Ethics Newsline®

LONDON
Is business ethics a fad?

Given the growing interest in the topic, the question needs asking. Are we watching the latest managerial “flavor of the month”? Or is there a profound and permanent shift in corporate tectonics?

I put that question to several dozen business leaders here in individual interviews earlier this month. Given the centuries-old globalism of London’s business community, many took the question in its broadest, most multinational reach.

The strong consensus: Ethics is no passing fancy.

“Things ethical are here to stay,” notes Robin Aram, head of external relations for Shell International, a company that took a public beating for its ethics in the early ’90s and is transforming itself into a corporate exemplar. “The lights are getting stronger.”

Shonaid Jemmett-Page agrees. She spent years working on corporate sustainability issues. “I really don’t think it’s a fad,” she says. “There’s increasing recognition among good managers that doing business in an ethical way is important for good business.” She calls it “a quiet movement, but with really quite a lot of momentum.”

Some, like dean John Quelch of the London Business School, are more cautious. While he admits to an “underlying shift” toward ethics, he thinks corporate commitment to the topic still needs to be tested by adversity. “Only when you get into a recession,” he says, “will you know whether your values will hold up.”

“There’s no question that there are some companies that have [become] engaged in these issues because it is a flavor,” adds Peter Davies, deputy director of Business in the Community, a nonprofit organization whose 700 member corporations work together on issues of social responsibility. “When times get tough,” he foresees that “you will know whether it’s a fad or a genuine belief.”

For many, however, the more interesting issue centers on why ethics should have risen to prominence so rapidly. For many, the change has been striking. One young executive, who now consults on issues of corporate social responsibility, recalls that when he finished his education in the early 1980s, “I had my idealism, but I assumed I left that at the door when I went to work and picked it up again when I went home.”

No longer. When Management Today magazine surveyed more than 800 readers for the professional services firm KPMG in October 2000, 85 percent of respondents said their firms offered no ethics training. Yet two-thirds wanted such training provided.

That’s a real change, says venture capitalist Peter Bennett. Recalling his long association with corporate boards, he notes that among company directors “you wouldn’t have had a conversation [about ethics] ten years ago.”

Yet today, says N. Craig Smith, who has just joined London Business School to teach marketing ethics, “you can use the ‘e’ word and people are not going to be shocked.”

Why the change? Several point to what Shonaid Jemmett-Page, who will shortly be joining Unilever as senior vice president for finance for the Central Asia and China Business Group, calls “the speed and reach and ease of communication.”

“The general public can be made aware very quickly of how big companies are conducting themselves,” she says. Result? “I don’t think [executives] have become more moral,” she says. “I just think they think they’ll get found out.”

Others see more internal reasons. Professor Smith of the London Business School points to an upsurge of “people looking for meaning in their lives.” At the turn of the millennium, he says, “a lot of people are asking, ‘What’s my life all about? What’s my business all about?’”

Michael Hastings, head of U.K. Public Affairs for the BBC, sees the agonizing over such questions as related to what he calls “the death of faith.” Venetia Howes, global brands strategy manager for Shell International Oil Products, agrees, noting that “moral philosophy is to some extent a substitute for the teaching of some religions.” She also notes a more pragmatic reason: As societies get richer, she says, “they can afford to have more principles than [they] used to.”

But Andrew Phillips, who sees corporate ethics through the lens of his legal practice in London’s business district, known as the “City,” and his seat in the House of Lords, feels that the “glitz and superwealth” of society are creating an atmosphere of materialism that severely challenge ethics. Business executives, like everyone else, live in what he calls “a society that is on the whole trying to diminish the rightful territory of ethics.”

“The typical City firm,” he says, “is fastidiously lawful — and fastidiously blind to anything else.” Yet he recognizes that the climate itself is creating a response on the part of the public. One small bit of evidence: the recent creation of a government position — parliamentary under secretary of state for consumers and corporate affairs, currently filled by Kim Howells — to focus in part on corporate social responsibility.

Recent debate over the Human Rights Act, which came into force here last October, may also be playing a role. One of the architects of the Act, Francesca Klug, academic director for the Human Rights Act Research Unit at King’s College, London, notes that “human rights” and “ethics” are often merged in public thought. Among her students these days, she says, “there’s room to look again at issues of ethics and morality without it being an absolute turn-off.”

As the debate continues, will ethics prevail? For all his doubts, Lord Phillips thinks it will. “The magnetism of good and good ideas,” he says, “is infinitely more than the magnetism of evil and evil ideas.”

Shonaid Jemmett-Page is also upbeat, but for an entirely different reason: She sees “enlightened self-interest” compelling managers to take ethics into account.

Whatever the reason, look for ethics to remain as other flavors wax and wane.

(c)2001 by Rushworth M. Kidder

Much of ethical debate hinges on the conflict between doing what is perceived as the action producing the greatest immediate good for the greatest number, versus the view holding that established principles should be followed because molding the rules to fit the situation really means having no rules at all.

Such was the course of the debate in our lead story this week in Business Ethics Newsline: the British Parliament’s approval of new laws allowing expanded cloning research involving human embryonic tissue.

We follow with three more items dealing with science and medical ethics: a settlement in a case in which the U.S. government accused a drug manufacturer of overstating prices in order to extract larger reimbursements from Medicaid; a larger-than-expected pay out in the case of some diet drugs implicated in heart and lung damage; and a report from Newsline correspondent Errol P. Mendes about the Canadian controversy over claims that cow byproducts possibly infected with mad cow disease could be reaching the general public.

Next, four stories from the litigation file: Microsoft settles a case in which a rival software manufacturer accused the tech giant of altering a program to make it compatible only with Windows, settlements in an oil-lease suit and a class-action shareholder suit over alleged accounting irregularities at a food-products firm, and a suit against Big Tobacco filed by two former Soviet republics.

And we conclude this week’s edition with a report on a suit filed by a U.S. fruit exporter claiming that EU trade rules are putting them out of business.

Have a productive, ethical week.

– Carl Hausman

LONDON
Britain’s House of Lords last week approved a set of controversial regulations broadening the scope of cloning research permissible under U.K. law — a move widely condemned by many religious groups.

By a wide majority, the Lords gave the green light to researchers hoping to experiment more freely with stem cells — cells taken from human embryos that have the potential to grow into any type of body cell, including bone, brain, organ, and skin.

Many researchers believe stem cells, which could be cultivated to genetically match a patient’s body, may vastly facilitate tissue and organ transplants, and hold the key to curing diseases such as cancer, Parkinson’s, and Alzheimer’s.

Last week’s move by the House of Lords expands the type of stem-cell research allowed by the government, a change approved late last year by the Parliament’s lower House of Commons. The new regulations uphold the ban on using cloning techniques to create actual babies, the BBC reported.

Leaders from several religious groups, as well as the European Parliament, urged British lawmakers to delay last week’s decision until a committee could study the ethical, legal, and social implications of expanded stem-cell research, according to a report from the Reuters news agency.

After eight hours of debate, the House of Lords rejected the proposed delay, deciding to enact the law first and then study the possible consequences.

While “the human embryo has a special status” that demands respect, the potential for treating disease compels immediate action, urged U.K. health minister Lord Hunt.

We “owe a measure of respect to the millions of people living with these devastating illnesses and the millions who have yet to show signs of them. This is the balance we must make,” Hunt said.

WASHINGTON
Bayer Corp. last week agreed to pay $14 million to the U.S. federal government and 45 states to settle charges that the pharmaceutical firm caused doctors and hospitals to submit inflated bills to Medicaid by falsely raising the figures it reported as the average price of the drugs.

The Justice Department accused Bayer of actually selling the drugs at steep discounts to doctors and other healthcare providers, according to the New York Times.

Bayer lawyer Dr. Paul Kalb admitted that there was a disparity between the stated average price — on which Medicaid reimbursement was based — and the real price.

Kalb, quoted by the Reuters news agency, described the process this way: “A manufacturer sells a drug to a customer for 30 cents a dose, but sets the average wholesale price at $1 a dose. Medicaid reimburses the doctor or hospital $1 a dose. Medicaid thus pays $1 for a product that the healthcare provider bought for 30 cents.”

But Kalb denied that the firm was guilty of any fraud, claiming that the government knew about the pricing arrangement and that a fraudulent act would require “evil intent.”

Bayer Corp., the U.S. branch of German pharmaceutical giant Bayer AG, said in a statement that the firm agreed to the settlement to end a “real social problem” — the overbilling of Medicaid — but said it still “believes its actions were lawful.”

Bayer’s action is the first settlement in a three-year investigation into alleged wrongdoing by more than 20 pharmaceutical firms targeted by a 1995 whistleblower suit, the Associated Press reported.

In a separate arrangement, Bayer also entered into a “corporate integrity agreement” that gives the federal government the right to monitor the company’s behavior for the next five years.

NEW YORK
American Home Products (AHP) last week said it now expects to pay out $7.5 billion — nearly $4 billion more than expected — to settle lawsuits related to the drug-maker’s diet-cocktail combination known as “fen-phen,” which has been implicated in many cases of heart and lung disease.

After recalling the diet drugs in 1997, AHP has been hit with a number of high-profile lawsuits charging the company’s diet cocktail with causing coronary and respiratory damage in as many as 50,000 former users.

AHP has settled nearly 80 percent of the lawsuits filed by former fen-phen users, though several suits remain pending by those who opted out of a $4.83 billion national settlement last year, according to a report from the Reuters news agency.

Special to Newsline from Canadian correspondent Errol P. Mendes

OTTAWA
The Ottawa Citizen is reporting that Canadian experts are warning that consumers of common vaccines, medicines, and cosmetics that are made with bovine-sourced ingredients may be exposing themselves to contracting the human variant of so-called “mad cow disease,” technically known as vCJD (variant CreutzfeldtJakob).

The Citizen is reporting that professor Tim Sly, a public health expert at Ryerson University in Toronto, is asserting that there is no such thing as a zero risk, pointing out that some 400 common health and consumer products contain some kind of bovine byproducts.

Canada has banned beef imports from European countries for over a decade, imposed bans on blood from high-risk donors, and prohibits drug manufacturers from using bovine byproducts from a country where there is mad cow disease.

The Citizen reports that there are vaccines still in use that were made before the policy was put in place and that cosmetics with bovine ingredients are not regulated. The same newspaper is also reporting that Health Canada has no policy in the works to insist on labeling, although it has been discussed.

A spokesperson for the Government of Canada Department, Erin Morin, claimed the risk was entirely theoretical.

But Professor Sly recommends the labeling so that consumers can make informed choices, adding that governments should err on the side of caution rather than wait for someone to fall sick and prove them wrong.

Another Canadian expert, Dr. John Last, an epidemiologist at the University of Ottawa, is also recommending extreme caution and, according to the Citizen report, is predicting that increasing public pressure in Canada and abroad will likely force governments to be more vigilant.

SEATTLE
Microsoft Corp. and Sun Microsystems Inc. last week called a halt to a four-year-long bitter feud over Microsoft’s alleged misuse of Sun’s Java technology, inking a deal that curtails Microsoft’s right to incorporate Java in its future products.

The settlement bars Microsoft from using newer versions of Java in its popular Internet Explorer and Office applications, bars Microsoft from using any Java programming beginning in 2008, and requires Microsoft to pay $20 million to Sun.

The dispute centered on Sun Microsystem’s Internet-based Java technology, which was designed to function on any computer regardless of its underlying operating system.

Sun filed suit against Microsoft in 1997, charging the tech giant with subverting its Java license — as well as Java’s intended universality — by creating a version that functioned only on machines running Microsoft’s Windows platform, the New York Times reported.

Microsoft claimed its licensing deal gave it the right to custom-tailor Java to its Windows platform.

Sun and Microsoft have become bitter enemies since the suit was filed, with Sun CEO Scott McNealy pushing for and loudly applauding the government’s decision to break up Microsoft last year.

Sun executive Rich Green said the dispute was characteristic of Microsoft’s strong-arm approach to dealing with competitors. “By taking the direction it has,” Green told the Associated Press, “Microsoft is choosing to challenge rather than partner with the participants in the Web services community.”

Both firms were quick to characterize last week’s settlement as a victory, according to the Times report.

Microsoft downplayed the significance of the settlement by noting that it has been developing C#, pronounced “C-sharp,” a rival technology to Sun’s Java.

Some analysts have suggested that the settlement may prove to be a Pyrrhic victory for Sun Microsystems. By barring Java from Microsoft products, Sun is essentially removing its technology from the vast majority of computers — a potentially self-defeating move, according to a report in the San Jose Mercury News.

WASHINGTON
Shell Oil Co. agreed last week to pay $110 million to the U.S. government to settle charges that the company underpaid royalty fees owed for oil taken from federal lands over an eight-year period.

Shell and 16 other oil companies were sued in 1996 by two whistleblowers, who alleged the firms deliberately bilked the government by undervaluing the oil taken from federal lands in 21 states, the Reuters news agency reported.

According to the whistleblowers’ suit, the oil companies filed as many as 500,000 false claims reporting deflated profits by pricing the oil according to internal industry figures, not fair market value.

The federal government, which leases land to oil firms for drilling and extraction, joined the suit last year, accusing Shell of filing false claims from 1980 through 1988, according to the Associated Press.

The case is scheduled to go to court in March — a prospect that has prompted more than $392 million in settlements from 11 other oil firms, including BP Amoco, Chevron, Conoco, ExxonMobil, Sunoco, and Texaco.

Charges against five other firms remain outstanding.

ST. LOUIS
Missouri-based Aurora Foods Inc. last week entered into a $26 million preliminary agreement with shareholders to settle a suit accusing the company’s former management of accounting improprieties.

Aurora has pledged to pay $26 million in cash and $10 million in common stock to resolve charges that four former executives misstated the company’s 1998 and 1999 earnings.

The executives, who resigned in April 2000 and were indicted on criminal charges last week, will return $10 million in stock holdings to repay shareholders for the alleged wrongdoing, according to the Associated Press. The $26 million cash portion will be funded by insurance.

Aurora Foods, which relocated to St. Louis shortly after the finance scandal, is the parent company of many popular food brands, including Aunt Jemima, Duncan Hines, Lender’s Bagels, Log Cabin, and Mrs. Paul’s and Van de Kamp’s fish products.

MIAMI
Two former Soviet republics, Tajikistan and Kyrgyzstan, last week became the latest in a series of foreign countries to sue Big Tobacco, accusing U.S. firms of aggressively marketing cigarettes to poor populations, escalating both illness rates and healthcare costs.

“We believe the tobacco cartel intentionally targeted these developing nations, where most of the citizens are poor, undereducated, and unaware of the dangers of nicotine addiction,” plaintiffs’ attorney Sonny Holtzman told the Associated Press.

Tajikistan and Kyrgyzstan filed their suit in Miami, where Big Tobacco was hit with a $145 billion verdict in favor of Florida smokers last year. Brazil, Guatemala, and Russia have also filed similar suits, which are being consolidated and moved to Washington, D.C., according to the AP report.

The new lawsuit seeks hundreds of millions of dollars in damages as compensation for treating smoking-related illnesses in the two Central Asian nations, reported the AP.

Defendants named in the suit include Philip Morris, R.J. Reynolds, Brown & Williamson, Lorillard Tobacco, and Vector Group (formerly Liggett Group).

CINCINNATI
Chiquita Brands International last week filed a $525 million lawsuit against the European Commission, accusing the agency of failing to open the European banana market to fair competition.

According to Chiquita, the company has suffered as much as $1.5 billion in extra expenses and lost sales due to EC policies that allegedly give preferential treatment to banana importers from former European colonies in Africa and the Caribbean, and thus discriminate against the U.S.-based firm, which harvests much of its crop from Latin America.

Chiquita and other non-European produce firms claim the European Union has failed to fix the disparity as mandated by the World Trade Organization (WTO) in 1997, according to the Associated Press.

The European Commission insists it has rectified the wrongs found by the WTO by adjusting its banana-import rules in 1999. But Chiquita charges that a subsequent WTO review of the new policies found that the new rules simply further codified the discriminatory treatment.

The EC has criticized Chiquita’s suit as unfounded and possibly related to the company’s current financial crisis, which may include a declaration of bankruptcy, noted the AP report.

Chiquita head Steven Warshaw admits there is a link, pointing to the steep financial toll the company has faced due to eight years of alleged European discrimination.

The United States, angry over the alleged trade improprieties, has authorized $191 million in retaliatory sanctions against the European Union for its banana-import policies.

From the Gallup News Service:

“Overall investor optimism rebounded slightly this month … but the increase was all due to more positive feelings about government policies that affect the investment climate, rather than to increased optimism about the economy itself. According to this month’s PaineWebber/Gallup Index of Investor Optimism, sentiments about the economy remained at 24, the lowest score on this dimension since the Index was established in October 1996….

“Decline in Economic Rating Found Primarily in Investors’ Perceptions of Economic Growth, Unemployment, and the Stock Market

“The economic rating was at 41 in November, and then declined to 24 in December, where it stayed this month. Five questions constitute the economic dimension — optimism ratings on economic growth, unemployment, performance of the stock market, inflation, and interest rates. Four of these show significant declines in optimism from November of last year to the last two readings in December and January. The three areas showing the largest declines in optimism are investors’ feelings about economic growth, the unemployment rate, and performance of the stock market….

“Optimism about interest rates is the one economic measure showing an increase….”

“What men want is not talent, it is purpose; in other words, not the power to achieve, but will to labor. I believe that labor judiciously and continuously applied becomes genius.”

– Edward Bulwer-Lytton (British statesman and poet, 1831-1891)

LONDON
Doctors get licensed. Accountants get certified. Universities get accredited. But what about corporations? Shouldn’t there be standards for business as well — and a badge to go with them?

GoodCorporation.com thinks so, particularly in the realm of ethics and social responsibility. So with the backing of private financiers in the United States and the United Kingdom, and with an impressive list of Britain’s great and good on its advisory panel, this new London-based Internet firm is readying itself for a launch next month.

The first-year goal: Sign up 1,000 small- to medium-sized companies largely engaged in business-to-business and business-to-government dealings. Member firms must agree to a 21-point charter that covers employees (e.g., “We do not employ underage staff”), suppliers (e.g., “We have a policy not to offer, pay, or accept bribes or substantial favors”), community (e.g., “We endeavor to protect and preserve the environment where we operate”), and other areas. More important, members must pass a certification process that requires evidence of compliance in these areas, and must agree to an audit each year. In return, members get to use the GoodCorporation’s hand-shaped logo as a badge of social responsibility.

It’s a fascinating idea from at least three perspectives. First, it’s a sign of the times. “Social responsibility is shooting up the agenda” in the corporate world, said GoodCorporation cofounder Leo Martin over a morning coffee here last week. He and his colleague, Vicky Pryce, both left high-flying jobs at the professional service firm KPMG to launch the startup — suggesting that they must be seeing some encouraging handwriting on the corporate wall.

Second, it’s targeting an underserved sector. Small firms, especially family-run ventures, are among the most interested in ethics. But they often lack the resources to develop social responsibility strategies, and then to turn these into market advantage and shareholder value. This startup, says Martin, can bring a firm of up to 5,000 employees on board for $3,000 to $15,000 a year.

Third, it’s a bold move into the tricky field of ethical assessment. We’ve long needed a tool that, like a cop’s radar gun, targets a corporation and registers any breach of ethical speed limits. GoodCorporation is no such gun. It’s more like a seal on the windshield that says, “I don’t speed” — not credible as a statement of fact, perhaps, but laudable as an assertion of intention.

Can this logo work? Yes, with two caveats. One is that the accreditation will be finally validated only when GoodCorporation finds it must decertify a member for violations of the charter. Will it have the courage to do so? Or will it allow the logo to be progressively devalued? How well will GoodCorporation’s verification panel stand up against a coven of corporate lawyers who threaten to sue if their firm’s certification if pulled?

The other caveat is related. Unlike most professional accreditation bodies, GoodCorporation is a for-profit venture. When, after due consideration, it finds that a controversial member does not warrant having its logo yanked, will a skeptical public be convinced? Or will the opinion circulate that GoodCorporation won’t bite the hand that feeds it? Nonprofit accreditation bodies generally operate by having “us” — whoever we are — accredit our peers. Despite GoodCorporation’s august advisory body, this is a different structure — a kind of ethics police with a profit motive.

To be fair, GoodCorporation is aware of these tightropes. If it can walk them, the game is definitely worth the candle. “There’s an awakening in the corporate world that these issues matter,” says Ken Rushton, director of the Institute of Business Ethics, which is developing the charter for GoodCorporation. Rushton sees this kind of certification as “a natural part of reputation-building.”

And so it is. There’s growing evidence that the public cares not only about the reputation of a brand but of the suppliers to that brand — especially among clothing manufacturers tempted to buy from third-world sweatshops where ethics plays no role. If GoodCorporation can persuade suppliers to thirst after the right to use their logo — and purchasers to demand to see the logo before buying — the cause of socially responsible business will be substantially advanced.

(c)2001 by Rushworth M. Kidder

How far must an employer go to protect workers from on-the-job injury? Regulations signed into law by outgoing President Clinton and slated to take effect later this year significantly expand the responsibilities of employers to protect workers from physical injury and stress-related illnesses. But the new Bush administration promises a thorough review of those regulations, which have been hotly opposed by many business groups.

Our lead story this week summarizes and links you to reports about a new study reaffirming the need for such ergonomic protections, as well as criticism of that study and renewed opposition to the pending regulations.

We follow with four stories related to ethics in high tech: a court decision that the Internet auction firm eBay cannot be held responsible for the sale of fraudulent sports memorabilia, a continued crackdown on inappropriate Internet use in British workplaces, a survey showing Canadian consumers would be more likely to purchase items over the Internet if they were guaranteed better privacy, and a report on a pay gap for men and women in high-tech fields.

Next, an item about ethics in the communication industries, as we report on a settlement in a suit lodged against WorldCom Inc. for alleged overbilling.

From the environmental ethics file comes a report about a new U.S. Department of Justice suit against a magnesium firm that the government charges is polluting the Great Salt Lake.

And we conclude this week’s report with a fair-trade story about allegations that Portugal’s major breweries are cornering the beer market in that nation.

Have a productive, ethical week.

– Carl Hausman

WASHINGTON
Up to one million injuries each year are caused by poor workplace design and on-the-job stress, ultimately costing the United States billions of dollars in healthcare expenses and lost productivity, National Academy of Sciences researchers warned last week.

That conclusion was part of a two-year study commissioned by Congress to evaluate the need for hotly contested ergonomics rules signed into law last November by President Clinton.

The U.S. government argues that employers should refit factory floors and computer cubicles to better suit the human body, eliminating injuries that plague an estimated one million workers annually.

President Clinton bypassed a divided Congress last fall to sign a set of regulatory guidelines requiring such adjustments. Clinton’s move earned the ire of business groups across the country, which argue that such requirements are unnecessary and expensive.

The National Academy of Sciences, an independent body that often advises the government, fueled the debate last week by releasing its two-year evaluation of workplace injuries.

The NAS report concludes that poor workplace design does indeed cause a number of musculoskeletal injuries, including back, wrist, and neck pain, the Reuters news agency reported.

“Each year, these disorders affect about one million workers and cost the nation between $45 billion and $54 billion in compensation expenditures, lost wages, and decreased productivity,” the report states.

But Jeremiah A. Barondess, president of the New York Academy of Medicine and chairman of the panel that authored the report, noted that “the connection between the workplace and these disorders is complex, partly because of the individual characteristics of the workers, such as age, gender, and lifestyle.”

Business groups, including the U.S. Chamber of Commerce and the National Association of Manufacturers, have seized upon such qualifying statements in an attempt to shore up opposition to last November’s ergonomics rules, which they want President Bush to overturn.

The newly released study indicates that while workers’ physical surroundings are a critical factor in avoiding injury, the overall workplace environment — relations with coworkers, stress, job satisfaction — also play a role, according to the Reuters report.

SAN JOSE, California
Internet auction company eBay was absolved last week of any responsibility for the sale of fake sports memorabilia over the company’s popular Web site.

A California judge ruled that eBay could not be held liable for damages claimed by a group of buyers who say they lost at least $10 million by buying baseball bats, trading cards, and jerseys with forged autographs of professional athletes.

The buyers had sued eBay for $100 million, claiming that the site — like traditional auction houses Christie’s and Sotheby’s — bore responsibility for determining the veracity of claims made about auctioned items.

eBay argued that such rules were not applicable to the Web venture, which relies on sellers to categorize their products honestly.

Last week, California Superior Court Judge Linda B. Quinn sided with eBay, dismissing the plaintiffs’ $100 million class-action lawsuit.

Judge Quinn said in her ruling that the choice of category under which to list the item is a decision left to the item seller, and not a formal description or implied promise of authenticity from eBay, according to a report from the Associated Press.

Plaintiffs’ lawyer James Krause vowed to appeal, warning that sooner or later eBay and other online auction sites must be held to similar standards as traditional auction outlets.

“As more and more people get ripped off, eventually they’re going to have play by the same rules everyone else has to,” Krause told CNET News.com. “Right now, we haven’t gotten to that … stage of thinking,” he said.

LONDON
The British division of Ford Motor Co. last week suspended three employees for allegedly surfing the Internet for pornography during work hours — the latest in a series of U.K. crackdowns on workers’ Web misuse.

The suspensions are “expected to last for a number of weeks” while Ford investigates the “unauthorized use of the computer system,” a spokesman told the BBC.

Ford managers reportedly became suspicious of the employees’ Web use last December, saying that one worker allegedly spent up to four hours per shift accessing the illicit material.

The Ford suspensions are the latest in a series of crackdowns by U.K. employers concerned about their employees’ misuse of the Internet and email. Earlier this month, U.K. insurer Royal and Sun Alliance fired or suspended 87 workers for allegedly circulating sexually explicit emails.

Widespread concern over how to balance trust in employees with corporate liability for email and Web abuse may be severely impacting the rate of Internet use by British workers, warned a report from the Guardian last week.

According to a survey from KPMG, one-third of British businesses do not provide their nonmanagement workers with Internet access — limits imposed partly due to concern over Web misuse.

“Increases in regulation have created uncertainty about how to manage employee use of the Internet and email,” KPMG’s Steven Levinson explained to the Guardian.

The survey noted that 20 percent of British businesses, recently empowered with greater rights to examine workers’ electronic communications, now monitor employees’ Internet use without telling them.