Ethics Newsline®

Business ethics. Several years ago, during the dot-com bubble, it was fashionably dismissed as an oxymoron. Then came 9/11, the corporate accounting scandals, Wall Street’s conflict-of-interest debacles, the Sarbanes-Oxley Act, a tougher Securities and Exchange Commission, and the economic downturn. Suddenly, to judge by the press coverage, business ethics is in ascendancy.

Is this a fad or does it reflect a deeper current of cultural change?

Cautiously, and I hope not naively, I’d vote for the latter. For evidence, look at the growing interest in ethics among faculty and students at business schools. These are the places that produce corporate leaders thirty years hence. What these students think, then, may be a useful gauge of the moral barometer in 2033. And judging from several recent reports, the evidence is generally encouraging:

• When MBA students were surveyed by the Graduate Management Admission Council (GMAC) about the effects of corporate scandals on their own job searches, 64 percent said they would be “more likely to accept a job offer from a reputable company versus one under investigation.” While that answer alone may simply reflect self-preservation, these students also observed that they would now “think more critically about the ethical culture of prospective employers” (50 percent) and be “more likely to ask questions about company values in job interviews” (39 percent) — with women agreeing to these latter two propositions more strongly than men.
• Nevertheless, students from a dozen leading U.S. business schools, polled by the Aspen Institute, said that meeting customers’ needs is now the top priority of a company, while maximizing shareholder value comes second — an exact reversal of the priorities found in the Aspen Institute’s 2001 study. This year’s survey also found that about three in four respondents agreed that it is “very important” that a well-run company be managed “according to its values and a strong code of ethics” — with women (82 percent) again feeling more strongly than men (72 percent) on this point.

True, the evidence is mixed: A survey of MBA students from 10 top-tier business schools by the Fuqua School of Business at Duke University found that while only six percent of students in 2000 expressed willingness to work for a tobacco company, 42 percent would do so today. And even as students declare the importance of ethics, they think that business schools need to do a better job teaching it. About 20 percent of today’s students, according to both the Aspen and the GMAC survey, think ethics is not being effectively taught. And about half of the students in the Aspen survey agree that the way ethics is taught might actually have contributed to the current corporate scandals.

Not surprisingly, business schools are abuzz with concern about their ethics programs. The Association to Advance Collegiate Schools of Business International, which accredits nearly 450 business schools globally, tightened its standards for accreditation in April to reflect greater interest in what it calls the “ethical understanding and reasoning abilities” of business students. It is now calling for the creation of an ethical environment within the business-school community.

All of that is encouraging. But won’t ethics simply slip back into relative obscurity during the next boom cycle? Four reasons say it won’t. Does anyone doubt that:

1. There will be more transparency as the years go by — more penetrating information about what’s happening in the governance and management of public companies?

2. Customers will have access to a more competitive marketplace offering greater choice, so that they can more easily vote with their dollars against unethical companies?

3. The public will pay increased attention to the social issues impacted by business — as they’re already doing about environmental stewardship, child labor, gender equity, and workplace diversity?

4. The reporting of corporate scandals will be a growth industry in the news media, with increasing focus on executive miscreants?

Only if you can imagine reversing those trends — creating more secrecy, less competition, rising social indifference, and shrinking outrage — can you see a clear way for ethics to shrink to mere faddishness.

That, and something else. There would also have to be a screeching reversal of the regulatory environment — a wholesale dismantling of the rules that get created every time a series of disgraces turns into a national scandal. Businesses, sensing the dangers of such imposed regulation, are awakening to the need for self-regulation. And that, at bottom, is what ethics is widely understood to be: It’s what you are in the dark, when nobody’s looking. As business schools get more serious about teaching that simple idea, look for the corporations that hire their graduates to feel an ethical upsurge. Judging from today’s students, it’s already in the pipeline.

(c)2003 Institute for Global Ethics

“I didn’t expect that. How can you expect to have anyone climb on stage and turn your mike off. Watching it in my own country is heartbreaking.”

– Chris Hedges, a former war correspondent for the New York Times, discussing how angry students at Rockford College (Illinois) reacted to his May 17 commencement speech. Hedges, who criticized the recent U.S.-led war on Iraq, was heckled and had his microphone twice unplugged, before cutting his speech short. (“Democracy, Civility Debated at College,” Rockford Register Star, May 21.)

WASHINGTON
Two major court decisions in the United States last week overturned record-setting damages awards against the automotive and tobacco industries, delivering setbacks to plaintiffs hoping to punish the industries for their behavior.

In Washington, the U.S. Supreme Court set aside a record $290 million punitive award against Ford Motor Co., citing its recent ruling that punitive damages should be proportionate to a case’s compensatory award.

The decision overturns a verdict against Ford following a 1993 rollover accident that killed three members of a California family and injured three others, reported the Los Angeles Times.

A jury in the case found that Ford had failed to ensure that the car — a Bronco — was safe, slapping the automaker with $4.6 million in compensatory damages and $290 million in punitive damages.

Last week, the Supreme Court dismissed that verdict as disproportionate, sending the case back to California’s courts for reconsideration. In a recent case, the Supreme Court recommended a 9-to-1 ratio as an appropriate ratio for punitive-to-compensatory awards.

The court took the same action in a second case against Ford last week, telling Kentucky to reconsider a $15 million punitive damages award given to a man who was crushed when his parked Ford pickup truck slipped into reverse, rolled backward, and crushed him, reported the Reuters news agency.

In Florida, the tobacco industry received a similar reprieve after a federal appellate court threw out a landmark $145 billion verdict on behalf of as many as 700,000 of the state’s smokers.

That 2000 verdict threatened to paralyze the nation’s five biggest cigarette makers, who said the scale of the jury verdict would bankrupt them. Verdicts that would bankrupt businesses are illegal under Florida law.

Last week, the U.S. Third Circuit Court of Appeals agreed, throwing out the verdict. The court said procedural and technical issues also made the precedent-setting verdict untenable.

“The fate of an entire industry, and of close to a million Florida residents, cannot rest upon such a fundamentally unfair proceeding,” a three-judge panel wrote. “Our system of justice requires more.”

That ruling likely will force smokers throughout the nation to seek reparations for smoking-related diseases on an individual basis — an outcome that should spare the industry from the crippling damages that often accompany class-action cases.

“Tobacco couldn’t have wished for a more positive decision,” Merrill Lynch tobacco analyst Martin Feldman told the Associated Press.

WASHINGTON
The U.S. Supreme Court last week handed the states a victory in their quest to reduce prescription drug prices with a 6-to-3 decision that allows a Maine bulk-discount program to take effect after three years of being blocked.

The “Maine Rx” program, which uses the state’s bulk purchasing clout to force drugmakers to offer discounts on prescription medicines sold through the Medicaid program, could save the state’s 325,000 Medicaid recipients up to 25 percent.

The program essentially forces drug companies to provide a discount for Medicaid purchases by requiring them to either substantially discount their products or go through a lengthy process to prove that a particular drug is the only one usable in a given situation.

Medicaid is a joint federal-state program that provides medical benefits to the poor.

The court’s decision opens the way for other states to consider similar legislation, as nearly half are currently doing.

In the current economic climate, in which many states face steep budget deficits, this cost-free approach has great appeal, say advocates. “This is unique among the health-care reforms. It doesn’t cost the state a dime,” Bernie Horn of the Center for Policy Alternatives told the Los Angeles Times.

The court’s decision is not the final word on the program, however.

While the court ruled that the Maine Rx program does not violate either the federal Medicaid statute or the constitutional prohibition against states regulating interstate commerce, last week’s ruling is not the final word on the program. The case has been remanded to federal court in Maine for further proceedings.

The U.S. Department of Health and Human Services also has yet to issue its interpretation of the law, which could have a tremendous impact as well, reported the Associated Press.

“We cannot predict at this preliminary stage the ultimate fate of the Maine Rx Program,” wrote Justice John Paul Stevens.

The Pharmaceutical Research and Manufacturers of America (PhRMA), which brought the suit, challenged the authority of the state to force drugmakers to offer discounts.

The court held, however, that the program’s method of doing so — by requiring doctors to seek “prior authorization” before prescribing to Medicare patients drugs from those companies that refused to offer the discounts — is valid.

Pharmaceutical companies also took issue with the Maine Rx program’s generic policy of covering all of the state’s uninsured, regardless of their income. The justices dismissed this challenge.

The lower federal court will review PhRMA’s claim that forcing drugmakers to offer broad discounts could ultimately hurt the Medicaid program by forcing companies to raise prices paid by the most needy.

NEW YORK
A unit of German drug giant Bayer AG continued to export a dangerous drug that could infect users with HIV even after a safer alternative was being sold in the Unites States and Europe, according to an investigative report from the New York Times last week.

Bayer last week denied any wrongdoing, saying its North Carolina-based Cutter Biological division, “behaved responsibly, ethically, and humanely” in selling the drug in the mid-1980s.

The drug — Factor VIII concentrate — was used by hemophiliacs to prevent and stop bleeding, making it a lifesaver until doctors discovered that it was infecting some users with HIV, the virus that causes AIDS, the Times reported.

The drug, which was made by using a pool of blood plasma from as many as 10,000 donors, some of whom were infected with HIV, was abandoned by U.S. doctors in 1984, forcing Cutter to come up with a heat-treated alternative free of the virus.

The Times reported last week that even after Cutter abandoned its unsafe product for the heat-treated version in U.S. and European sales, it continued exporting the dangerous version to Asia and Latin America.

Altogether, more than 100,000 vials — each approximately one dose — were sold to foreign markets, saving the firm $4 million, according to the Times. Argentina, China, Indonesia, Japan, Malaysia, and Singapore were among the recipients of the outdated drug, the report claims.

Citing internal memos, minutes from marketing meetings, and telexes to international distributors, the Times alleges that Cutter tried to offload much of its possibly tainted product — partly in order to avoid the cost of simply destroying it.

In late 1984, Cutter told a Hong Kong distributor to “use up stocks” of the old medicine before switching to the “safer, better” drug, the Times reported. Even after the Hong Kong patients began testing positive for HIV, Cutter told the distributor that the older drug posed “no severe hazard.”

Cutter continued selling the older, unsafe product for more than a year after the heat-treated version was available, infecting thousands of hemophiliacs with HIV, according to the Times.

The Times reported that the U.S. government contacted Cutter in May 1995 — more than a year after the safer drug had been developed — to complain that the older version was still being sold overseas.

Still, despite their concerns, federal regulators told Cutter that the issue should be “quietly solved without alerting the Congress, the medical community, and the public,” according to Cutter documents cited by the Times.

“These are the most incriminating internal pharmaceutical industry documents I have ever seen,” Dr. Sidney Wolfe, director of the Public Citizen Health Research Group, told the Times.

Bayer last week blamed the continued use of the untreated drug on a shortage of plasma and on foreign countries’ red tape, import delays, and fears that the newer, safer drug would not work. Bayer denies dumping the dangerous drug on poorer nations.

“Decisions made nearly two decades ago were based on the best scientific information of the time and were consistent with the regulations in place,” Bayer insisted in a statement.

Bayer and three other companies have paid roughly $600 million to settle 15 years’ worth of lawsuits filed on behalf of thousands of U.S. hemophiliacs who contracted HIV and AIDS from the firms’ untreated drugs, many of which were sold before an HIV screening test was available.

HARTFORD, Connecticut
Aetna Inc. last week said it would pay $170 million to settle a class-action suit accusing the insurer of pushing the nation’s doctors to limit care in a bid to keep costs down.

The settlement, which must be approved by a federal judge, would allocate $100 million for more than 700,000 plaintiff doctors, $50 million for the doctors’ legal fees, and $20 million for the establishment of a foundation to improve the quality of health care.

If approved, the deal would end Aetna’s involvement in a class-action case that is still pending against most of the nation’s major health insurers, reported the New York Times.

The suit, filed 1999, accuses insurers of shortchanging doctors by cutting payments and interfering with physicians’ recommended treatments in an effort to keep costs low and revenues high.

“The doctors certainly didn’t get everything they wanted, but we think we’ve created a blue print that will make it far easier to communicate with the other health plans,” plaintiffs’ attorney Archie Lamb told the Reuters news agency.

Under the deal, plaintiff doctors will each get a tiny cut of the settlement — roughly $140 apiece, noted Reuters.

“This is not about a big payment by the industry,” Lamb added, but rather about changing the “contentious relationship between managed care companies and doctors.”

Special to Newsline from Canadian correspondent Errol P. Mendes

CALGARY
With Toronto still reeling from the economic blows caused by the SARS crisis, Canada now has to add the threat of mad cow disease to its list of problems.

The discovery of a single cow in northern Alberta infected with bovine spongiform encephalopathhy (BSE), commonly known as mad cow disease, now threatens to deal a deadly blow to Canada’s $7.6 billion beef industry.

The majority of Canadian beef is exported to the United States, which imposed a ban on all Canadian beef imports until further notice. Other countries are following suit.

On the Chicago Mercantile Exchange, beef prices slipped. McDonalds, Wendy’s, and other restaurant chains that are famous for their fast-food beef products saw their share prices plummet as news of the disease spread.

Lost in the onslaught of bad news was the fact that the infected cow was spotted before it entered the food chain, some proof that Canadian precautions to ensure that BSE did not take hold to the extent that it did in Britain were working.

Canadian officials are now quarantining cattle and herds that have any links with the single infected cow and are determined to ensure that Canada is quickly rid of the disease.

After BSE was first discovered in British cattle in 1986, thousands of animals had to be destroyed. Over 100 people eventually died from the human variant of mad cow disease after eating infected beef products.

WASHINGTON
Bankrupt telecommunications firm WorldCom last week agreed to pay a $500 million civil penalty to settle charges that it overstated revenues by up to $11 billion — a record settlement that will be used to reimburse investors burned by the firm’s bogus bookkeeping.

WorldCom initially disclosed $4 billion in accounting irregularities last June, prompting the U.S. Securities and Exchange Commission to file civil fraud charges against the company, reported USA Today.

The firm has upped that figure several times, hitting $9 billion most recently. Many expect the final tally to reach $11 billion.

As the company’s finances crumbled, creditors lined up to get their share of the revenues that remained. Investors, who lost millions of dollars as WorldCom’s share price crashed, joined the queue.

Last week’s deal, which actually calls for a penalty of $1.51 billion, will pay those investors $500 million — only 33 cents on the dollar, due to WorldCom’s bankruptcy protection status, noted the Washington Post.

The deal — “the largest civil penalty ever imposed,” according to the SEC — uses provisions of the new Sarbanes-Oxley law to take settlement funds more directly to cheated investors.

U.S. District Judge Jed Rakoff, who must approve the settlement, last week said he has some concerns that must be met before he will sign off on the deal.

“The court needs to have complete information not only as to whom the settlement will benefit but whom it will not,” as well as how reimbursements will be made, Rakoff said.

Before approving the settlement, Rakoff also wants “to know much more of the details of the defendant’s seemingly massive fraud” and how the firm plans to prevent future abuses, reported the Post.

Critics of the plan contend that the fine amounts to little more than a slap on the wrist, noting that $500 million is equivalent to “about one week of revenue” for WorldCom, reported the Associated Press.

BRUSELLS
European regulators last week hit German firm Deutsche Telekom with a $14.7 million fine after concluding that the company was charging unfair fees to rival firms in a bid to curb competition.

The European Commission accused Deutsche Telecom, a formerly state-owned firm that is now Europe’s largest phone company, of strong-arming competitors, reported the Associated Press.

Regulators say that Deutsche Telecom, after being forced to open up its lines to rivals during deregulation, went on to charge those rivals higher access fees than it charged to the company’s other customers.

Those steeper prices, regulators say, cut into rivals’ profit margins and kept them from offering services at competitive rates. Five years after deregulation began, Deutsche Telecom still holds a 95 percent market share, reported the AP.

“This is clearly harmful to consumers, because competition between operators is the best means to bring overall prices down,” EU antitrust head Mario Monti said in a statement last week.

The EU slapped Deutsche Telekom with a $14.7 million fine and gave the firm two months to correct its pricing structure — an order that perplexes the telecom giant, which insists that those prices already adhere to rates set by German regulators, according to the New York Times.

WASHINGTON
The nonprofit Nature Conservancy last week defended itself against mounting criticism that the environmental group had rigged land deals to benefit its trustees and corporate supporters.

The Conservancy, with $3 billion in assets earmarked for preserving U.S. wilderness and lands, last week said it has retained the services of a law firm and a prominent PR company to help preserve its reputation.

The moves follow a Washington Post series detailing suspect land deals and conservation easements allegedly designed to benefit the group’s supporters and advisors.

The Post pieces accuse the Nature Conservancy of drilling for oil under the breeding grounds of an endangered bird, buying land from corporate executives serving on the group’s board, and giving sweetheart land deals to trustees who then built homes on the sites.

Conservancy president Steven McCormick responded in a Post editorial, saying the series lacked context, mischaracterized the group’s motives, and was skewed to paint a dark picture of the Conservancy.

The U.S. Senate Finance Committee last week said it planned to investigate the allegations, noted the Post.

“The best thing for the Nature Conservancy to do when it comes to both its donors and oversight from Congress is to be transparent in its practices and forthcoming with information,” committee chairman Sen. Charles Grassley (R-Iowa) said in a written statement last week.

In a May 5 memo to Conservancy workers, McCormick urged his staff to adhere to the truth. “As the story rolls out, we will continue our approach of answering all questions and harboring no secrets,” he wrote.

WASHINGTON
A handful of U.S. senators sparred last week over whether political pressure had pushed the renowned Smithsonian Institution to self-censor a museum exhibit on Alaska’s Arctic National Wildlife Refuge (ANWR).

The exhibit by Seattle-based photographer Subhankar Banerjee depicts the beauty of the refuge and its animals and opened on May 2, just as the Senate resumed its heated debate on whether to open ANWR to oil drilling.

The politically charged issue veered from the Capitol to the Mall after Sen. Barbara Boxer (D-Calif.), an opponent of drilling, held up one of Banerjee’s photographs and urged senators to visit the exhibit before voting to remove the refuge’s protections from oil extraction.

Soon afterwards, the Smithsonian stripped Banerjee’s photographs of their descriptive captions and moved the exhibit from its prominent place on the main floor to a basement hallway, reported the Associated Press.

Democratic senators questioned the Smithsonian’s move and alluded to political pressure from pro-drilling politicians — charges Smithsonian secretary Lawrence Small and Sen. Ted Stevens (R-Alaska) denied.

Stevens is chairman of the Senate Appropriations Committee, which hears requests for federal funding from the Smithsonian.

“Senator Boxer raised the book and everything changed,” Sen. Richard Durbin (D-Ill.) said, “and I want to know why.”

Lawrence Small said the quick demotion was done to avoid any taint of political advocacy, noting that one of Banerjee’s captions implied that preserving the wildlife refuge would be a positive step.

Durbin and others noted that other Smithsonian exhibits, including displays critical of less controversial issues such as strip mining and the extinction of species, also implied political stances but were left alone.

Though critics stopped short of alleging any wrongdoing, they warned the Smithsonian to formulate a coherent and consistent policy, noted the Washington Post.

“Put aside this particular issue; if you are going to get people [to donate to the Smithsonian], you need to be clear what the standards are going to be,” counseled Sen. Christopher Dodd (D-Conn.) “You don’t want to get involved in this kind of row.”

MANHATTAN
TV network CBS got an earful last week from protestors complaining about the planned television show “The Real Beverly Hillbillies,” a reality project they say goes too far.

United Mine Workers of America (UMWA) president Cecil Roberts, who hails from rural West Virginia, led the charge on CBS, gathering with others outside of the offices of network parent company Viacom, which had its annual meeting last week.

The planned show would update the popular 1960s’ TV comedy “The Beverly Hillbillies” by televising the fish-out-of-water missteps of an Appalachian family transplanted to Beverly Hills with $500,000 for one year.

Roberts and others say the planned show panders to ignorant stereotypes. “They’re on a hick hunt for a bunch of Li’l Abners,” he told the Washington Post. “If you have an accent like mine, I guess you’re supposed to be stupid.”

The Association of Flight Attendants, the Communications Workers of America, the Service Employees International Union, the United Mine Workers, the United Steelworkers of America, and 43 members of the U.S. House of Representatives have asked CBS to abort the planned reality show.

“We’re tired of the negative image of the Appalachian people,” said Tom Manuel, an electrician from Fairmont, West Virginia, who was among the protesters outside Viacom headquarters in midtown Manhattan.

After announcing plans to roll out the show 10 months ago, CBS spokesman Chris Ender last week backpedaled a bit. The show “is a concept in development,” he told the Associated Press. “The network has not made a decision and there is no deadline or timetable on the decision.”

UMWA president Roberts last week said he met Viacom president Mel Karmazin for 20 minutes to discuss the show’s prospects, though no definitive answer on its fate was provided.

“He’s a very personable guy, so I told him I know a better show than ‘The Real Beverly Hillbillies,’” Roberts told the Post. “I call it ‘Executive Survival.’ We’ll take someone like him and put him in a 30-inch coal shaft and see how he works down there. I told him I’ll watch it every night. I guaranteed that.”

From The Conference Board:

“Women still have a long way to go before achieving parity with their male counterparts in the workplace, according to a new report released by The Conference Board….

“Despite progress in recent years, significant gender gaps persist, the report reveals. Only 15.7 percent of the directors in Fortune 500 companies are women, according to Catalyst. In Europe, women hold only 3 to 4 percent of all senior executive jobs.

“‘Women executives suffer from inequities in a variety of areas, ranging from wages to representation on boards and corporate officer ranks, to attitudes about networking and job opportunities,’ says Deborah Anderson, author of the report. ‘Leaders and companies attempting to bridge the gender gap point to several barriers standing in the way of achieving parity, including work-life balance challenges, a lack of awareness among senior executives, and inadequate networking, mentoring, and visibility opportunities.’

“The report cites this year’s Business Leadership Index of The Committee of 200 (C200), which measures women’s clout in business and concludes that ‘women business leaders continue to show slow, but steady and determined progress toward parity with men in major spheres of influence within the business world.’

“‘But we are still less than halfway to parity,’ the C200 says. ‘Women entered the workforce in droves in the 1970s, and after 30 years of significant participation in the American business arena, we still have a long way to go…. If the current trends were to continue, businesswomen would still need a minimum of two more decades to reach an equal footing on all fronts with their male counterparts.’…

“Research by WFD Consulting cited in the report shows that many women have been stifled at work because they must juggle family responsibilities to a far greater extent than men. Working women are almost twice as likely to have spouses who work full-time, while men are far more likely to have spouses who work only part-time or do not hold down jobs outside the home.

“The report offers solutions for putting women on an equal footing, ranging from more aggressive awareness campaigns and stronger mentoring and networking programs to a genuine endorsement of work-life balance, gender-neutral processes, and accountability for achieving specific, measurable objectives….”

“A people, it appears, may be progressive for a certain length of time, and then stop. When does it stop? When it ceases to possess individuality…. Whatever crushes individuality is despotism, by whatever name it may be called.”

– John Stuart Mill (English philosopher and economist, 1806-1873)

As commencement season begins, Florida faces a wrenching dilemma over a seemingly routine educational assessment. The Florida Comprehensive Assessment Test (FCAT), introduced in 1998 as the centerpiece of Gov. Jeb Bush’s education reform plan, aimed to make sure that every high-school senior demonstrated competency before receiving a diploma.

Yet when state education officials announced this month that 13,000 seniors had failed the FCAT (pronounced “eff-cat”) and wouldn’t graduate, Florida erupted. Students are protesting. Parents are picketing. Some civic leaders have threatened a statewide boycott of tourism, citrus, and sugar.

There’s moral high ground on both sides. Who wants schools that pass along 13,000 students who can’t meet minimum standards? If an education doesn’t provide basic reading and writing skills, what’s it good for? Nor was the test a surprise. This year’s graduates first took it in seventh grade, knowing it would be a graduation requirement, and have been preparing for it ever since.

That’s not the point, say the protesters. The failures, they argue, disproportionately hit students from poor schools. Those children are being denied a high-school diploma — the basic credential for upward mobility, more needed by this group, perhaps, than any other. Who’s responsible for their failure? Not the students themselves, but teachers and schools, say the protesters. They agree education needs reform. But should reform come, they ask, at the cost of lifelong detriment to these hapless victims of a bad system?

It’s a classic right-versus-right dilemma. It pits the long-term demands for education reform against the immediate needs of these students. It sets the community’s desire for standards of achievement against the individual’s desire to escape calamity as these standards are introduced. And it squares off justice against mercy, as compassion for those who fail comes up against fairness and accountability.

But the FCAT flap illustrates the larger truth that ethics really is, as British jurist Lord Moulton once noted, “obedience to the unenforceable.” Law, by contrast, is enforceable. But law, and the regulations that make it enforceable, come under another large truth, which is that there’s only so much regulatory energy in the universe. Regulators have only a limited attention span. Get your business, trade association, health-care system, profession, or educational institution in ethical running order, and they’ll tend to leave you alone: They’ve got smellier fish to fry. Let unethical behavior boil over and scald the public, however, and the regulators will be all over you. The shorthand: Self-regulate well, or the regulators will pounce.

In recent months, we’ve seen a lot of pouncing. It occurred most notably in the accounting profession, where a traditional insistence on regulating themselves failed to prevent the collapse of Arthur Andersen and the financial scandals surrounding scores of other companies. As self-regulation evaporated, the law rushed in to fill the void. The result: Sarbanes-Oxley, the federal legislation that requires fuller and more rapid disclosure, tougher sentences for fraud, and higher walls between auditing and consulting practices in the same firm.

Then came Wall Street’s difficulty in self-policing a similar separation between investment bankers and stock analysts in the same firm. Again, the enforcement mechanisms stepped in to produce the $1.4 settlement between the Securities and Exchange Commission and states’ attorneys general, on one side, and ten Wall Street firms and two celebrity analysts on the other.

Even the federal education legislation known as No Child Left Behind partakes of this same trend. When the conviction coalesced that every child mattered and the perception settled in that locally run schools were leaving lots of children behind, the federal government entered the fray with its own set of regulations and requirements for accountability.

Florida is not experiencing some new trend of social policy. It’s simply manifesting a law of the moral universe. When the self-regulation of its schools slipped below the threshold of public tolerance, regulators intervened.

But regulations make lousy policy. Under their influence, teachers start teaching to the test rather than to the child. Children only get taught what’s testable. And all the while, the pressure to cheat ratchets upward in the high-stakes world of college scholarships, school budgets, and teacher advancement.

The FCAT problem is complex. But the answer is exquisitely simple: Self-regulate. Unless schools tighten their own standards, articulate the elements of a good education, and hold their own educators accountable for teaching those elements, regulators won’t go away. They’ll be there year after year, demanding compliance. Educators need to put in place an ethic of moral values that characterizes well-taught students. Only a self-regulation that obeys the unenforceable will achieve that standard.

(c)2003 Institute for Global Ethics

“The notion that you need to allow religious groups to discriminate to receive federal funds is a lie. If you dip your fingers in the federal till, you can’t complain if a little democracy rubs off on you.”

– U.S. Rep. Barney Frank (D-Mass.), commenting on current efforts by the Bush administration to relax church-state boundaries in the dissemination of funds for social services. The administration says religious groups that provide badly needed social services should receive federal funds even if they discriminate in their hiring practices. Critics say such moves violate the separation of church and state, and that faith-based groups wanting taxpayer funds should be required to uphold the laws protecting those taxpayers from discrimination. (“U.S. Quietly Eases Rules for Faith-Based Groups,” Boston Globe, May 8.)

BRUSSELS
A lawyer representing Iraqis injured during the recent U.S.-led war filed a war crimes suit last week in Belgium against U.S. Gen. Tommy Franks, commander of U.S. operations in Iraq — a move the Bush administrations says could jeopardize diplomatic relations.

The suit, filed by lawyer and aspiring politician Jan Fermon, accuses Franks and U.S. Marine officer Brian McCoy of recklessly killing civilians with cluster bombs, shooting at ambulances and civilians, and failing to control reckless U.S. forces.

“General Franks is responsible as commander in chief for the way some of his men acted on the ground,” Fermon charged on behalf of 17 Iraqis and two Jordanians who were injured or lost family members during the war.

The suit was filed under a controversial 1993 Belgian law that allows the country’s courts to prosecute war crimes charges regardless of where the alleged atrocities occurred and who perpetrated them.

After suits were filed against a wide range of political leaders — Yasser Arafat, Fidel Castro, Saddam Hussein, Ariel Sharon, and former U.S. president George Bush, among them — Belgian authorities revised the law.

The tightened version, adopted last April, gives Belgian authorities the right to decline cases filed against foreigners whose countries have a record of democracy and judicial fairness, reported the Associated Press.

Under such terms, last week’s lawsuit faces an uphill battle, with ultimate authority over whether to prosecute Franks and McCoy likely to be ceded to U.S. authorities, who have already condemned the charges as a political tool.

The Bush administration last week warned that the suit, if not vacated or forwarded to U.S. courts for consideration, could have severe diplomatic fallout, noted the AP.

It “clearly could have a huge impact on where [NATO leaders] gather,” said Gen. Richard Myers, chairman of the U.S. Joint Chiefs of Staff. NATO headquarters are located in Brussels, which opposed the war on Iraq.

Belgian prosecutors have one month to decide how to proceed with the war crimes lawsuit.

WASHINGTON
France last week accused U.S. officials of orchestrating a “campaign of misinformation” designed to disparage and discredit the nation following its opposition to the U.S.-led war on Iraq.

The Bush administration, accused of looking the other way while anonymous intelligence sources spread apparent lies to the media, denounced the accusations as “utter nonsense.”

Jean-David Levitte, France’s ambassador to the United States, petitioned Congress last week to crack down on the spread of stories he says are untrue, producing a two-page list of “false” stories that have appeared in the U.S. press over the past nine months.

Those stories include allegations that the French possessed banned strains of the smallpox virus and supplied Iraq with weapons parts, nuclear switches, and missile and radar components, reported the BBC.

The casus belli came last month, when the Washington Times quoted an anonymous “American intelligence source” who said France had helped Iraqi leaders escape to Europe by issuing bogus French passports.

French officials claim the stories are being deliberately spread by high-placed civilians in the Bush administration as retaliation for France’s refusal to support Washington’s war on Iraq, reported the Washington Post.

Although Washington has warned that France will be punished for its anti-war position, White House spokesman Scott McClellan last week denied any “organized effort” to plant misinformation against France.

“There is no basis in fact to it,” McClellan said, according to a report from the Reuters news agency. “France is an ally. They are still friends, and despite our past differences, we are looking to the future.”