Ethics Newsline®

Real ethical dilemmas, we often say around the Institute, sneak up and take you by surprise. As I drove to work on Friday, one had snuck up on me. It’s one that many in the business world will likely recognize.

We were about to go to press with the inaugural edition of a departmental newsletter, slated to receive wide distribution. In order to provide visual support to one of our projects in which we are going door-to-door talking with people throughout Ohio, we had snapped a photo of an IGE staffer talking to someone while she held a clipboard. The newsletter designer had used the shot as a key element on the front page of the newsletter, with a caption mentioning our canvassing project.

I had a dilemma. The staged photo wasn’t sitting well with me, and we had just a few hours to make a decision about it. Is it okay to use staged photos in organizational communications like newsletters? There are good arguments on both sides:

• On the one hand, it is right to be fully and completely honest. Every photo or news item coming from us ought to be accurate, in context, and fully sourced. We owe no less to our readers and members.
• On the other hand, no one holding a glossy newsletter in their hands really thinks it has the same journalistic standards as a major newspaper. Not only is it accepted (and expected) that the stories included are by definition positive, but our editorial obligations are fewer, too. Furthermore, we also have an obligation to make sure that the communications coming from our organization are interesting and engaging. This is public relations, not a scholarly journal. Even newspapers sometimes use staged photos as illustrations for articles (as when a cover story in the Food section about pies has a cutout photo of a smiling person, often a model, holding a pie as a key graphic element).

The deadline was breathing down our necks. Some wanted to pull the photo and redesign the newsletter, at great cost not only in terms of money but also of time. Others held that the issue was in fact a non-issue. Yes, they said, we should make sure that we have our facts straight. But this was ridiculous. Throughout the business world, stock images are used routinely in brochures, newsletters, and annual reports. It’s not like we are claiming we’re doing canvassing when we’re really not — we just don’t happen to have an attractive picture of it.

We finally found a third-way-out solution. We captioned the photo so as to make it clear that it isn’t an actual picture of actual canvassing, but rather a “photo illustration.”

It felt in many ways like a “truth vs. loyalty” issue. But it was also a “self vs. community” question. In our increasingly networked world, we all share an epistemological anxiety about what is real and what isn’t. What is “truth” when images can be made to look like anything we want? Don’t we, because of this capability, have an obligation to use the technology at our disposal in ways that don’t demean the very notion of truth? But, on the other hand, don’t we also have an obligation to tell our organization’s story in as effective and interesting a way as possible?

For a host of good reasons and towards worthy ends, our tendency is to use all of the tools available to us. But as we do this, do we reduce the trustworthiness of all that we do? Each click of the image-manipulation mouse poisons the well just a little bit — if handled unethically. It is a digital tragedy of the commons.

These questions have a special resonance for the business world. After all, in any major company (and smaller ones too) good communications are a critical factor in the organization’s success. Businesses — and other organizations, like growing nonprofits located on the coast of Maine — have an obligation to market their products effectively as well as honestly.

Issues like this are cropping up throughout the corporate world, and they won’t go away. As more and more consumers and shareholders are demanding high ethical standards from the companies with whom they associate, managers must decide where to draw the line in their own publications. We may do well to ask ourselves: When we use pictures, are we doing so in a way that makes people less and less able to believe their eyes?

(c)2000 by Brad Rourke

That was the reaction of a Florida judge when he was handed the court papers detailing a record $144.8 billion damage award against defendants named in the first class-action suit against Big Tobacco to reach a jury. Circuit judge Robert Kaye, seemingly stunned, told the court he needed a minute to “digest” the figures.

The astonishing verdict — many times the previous punitive-damage record of $5 billion — breaks new ground in the legal and ethical aspects of liability, and leads our report this week in Business Ethics Newsline.

We follow with two stories about online privacy: an FTC suit against a defunct firm trying to sell its customer list, and a look what could possibly be a new fixture in the corporate hierarchy — the Chief Privacy Officer.

Next, two reports dealing with healthcare ethics: an ethics panel’s findings about medical research in the developing world, and a settlement in a case against a drug company that allegedly cornered the market on sedative ingredients and then jacked up their prices.

From the international affairs file come three stories: a new U.S.-Vietnam trade pact, a ban on diamonds used to fund insurrection, and a claim from a political movement that Afghan women working for international relief agencies are spies.

We conclude our report with three intriguing items about the workplace: a survey claiming that Canadian women face an impenetrable glass ceiling, a report showing British bosses burning an inordinate amount of midnight oil, and a study indicating that the work ethic is alive and well among U.S. teenagers.

Have a productive, ethical week.

– Carl Hausman

MIAMI
In a decision that may forever change the landscape of liability law, a Florida jury last week awarded $144.8 billion, the largest civil damage award in U.S. history, to 500,000 class-action plaintiffs who sued tobacco companies claiming they were sickened by cigarettes.

The tobacco industry immediately vowed to appeal, claiming the staggering verdict, if enforced, would put all five companies named in the suit out of business.

Meanwhile, however, the tobacco companies have some breathing room as they begin what is likely to be a protracted appeal process. Under a law recently passed by the Florida legislature — and backed by what the New York Times called “a strange consortium of industry lobbyists, Florida officials, and plaintiffs’ lawyers” — the tobacco companies must post only $100 million per company in order to appeal the case.

Under previous law, the losing party in a civil case was required to post the entire award as bond before entering an appeal.

Analysts noted that the case crosses a legal Rubicon into a land of astonishing damage awards. Even Circuit judge Robert Kaye seemed stunned as he caught his first glimpse of the financial breakdown of the jury’s award.

CBS News reported the judge stared at the paper, remarked, “lots of zeros,” and said, “let me digest this for a moment.”

The award dwarfs the previous record for punitive damages in a civil case — a $5 billion verdict against Exxon Corp. in 1994 for the Exxon Valdez oil spill that is still under appeal, the Washington Post reported.

While some analysts and investors shrugged off the verdict as an impossibly high amount certain to be overturned on appeal, others predicted that the verdict will eventually force tobacco companies to raise the price of the product out of reach of many smokers. Tobacco stocks closed only marginally lower Friday.

The same opinion split was visible in Washington, where some business groups and politicians assailed the decision as unfair, while others, including Illinois senator Richard Durbin, claimed Big Tobacco got what it deserved, the Post reported

“It’s hard to feel sorry for the tobacco industry, which never felt sorry for its victims,” Durbin said.

BOSTON
The Federal Trade Commission (FTC) last week sued online retailer Toysmart.com in a bid to block the bankrupt company from selling its customer database to a third party — an action the FTC claims is an end-run around the firm’s promise in its privacy statement not to sell customers’ names.

Toysmart.com shut its doors in May and declared bankruptcy the next month. In early June, the company placed an ad in the Wall Street Journal offering its assets to the highest bidder. Among the list of items for sale were Toysmart.com’s intangibles, including the company’s databases and customer lists, the Reuters news agency reported.

That ad sent red flags flying. Online privacy verifier TRUSTe, which had accredited the Toysmart.com site, immediately filed a complaint, and the FTC filed suit.

On its site, Toysmart.com promised registered visitors that “you can rest assured that your information will never be shared with a third party.” Such information includes the addresses, phone numbers, purchase histories, and family profiles of roughly 260,000 users, reported CNET News.

By offering to sell that information during bankruptcy, Toysmart.com is violating its privacy promise — a deceptive act illegal under federal law, according to the FTC suit.

Online privacy experts and industry observers say the government’s suit will set an important precedent in how the growing number of failed dot-coms handle their customers’ information during liquidation proceedings.

“Even failing dot-coms must abide by their promise to protect the privacy rights of their customers,” FTC chairman Robert Pitofsky warned last week.

“Toysmart is a test case in a much larger issue,” added TRUSTe spokesman David Speer. “In an information economy, information is the thing that has the most value.”

Late last week, Toysmart.com’s major shareholder, Walt Disney Corp., offered to buy and retire the failed venture’s customer information in a move to end the controversy, according to a report from the Industry Standard.

Toysmart.com legal representative Alex Rodolakis said settlement talks with the government already have begun and that he believes “a resolution can be effected” before Toysmart.com’s asset auction later this month.

WASHINGTON
As technology reaches deeper into the homes and habits of modern computer users, online privacy is becoming a top concern of consumers and companies alike, according to a report last week from the San Jose Mercury News.

As a complaint of privacy abuse increasingly becomes a buzzword that can topple a company’s good reputation or bust a proposed merger, many firms have gone proactive by adding a new position: Chief Privacy Officer.

American Express, AT&T, Citigroup, Microsoft, Prudential Insurance, and Verizon Communications are among the growing number of firms making room on the corporate ladder for top-level executives with privacy duties.

Putting a single individual in charge of implementing and enforcing a company-wide privacy policy makes good sense — both for organizational efficiency and for staying in the public’s good graces, Stanford University business lecturer Ward Hanson told the Mercury News.

With a chief privacy officer on the payroll, employees know where to go for answers about handling customers’ data, consumers know whom to contact with their questions, and oversight becomes singularly assigned.

“The battle for competitive advantage is going to increasingly be fought with a closer relationship to customers, and the only way that’s going to work is if customers trust companies with their data,” Hanson says.

Alan Westin, a privacy expert who helped Congress draft the Privacy Act of 1974, agrees with that assessment, noting that privacy is no longer a secondary matter in the minds of online firms.

Privacy has gone “from being a minor issue in most companies to something that could threaten their basic revenue model,” Westin told the Associated Press.

The growing push for online privacy follows a series of heavily criticized attempts by companies — including Internet ad giant DoubleClick and, last week, defunct retailer Toysmart.com — to market, merge, and otherwise disseminate their clients’ private information.

WASHINGTON
U.S. companies conducting medical research trials in developing nations are ethically obligated to continue providing test patients with free drugs and treatment if the practices prove beneficial, the nation’s leading bioethics committee said last week.

That controversial and potentially costly recommendation is part of the U.S. National Bioethics Advisory Commission’s newly released guidelines, “Ethical and Policy Issues in International Research.”

Commission chairman Dr. Harold T. Shapiro says the recommendation is an attempt to ensure that poor people around the world don’t become medical guinea pigs for wealthier nations, and that they reap some of the rewards from the medical advances enabled by their participation.

“It’s a case of distributive justice,” Shapiro told Reuters.

But some Commission members challenge the official recommendation, which essentially orders companies to provide free products indefinitely, as impractical and infeasible.

“If we’re not able to do it [for U.S. research subjects], how can we do it elsewhere?” Commission member Dr. Patricia Backlar asked — a concern echoed by Shapiro. “The fact that we can’t do it [in the United States] should cause us to pause,” he conceded.

The Commission’s guidelines are scheduled for draft publication this week. Public comments will be accepted until September 1, according to the Reuters report.

PITTSBURGH, Pennsylvania
Mylan Laboratories Inc. last week agreed to pay up to $147 million to settle charges that the company used its monopoly power to hike the prices of two generic antianxiety drugs.

Mylan was sued in 1998 by the federal government, 32 states, the District of Columbia, and consumers for allegedly cornering the market and raising prices for two generic anxiety drugs used mostly by the elderly and those affected by Alzheimer’s disease.

According to the suits, Mylan negotiated a near lock on the drugs’ active ingredients, then upped prices by more than 2000 percent — raising the price of 1000 tablets of one drug from $22.72 to $754, according to the Associated Press.

Ohio attorney general Betty Montgomery slammed Mylan for its alleged market rigging, calling the abuse a “brash example of corporate greed” that affected people dependent on the drugs for treatment.

Mylan’s alleged price gouging also “nearly single-handedly led to a 0.2 percent increase in the May 1998 national Producer Price Index, which the federal government uses to monitor national economic health,” Montgomery said in a statement.

Mylan denied any wrongdoing last week, saying the settlement simply was in the “best interest of our company’s shareholders, customers, and employees…. We continue to believe we acted properly.”

Last week’s settlement, which allocates $135 million for distribution to the states and up to $12 million for attorneys’ fees, must still be approved by the states and the Federal Trade Commission, noted Reuters.

WASHINGTON
The United States and Vietnam last week signed a historic trade agreement designed to restore normal trade relations between the two countries for the first time since the Vietnam War.

The pact, which still must be approved by the U.S. Congress and Vietnam’s National Assembly, would slash U.S. tariff barriers on Vietnamese imports from the current average of 40 percent to around 3 percent. In exchange, Vietnam would open its markets to greater U.S. investment and imports and pledge to guard intellectual property rights, the New York Times reported.

“This agreement is one more reminder that former adversaries can come together to find common ground,” President Clinton said when announcing the proposed trade pact.

The agreement, which follows more than four years of tough negotiations, received an apparent boost from Clinton’s recent push to normalize trade relations with China, which would have left Vietnam on the economic sidelines as one of Asia’s weaker economies, according to the Times.

USA Today reported that the deal, if approved, is expected to double Vietnam’s exports to the United States, bringing the communist nation an anticipated $768 million, according to World Bank forecasts. Other forecasts chart the expected boost in exports at roughly $1 billion over the next one to two years.

According to the Boston Globe, while the economic benefits will mostly fall to the Vietnamese, the United States walks away from the deal with a much desired strategic benefit: stronger and stabilizing relations with a major nation in the unsteady region of Southeast Asia.

LONDON
De Beers, the world’s largest diamond company, last week announced new guidelines requiring its customers to boycott stones mined and sold to fund African conflicts as well as those mined by child laborers — or face a freeze-out by De Beers, which controls 60 percent of the world’s uncut diamond supply.

The company’s new “best practice principles” will take effect next July, at which time offending companies will no longer be welcome to purchase diamonds from De Beers, the Associated Press reported.

The move by the world’s dominant diamond firm follows a vigorous push by African leaders and the United Nations to destroy the market for so-called “conflict diamonds” — gems sold by rebel groups to finance arms deals and insurrections.

“The legitimate diamond industry will do what it can to help,” De Beers spokesman Andy Lamont said. “But the legitimate diamond industry doesn’t work in isolation. The producer countries … and governments in the developed world need to put in place the sort of legislation that makes it a criminal offense to trade in diamonds from conflict areas.”

Last week, the UN Security Council took a step in the same direction, calling for an 18-month embargo on conflict diamonds, according to the Reuters news agency.

The U.S. Congress quickly answered by advancing a proposal barring the purchase of diamonds from many African nations. Only diamonds carrying a certificate of origin from the Sierra Leone government would be exempted.

Sierra Leone’s UN ambassador, Ibrahim Kamara, last week said his government, currently under siege by rebels who control gem-rich areas and fund their operations largely through diamond sales, welcomes the international push to end the trade in conflict diamonds.

“At last, the Security Council has come to realize that the war in Sierra Leone is cast in gemstones,” Kamara told the United Nations.

Britain’s Global Witness watchdog group estimates that the illicit trade in conflict diamonds pulled in roughly $200 million annually for rebel groups between 1991 and 1999, noted the Associated Press.

UNITED NATIONS
Afghanistan’s radical Taliban movement, a fundamentalist Islamic group that controls much of the nation but is not officially recognized by the United Nations, last week warned the UN and other relief agencies to stop hiring Afghan women, who it claims are often subversive agents and spies for foreign governments.

Alleging that “35,000 women were employed as secret agents” trained by the Soviet KGB during the 1980s, a spokesman for the radical Islamic group called the employment of women by foreign agencies a “national security issue.”

After seizing power in 1996, the Taliban issued a series of orders barring girls from the country’s schools and ordering women to stay at home. Gradually, some women were allowed to work in the education and health fields, as well as for foreign aid agencies, according to the Reuters news agency.

But last week, the Taliban signaled a renewed crackdown on Afghanistan’s working women, and arrested a U.S. citizen, Mary MacMackin, saying her philanthropic group helping women and widows was actually a front for spying and converting women from Islam to Christianity.

After a hastily arranged meeting with a UN representative, the Taliban agreed late last week to rescind its edict against employing women and freed MacMackin, expelling her from the country, the New York Times reported.

Last week’s move by the Taliban follows angry charges by the movement against the UN World Food Program (WFP), which recently hired 600 Afghan women to help conduct a study of where food aid was most needed.

According to the Taliban, the WFP tried to lure women into fleeing Afghanistan, and failed to hand over biographies of all the hired women as required by a May 1998 agreement between the agency and the Taliban.

WFP spokeswoman Abbey Spring rejected the allegations, according to the Reuters report.

Special to Newsline from Canadian correspondent Errol P. Mendes

TORONTO
The Globe & Mail is reporting that a new survey commissioned by the Womens Executive Network based in Toronto paints a dismal picture of gender equality at the top of the private sector.

The survey of 350 women in senior positions in the public and private sectors indicates that those polled predict that there will not be equal numbers of women in Canadian corporate boardrooms until 2027 and that it will take until 2033 before half of the CEO positions at large corporations are held by women.

The average prediction of when gender discrimination will be eliminated in the workplace was 2034.

However, 42 percent of those surveyed predicted that discrimination will never be eliminated.

The founder of the organization that commissioned the study, Pamela Jeffery, stated that these dismal predictions are based on the long experience of the women who were polled and that the figures should be “a wake-up call” for those who have grown complacent on the issue of gender discrimination in the workplace.

LONDON
British bosses are burning the midnight oil more than most of their counterparts in Europe and the United States, clocking an average of 60 hours per week, according to a new survey released last week.

The poll of 550 managers of small and medium-sized businesses found that only German bosses put in more time — a numbing 70 hours per week, reported the office-equipment supply company Esselte.

Technological advances — from email to cell phones to intranets — have blurred the line between home and office, making it harder than ever for supervisors to call it quits at day’s end, Esselte executive vice president Magnus Nicolin told the BBC.

The company’s survey also suggests that young bosses (38 percent of those aged 18 to 35) as well as heads of small companies (60 percent of bosses with 10 or fewer employees) are most likely to work more than 40 hours per week.

WASHINGTON
The work ethic is alive and well among U.S. teens, the nation’s Labor Department reported last week, releasing a survey that shows nearly two-thirds of 15-year-olds holding down jobs.

According to government figures, 64 percent of the nation’s 15-year-olds were employed in 1997 — more than half (38 percent) in steady, formal jobs, the Associated Press reported.

Working teens most often hold jobs in the custodial, clerical, and food service sectors, according to the government’s 1997 interviews with 9,022 boys and girls between the ages of 12 and 16.

While the Labor Department study applauds the fact that as many girls are now holding down formal jobs as boys by the age of 15, the report did sound some cautionary notes. Minority children were only two-thirds as likely as white children to hold jobs, and the overall number of working teens aged 15-17 has dropped between five and nine percent over the past two decades.

U.S. law allows children between 14 and 15 to work certain jobs, but sets strict limits on the activities they can perform and the number of hours they can clock, noted the AP report.

From Quest Diagnostics:

“Workplace drug use decreased during 1999 to the lowest level in 11 years, as measured by the semi-annual Drug Testing Index, released [last month] by Quest Diagnostics Incorporated, the leading provider of drug testing services in the United States. Since 1988, when publication of the Drug Testing Index began, the proportion of positive test results to all test results has declined by 66 percent.

“During 1999, 4.6 percent of approximately 6 million workplace drug tests performed by Quest Diagnostics were reported positive, down from 4.8 percent for all of 1998. In 1988, when the Drug Testing Index was established, 13.6 percent of all drug tests were reported as positive.

“Rates of use for several drugs, including cocaine and opiates, showed declines as a percentage of all positive test results. Cocaine use made up 16 percent of all positive results in 1999, down from 18 percent for 1998. The percentage of opiate tests that were reported positive declined by almost half in the current Drug Testing Index, from 10 percent of all positive results for all of 1998. This change in opiate positivity was most likely due to a change in the standard cutoff for all opiates, from 300 ng./ml. to 2000 ng./ml. In December, 1998, the opiate cutoff changed for federally mandated testing and most private sector employers adapted this change in their drug testing programs in early 1999. At the same time, marijuana use represented 62 percent of all positive results, up from 59 percent in 1998.

“A significant group of positive results on the Drug Testing Index represented attempts to alter test results by tampering with or substituting specimens. These so-called ‘test cheaters,’ who test positive for substances used to adulterate or replace their specimens, accounted for 2.6 percent of positive results for 1999, up from 0.63 percent for 1998, when only nitrate adulteration was reported. More than 5,400 test results were reported as positive for the use of adulterants. In addition, 2,400 other samples were identified as having been ’substituted’ for valid test specimens….

“Color graphics of the Drug Testing Index©, including regional maps which show positivity rates by type of drug, are available on-line at www.questdiagnostics.com to provide more localized workplace drug test data. The Drug Testing Index is released every six months as a service for government, media and industry, and is considered a benchmark for national trends….”

“You can tell the ideals of a nation by its advertisements.”

– Norman Douglas (British author, 1868-1952)