An ethical approach to business

City would link incentives, behavior

By Steve Patterson
Times-Union staff writer - published in 2000 in the Jacksonville Times Union

Racism charges at the Adam's Mark hotel chain are helping fuel an ethical debate at Jacksonville City Hall.

Citing the massive downtown hotel project as an example, members of the city Ethics Commission are pondering whether companies that receive taxpayer money to move to Jacksonville should have to prove they do business in an ethical manner.

Commission members expect to propose legislation to that effect to the City Council, though that will not be for some time. If the idea ultimately becomes law, Jacksonville apparently would be among the first cities in the country to set such a standard.

"It's the first case I'm aware of where a municipality has taken or considered this type of step," said Ed Petry, executive director of the Ethics Officer Association, a group supported by about 650 businesses with ongoing programs to promote good corporate conduct.

How stringent Jacksonville's criteria would be remains to be seen. But the commission's first discussion of the idea last week touched on subjects including racial discrimination, sexual harassment, fair business practices and respect for employees.

The idea reflects goals that City Hall embraced when it adopted stronger ethics laws last year, said Commission Chairman Carla Miller. She noted that the law declared an intention to continually create a more moral and honest climate, and required city departments to take continuing steps to that end.

"To not get out our philosophy to companies that want money from us would be an oversight," Miller told other commissioners. "We believe in honesty and respect and we want to do business with companies that feel that way."

To avoid over-regulating small companies, she suggested the rules might apply to firms seeking more than $1 million in aid to expand or move to town. Nearly all large cities offer financial incentives to attract businesses they consider desirable, often bidding among each other for big employers.

A 1998 review found Jacksonville had brokered at least $135 million worth of incentives over a decade.

Adam's Mark Hotels and Resorts received grants, land and other incentives worth about $23 million in 1998 to build an 18-story complex downtown, the largest hotel in Northeast Florida.

Last month, the U.S. Justice Department filed a suit claiming the chain charged African-Americans higher room rates than whites, segregated them away from whites' rooms and kept them out of hotel restaurants.

"That's kind of an example of a company that's having ethical problems at a national level, and we're giving them millions of dollars," Miller said.

Ironically, the head of Adam's Mark said he thinks an ethics requirement is a good idea, too. "I applaud it," said Fred Kummer, president of HBE Corp., the privately held parent of the 21-hotel chain that flatly denies the Justice Department claims. "We certainly would pass muster. . . .

We are a very, very ethical and proper company."

Whether other businesses would be that receptive is an open question. "Lose the idea. Bad idea," said Dennis Donovan, an executive with a Morristown, N.J., site-selection firm that has helped several companies move call centers to Jacksonville. He said companies would worry about being entangled in a fuzzy, hard-to-quantify set of rules that could change from city to city.

"It is not the role of the incentive to be a guidepost for corporate behavior," Donovan said. But the idea is so new that it's hard to tell how businesses would react, said Bob Goforth, a Jacksonville-based site selector.

"Certainly Jacksonville wants to attract companies that are ethical and honest, and for the most part I'm sure they do," he said. "I'm not sure it would be a pivotal factor in the [companies'] decision-making process. . . . I'm not sure it would be a big concern, but I don't know."

Mayor John Delaney has described ethics reform as a priority in his administration. The Mayor's Office is open to new ideas from the Ethics Commission, but would want to look at a concrete proposal before deciding whether to support it, said Susan Wiles, Delaney's chief of staff.

The Jacksonville Economic Development Commission, which oversees incentives for new businesses, routinely checks company backgrounds, including whether companies have been the subject of federal equal employment opportunity lawsuits, said Kirk Wendland, chief of the commission's financial support and analysis division. The agency also checks whether businesses are on federal or state lists of firms convicted of various crimes or suspended from vendor contracts.

Problems found in company background checks are weighed along with other factors in deciding whether to support a company's move, but aren't determining factors by themselves, said Heather Surface, a commission spokeswoman. The hotel deal should teach the city to set its standards higher, said Isaiah Rumlin, president of the Jacksonville branch of the National Association for the Advancement of Colored People.

"To give millions of dollars to companies who have a history of discrimination isn't worthy of our tax dollars," said Rumlin, who sits on the commission.

In addition to the Adam's Mark deal, development officials were second-guessed when they supported a seafood processor's request in 1998 to use $3.5 million in tax-exempt state bonds to move from South Florida to Northwest Jacksonville.

The City Council rejected that deal after a union organizing the firm's South Florida workers, mostly Haitian immigrants, contended the move was an attempt to duck labor problems. The company moved to town with no government aid.

In considering new guidelines for businesses, the Ethics Commission is following an example started by corporate America.

In the past decade, nearly all Fortune 500 firms have begun requiring employees to follow written codes of conduct, and a small but increasing number set a similar standard for business partners, said Petry, whose organization in Belmont, Mass., is made up of companies that use an ongoing ethics-development system similar to that adopted by City Hall.

Although started as a way to limit liability in civil and criminal court cases, some firms have bought into ethics initiatives as a way of expressing deeply held values, said David Smith, president of the Council for Ethics in Economics in Columbus, Ohio. He said cities haven't moved into that arena except to take stands on a few hot-button topics.Some politically liberal communities in the 1980s rejected business with companies invested in South Africa's apartheid system, for example. Others have refused to do business with companies tied to weapons manufacturing or with oil companies accused of pollution or political corruption.

But applying a general ethical yardstick to businesses getting government money would be more involved, he said, and would test whether a city was serious about its standards. "Is this going to be another box to check off when your company starts working with the city?" Smith asked. "This in itself doesn't do much. The question is, what do you do with it?"