For more information, see this week’s Research Report.

by Rushworth M. Kidder

Last week, the Obama administration proposed significant cutbacks in executive pay for bailed-out financial institutions — a move that produced some curious ethical responses.

On one hand, some who support pay czar Kenneth Feinberg’s work would have us believe that high pay is by definition unethical — a reasonable point, but only if you think free enterprise is intrinsically evil and success should be penalized.

At the other extreme, a bizarre philosophical position surfaced during a London debate on morality in the marketplace. The British public, said Goldman Sachs vice chairman Brian Griffiths, should “tolerate the inequality” inherent in executive bonuses “as a way to achieve greater prosperity for all.” (See our lead report, below, on executive pay.)

When well-meaning people suggest that prosperity is immoral but inequality is ethical, there’s a deeper confusion at work. So step back for a moment and consider a popular but untested assumption, which is this: If you constrain executive pay, corporate excellence will be damaged because current talent will leave and top talent can no longer be recruited.

True, if you want the smartest guys in the room, you have to pay handsomely. But do such high fliers always produce corporate cultures that build a better world? Or are they just as apt to create cultures that degrade ethics? Will top pay guarantee the strongest possible financial sector?

During game five of the American League Championship series last week — stay with me, here, I’m not changing the subject — the Los Angeles Angels leapt to a 4-0 lead in the first inning. Their early advantage held for six innings, which for them was a very good thing: This game, if lost, would end their bid to play in the World Series. But in the top of the seventh inning, the Yankees mounted a massive rally. As it grew, Angels manager Mike Scioscia pulled out his pitcher and brought in a reliever. And that’s when everything came unglued. By the time the Angels came to bat, the tide had turned to a 6-4 Yankee lead.

The Angels later won that game. But what if they’d lost? And what if we later learned that the Angels’ manager was on the take? What if he’d secretly been paid an enormous amount to throw the game to the Yankees? What if his change in pitchers was designed to make sure he’d lose?

Now, there’s not a shred of evidence for what I’ve just said. But what if, in place of the real Mike Scioscia, you’d had his evil twin? What if the man in the dugout that night had immense leadership talents, deep experience, a sixth sense for the right move — and no moral sense whatever? His lifelong quest (which he’d never shared with the team that hired him, of course) had always been to make himself rich by any means possible. If at times he sounded and looked ethical or even based an occasional decision on principle — well, that was all part of the show. Give him a once-in-a-lifetime choice between retiring rich or honest, and there wouldn’t even be a question: Go for the green.

There’s not a baseball fan in the world who would want that guy as their manager. Sure, the credentials look great. But if it’s all about self and in the end he can’t be trusted … get rid of him as fast as you can.

Which brings us back to pay packages. What if companies cut compensation and lots of well-credentialed executives leave? Is it possible that might be the healthiest thing that could happen for the financial sector? Sure, it’s possible that future historians, studying this recession, will tell us that the companies paying the largest bonuses:

1. Engaged in the fewest deceptive mortgage practices,
2. Invented the least number of complex, hyper-risky products, and
3. Were hardly ever inclined to think government should bail them out if things turned sour.

I can already hear our readers snorting in derision. What brought us into this recession, many would say, were just the opposite characteristics: deception, irresponsibility, and calculated greed. Do we really want to preserve the talent that did that to us?

But what about attracting the best talent for the years ahead? Won’t we be in danger on that front? Well, which sounds more logical: (1) that massive compensation frees executives from concern about making money, making them less egocentric and more focused on others, or (2) that enormous pay packages reinforce their desire to make even more money, leading them to become even less interested in the moral sense? There’s extensive, if still controversial, behavioral research suggesting that when you replace intrinsic motivation with monetary reward, the quality of work goes down. Called over-justification theory, it seeks to explain why three-year-olds who are promised rewards are less engaged in their play activities — do a poorer job playing, really — than those who are rewarded unexpectedly after the fact.

It’s hard to see why such promises wouldn’t change the mindset of adults, too. I’m not saying there’s a necessary connection between high pay and low ethics. There are lots of people of great integrity who are very well paid. I’m arguing a different point, which is that there’s no guarantee that high pay brings high ethics with it. We know it will bring you all of the other credentials of the evil twin. But will it bring you the manager you really want in your dugout during life’s playoffs?

©2009 Institute for Global Ethics

Find this and previous weeks’ commentaries online as a podcast titled Ethicast™ now available on iTunes. Subscribe today!

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“The Associated Press raised serious questions in its recent coverage of insurance companies and homeowners’ drywall claims. Some of these companies need to be shamed into doing the right thing.”

– U.S. Sen. Bill Nelson of Florida, talking to the AP last week about insurance companies’ efforts to cancel the policies of people whose homes were built with defective Chinese drywall.

Thousands of people across the country own homes built with the faulty drywall, which emits fumes, contains traces of a chemical that can produce a sulfurous odor, and corrodes “copper pipes, destroying TVs and air conditioners and blackening silverware,” according to the report.

Following the original AP story, the Florida-backed Citizens Property Insurance Corp. announced that it had changed its mind and wouldn’t cancel the policy of the couple featured in the article. “We’re just elated. I mean, you never hear of an insurance company changing their mind,” said homeowner James Ivory.

Source: AP, Oct. 23.

For more information, see related Newsline story, Oct. 19.

“Pay czar” slashes compensation; New York Times analysis says solution must be responsibility of shareholders with the power to remove board members; big compensation garners some defenders among those who argue that bonuses and salaries should be viewed as an investment in firms that owe TARP money

NEW YORK and LONDON
Many executives at top firms that still hold billions of dollars in government bailout money saw their compensation slashed last week by the Obama administration’s compensation overseer.

“Pay czar” Kenneth Feinberg’s decision to link compensation more closely to performance seemed to strike a balance between taxpayer anger and the need for companies to retain talent, a New York Times analysis last week reports.

The piece also contends that responsibility for a complete overhaul of pay structures across Wall Street is probably beyond the ability of any official overseer and instead rests in the hands of shareholders.

The Times quotes Nell Minow, cofounder of the Corporate Library and an advocate of executive compensation reform, as saying that the only way to change things is to “throw the bums out” — allowing shareholders the ability to vote directors off the board if they feel they are improperly governing compensation or any other aspect of the firm’s operation.

At present, writes the Times’s Joe Nocera, “the deck is so stacked that [voting a director off], is nearly impossible, especially since many companies don’t allow simple, majority votes to elect (or reject) directors. But the most straightforward way to shrink the oversize pay of Wall Street executives — and, more generally, curb the excesses of executive pay — would be to make directors more accountable to the company’s shareholders.”

CNN reports that the hardest case confronting Feinberg was AIG, which had lobbied hard to let three of its executives keep their bonuses, ruling that paying the extra money was in the public interest because those employees are critical to helping AIG pay back its government bailout.

Feinberg went along with most provisions of that request.

Therein lies the practical and moral dilemma, notes the Los Angeles Times: Some experts are cautioning that pay curbs could lead to a brain drain at bailed-out companies, meaning that taxpayers will never be reimbursed for their TARP investment.

That issue was echoed in Britain last week as the vice chairman of Goldman Sachs told spectators at an ethics debate that big payouts to bankers should be seen as an investment in London’s economy, according to a report from Reuters.

Brian Griffiths said he was not “ashamed” of the bank’s compensation package, which has, according to Reuters, inflamed the debate about bonuses when details were recently released.

The British pubic, Griffiths said, should “tolerate the inequality as a way to achieve greater prosperity for all.” He spoke at a public debate in which participants discussed the role morality should play in the marketplace.

Sources: CNN, Oct. 23 — New York Times, Oct. 22 — Los Angeles Times, Oct. 22 — Reuters, Oct. 20.

For more information, see: Related Newsline Commentary, Oct. 26 — Related Newsline story, Oct. 19 — Related Newsline story, Sep. 21 — Related Newsline story, Aug. 3 — Related Newsline story, Aug. 3 — Related Newsline Commentary, July 13.

Some of the disputes are turning downright nasty — in one, lawmakers change the locks to a hearing room

WASHINGTON and OTTAWA
At the top of the news from the political-ethics file:

• An ethics dispute in the U.S. House of Representatives devolved into melodrama last week after Democrats on a House committee literally changed the locks on a hearing room door to shut out Republicans, who had had enraged the Democrats by posting an embarrassing video online, the Washington Post reports. The dispute started when Democrats failed to attend an Oversight and Government Reform Committee hearing on allegations that certain members of Congress received preferential treatment in mortgage applications, according to the Post. Video of the Democrats leaving a private meeting in another room through a back door was posted on the party’s website and YouTube, set to the tune, “Hit the Road, Jack.” Later, reported the Post, panel Democrats had the locks changed because, in the words of chairman Edolphus Towns, the Republicans “don’t know how to behave.”
• The chief justice of South Carolina’s Supreme Court last week implied that embattled Gov. Mark Sanford is trying to delay an ethics panel investigation of his activities, UPI reports. Justice Jean Toal told Sanford’s lawyers that she believes the governor is using a “four corners” offense in the case, referring to a basketball game-delaying strategy that originated in the Carolinas. Sanford’s lawyers said their client actually wants an expedited hearing. Sanford instigated various questions about his conduct when he disappeared from his state for a week, secretly traveling to Argentina to be with a mistress.
• The Charles Rangel saga continued to play out in the U.S. House of Representatives last week, with at least one influential publication speculating that it’s being drawn out on purpose. Politico reports: “Convinced that Rep. Charles Rangel (D-NY) is on the ropes because of a tangle of ethical issues, House GOP leaders are debating whether to aggressively press for his removal as chairman of the Ways and Means Committee or try to drag out the controversy as long as possible for maximum political advantage.” Politico reports that while the Democratic wall of support for Rangel, who faces a variety of ethics charges related to allegations that he failed to report income and misused his position, is showing cracks, some Republicans are reticent to press the issue because they face their own ethics problems and don’t want a full-scale shootout. Nor, Politico notes, do they want to build a sympathy backlash for Rangel.
• Canadian lawmakers are embroiled in a dispute over whether members of Parliament should be allowed to put their names and party logos on economic stimulus checks, according to a report from the Canadian Press. Opposition members say the Conservatives are flaunting oversize ceremonial checks with their party’s insignia. “Conservative members have tried to funnel $600,000 of taxpayers’ money to their ridings as if this money belonged to the Conservative party…. It’s an ethical matter,” Liberal leader Michael Ignatieff charged, according to the CP report. The parliamentary ethics commissioner will examine the complaints.

Sources: Washington Post, Oct. 23 — UPI, Oct. 22 — Canadian Press, Oct. 21 — Politico, Oct. 19.

For more information, see: Related Newsline story, June 1 — Related Newsline story, Feb. 23 — Related Newsline story, Jan. 5 — Related Newsline story, Oct. 9, 2000 — Related Newsline story, Oct. 9, 2000.

How far, analysts wonder, should you pursue a story about an obvious hoax that was perpetrated simply to attract attention?

DENVER
The misadventures of 6-year-old Falcon Heene, better known to the public as the “balloon boy,” could present a teachable moment in media ethics, according to a variety of press reports last week.

Falcon’s parents may face charges in the aftermath of the stunt, during which authorities believed the 6-year-old was adrift in a homemade balloon cast loose from the Heene home in Fort Collins, Colorado. Falcon was later found at home, raising speculation that the stunt had been arranged by his parents to attract attention and create a television reality show, reported the trade journal Broadcasting & Cable.

As if those circumstances weren’t unusual enough, the story was revived late last week as news media began to examine their own behavior in covering the apparent hoax — then remained fixated on it for more than a week.

Kris Kodrich, an officer of the Society of Professional Journalists and an associate professor of journalism at Colorado State University, summed it up in a Denver Post commentary: “This really has become more of a story about the media now,” he writes. “Sure, it was gripping TV as it was happening. When a student mentioned it right before my Thursday afternoon media ethics class, I admit I put the latest details from CNN’s home page on screen for the class. But this week we’ve turned our attention toward the media coverage itself: Why was it so extensive? Was it responsible, and why is it a continuing story?”

TIME commentator James Poniewozik contends that the event is symptomatic of the new media equation: acting out means getting paid.

“Modern media did not invent greed, eccentricity or lust for attention. What they did was monetize them,” Poniewozik argued. “There have long been odd families and obscure men pursuing bizarre theories and cobbling together flying machines in their backyards. But only in the reality-TV era has unstable behavior become a valid career choice. Only now are questionable parenting decisions the stuff of a lucrative family business. Say whatever you want about Jon and Kate Gosselin, their divorce proceedings entail numbers with a lot more zeroes than your typical young Pennsylvania family encounters.”

What was the teachable moment in all of this? Patti Dennis, news director at KUSA-TV in Denver, told the media think tank publication Poynter Online: “There are more and more people who are likely to fool and manipulate the media. You must have a process of vetting the consumer contributions to journalism. Everyone in the newsroom must be diligent in checking tips and calls. We get hundreds of tips each week.”

“We spend a lot of time trying to determine if there is a story and how to work around the agenda the news tipper probably has,” Dennis said. “Nothing too profound, but just sound journalism in an age where everyone gets to play.”

Sources: TIME, Nov. 2 — Poynter Online, Oct. 23 — Broadcasting & Cable, Oct. 22 — Denver Post, Oct. 22.

For more information, see: Related Newsline story, Oct. 19 — Related Newsline story, Sep. 21 — Related Newsline story, Sep. 8 — Related Newsline story, May 19 — Related Newsline story, June 15.

“If the White House can reach out to the Iranians and North Koreans … they can talk to Shepard Smith,” one commentator chides

WASHINGTON and NEW YORK
A confrontation between President Obama and Fox News has raised dual ethics issues: whether it’s right for a network to offer what critics say is slanted coverage, and whether the President’s efforts to stanch the network’s criticism go too far.

The Christian Science Monitor writes, “With its concerted campaign against Fox — including not sending administration members to talk to Fox News Sunday’s Chris Wallace — the White House has stepped up an unusual campaign on a major media organization.”

Critics of Fox News contend that that organization is more a source of political propaganda than news. Jacob Weisberg, writing in Slate, argues that the network is deceitful in its coverage and should not be regarded as a venue for serious journalism.

“Whether the White House engages with Fox is a tactical political question. Whether we journalists continue to do so is an ethical one,” Weisberg writes. “By appearing on Fox, reporters validate its propaganda values and help to undermine the role of legitimate news organizations. Respectable journalists … should stop appearing on its programs.”

But a journalists who has blasted Fox for conservative bias nevertheless wrote a piece sharply skeptical of a boycott.

“I’m not a fan of slippery slope arguments,” notes the Atlantic’s Matthew Cooper, “but where does the boycott Fox approach end? Skipping the Simpsons or the NFL because they’re broadcast on the Fox network or not reading Harper Collins books … would seem extreme…. If appearing on Fox News is a morally dubious act, why support any part of the company? Engagement has been the mantra of the Obama years. Talk to your enemies. If the White House can reach out to the Iranians and North Koreans, for gosh sakes, they can talk to Shepard Smith. As for me, I’ll keep watching Rachel Maddow.”

Sources: Christian Science Monitor, Oct. 23 — USA Today, Oct. 21 — Atlantic, Oct. 20 — Slate, Oct. 17.

Business media notes that insider trading is a difficult charge to prove: There’s a fine line between gathering good market intelligence and illegal nonpublic information

NEW YORK
A hedge fund embroiled in an alleged insider-trading scandal last week announced that it will shut down its funds.

The Galleon Group LLP plans an “orderly wind down” of its funds after investors pulled out millions of dollars in the wake of charges against manager Raj Rajaratnam, the Associated Press reports. Rajaratnam maintains his innocence.

Galleon, reports the London Independent, became one of the top hedge funds because its traders aggressively sought out information on companies that they would use in assessing future share price moves.

But there’s a fine line between seeking valuable intelligence and benefiting from illegal inside information, notes BusinessWeek, which reports that the U.S. Securities and Exchange Commission (SEC) case against Rajaratnam came as part of a new government offensive against insider trading — a probe based on informants, wiretaps, and software tools.

A Wall Street Journal analysis notes that insider-trading cases are notoriously difficult to pursue because prosecutors need to show that the accused had a culpable state of mind, and also establish that the defendant had a duty not to trade on the nonpublic information.

Likely to be part of the prosecution’s case in any insider-trading action, reports the Journal, is that fact that all hedge funds registered with the SEC have codes of conduct requiring employees to pledge they will not make trades based on inside information.

Sources: AP, Oct. 22 — Independent, Oct. 22 — BusinessWeek, Oct. 21 — Wall Street Journal, Oct. 20.

For more information, see: Related Newsline story, May 11 — Related Newsline story, Jan. 7, 2008 — Related Newsline story, Apr. 23, 2007 — Related Newsline story, Mar. 5, 2007 — Related Newsline story, Sep. 27, 2004.

More complaints come in about Google and privacy; ‘Net Neutrality’ issue surfaces again after FCC vote; and there’s continuing controversy over genetically engineered crops

VARIOUS DATELINES
Top technology news took an ethical slant last week. Among the coverage:

• The battle over “net neutrality” — an important if nascent ethics issue in the communication infrastructure — is just beginning, reports CNET, even though U.S. Federal Communications Commission (FCC) officials voted in favor of the doctrine last week. Net neutrality is the concept that all users of the Internet have their information moved at the same speed. Some major Internet service providers (ISPs) have argued that they should have the right to slow some traffic — particularly file sharing, which they claim clogs the whole system for all users even though it involves just a few. Net neutrality proponents say that all traffic should be put on the same track, because ISPs must inspect traffic in order to slow it — a presumed invasion of privacy. Critics also warn that putting some clients on a faster track will inevitably favor users with deep pockets. CNET reports that even before the FCC vote was complete, a bill was introduced in the Senate to block the FCC from regulating the Internet.
• Britain’s National Academy of Science said that genetically modified crops are an essential tool for feeding the exploding world population. Opposition groups counter with ethically based objections, saying the move toward genetically modified food will hurt small farmers, who cannot afford the practices needed to sustain it, according to the Voice of America. Some opponents claim that the practice will raise the risk of unknown scientific mutations and health consequences for crops and consumers, reports the Times of London.

Sources: CNET, Oct. 22 — Voice of America, Oct. 22 — Times of London, Oct. 20.

For more information, see: Related Newsline story, Sep. 21 — Related Newsline story, Aug. 4 — Related Newsline story, Apr. 14, 2008 — Related Newsline story, Feb. 17, 2004 — Related Newsline story, May 11, 1998.

“Many people prefer to buy locally grown, or organic, produce and ‘green’ products from environmentally-friendly companies, but not if they are much more expensive,” poll finds

From Harris Interactive:

“It’s quite popular for people to claim that they care about the environment. In fact many millions of people — from 18% to 39% of all adults — say that their purchasing behavior and other interactions with companies is sometimes influenced by environmental factors. However, in reality, only a very small minority is willing to pay substantially more for ‘green’ products or goods produced by environmentally-friendly companies….

“Over 30% of adults say that they often or always purchase locally grown products or seek out and are willing to pay more for ‘green’ products. And a quarter of all adults say that environmental issues are very important to them when deciding what products to buy. But only a few people seek out and buy green products if they have to pay a lot more for them (2%) or say the cost doesn’t matter (3%).

“Some of the findings of this Harris Poll include:

• “26% of all adults say that environmental issues are extremely or very important to them when deciding what products or services to buy;
• “17% say that environmental issues are extremely or very important to them when deciding what company to work for;
• “Fully 32% say they seek out ‘green’ products and are willing to pay at least a little more for ‘green’ products…

“…The survey also found that most people were taking some action, however modest, to limit their use of electricity, water or gasoline. While two-thirds (67%) of these people said that they were doing this to benefit the environment, over half (55%) said that they were doing this to save money….

“The most important conclusion to be drawn from these findings is that ‘green marketing’ surely appeals to substantial numbers of consumers. Everything else being equal, many millions of people would prefer to buy products and services that are ‘green’ or are produced by environmentally-friendly companies. However, if ‘green’ products cost significantly more than less ‘green’ products, relatively few people will buy them. When push comes to shove, in these economic times especially, price usually trumps environmental factors.”

For the full release from Harris, Oct. 23, click here.

“Thinking is the talking of the soul with itself.”

– Plato (Greek philosopher, ca 428 – ca 348 B.C.)

For more information, see this week’s Research Report.

by Rushworth M. Kidder

LAKE WORTH, Florida

“What do you think of ethics awards?”

The question popped up at a meeting of community leaders here in Palm Beach County the other day. If each year we recognized an individual or organization of outstanding integrity, I was asked, wouldn’t that help promote ethics, especially when our community needs visible moral role models?

The questioner was right about the need. Headlines in the local paper, the South Florida Sun-Sentinel, sadly refer to this place as “Corruption County,” and for good reason. Five local politicians — three former county commissioners and two West Palm Beach city commissioners — have been sentenced to prison terms recently, brought down by an FBI operation launched several years ago. The area’s former congressman, six-term Republican Mark Foley, left office in 2006 over a sex scandal involving teenage pages working at the Capitol.

What’s more, convicted financier Bernie Madoff played out his giant Ponzi scheme on investors who lived in the same exclusive Palm Beach neighborhood where he had a home. And last week Florida governor Charlie Crist called for a statewide grand jury to investigate what he called “a culture of corruption,” predominantly in South Florida. At his press conference, he noted that he has suspended or fired 31 public officials since he took office early in 2007.

To their credit, the citizenry here is exercised over these matters — part of the reason this community meeting was convened. Are they fighting a hopeless battle? I don’t think so. History is on their side. In the nineteenth century, when New York City fell into the clutches of Tammany Hall, it took 80 years to break the corruption of the Democratic Party’s political machine. By the end of the twentieth century, Hong Kong took only several decades to do it: After a siege of corruption so notorious that firemen at burning houses refused to turn on the water until the owners paid a bribe, an Independent Commission Against Corruption, set up in 1974, helped Hong Kong become one of the cleanest jurisdictions in the world. And just this year, former Illinois governor Rod Blagojevich was thrown out of office in a matter of months over his efforts to sell the Senate seat vacated by Barack Obama to the highest bidder.

All of which should make the case for ethics awards. Shouldn’t the investigators, reformers, and leading citizens in these cases be honored? Shouldn’t those with the moral courage to stand up and fight be celebrated? Shouldn’t a thoughtful award committee be able to determine the best candidates?

In theory, yes. But before rushing into it, the good citizens of Palm Beach County might look across the state to Hillsborough County and its county seat, Tampa. There, a moral courage award sponsored by the county commissioners and named for Ralph Hughes, a prominent local anti-tax campaigner, has just come a cropper. After his death, the IRS billed his estate for nearly $70 million in unpaid levies, and the U.S. Department of Justice is suing the company he owned to recover $300 million in back taxes. Perhaps because this embarrassing story was featured in a page-one Wall Street Journal story several weeks ago, the county won’t be making an award this year.

The problem with such awards is that ethics is not an inoculation, but a process. It’s something you measure over time. And that measurement can be difficult. To be sure, community leaders may engage in specific acts of undeniable moral courage. In a given instance, they can speak truth to power, defend noble but unpopular causes, or publicly announce their own mistakes. But what if, after they do so, they descend into blatant moral idiocy? Does their later history invalidate their earlier integrity? Not unless new facts have come to light. Then don’t they still deserve the award? That depends on the purpose of the award. If the honoree is plagued by subsequent moral failings, how effective will the award be in inspiring a new generation? Should we hold up as a moral exemplar someone who, one cold winter night, stood up for the homeless — only later to become a notorious wife-beater?

The problem is that we can’t — and shouldn’t — compartmentalize ethics. There’s no such thing as “political ethics” that is separate from personal ethics or business ethics or legal ethics. There’s only ethics. It’s part and parcel of everything we do. Most awards in the business or community arenas don’t have to rise to that high standard. They can focus just on leadership or excellence in innovation or skill in athletics or the arts. Yet even there, ethics is inherent in every award. Should a baseball Hall of Fame recipient be removed if future investigations discover that he excelled only because he used illegal steroids? Should we honor a CEO of the Year if we later learn she cooked the company’s books to win the prize? Should a highly praised new author be admired if he’s later found to have plagiarized? No in each case, we say — not because these people didn’t have outstanding records, but because the ethical lapses compromised everything they did.

Ethics awards are inviting, to be sure. And I suspect, with immense care, they can be properly done. But I have one request of any award committee. First, go see the movie The Informant! (the punctuation is part of the title), based on the true story of Mark Whitacre, a top corporate executive at agribusiness giant Archer Daniels Midland. Was he a whistle-blower and a reformer — or a mole and a con man? When lying becomes so subtle, what does it mean to say, “There stands a noble life”? If you’d given him an award, at what point would you wish you hadn’t?

In questions of awards, the old Russian adage still rings true: “Trust, but verify.”

©2009 Institute for Global Ethics

Find this and previous weeks’ commentaries online as a podcast titled Ethicast™ now available on iTunes. Subscribe today!

“For a long time, matters that should have been investigated were just ignored, so we’ll have to see what type of accountability we have now.”

– Fred Wertheimer, former president of Common Cause and current president/CEO of Democracy 21, talking to the New York Times about the slow pace and absent punishments by congressional ethics committees.

The Times notes that the House and Senate both rushed to embrace strict ethics enforcement two years ago after the Jack Abramoff scandal. “Since then, however, no member of Congress has been censured, the toughest punishment short of expulsion, despite a number of recent scandals involving sexual impropriety, financial dealings and conflicts of interest. The record illustrates how Congress has struggled to police itself after years in which its ethics committees were often derided as ineffectual.”

The last formal censure in Congress came in 1990, notes the paper, despite the gravity of the Abramoff affair and other scandals involving members of Congress, including Larry Craig (R-Idaho), Randy Cunningham (R-Calif.), Tom DeLay (R-Tex.), John Ensign (R-Nev.), Mark Foley (R-Fla.), William Jefferson (D-La.), Charles Rangel (D-NY), and David Vitter (R-La.).

Source: New York Times, Oct. 17.

For more information, see related Newsline Commentary, Oct. 12.

U.S. Congress casts an eye on bonus payouts at AIG; British regulator warns against return to high-flying compensation practices; President Obama rails against health insurance industry; Japan’s economic head says there will be no “aping” of U.S. business practices on his watch; Nigeria’s banks are in the midst of crisis thanks to a huge roll of deadbeats, say press reports

VARIOUS DATELINES
The week’s top ethics news dealt with a variety of global issues revolving around banking, business, and finance. Among the stories:

• AIG was back in the news last week after a new watchdog report criticized the U.S. Treasury Department for failing to properly oversee bonus payout plans at the troubled firm, reports ABC News. AIG, which melted down after becoming heavily involved in exotic mortgage-based financial instruments, ignited a business-ethics firestorm when it paid out millions of dollars in retention bonuses after being bailed out by the government. Neil Barofsky, the special inspector general for the government’s $700 billion Troubled Asset Relief Program, said Treasury essentially abdicated its oversight duties of compensation structures, according to ABC. Barofsky’s remarks came during a congressional hearing into whether Wall Street-style bonuses are merited at a firm that is propped up by taxpayer dollars and is blamed widely for playing a part in the global economic collapse, notes the Christian Science Monitor.
• London is seeing an “unacceptable return” to past practices of excessive bonuses, says U.K. Business secretary, Lord Mandelson. The London Daily Telegraph reports that the government may crack down if banks show they are handing out excessive rewards to high-earning staff. The remarks came after it was disclosed that Goldman Sachs, one of the better-paying financial institutions in London and New York, is on track to pay record bonuses this year, reports the Telegraph.
• President Obama slammed the health insurance industry last week, saying that its quest for profits is leading the industry to “kill reform at any cost.” In his Saturday radio and internet address, the President said that the health industry is “rolling out the big guns and breaking open their massive war chest to marshal their forces for one last fight to save the status quo,” reports the Washington Post. “They’re filling the airwaves with deceptive and dishonest ads,” Obama continued. “They’re flooding Capitol Hill with lobbyists and campaign contributions. And they’re funding studies designed to mislead the American people.”
• Japan’s new Financial Services minister last week demanded that firms in his nation return to “traditional business practices,” saying there must be no “aping of America.” Shizuka Kamei told the Times of London’s Asia business correspondent, Leo Lewis, that companies are not “money-making tools” for enriching shareholders and management, asserting that they must embrace the “social meaning” of being corporations. Kamei called for a return to the spirit of “unity and cooperation” in which employees were offered what amounted to jobs for life and profits were equitably distributed among employees, business partners, and subcontractors. The Times notes that many investors likely will be displeased by those comments because “traditional” Japanese firms had gained an international reputation for putting shareholder returns well down on their list of priorities. Also, the Times notes, “traditional” business models were regarded by some as factors in making Japanese business sluggish and uncompetitive.
• Nigeria is caught up in a banking crisis, reports the BBC, with debtors failing to repay almost $2.5 billion in loans. The scandal, which includes alleged deadbeats who occupy high positions in government and commerce, has resulted in a government takeover of several banks as well as several arrests, according to the BBC.

Sources: Washington Post, Oct. 17 — Telegraph, Oct. 16 — Times of London, Oct. 15 — ABC, Oct. 15 — Christian Science Monitor, Oct. 15 — BBC, Oct. 15.

For more information, see: Related Newsline story, Oct. 12 — Related Newsline story, Sep. 21 — Related Newsline story, Sep. 14 — Related Newsline story, Aug. 24 — Related Newsline Commentary, July 13.

Filmmaker alleges some British tabloids were ready to buy what they thought was private medical information on movie stars; Boston hospital bans social networking because of privacy concerns; Canadian government shelves plans to expand privacy protections, according to report

VARIOUS DATELINES
The ethics of privacy captured headlines worldwide last week. Among the stories:

• Without fanfare, the Canadian government has quietly abandoned plans to expand privacy laws, according to a report from the Canadian Press news service. Privacy advocates say that current policies are outdated and do not cover the threats posed by modern technologies such as surveillance cameras and DNA databases. But Canada’s justice minister said that the proposed expansion of the laws, as planned, would be difficult to enforce and would inappropriately expand government power.
• Three British tabloids discussed buying confidential medical data about famous actors — unaware that they were being filmed in a hoax set up by documentary filmmakers, according to Reuters. The filmmakers posed as members of the public to offer fabricated stories to the papers, with one hoaxer claiming to be an aide at a fictitious cosmetic surgery clinic. According to the Reuters report, representatives from three tabloids said they would need to see proof of the claims, with one saying the information could potentially be worth thousands of dollars. Under British law, obtaining medical records without consent can be a violation of privacy laws unless the media can prove that obtaining the information served the public interest, notes Reuters.
• A Boston hospital has banned the use of Facebook and other social media within the building, according to technology trade journal InformationWeek. New England Baptist hospital said it made the move after checking with other hospitals in the city — some that have similar bans, but others that view social networking as a way to build morale and community. A spokesperson for New England Baptist said that in the end the decision came down to protecting patient privacy. InformationWeek notes that many hospital officials in Boston and elsewhere worry that informal chatting on social media may cross the line into discussion of specific patients.

Sources: Canadian Press, Oct. 15 — Reuters, Oct. 15 — InformationWeek, Oct. 15.

For more information, see: Related Newsline story, Oct. 12 — Related Newsline story, Oct. 5 — Related Newsline story, Sep. 28 — Related Newsline story, Sep. 21 — Related Newsline story, Sep. 14.

Researchers take an interesting view of how to convince people to protect others and themselves from the spread of swine flu

LONDON
A potentially severe public-health issue was coupled with moral debate over one of the most mundane of all actions last week — and the conclusion came down to an examination of the effectiveness of public shaming.

The issue is washing one’s hands after using the restroom.

TIME magazine reports that a recent study tracking hand-washing habits in England found that only a third of men and two-thirds of women washed their hands with soap and water.

But the study didn’t stop there: Researchers posted various signs on an electronic display at the entrance to restrooms in an effort to gauge the most effective way to promote hygiene.

Overall, the most persuasive message prompting hand washing was, “Is the person next to you washing with soap?” reports National Public Radio.

After that, the effectiveness of messages was found to vary between men and women. Women responded better to gentle reminders such as “Water doesn’t kill germs, soap does,” reports the CBC. Men were more strongly persuaded by messages that prompted disgust, including, “Soap it off or eat it later.”

According to the U.K. Guardian, there’s a potentially deadly serious side to the study. Health officials all over the world are stepping up efforts to promote hand washing in order to prevent the spread of the H1N1 flu virus.

Authors of the study, faculty from the London School Tropical Medicine, write that hand washing with soap is the most cost-effective method of disease control. “It could save more than a million lives a year from diarrhoeal diseases, and prevent respiratory infections — the biggest causes of child mortality in developing countries,” they write in the American Journal of Public Health, according to the Guardian.

Incidentally, the results were monitored by internet sensors attached to the faucets and soap dispensers. No cameras were placed inside the restrooms.

Sources: TIME, Oct. 15 — CBC, Oct. 15 — NPR, Oct. 15 — Guardian, Oct. 15.

For more information, see: Related Newsline story, Aug. 24 — Related Newsline story, Aug. 10 — Related Newsline story, July 20 — Related Newsline story, July 6 — Related Newsline story, May 4.

In other news from ethics and education: Singapore focuses on medical ethics, and an Indian conference looks at business-ethics curricula from the viewpoint of a spiritual guru

VARIOUS DATELINES
Several reports from the world press last week focused on aspects of ethics education. Among the coverage:

• The implications of zero-tolerance rules were debated last week following the suspension of a six-year-old boy who took a camping utensil to school. The device contains a small fold-out knife. The boy was suspended by his Delaware school district and ordered to a school for troubled children, prompting national scrutiny. According to the New York Times, the district now says it will tone down punishments for kindergartners and first-graders, but will retain policy provisions for older students caught with “dangerous instruments.” The case echoed a previous incident in the district in which an elementary school student was suspended for a year for bringing in a birthday cake with a knife to cut it, reports the Times.
• Ethics education has become an increasingly important component of the curriculum in Singapore, reports AsiaOne, one of the region’s largest news portals. Last year, Singapore recruited Alistair Campbell, a highly regarded medical ethicist, to expand its curriculum. Campbell told AsiaOne that his goal is to keep ethics front and center in medical studies and care. Ethics, he says, often moves to the background as studies and clinical work pile up, and busy clinicians begin to focus on diseases instead of people. ” The patient is the ‘hip fracture in Bed Six’ rather than someone’s grandmother,” Campbell said.
• Integrating ethics into business management education was the central theme of a major international conference held last week in Bangalore, reports the Times of India. While management curricula across the globe are under scrutiny after the recent economic meltdown, the Bangalore conference took an angle not commonly discussed: analysis by spiritual guru Swami Sukhabodhananda. “Lack of harmony between internal energies is preventing us from following ethical principles involved in a business. Ego is the biggest disorganizer. We need to creatively address this issue in education,” Swami Sukhabodhananda said, according to the Times.

Sources: New York Times, Oct. 15 — AsiaOne, Oct. 15 — Times of India, Oct. 11.

For more information, see: Related Newsline story, Oct. 5 — Related Newsline story, Sep. 28 — Related Newsline story, Sep. 28 — Related Newsline story, Sep. 21 — Related Newsline story, Sep. 14.

Protests over blogging rules, a commercial that some say ridicules a political candidate for his weight problem, and a campaign that encourages consumers to brag about their sexual conquests raise issues and eyebrows

VARIOUS DATELINES
Advertising and ethics had some uneasy encounters last week. Among them:

• Political advertising in New Jersey crossed an ethical line by getting too personal about one candidate’s weight, according to some critics who say a commercial attacking candidate Chris Christie, who is challenging incumbent governor Jon Corzine, goes too far. Newark Star-Ledger columnist Steve Adubato comments: “It’s been hard to avoid a Jon Corzine commercial on the air accusing Chris Christie of ‘throwing his weight around’ in connection with some highly publicized traffic incidents in which he wasn’t ticketed. The argument is that Christie used his influence as U.S. Attorney to get out of what most New Jerseyans would have taken a hit for. But the visual of Christie getting out of a car as the ad talks about him ‘throwing his weight around’ is embarrassing at best. He looks big — really big. He is a big guy and this, clearly, is not the best angle of him. To any reasonable person, the spot is intended to draw attention to Christie’s girth. The Democrats will deny it, but I’ve got pretty good sources in the Corzine campaign who know exactly what this ad was intended to accomplish.” Corzine has denied that the commercial intended to mock Christie’s weight, the Philadelphia Inquirer reports.
• PepsiCo’s attempt at innovative advertising for its high-caffeine Amp Energy Drink is causing a controversy because of its lurid approach, reports the San Francisco Chronicle. The drink was advertised via an iPhone application called “Amp Up Before You Score,” promising “up-to-the-minute info, feeds, lines and much more to help you amp up and talk to your favorite kinds of women — 24 in all.” Pepsi has apologized for the pre-programmed pickup lines as well as for urging Amp drinkers to upload details of their sexual conquests on social networks, reports the Chronicle. As of this writing, though, the application is still available.
• New U.S. Federal Trade Commission rules requiring that bloggers disclose any freebies or other in-kind benefits they’ve received for writing product reviews was attacked as unconstitutional by a trade organization last week. AdWeek reports that the Interactive Advertising Bureau claims that the restrictions unfairly target Internet communications and threaten to muzzle free speech. “What concerns us the most in these revisions is that the Internet, the cheapest, most widely accessible communications medium ever invented, would have less freedom than other media,” wrote Randall Rothenberg, the trade group’s head. “These revisions are punitive to the online world and unfairly distinguish between the same speech, based on the medium in which it is delivered.”

Sources: Philadelphia Inquirer, Oct. 16 — San Francisco Chronicle, Oct. 15 — Newark Star-Ledger, Oct. 15 — AdWeek, Oct 15.

For more information, see: Related Newsline story, Oct. 12 — Related Newsline story, Oct. 5 — Related Newsline story, Aug. 10 — Related Newsline story, May 18 — Related Newsline story, Apr. 20.