Ethics Newsline®

On one hand, the latest flap over Chinese-made toys can be read as another ain’t-it-awful story — evidence that China’s moral barometer is in decline. Last week Mattel, the world’s largest toy company, announced its second recall within a month, this time of die-cast toy vehicles from the movie “Cars” contaminated with lead paint. The company, which buys 65 percent of its toys from China, put in place an expanded surveillance and testing system to prevent unethical suppliers from substituting cheaper, brighter lead-based coatings for the lead-free paint required by Mattel. The cost of this latest effort to combat unscrupulous Chinese vendors: $30 million.

On the other hand, the story fits into broader patterns suggesting a rise in the moral barometer. Bad though it is, there’s an encouraging trend developing here, driven by new awareness among Western consumers, increasing diligence among global regulators, and movements toward Chinese reforms.

Consumer awareness. Over the last half-century, public ethical concern in Western nations has led five-year-olds to recycle, adults to stop smoking, and automakers to marginally increase fuel efficiency. Today, those changes are all supported by law. But they began as a public insistence that, even though the law says you can toss, smoke, or guzzle, you ought not to do it. That awareness now extends to the dangers of lead paint, which I watched my father happily use in the 1950s when, like everyone else, he painted our old New England house with it. Those who argue that we’re in steep moral decline, in other words, have to contend with some pretty strong evidence of a rising barometer. If a culture cares enough about ethical problems to spot them and address them — as is happening with lead-painted toys — that itself is a sign of moral progress.

Regulatory diligence. Aiding this grassroots push are the efforts of legislators and regulators to create lasting change. For decades, Western nations have been concerned enough about the safety of food and drugs to require inspections and impose penalties. One can argue over the efficacy of those regulations — whether inspectors are funded to do enough or directed to do the right things, for instance. But without them, where would we be? Somewhere back in the Elizabethan era, when medical practice was largely unregulated and eating was a daily expression of caveat emptor, where it was left wholly to the buyer to beware of the risks.

As a measure of how far we’ve come, look at the growing emphasis on supply-chain ethics. Reports in recent years, including those from the Institute of Business Ethics in the United Kingdom and the Conference Board in the United States, have focused on the growing public demand for companies to take responsibility for every aspect of their production processes. That responsibility has now extended beyond the quality of the product itself. It includes the health and safety of overseas workers — even those employed by suppliers — and the environmental and social impact on their communities. Result: Companies like Mattel are increasingly sensitized to the actions of their overseas vendors. That, too, counts as a sign of moral progress.

Chinese reform. The real story here may be the wrenching modernization within China. On its face, the record is grim. Stories this year of deadly pet food, dangerous tires, toxic jewelry, and poisonous toothpaste have raised alarms among importers of Chinese goods, with potential harm to China’s export economy. Similar problems are arising internally, as counterfeit drugs have circulated through the system. On July 10, the government executed Zheng Xiaoyu, head of the State Food and Drug Administration, for accepting bribes totaling some $850,000, failing to police the drug industry, and approving dangerous drugs for the market. One of the highest Chinese officials ever sentenced to death, Mr. Zheng was clearly used to send a signal to other miscreants within a system that observers say remains deeply corrupt.

Yet the trend-line seems clear. International trade in the twenty-first century comes with unavoidable mandates, one of which is ethics. To continue playing in this league, China’s ethics will have to rise. That may be tough. The challenge for China is a legacy of ethical indifference, imposed by a Communist regime that sought, wherever possible, to replace the responsibility of the individual with the oppressive regulatory mechanism of the state. Draconian and invasive, that mechanism was actually quite successful in crushing ethical concerns out of business practices, shrinking the moral perimeter of individuals to the narrow radius of family and friends, and producing a society with little experience in rejecting corruption, counterfeiting, and a whatever-works mentality.

As that mechanism retreats and China looks outward, it does so with a citizenry that grew up seeing public trust as fungible, negotiable, and opportunistic. With a workforce equipped with enormous skill, energy, and drive, China is now learning that it needs one more thing to be a successful global vendor: an ethical grounding. Mattel’s object lesson for other companies trading with China is clear: Don’t count on finding trust and responsibility. Be prepared to inspect, test, and verify in ways you never thought you’d need to. Set aside $30 million just in case. But recognize that, despite all that, ethics is stirring in China, its future is more morally encouraging than its past, and when it does it right, it makes good things that the West loves to buy.

©2007 Institute for Global Ethics

“Mr. Ashcroft talked about the legal issues in a lucid form, as I’ve heard him talk about legal issues in the White House.”

“Saw AG. Janet Ashcroft in the room. AG in chair; is feeble, barely articulate, clearly stressed.”

WASHINGTON
The death of three rescuers in a failed attempt to reach six miners trapped in Utah’s Crandall Canyon Mine has raised ethics questions about the handling of the disaster.

Associated Press writer Jennifer Talhelm reports that many are questioning whether the government agency that oversees coal mine safety, which was supposed to implement sweeping changes following last year’s Sago Mine disaster in West Virginia, has really changed its ways.

House leaders are vowing to convene hearings into the latest cave-in and Utah lawmakers say they will pose tough questions to the leadership of the Mine Safety and Health Administration (MSHA) as well as to representatives of the mining industry.

Talhelm’s report notes that MSHA has been criticized for being slow to take public control of the scene, and some are questioning the role of the mine’s owner, Bob Murray, who has led reporters and family members on a tour of the mine.

Federal laws enacted after last year’s Sago Mine disaster, in which conflicting information about miners’ safety resulted in inaccurate reports that miners had been saved when in fact they had perished, spurred Congress to specify that MSHA would take charge of communication in a mining disaster.

An MSHA spokesperson told the AP that the agency interprets the regulations as meaning MSHA is expected to take the lead role in communications but that the agency is powerless to censor others who wish to communicate with the press and public.

The logistics of the rescue are also under scrutiny: “The fact that MSHA let anyone, including rescuers, into the still-dangerous mine is raising new questions,” Talhelm writes. “Others also predict greater scrutiny of the agency’s decision to allow mining at Crandall Canyon at all, given what it knew about conditions that made the mine particularly unstable.”

Last Thursday, two rescue workers and a mine inspector died when the walls of a tunnel collapsed. They were attempting to dig down to where six miners have been trapped since August 6.

According to an analysis from Time magazine, the terrain has become increasingly unstable because years of mining have weakened the ground, causing it to settle.

The method of mining used at Crandall Canyon involves allowing some mine ceilings to collapse in order to retrieve the last remnants of coal deposits and is “inherently dangerous,” according to an editorial in the St. Petersburg Times, which quotes a mine safety expert as saying he was surprised that federal authorities let the operation, called “retreat mining,” continue as long as they did.

A piece syndicated by the New York Times reports that while a series of mine disasters last year prompted Congress to pass laws upgrading communication systems in mines, the Bush administration and Congress have given mine owners until 2009 to develop and install more sophisticated devices than those that were in place at Crandall Canyon — systems that that could allow communication through dense layers of rock and coal, which might have helped the Utah miners.

WASHINGTON
Ethics and politics intersected in three stories from Washington last week:

• Two longtime federal lawmakers from Alaska, both legendary for their prowess in procuring federal funds for their state, are losing much of their clout because of ethics issues that dog both of them, according to a report from the Associated Press. Sen. Ted Stevens and Rep. Don Young, both Republicans, are currently under federal investigation — Stevens for alleged irregularities in his dealings with a businessman who oversaw construction of his home, and Young for alleged campaign finance violations. According to the AP report, the two are facing erosion of their legislative influence as well as a weakening of the considerable powers of intimidation they have developed after decades of legislative leadership positions.
• Former U.S. Rep. Bob Ney (R-Ohio), now in prison for taking bribes in return for doing favors for disgraced lobbyist Jack Abramoff, was convicted partly on the strength of information gathered by an aide who wore a secret recording device, court documents revealed last week. UPI reports that Ney’s former chief of staff, Will Heaton, secretly recorded his boss’s conversations. Heaton pleaded guilty in the corruption probe last February, and is seeking a light sentence based on his cooperation with the government, according to the UPI story.
• In one more devastating blow to a city rocked by a series of ethics scandals, New Orleans city councilman Oliver Thomas last week pleaded guilty to accepting bribes from a city hall vendor. The New Orleans Times-Picayune reports that U.S. district judge Sarah Vance, in accepting Thomas’s plea, condemned his actions and their effect on the devastated city: “This guilty plea is a body blow to a community that is already reeling under a wave of public corruption,” Vance said. “If this city is ever to recover, we have to have an end to this type of venality.”

VARIOUS DATELINES
Ethics was the central theme in sports coverage last week. Leading the news:

• Former NBA referee Tim Donaghy pleaded guilty last week to two felony counts in connection with a betting scandal that has cast doubt on the integrity of professional basketball. The Washington Post reports that Donaghy admitted providing inside information to gamblers and was rewarded when his tips proved successful. He also admitted betting on games himself. Whether he manipulated calls in order to affect the outcome of games remains unclear. Donaghy faces up to 25 years in prison when he is sentenced on November 7.
• Atlanta Falcons quarterback Michael Vick will plead guilty to federal dog-fighting conspiracy charges, his lawyer said on Monday. Vick, who originally pleaded not guilty and vowed to clear his name, reversed course after his three codefendants pleaded guilty, agreed to help prosecutors, and said they would testify against him, reports the Associated Press. Vick’s codefendants say he bankrolled the dog-fighting operation and personally killed dogs that did not fight well, notes the Atlanta Journal-Constitution. As of Monday, the Falcons had not decided whether to cut Vick from the roster.
• Home-run record holder Barry Bonds has hired a team of lawyers to go after people Bonds claims are making false statements against him about using steroids and evading taxes. The San Jose Mercury-News reports that Bonds waited until he broke Hank Aaron’s all-time home-run record before mounting his counterattack, which his lawyers were careful to note will be against individuals who slander or libel him and not against the press itself. But one legal expert quoted in the Mercury-News says the legal maneuver may be more for publicity value both because it is difficult for a public figure to make a libel case and because such a suit would result in a trial centering on steroid use — something Bonds is unlikely to pursue.

LONDON
Reports in the British press claim that one of the richest retailers in Europe pays workers in Mauritius less than $8 a day to make clothes for the Kate Moss collection sold through a U.K. chain called Topshop.

The Times of London says that factories supplying Sir Philip Green employ hundreds of migrant workers who come to Mauritius from Bangladesh, India, and Sri Lanka, lured by recruiters’ false promises of high wages.

According to the report, the migrants work for less than the prevailing wage in Mauritius, and labor for up to 12 hours a day, six days a week.

The Scotsman quotes a garment workers’ union official as saying that many migrant workers in clothing factories face virtual slave-labor conditions.

Green disputed the reports late last week, producing three audits and two letters he said show that the factories mentioned in the article were “generally compliant with relevant codes of practice,” according to the Reuters news agency. Green said the workers were paid more than the standard established by the Mauritian government.

In a related story, the BBC reports that while U.K. clothes retailers “have been keen to show off their ethical values to appeal to socially aware customers,” a survey shows that shoppers are skeptical of claims of good working conditions in overseas factories that make the goods. More than half of the 7,000 respondents to the TNS Worldpanel Fashion Survey indicated they believe abuse takes place in the supply chain.

EVANSVILLE, Ind.
Research into an ethics issue has itself raised some provocative ethical questions.

The trade journal ComputerWorld reports that a professor at Indiana University in Bloomington, who is researching a type of computer fraud known as phishing, raised some eyebrows when he conducted a study in which he tricked many email recipients into believing they were supposed to provide information to a legitimate business.

Phishing is a scheme in which fraudsters trick email recipients into visiting a site that looks like an authentic bank, Internet store, or other institution. The goal is to lure the unsuspecting victim into supplying information such as account numbers, credit card numbers, or passwords.

In his latest study, professor Markus Jakobsson tricked email recipients into visiting a phony eBay site.

In an interview with the Associated Press, Jakobsson maintained that it is not possible to conduct a reliable study by asking people if they had been scammed, because many would be too embarrassed to admit it.

Federal law governing university research allows investigators to use deceptive techniques if there is only minimal risk to participants and the risk is no greater than it would be in everyday life, according to the AP report.

About 30 people drawn into the imitation phishing scheme, which was aimed at about 600 recipients, complained to the university about the methods.

Jakobsson argued that phishing and related scams have become so prevalent and damaging that research into anti-phishing methods is vital.

According to a recent survey, U.S. consumers lost more than $7 billion over the last two years to phishing schemes, viruses, and spyware, according to the Kansas City Star. The survey notes an increasing risk for younger users on social networks such as MySpace and Facebook.

Another study involving Facebook showed that a high percentage of users were willing to divulge information such as email addresses, birth dates, addresses, and phone numbers to “Freddi Staur,” who was not only a complete stranger but a phony identity invented by a research firm to test members’ willingness to share data.

As the technology publication Sci-Tech Today notes, Freddi Staur is an alphabetical rearrangement of “Fraudster.”

VARIOUS DATELINES
New developments in ongoing ethics issues were featured in reports from Asia last week:

• The presidential candidate of Taiwan’s leading opposition party last week was acquitted of corruption charges. The Financial Times reports that Ma Ying-jeou, the former mayor of Taipei, was accused of pocketing about $300,000 from his mayoral allowance. Last week’s acquittal, reports the Financial Times, probably will allow Ma to depict the charges as politically motivated.
• Thailand’s Supreme Court last week approved issuing an arrest warrant for former premier Thaksin Shinawatra and his wife Potjaman for failing to answer a summons in a corruption case against them. The Bangkok Post reports that Thaksin, who is living in exile in London, said he did not originally appear because he feared for his safety. The Post reports that Thailand is expected to pursue extradition proceedings against Thaksin, who was deposed in a bloodless coup in the wake of public outrage over a deal that allowed him to sell his business tax-free.
• China has ordered an investigation into all land sales from 2005 to 2007 as part of a wide-ranging probe into corruption, according to a report from Forbes. Rigging land sales is thought to be one of the more lucrative types of graft in China.

FRANKFURT
The news for Siemens, the German electronics and engineering giant, took a turn for the worse last week as the company, embroiled in a corruption scandal, reportedly was forced to expand a probe into an estimated $1.4 billion in unexplained payments.

The German news service Deutsche Welle reports that Siemens’ internal auditors discovered “dubious” payments dating back to the early 1990s.

The auditors have been probing the company’s affairs for eight months as part of a probe into payments allegedly made to secure contracts, according to the Reuters news agency.

Spiegel Online claims that the size of the slush fund astonished the auditors, and could amount to three times the amount of illicit payments Siemens expected to uncover.

Controversy surfaced last year when it was alleged that millions of dollars in “consulting fees” were actually bribes, and the scandal soon led to the resignations of Siemens’ chief executive Klaus Kleinfeld and chairman Heinrich von Pierer, reports the Times of London.

Siemens had no immediate reaction, saying it does not comment on internal investigations.

NEW YORK
The August 12 edition of the New York Times features a profile of sister Patricia Daly, an activist from the order of the Sisters of St. Dominic of Caldwell, New Jersey, who is also the executive director of an alliance of Roman Catholic investors who use their pension funds to pressure companies to take action on ethical issues.

Times writer Dashka Slater notes that Daly’s type of activism is a relatively new phenomenon in the corporate world.

“While shareholders are technically the owners of a company,” Slater writes, “corporate executives have tended to view them the way a symphony orchestra might view its subscribers. The last thing the symphony expects is for its concertgoers to start giving the oboist pointers on her technique, or to suggest that the conductor choose a different program of composers.”

“Yet that is exactly the sort of thing that has been happening at shareholder meetings nationwide, thanks to the fall of Enron, the rise of socially responsible investment funds, a new sense of mission on the part of institutional investors and an Internet-age impulse toward participatory democracy,” the Times continues. “At CitiGroup’s annual meeting in April, for instance, Chairman Charles Prince listened patiently for nearly three hours while shareholders sounded off on subjects ranging from business strategy to tooth decay.”

The story focuses on Daly’s interaction with ExxonMobil, and the pressure she and other activists are mounting to persuade the company to help reduce global warming.

From the Project for Excellence in Journalism:

“The 2008 Presidential campaign — with its crowded field and accelerated timetable — emerged as the leading story in the American news media in the second quarter of 2007, supplanting the policy debate over Iraq. And the once lopsided gap favoring Democrats over Republicans in campaign coverage became more balanced, according to a new study of the U.S. media….

“…These are some of the findings drawn from the second quarterly report of the Project for Excellence in Journalism’s News Coverage Index, a weekly content analysis of a broad cross-section of American news media.

“Another major change in the period from April through June of 2007 was that press coverage of the war in Iraq declined markedly. Together the three major storylines of the war — the policy debate, events on the ground, and the impact on the U.S. homefront — filled 15% of the total news hole in the quarter, a drop of roughly a third from the first three months of the year, when it filled 22%.

“That decrease resulted largely from a decline in coverage of the Washington-based policy debate, which fell 42% from the first to second quarter, once the Democrats failed to impose timetables in legislation funding of the war….

“Among the findings in the second quarterly report of the PEJ’s News Coverage Index:

• “After Democrats received more than twice the coverage of Republicans in the first quarter of the year (61% to 24%), coverage evened out in the second quarter. Democrats received 42% of the coverage versus 41% for Republicans. That Republican gain came largely from a one month surge in May….
• “There continue to be clear differences in the news judgments of different cable channels. As in the first quarter, the Fox News Channel devoted roughly half as much coverage to the war (8%) than its rivals, CNN (18%) and MSNBC (15%). On the subject of the presidential campaign, MSNBC stood out, providing more than twice the percent of airtime of either competitor….
• “The Virginia Tech campus massacre that claimed 33 lives was the biggest story for any given week so far this year. It accounted for 51% of all coverage April 15-20. But the media’s attention to the story was fleeting: by the end of April, coverage had virtually disappeared. The policy debate in Iraq was the second most covered event of the year so far the week the president announced the ’surge.’ Don Imus’ firing was the third most heavily covered story of the year in any given week….”

“To preserve their independence, we must not let our rules load us with perpetual debt. We must make our election between economy and liberty, of profusion and servitude.”

– Thomas Jefferson (3rd U.S. president, 1743-1826)