,000 gallons a day of potable water from the filthiest sources they could find. It was simple to fix, cheap to run, and easy to move. So they built five more.

Then, following a community meeting in Charleston, and with help from South Carolina senator Strom Thurmonds office, they lined up a C-5 transport plane, flew the six units and a crew of 17 to Honduras, and had them running within hours of arrival in Tegucigalpa and San Pedro Sula. Elapsed time from email to fresh water: three weeks.

Since then theyve sent 12 more to Honduras and another six to Turkey. And theyve set up a new business unit, Project Living Water, to manufacture them.

A heartwarming success? Yes, indeed, but for one final coda. When Hurricane Floyd hit the east coast in September, George and Molly saw pictures from Tarboro, North Carolina, of mile-long waiting lines for bottled water. So they loaded a unit onto a truck. They were just about to head north when they got a call from the North Carolina environmental authorities — essentially threatening them with legal action if they proceeded. Why? Because their unit had not received a proper permit from the Environmental Protection Agency.

"If we had bottled this water, they could have accepted it," says a still-astonished Molly, noting the famously lax standards for bottled water. But even though their units used familiar and well-tested treatment systems, nobody had ever packaged them quite this way before. So nobody dared approve it.

They never did send that truck to Tarboro. And will they go through the permitting process? George sighs. "The bureaucracy to get an EPA permit?" he says. "Thats beyond us."

Think what that means. This is the team that designed a new system, built six units, negotiated international transportation, assembled volunteers, and sent the whole thing to Honduras in three weeks. But it finally met its match. Not from technical challenges. Not from community apathy. Not from lack of funds. Not even from some perverse, antihumanitarian thrust. No, simply from bureaucracy.

Standing back, of course, you can see the ethical dilemma. Its right to respond instantly to immediate human needs, and to encourage the entrepreneurial spirit that does so. Yet its also right to require that systems claiming to provide potable water really are safe — since nobody wants an uncontrolled world of cowboy volunteers. The irony is that when you test water for safety, who does the testing? Analytical laboratories like General Engineering. If anyone knows safe water, they do.

George and Molly havent given up their good works, however. Theres a little village in Honduras, George notes, where three hundred new houses now have clean water from a unit they installed earlier this month. Ten days ago, a community of shacks just across the road was swept with an epidemic of water-borne disease — until the unit began supplying them, too, and the disease abated.

But thats Honduras, and this is the United States. "Sometimes," George says sadly, "all our laws and regulations work against us."

(c)1999 by Rushworth M. Kidder

What should the government do and how far should it go in order to ensure a safe and civil workplace? That question carries a heavy load of ethical baggage and is the focus of our lead story this week in Business Ethics Newsline.

We begin our report with new OSHA proposals aimed at avoiding workplace injuries, in particular repetitive-stress injuries. But in a classic confrontation between government and private enterprise, many business groups are crying foul, claiming that the proposed regulations overstep the boundaries of government control over private business, and would impose a crippling burden, particularly on small business.

Several other workplace stories follow: the continuing perception of racism in the military, particularly in the lower ranks; a widening pay gap between British executives and their workers; allegations of pervasive racism against female European scientists; and a newly recognized labor organization in South Korea.

Next, four items from the litigation file: a slew of civil suits against Microsoft; an action by Michigan’s attorney general against a department store that allegedly tolerates too many errors by checkout scanners; a raft of suits against HMOs filed by the same legal team that went after Big Tobacco; and class-action suits — coupled with a stock nosedive — that hit a Chicago consulting firm.

And from the Canadian desk, three reports this week from correspondent Errol P. Mendes: allegations that a Canadian tobacco firm targeted young smokers, a dispute over a Canadian researcher who claims she has uncovered dangers from a drug, and a report critical of the human-rights record of a Canadian oil company.

The world of sports produces three interesting stories with an ethical angle this week: allegations of academic cheating at a major basketball power, background checks for college-tournament referees, and a course that teaches parents the fine points of spectator ethics.

We conclude this week’s Newsline with a report on alleged media racism in South Africa, and some good news about dropping crime rates and drug use among U.S. teens.

Have a productive, ethical week.

– Carl Hausman

WASHINGTON
In a move that has re-ignited debate over the limits of government control of private business, the federal government last week unveiled controversial proposed ergonomics standards designed to protect workers from on-the-job injuries.

The new guidelines are a scaled-back version of a proposal made last February, which met with hostility from business groups and some members of Congress, who insisted that more research was needed.

Last week, the Clinton administration released new proposals, saying new ergonomics guidelines are urgently needed to protect U.S. workers from repetitive-strain injuries.

The new guidelines would require employers to train their employees about workplace health threats, but would not require refitting the workplace unless a worker was actually injured, the Los Angeles Times reported.

Several business groups denounced the new proposed guidelines, calling them vague and saying that the estimated annual $4.2 billion cost to business would be crippling.

Labor Department secretary Alexis Herman argued that the expense would be more than offset by the estimated $9 billion in annual savings from lower workers’ compensation costs and injury absenteeism.

“Good ergonomics is good economics,” Herman insisted.

The U.S. Chamber of Commerce has threatened to sue the government if it tries to enforce the ergonomics proposal, the Associated Press reported.

Repetitive-strain injuries, most notably carpal-tunnel syndrome, are rising alarmingly, currently affecting 1.8 million U.S. workers each year, according to the U.S. Occupational Safety and Health Administration (OSHA).

Public comments on the proposed guidelines are due by February, when public hearings are scheduled to begin.

WASHINGTON
Nearly three-quarters of blacks and Hispanics in the U.S. military say they have experienced recent instances of racism, according to a new report released last week by the Defense Department.

The new study surveyed more than 44,000 enlisted personnel and officers, compiling their reports of discriminatory treatment and abuse by race and rank, the Associated Press reported.

Eighty-five percent of Hispanic military personnel in lower enlisted ranks reported racist treatment. Reports of racism also extended into the ranks of officers, however, with 71 percent of black officers reporting racially offensive encounters with other members of the military, according to the Washington Post.

The Congressionally mandated survey found white respondents more upbeat about race relations than their minority counterparts.

But despite the discouraging results, Defense officials noted that most respondents felt that race relations had improved compared to five years ago.

Announcing the release of the study, Defense secretary William Cohen warned that the military would continue its crackdown on racist attitudes, saying that “there is no place for racism in our society and there is certainly no room for it in the military.”

LONDON
The pay gap between British workers and their bosses continued to widen last year, further fueling calls for an overhaul of the way executive pay is determined.

The U.K. Trades Union Congress (TUC) last week reported that the directors of Britain’s 500 largest firms received salaries averaging 18 times their workers’ pay — a bigger gap than in any other European nation.

That average jumped to 26 times the average worker’s pay once long-term incentives, such as popular stock-option plans, were added in, the BBC reported.

The TUC figures, covering the 1997-98 fiscal year, show an escalating earnings gap between British workers and executives. At the extreme, some executives take home 96 times their employees’ average pay.

Institute of Directors representative Ruth Lea told the BBC that the pay gap is justified because if British executives did not receive such high incomes, they might be more easily lured away to U.S. companies, where the wage discrepancy is even higher.

The report is expected to increase pressure on the government, which is currently conducting a probe into corporate pay, to pass legislation empowering stockholders to veto executives’ pay packages, according to the BBC report.

BRUSSELS
Female scientists face systemic discrimination within the scientific community that not only impedes their careers but threatens potentially vital research, a report from the European Commission warned last week.

The report claims that the scientific establishment routinely discriminates against its female members, limiting their access to key positions and keeping their overall numbers low, according to the BBC.

The report, produced by professor Teresa Rees of the University of Wales in Cardiff, asserts that the mostly male scientific community has traditionally filled open positions from within, rather than looking to the ranks of female scientists.

That “old boys’ network,” Rees insists, not only discriminates but limits progress in many branches of science by disqualifying creative and qualified researchers.

The European Commission’s report recommends several improvements, including wider advertisement of open positions, gender monitoring, and equal appointment of men and women to decision-making committees.

SEOUL
In what appears to be a major shift in the government’s attitude toward labor, South Korea last week officially recognized the Korean Confederation of Trade Unions, the nation’s second-largest labor group.

The government had previously denied the group’s request for official status four times, citing its occasionally violent protest methods and a Korean law permitting only one umbrella labor group, the Associated Press reported.

Last week, the government reversed its position. “We hope our decision will help promote labor peace and lay the foundation to resolve pending labor issues,” explained Kim Won-bae of the Labor Ministry.

The government had hoped to win the group’s support in settling a bitter dispute over plans to restructure and privatize Korea’s state-run power, gas, and financial corporations, according to the AP.

But last week, the Korean Confederation of Trade Unions refused to help, instead backing a protest by 20,000 Korean workers who say that the changes likely would result in massive and unacceptable layoffs.

The confederation, with 570,000 members and dominance in the auto and shipbuilding industries, is about one-third the size of Korea’s other recognized labor coalition, the Korea Federation of Trade Unions.

CORAL GABLES, Florida
Lawyers in Florida last week filed the latest in a series of class-action lawsuits accusing Microsoft of overcharging consumers for its Windows 98 operating system.

The Florida suit and four other recent class actions — in New Orleans, New York, Ohio, and San Francisco — base their claims on preliminary findings by District judge Thomas Penfield Jackson earlier this month that Microsoft is a monopoly that has hurt competition and inflated prices.

Jackson’s preliminary finding of fact has yet to be formalized into law.

The suits accuse Microsoft of inflating the price of its Windows 98 upgrade by more than $40, charging consumers $89 when company documents showed that a $49 price tag would have produced adequate profits.

Analysts say the smaller suits are likely the first of a swarm of antitrust actions to target Seattle-based Microsoft in the wake of Jackson’s unfavorable ruling, the Associated Press reported.

Earlier this month, Judge Jackson appointed a mediator to assist in resolving the government’s case against Microsoft, which analysts warn could drag on for years unless a settlement is reached.

DETROIT
Michigan’s attorney general filed suit last week against J.C. Penney after claiming that the retailer’s price-scanning machines overcharged investigators on one-third of tested items.

The suit follows Michigan’s third annual survey of price accuracy at the nation’s leading retail chains, where the prices of on-sale items most likely to draw consumers to the stores are double-checked.

This year’s in-state survey found an overall mistake rate of 16.8 percent, the Reuters news agency reported.

J.C. Penney, the nation’s fourth largest retailer, wrongly scanned 33 percent of items, according to the investigators.

Company spokesman Duncan Muir said such mistakes are often attributable to “human error” in leaving promotional signs up too long, and promised that J.C. Penney would cooperate with investigators.

J.C. Penney’s 33-percent error rate was followed by Montgomery Ward (27 percent), Hudson’s (19 percent), Sears (17 percent), and Target (7 percent), Reuters reported.

JACKSON, Mississippi
A group of lawyers fresh from courtroom victories against Big Tobacco turned their attention to the nation’s HMOs last week, filing five lawsuits charging health care firms with unscrupulous business activities and “racketeering” practices that restrict patients’ access to treatment.

While last week’s lawsuits seek class-action status on behalf of 32 million people as well as compensatory and punitive damages, analysts suggest that their real bite may lie more in their bark — the spotlight they throw on the issue of HMO operations, according to the Los Angeles Times.

More lawsuits mean more press coverage and more public clamor for regulation of the increasingly vilified industry, explained Todd Richter, a health care services analyst for Bank of America Securities.

Targeted HMOs, such as Aetna/US Healthcare, promised to “vigorously” fight the “baseless” charges.

The firms named in last week’s suits are Pacificare Health Systems Inc., Foundation Health Systems Inc., Cigna Healthcare, Prudential Health Care, and Humana Inc.

CHICAGO
The utility-consulting firm Navigant Consulting Inc. was hit with five class-action lawsuits last week after it admitted it was investigating rumors of fraudulent accounting and improper loans made to company executives.

Under fallout from the allegations, Navigant last week fired its general counsel, its vice president of corporate development, and two board members.

Navigant’s board also demanded the resignation of chairman, CEO, and president Robert Maher, who had taken Navigant from a $20 million company to a $400 million firm in three years, the Reuters news agency reported.

What Navigant needs now, new president Carl Spetzler said, “is a more systematic, transparent, open, and conservative style especially in our communications and our credibility.”

Navigant shares fell more than 50 percent on news of the investigation.

Special to Newsline from Canadian correspondent Errol P. Mendes

OTTAWA
The federal Department of Health released 1,200 pages of industry documents last week which it claims show that the giant Canadian tobacco company, Imperial Tobacco, was not much different from its U.S. counterparts in “examining” the youth market as well as developing new products to keep smokers buying cigarettes, including the so-called “light cigarette.”

The documents obtained in Guildford, England, under a U.S. court order, included analyses of smoking of children as young as nine to fourteen years of age, which the documents describe as the “experimental phase,” and the fourteen-to-sixteen age group which is described as the “adoption phase.”

The well-known whistle blower, Jeffery Wigand, a former top U.S. tobacco company executive, spoke to antismoking groups and the Canadian Minister of Health, Allan Rock.

Wigand claimed that Imperial Tobacco was no different from the U.S. tobacco companies that targeted teens and developed new products like the “light cigarette” which, in reality, just made the nicotine uptake easier.

A spokesperson for the tobacco industry asserted on the Canadian Broadcasting Corporation’s main nightly news magazine that the Guildford documents did not, in any way, show that the Canadian tobacco industry had acted unethically or improperly.

Special to Newsline from Canadian correspondent Errol P. Mendes

LUXEMBOURG
A professor of medicine at the University of Toronto is asking the European Court of Justice to reverse the decision of the European Commission approving the drug deferiprone.

Dr. Nancy Olivieri, who says her research on the drug suggests that it could damage the livers of patients who take it, started her battle with Apotex, the company which manufactures the drug, last year.

Although her research was sponsored by Apotex, the company threatened to sue Dr. Olivieri after she publicly disclosed her research findings.

Apotex claimed her research was flawed and that she was in violation of a confidentiality agreement.

Dr. Olivieri resisted attempts to curtail her public statements on the drug and has attracted the support of a Toronto-based group, Doctors for Research Integrity, with 200 members worldwide, who are supporting her application before the European Court of Justice.

Apotex refutes Dr. Olivieri’s assertions, claiming that more than 100 doctors who have studied the drug disagree with her findings and that many patients in Europe and North America have taken the drug without notable negative side effects.

Special to Newsline from Canadian correspondent Errol P. Mendes

TORONTO
A report by UN Special Investigator for the UN Commission on Human Rights, Leonardo Franco, claims that Talisman’s exploitation of oil fields in southern Sudan was facilitated by atrocities against civilians, which included “bombers, helicopter gun-ships, and artillery against unarmed civilians.”

These alleged atrocities, according to the UN report, were designed to protect oil production facilities and an oil pipeline by forced civilian displacement in order to clear people in these areas who were thought to support the country’s rebels.

Talisman has criticized the report, claiming that Mr. Franco did not visit the areas where the attacks occurred, but rather relied on witness accounts from other individuals.

The Canadian government is under pressure from the United States to impose economic sanctions against Sudan, including the cessation of Canadian involvement in the production of oil.

However, Canadian Foreign minister Lloyd Axworthy is adamant about waiting to receive the report of an independent Canadian fact-finder before deciding whether to restrict the operations of Canadian companies in Sudan.

Meanwhile, Talisman has embarked on a public relations blitz in North America by taking journalists and financial analysts to see their operations in Sudan and hiring a major public relations firm to counter the negative publicity.

MINNEAPOLIS
The University of Minnesota’s men’s basketball program conducted a campaign of “systematic, widespread academic misconduct” in order to keep student-athletes eligible for games, according to an internal investigation made public by the university last week.

A team of investigators concluded that the men’s basketball program encouraged players to cheat on their academic work, condoned the writing of papers by an academic counselor, and coerced teachers into changing players’ grades.

The report lays a heavy portion of blame on former head coach Clem Haskins, who left the university with a $1.5 million severance package before the full extent of the scandal was made public.

Last week’s report charges Haskins with committing a host of ethics violations, including giving cash payments to players and encouraging them to lie to investigators about the cheating, the St. Paul Pioneer Press reported.

University president Mark Yudof used the report’s findings to levy a series of self-imposed penalties against the school, including a ban on postseason play and a restructuring of oversight in the sports program.

Yudof says he hopes those measures, as well as the elimination of Coach Haskins and four other department leaders, will appease the NCAA, which could consider levying further penalties.

The scandal erupted last March, when academic counselor Jeanne Gangelhoff told reporters that she had written at least 400 papers for basketball players between 1993 and 1998. Gangelhoff charged that Coach Haskins encouraged the cheating — allegations that he repeatedly denied.

Last week’s report, detailing intimidation of university professors, extensive cheating, and deliberate misconduct, sent the scandal back onto the front page.

Athletics director Mark Dienhart and vice president McKinley Boston resigned upon the report’s release.

INDIANAPOLIS
College-basketball referees planning to officiate in championship tournaments must agree to undergo background checks or lose their eligibility, the National Collegiate Athletic Association (NCAA) announced last week.

The investigations are designed to weed out any referees susceptible to influence by gamblers, according to the Associated Press.

Referees must submit signed release forms agreeing to let the NCAA investigate employment, credit history, civil litigation, and motor-vehicle registration records, the Los Angeles Times reported last week.

Those who refuse will lose their shot at officiating in next spring’s final tournaments for men’s and women’s basketball.

Officials previously have been required to disclose information on felony convictions for illegal sports wagering, bookmaking, and bribery. The new policy is the next logical step, Bill Saum, NCAA director of agent and gambling activities, told the Times.

“We know there are significant dollars wagered on college basketball, and the referees ensure the integrity of the contest,” Saum said. “I look at this as a positive step for game officials. It takes away from media and fans the idea … (of making) comments about their integrity.”

Some referees, including 15-year veteran and New Jersey sports and employment lawyer Mel Narol, complained that the NCAA’s background checks pry too far into officials’ lives.

“The questions on the forms need to be re-evaluated,” Narol told the Times. “The magnitude and scope of the questions being asked … seem to go beyond what is necessary to protect the game.”

The NCAA said it will review the release forms and eliminate some of the questions, but that background checks are here to stay, reported the Times.

Officials have until December 1 to submit their release forms.

JUPITER, Florida
Hoping to head off bad behavior from the sidelines, a Florida youth athletic league will soon require parents to take an hour-long ethics course on spectator ethics and etiquette.

“We just want to try to de-escalate the intensity that’s being shown by the parents at these games,” Jeff Leslie, volunteer president of the Jupiter-Tequesta Athletic Association, told the Associated Press.

The ethics program, which includes a videocassette and workbook, has been offered by other associations across the United States, but has never before been mandatory, said program director Kathleen Avitt.

Parents who refuse to take the hour refresher on good sportsmanship will not be allowed to enroll their children in the association’s programs, which play host to roughly 6,000 kids, ages 5 to 18.

In related news, another group of grown-ups — professional football players — was reminded last week to mind their manners or pay fines for making a popular, but unsportsmanlike, throat-slitting gesture.

The display, used to offend opponents and celebrate successful plays, will no longer be tolerated and will result in a 15-yard penalty or league fine, warned National Football League (NFL) spokesman Greg Aiello.

A handful of NFL stars, including Green Bay quarterback Brett Favre, are already under threat of fines for making the gesture during recent games, reported the Associated Press.