“It’s always an integrity issue of some kind.”

That’s how Jeffrey Emmelt put it when Business Week asked him, “What keeps you up at night?”

Having just succeeded Jack Welch as CEO at General Electric, Mr. Emmelt explained that “with 300,000 people, you always worry that somebody doesn’t get it. We can survive bad markets. What you can’t live through is anybody who takes from the company or does something wrong in the community.”

In a pre-Enron age, would he have elevated integrity to top billing? Maybe so, maybe not. Whatever the case, his remarks set a lot of corporate heads nodding in agreement.

They’ve also been nodding at The Kiplinger Letter, a weekly four-pager on business trends. “Business ethics will get a lift from the Enron mess,” the editors predicted in their February 22 edition, foreseeing that “more companies will examine their own procedures and corporate cultures to see if they unwittingly abet or tolerate corner cutting and deceit…. Look for a surge in formal ethics policies, training programs, compliance procedures, and discussion among senior executives and boards.”

If they’re right, we’re entering the Third Age of modern American business ethics. The first began in the defense industry in the 1980s, when reports of military contracts for $500 toilet seats prompted the Procurement Integrity Act of 1988. The second took shape in 1992, after the Federal Sentencing Guidelines promised softer punishments for errant corporations that already had ethics programs in place.

Between those milestones, ethics initiatives ebbed somewhat — as they have again in the latter years of the cash-drenched 1990s. But in this Third Age, business ethics is back on the public radar — due not only to Enron but also to a post-9/11 renewal of introspection. Yet as the Kiplinger editors point out, the erosion in ethics is “much wider than just business.” The challenge for all of society, they observe, lies in “de-emphasizing winning at any cost and elevating fair play, honesty, and compassion for others.”

And that raises an interesting question. As new young recruits enter the corporate fold, what will be their mind-set? Will it be the materialism of “winning at any cost,” or the ethics of “fair play, honesty, and compassion”?

One answer comes from the American Council on Education, which through the Higher Education Research Institute at UCLA has surveyed U. S. college freshmen every two years since 1968. It includes a pair of questions that provide astonishing mirror-image answers. In one, the numbers of freshmen who thought it was “essential” or “very important” to be “very well-off financially” rose almost steadily from 41 percent (1968) to 73 percent (2000, the most recent data available). In the other, “developing a meaningful philosophy of life” fell steadily in importance, from 83 percent to 42 percent in that same period.

That’s troubling. Ethics, after all, is about a “philosophy of life.” If fewer than half of tomorrow’s business leaders show up at the corporate door without some philosophical impulse, what’s to counter the seduction of materialism as they rise through the ranks?

Yet there are hopeful signs. Anecdotal evidence since September 11 suggests a significant adjustment of campus attitudes. Students appear to be volunteering more, taking a broader interest in social and international issues, becoming more patriotic. Will that translate into stronger commitments to moral and metaphysical issues? Will this, in fact, be the generation of leaders that implements ethics across the board?

Next fall’s freshmen may have interesting news about this Third Age and their role in it.

(c)2002 by the Institute for Global Ethics

“This vote could be so close that only a few votes could determine whether the merger is approved or not. I control more than 1,000 shares. That could easily determine which way the vote goes. I am hereby selling my proxy votes to the highest bidder.”

WASHINGTON
The Bush administration last week proposed a series of get-tough measures meant to reduce the chances of another Enron-like meltdown, warning the nation’s CEOs that higher ethics and transparency will be required of them.

President Bush proposed a 10-step reform plan last week, saying that unless corporate heads and auditing firms improve their ethical conduct, the U.S. public will lose faith and firms will lose money, reported the Associated Press.

“The whole design of free-market capitalism depends upon free people acting responsibly,” Bush said last week. “Business people must answer not just to the demands of the markets or self-interest, but to the demands of conscience.”

Last week, Bush said the government would meet those demands with a plan that includes harsher punishments for CEOs who defraud investors, and tougher restrictions on auditing firms that moonlight as consultants to the same firms they are supposed to monitor.

The new plan also includes the creation of an independent regulatory commission to oversee auditing reforms, and a new rule requiring CEOs to disclose stock sales or purchases within two days instead of the current year or more.

The plan, which comes after persistent questioning of Bush’s cozy relationship with former Enron head Kenneth Lay, puts the administration on the offensive for a change, reported the Washington Post.

It’s a change Bush embraced last week, reminding corporate leaders that “a good business always respects the boundaries of right and wrong.”

Special to Newsline from Canadian correspondent Errol P. Mendes

TORONTO
In another example of large institutional shareholders in Canada and the United States demanding better corporate governance practices, one of Canada’s largest pension funds, the Ontario Teachers Pension Plan Board, is demanding that Canadian corporations clean up some of their corporate governance practices.

In the wake of the Enron debacle, Claude Lamoureux, CEO of the Teachers Pension Board, called for investors to “strike back.” At a speech in Toronto, he unveiled an 11-step plan to clean up corporate governance in Canada.

Among them are suggestions that large institutional investors disclose how they vote their shares in public companies, keep managers out of regular board meetings, and prevent audit firms from also providing consulting services to the same client.

Mr. Lamoureux condemned the fact that only 40 percent of the companies listed on the Toronto Stock Exchange (TSE) report whether they are in compliance with voluntary guidelines on corporate governance issued by the TSE.

PHOENIX, Arizona
Embattled accounting firm Arthur Andersen LLP last week agreed to pay $217 million to settle charges that its Arizona office ignored fraud when signing off on the accounts of a religious foundation that went bankrupt.

Andersen was accused of abetting fraud in the case of the Baptist Foundation of Arizona (BFA), which collapsed in 1999 after extensive fraud by its senior managers was uncovered, according to the Associated Press. The BFA failure is the largest nonprofit bankruptcy in U.S. history.

Investors sued both Andersen and the BFA managers, arguing that the former helped cover up the fraudulent bookkeeping of the latter, causing 13,000 mostly elderly investors to lose about $570 million.

Andersen last week said it would settle the charges without admitting or denying any wrongdoing. The settlement strips two local Andersen executives of their Arizona accounting licenses, and requires two years of independent monitoring at Andersen’s expense.

Three former BFA officials already have pleaded guilty to fraud, and five others are awaiting trial, according to the AP report.

Arizona Attorney General Janet Napolitano said Andersen’s likely liability in the Enron debacle — as well as the accounting firm’s possible bankruptcy — made local regulators push hard for last week’s settlement.

“We wanted to get money for our Arizona investors now,” Napolitano told the Arizona Daily Star.

Enron litigants are currently considering a preemptive $750 million settlement offer made by Andersen last week.

But USA Today last week warned that the offer failed to signal significant change on the part of Andersen. The paper notes that Andersen has paid more than $512 million in similar settlements since 1998 — all the while fighting increased regulatory oversight by the U.S. government.

LONDON
Energy giant BP (formerly British Petroleum) announced last week that it would no longer make donations to political groups anywhere in the world, saying the political process was too important to be tainted by corporate influence.

BP chief executive Lord John Browne made the announcement last week, promising that his company “will make no political contributions from corporate funds anywhere in the world,” reported the New York Times.

Corporations “must be particularly careful about the political process, not because it is unimportant — quite the reverse — but because the legitimacy of that process is crucial both for society and for us as a company working in that society,” BP’s John Browne said last week.

“We’ll engage in the policy debate, stating our views and encouraging the development of ideas, but we won’t fund any political activity or any political party,” Browne added.

BP donated roughly $1 million to U.S. political parties last year, and $2 million during the 2000 election cycle, noted the Times.

BP’s announcement follows weeks of intense international media scrutiny over the ties between the Bush administration and its largest donor, the now-collapsed Enron Corp.

Allegations of undue corporate influence are also dominating headlines in England, where Prime Minister Tony Blair last week denied reports that he awarded a lucrative steel contract to a donor, according to the Associated Press.

LONDON
In other news involving British energy firm BP, the firm last week defended its decision to increase the transparency of its international operations, fending off criticism from an Angola firm angry over BP’s release of contract data.

BP has led the way in many corporate social responsibility initiatives, including an agreement to provide details about the company’s contracts and payments in developing countries, according to the BBC.

In Angola, that improved transparency has drawn fire from Angola’s state-owned oil group Sonangol, which is angry over BP’s reporting of $111 million paid as part of a lucrative oil contract in Angola.

Sonangol, owned by the Angola government, which is currently being scrutinized amid the disappearance of more than $1 billion in funds from the International Monetary Fund, said it was reserving the “right to take appropriate action” against BP, according to the BBC.

Despite the attack by Sonogol, BP insisted that openness is the best policy — and one to which it will continue to adhere. “We are still planning to stick to our plans to give data wherever we operate,” a spokesman told the BBC.

WASHINGTON
The Bush administration is undermining efforts to clean up the nation’s air by taking the teeth out of antipollution provisions, according to charges leveled in a resignation letter by a top Environmental Protection Agency (EPA) official.

Eric Schaeffer, a lifelong civil servant and 12-year veteran of the EPA, quit his job last week, accusing the Bush administration of weakening his ability to enforce pollution controls at the nation’s power plants.

Schaeffer’s chief criticism centers on Clinton-era rules known as New Source Review (NSR), which require older coal-fired power plants to update their antipollution measures when undergoing significant redesign or renovation.

Power companies complained that the NSR program is too costly, and convinced President Bush to table them for review when he took office. That review, which was supposed to last for 90 days, has now lasted nine months, reported the Associated Press.

While Clinton was in office, the EPA filed nine suits against polluting power producers, hoping to force them and others to obey the NSR. Two suits were settled, and two more were on the verge of being settled when Bush took office, suspending the rules.

“Today, we seem about to snatch defeat from the jaws of victory,” Schaeffer wrote last week. Polluting companies are “hedging their bets” that Bush will weaken the rules, he wrote, and now “companies with whom we were close to settlement have walked away from the table.”

“We are … fighting a White House that seems determined to weaken the rules we are trying to enforce,” Schaeffer continued. “This is the kind of thing you can’t say when you’re in government, and it is something I really feel needs to be said.”

EPA spokesman Joe Martyak disputed Schaeffer’s assertion that the fight over NSR review was part of a widening rift between staffers at the EPA and those at the Energy Department and White House, who have been accused of giving power companies excessive input when formulating the nation’s energy policy.

Schaeffer’s accusations prompted Sen. Joe Lieberman (D-Conn.), head of the Governmental Affairs Committee, to convene hearings into the Bush administration’s environmental record, saying Schaeffer’s resignation was “a disheartening development.”

Schaeffer’s concerns over weakened air pollution enforcement coincided with a new report warning that air pollution is causing accelerated cancer rates in U.S. cities, reported the AP.

The study, published last week in the Journal of the American Medical Association, found that air pollutants are causing lung cancer rates equivalent to those faced by nonsmokers living with smokers. The biggest causes of such pollutants are the target of the NSR: coal-burning power plants in the Midwest and East, according the AP.

WASHINGTON
The U.S. State Department last week released its annual report on human rights violations around the world, accusing a wide range of nations, including China, Russia, and Saudi Arabia, of torture and abuse.

The report, covering 190 nations, warned that human rights conditions worsened during 2001 in China, Iran, Iraq, North Korea, and Sudan, calling them countries of “particular concern.”

Alleged violations include torture in Russia, Saudi Arabia, and Turkey, prolonged detention without trial in Uzbekistan, and rape and murder by police in Pakistan, reported the Los Angeles Times.

Uzbekistan and China were also cited for allegedly using the current war on terrorism as a cover for cracking down on dissidents seeking religious and civil reforms, a charge vehemently rejected by China.

“This report is full of fabrications,” China’s Foreign Ministry spokesman Kong Quan blasted last week. “It confuses right and wrong and attacks China’s legal system, ethnic policies, and human rights conditions.”

Disputing that assessment, human rights groups criticized the report for not going far enough, for going soft on U.S. allies in the war on terrorism, and for being more bark than bite.

“The administration is candid and accurate in pointing out the problems, but it’s still doing virtually nothing to address them,” Thomas Malinowski of Human Rights Watch told the Times.

“Its argument that human rights still matters is not reflected in the alliance that the United States is forging, the money it’s spending, or the military bases it’s building overseas,” Malinowski said.

U.S. Rep. Tom Lantos (D-Calif.), co-chairman of the Congressional Human Rights Caucus, affirmed the government’s need to back the report with credible diplomatic steps.

“We must redouble our efforts to promote democracy and human rights not only in Afghanistan, but also in critical states such as Sudan, Saudi Arabia, Syria, and China, where this report makes clear human rights abuses persist.”

Despite the litany of abuses chronicled in the report, not all of the news was bad. Afghanistan, Bahrain, Oman, Peru, and Qatar were praised for taking steps toward greater democracy and human rights.

JAKARTA
Sportswear superpowers Nike and Adidas have made some progress but are still mistreating workers in their Asian factories, where full-time wages remain as low as $2 a day, according to a report released last week by international rights watchdog Oxfam.

The report is a six-month update on the group’s September 2000 study, which chronicled high levels of abuse, mistreatment, and union suppression at Nike and Adidas factories overseas.

The companies have made progress, report author Timothy Connor told Reuters. “There have been improvements in terms of a reduction in sexual harassment, the availability of sick leave, and a reduction in the level of humiliation against workers.”

But the changes “still fall well short of pulling workers out of poverty or providing them with safe conditions or protecting their rights to have unions,” Connor said.

According to Connor’s study, workers suffer injuries on cutting machines, inhale toxic fumes without protection, and continue to fear being fired or physically assaulted if they unionize, the BBC reported.

Nike and Adidas say they are working to improve conditions at the Asian factories, most of which are operated by Taiwanese or Korean subcontractors, according to the Reuters report.

With help from Sim Khera, researcher for the Institute for Global Ethics UK Trust in London

GLASGOW
In the coming weeks, Scottish schoolchildren will be tackling the deeply embedded issue of religious strife that goes back generations in the city of Glasgow, using a new video documenting young people’s struggles with sectarianism.

The video is part of a citywide program launched by Glasgow officials, who say the best way of ending the area’s religious discrimination is by educating young people about one another and the effects of hatred, reported the BBC.

The new video, featuring the stories of young people affected by religious bigotry and violence, will be distributed to every primary and secondary school in the city — part of an activity pack created by the Glasgow City Council.

“We are very serious about challenging sectarianism in Glasgow and this is an important weapon in terms of our overall strategy for doing that,” Archie Graham, the city council’s anti-sectarianism spokesman, told the BBC.

The new video follows last year’s launch of the Sense Over Sectarianism campaign, which encourages grassroots efforts aimed at ending religious persecution and discrimination in Scotland, where hatred and bigotry between Catholics and Protestants frequently erupts into violence.

From NOP:

“The United Kingdom’s first national email ethics survey has revealed that 53 percent of white-collar employees from the U.K.’s largest cities behave ‘e-morally’ on email while at work. From widespread political use of email to ‘back stab’ colleagues in the quest to further their own careers, to sending racist, sexist, pornographic, or discriminatory emails — today’s results uncover the serious problems endemic within the U.K.’s email culture.

“SurfControl, [which manages] email and Internet content in the workplace, commissioned the NOP survey to determine exactly how 100 white-collar workers from each of the UK’s largest cities (London, Edinburgh, Cardiff, Birmingham, Manchester, Leeds, Liverpool, and Newcastle) really use email when left to their own devices.

“…SurfControl’s survey reveals that 38 percent of U.K. white-collar employees use email in the pursuit of political gain within their company. With recent publicity surrounding the political use of email within the government, the country’s employees appear to be following suit — using email as an easy way of highlighting a colleague’s mistake in front of other recipients. By simply hitting ‘reply all,’ ‘forward,’ or using the ‘CC’ and ‘BCC’ buttons strategically, SurfControl’s survey suggests that the U.K.’s employees view email as a tool to further their own careers at the expense of others….

“…The figures are further compounded by the fact that a third of white-collar employees prefer to hide behind email rather than deal with a sensitive situation face-to-face or over the telephone. Furthermore, 80 percent believe that email provides them with a ’sense of protection’ because everything is written and documented — both of these figures clearly illustrating U.K. workers’ defensive mind-set.

“Of major concern, SurfControl’s research indicates that nearly 30 percent of the U.K.’s white-collar workforce admits to sending racist, sexist, pornographic, or discriminatory emails while at work. Aside from risking losing their own jobs, over one in four businesses in the U.K.’s eight largest cities could face legal action taken against them if found to be liable for an employee’s email that has caused serious offense to another individual….”

“It is not what he has, or even what he does which expresses the worth of a man, but what he is.”

– Henri Frédéric Amiel (Swiss philosopher, 1821-1881)