When it comes to business ethics, few American corporations have a better image than the H. B. Fuller Company of St. Paul, a leading manufacturer of industrial glues, coatings and paints. Awards, honors and inclusion in various socially conscious mutual funds attest to its standing as a good corporate citizen.

But that reputation is being clouded by the company's handling of a stubborn image-staining problem: the illegal abuse of its shoemaker's glue by homeless Central American children, who have become addicted to the product's intoxicating but dangerous fumes.

Some child welfare advocates, led by Covenant House in New York City, have demanded for years that the company add a noxious oil to its glue to discourage abusers. The company has resisted that approach--possibly because it might reduce the glue's effectiveness, possibly because the smell would be irritating to legitimate users. Fuller will say only that it is doing all it reasonably can to prevent abuse.

Now this simmering dispute may boil over into something more serious for the company's image, and for its shareholders. Lawyers will decide by the end of the year whether to press ahead with a wrongful-death suit against Fuller on behalf of the family of a Guatemalan teen-ager who died in 1993. The legal team is also weighing the expansion of that suit into a class action, said one of the lawyers, Scott Hendler of Austin, Tex. By some estimates, tens of thousands of Central American children sniff some sort of glue.

Officers of Covenant House's Latin American subsidiary are "anxious that we go forward with this case," Mr. Hendler said, "because they are absolutely convinced that Fuller's glue was responsible for the boy's death and that Fuller has been negligent in dealing with this problem."

William Belknap, a Fuller spokesman, would not respond to specific questions but provided a one-page statement. "We are a law-abiding company with a long history of concern for product safety," it said. "We make and sell only legitimate products for legitimate purposes." The statement also listed briefly the steps the company has taken in recent years "to reduce the likelihood" of its glue being abused, including substituting a slightly less toxic formulation and curbs on retail sales in Honduras and Guatemala.

The Fuller experience provides a textbook example of the thorny moral equations that lie beyond the simple arithmetic of the bottom line. But few agree on what lessons it offers: Does it teach that those who pursue the "good citizen" label too aggressively leave themselves vulnerable to attack? Or does it simply underscore how important it is for a corporate citizen to live up to its self-created image?

And Fuller does repeatedly present itself as a good citizen. Year after year it sprinkles its annual reports with statements proclaiming that it has a commendable corporate conscience. In 1992, for instance, its "mission statement" said the company "will conduct business legally and ethically, support the activities of its employees in their communities and be a responsible corporate citizen." In material sent to shareholders, it chose as one benchmark for its overall performance an index of socially responsible companies, thus underscoring that that is a peer group it considers important. And it has endowed a chair in business ethics at the University of Minnesota.

Fuller, of course, is not the only company to be accused of not living up to its own good-citizen image. In September 1994, the Body Shop International P.L.C., the cosmetics retailer whose advertisements stress a commitment to natural products, high environmental standards and philanthropy, was accused of exaggerating its adherence to those principles. And the founders of Ben and Jerry's Homemade Inc. have been tweaked frequently for preaching corporate democracy while practicing a more autocratic management style.

Nor is glue-sniffing a new issue for the makers of solvent-based adhesives. The Testor Corporation added a noxious ingredient to discourage abuse of its hobby glue in July 1969. And Henkel, a German chemical company that competes with Fuller, stopped making certain toxic glues in Central America last year.

But Fuller, which dominates the Central American market with its Resistol brand of glue, seems to have been singled out for more than its share of recent criticism, one industry consultant said. For four years, protesters have demonstrated outside Fuller's annual meetings, often in Minnesota's cold and rain. And some have bought Fuller shares and tried to get their complaints on the record at those meetings.

"If they had a lesser reputation they would be less of a target," said William Boxterman, president of Chemquest Group, a consulting firm in Cincinnati.

Timothy Smith, executive director of the Interfaith Center for Corporate Responsibility, which coordinates the work of 275 religious investors with about $50 billion in assets, agreed that a high profile in the corporate citizenship arena can invite attack. "But as I see it, the hazard is not in acting in a socially responsible way," he said. "The hazard is in over-marketing yourself as a saint."

Whatever the lesson one draws, however, the Fuller case should be required reading for corporate directors, said Lawrence Bear, a New York University professor and co-author of the textbook "Free Markets, Finance, Ethics and Law." As Professor Bear sees it, "the question of how directors ought to act in circumstances like this is a terribly serious one, because when it gets out of hand, it gets into court."

Even if Fuller loses the wrongful-death suit, it would be unlikely to affect, in any meaningful way, the bottom line of a company with more than $30 million in profits on $1 billion in revenues. But if it is expanded to a class action, the impact is more difficult to predict, since that step would make the case more difficult for the plaintiffs and more potentially damaging for the company.

The litigation will also be an important test for Fuller's reputation not only at home but in Latin America. In 1994, fully 27 percent of its operating profits of $66 million came from Latin American operations.

The company--no relation to Fuller Brush--has deep roots. Founded in 1887 by Harvey Benjamin Fuller as a one-man wallpaper-paste shop, it now has operations worldwide. Its glues--in more than 10,000 varieties--hold together everything from cars to cigarettes to disposable diapers. The company was run for years by Elmer L. Andersen, a former Minnesota Governor, whose son Anthony L. is now chairman.

How did the Fuller dispute become so bitter? Most participants agree that the answer lies in the events of the summer of 1992, when Fuller's board adopted a resolution that seemed to be a victory for the company's critics.

For years, the directors had been under pressure by a loose alliance of child advocacy groups concerned about the hazards of glue-sniffing among the homeless children of Central America. Those young glue-sniffers are widely called "resistoleros"--for Fuller's Resistol--regardless of which brand they actually abuse. As that summer began, a national television news magazine was preparing to feature Fuller's products as part of the glue-sniffing problem.

Then, on July 16, 1992, the board abruptly but unanimously voted to stop selling Resistol adhesives in central America. As the company explained in its 1992 annual report: "Faced with the realizations that a suitable replacement product would not be available in the near future and that the illegitimate distribution was continuing, the Board of Directors decided that our Central American operations should stop selling those solvent-based Resistol adhesives that were commonly being abused by children."

Local newspapers quoted Mr. Belknap as saying that until an alternative was found, "we simply don't believe it is the right decision to keep our solvent product on the market."

Mary Swenson, a member of the informal Coalition on Resistoleros in St. Paul, said her group was "ecstatic." "We had a party," she recalled. "We had champagne."

But jubilation soon turned to anger. By October 1992, the advocates had learned that Fuller had not stopped selling Resistol in Central America--and did not intend to. It no longer sold the glue to retailers and small-scale users in Honduras and Guatemala, but it did sell large tubs and barrels of it to industrial customers in those countries, and to a broader list of commercial and industrial users in neighboring countries.

According to the company's statement, it has since taken other steps to address the abuse. It has changed the product's formula, dropping the sweet-smelling but highly toxic solvent toluene and substituting the slightly less toxic chemical cyclohexane. it has tried to develop a water-based glue, which is not intoxicating. It has studied the issue "thoroughly and carefully" and has contributed to community programs for homeless children in Central America.

But those who expected Resistol sales in Central America to stop in 1992 describe those steps as a mere image-polishing. Bruce Harris, the director of Latin American programs for Covenant House, asserts that Resistol is still readily available to children in Nicaragua and El Salvador and, to a lesser degree, in Costa Rica. "If they are genuinely concerned about the children," he asked, "why haven't they pulled out of all the countries--as their board mandated?"

Mr. Harris not alone in wondering about the gap between the board resolution of 1992 and the company's subsequent action. Indeed, among experts in business ethics, that remains the biggest mystery.

"They shot themselves in the foot," said Mr. Smith of the Interfaith Center for Corporate Responsibility, who nevertheless gives Fuller high marks for corporate conduct. The company has been raised for a high level of corporate philanthropy, including giving 5 percent of its profits to charity in each country where it operates. Moreover, the company has committed itself to safe environmental practices worldwide--practices "often more stringent than local government standards," Fuller said in an S.E.C. filing last year.

Alice Tepper Marlin, executive director of the Council on Economic Priorities, a leading advocate for socially responsible corporate conduct agreed that the 1992 episode damaged Fuller's credibility. "If a company seems to go back on its commitments, they have sowed such distrust that it makes it very difficult to proceed," she said. "And that is the board's responsibility."

Mr. Belknap, the Fuller spokesman, said none of the company's directors would comment about the handling of the issue, which he said has not been the subject of any other board resolution since the July 1992 action. "I'd have to say that the position statement I provided you with is consistent with the thinking of the board," he said. "I can't really go beyond that."

Whatever happens with the threatened litigation, the dispute has certainly tarnished the company's once-pristine reputation as a good citizen. The attacks are coming on several fronts, including accusations that its paints made and sold abroad exceed United States limits on lead and a quarrel over the company's role as a big supplier of glue to the tobacco industry.

According to Mr. Harris and Ms. Swenson, paints purchased from hardware stores throughout Central America were tested in a St. Paul laboratory. The test results, which were provided to The New York Times, show high levels of lead in many of the samples, including some but not all that are identified by the group as being Fuller products. Even though selling such paint is legal in Central America, critics point out that high lead levels are a known hazard, especially to children.

Asked about the group's accusation, Mr. Belknap said, "We have publicly stated at our annual meeting that all of our products are within the U.S. standards for lead in pain." He would not respond to questions about whether Fuller's Central American paints have always conformed with United States lead standards, and if not, when the formula was adjusted.

Given this history of mutual mistrust and frustration, it is not surprising that the Fuller dispute ultimately would up in lawyers' hands. On Jan. 3, 1995, Mr. Hendler and a co-counsel, Michael Brickman of Charleston, S.C., filed their wrongful-death claim against Fuller in state court in Dallas.

The case was filed in Texas to stop the clock until Mr. Hendler could determine that the statute of limitations for such cases was three years in Minnesota, his preferred venue because he wants to take the case right to Fuller's home town. He then obtained court permission to withdraw the case in Texas, but must refile in Minnesota before the first week in January.

A class action against Fuller is "something that is under consideration," Mr. Hendler said, adding, "We are still evaluating certain factors, such as how much of their product was out there, how many children are affected, and the extent of the impairment caused in the children who use the glue chronically--that's the most significant factor."

But, according to Mr. Smith of the Interfaith Center, Fuller's board may soon face another test in the treacherous world of corporate citizenship, regardless of what Mr. Hendler decides about his lawsuit. "Fuller is a major seller of adhesives to the tobacco industry," Mr. Smith noted. "They are selling glues that go into a lethal product. That is another corporate responsibility issue that Fuller's shareholders will be raising this coming year."

See also "Critics Boiling Over Company's On-going Sales of Glue that Is Sniffed by Latin American Children."