Why should directors, executives, and accountants understand consequentialism, deontology, and virtue ethics?
> If you were an auditor, would you buy a new car at a dealership you audited for 17% off list price?
> The Prairieland Bank was a medium- sized mid-western financial institution. The management had a good reputation for backing successful deals, but the CEO (and significant shareholder) had recently moved to San Francisco to be “close to the big-bank cent
> If the provision of management advisory services can create conflicts of interest, why are audit firms still offering them?
> An auditor naturally wishes his or her activity to be as profitable as possible, but when, if ever, should the drive for profit be tempered?
> Which type of conflict of interest should be of greater concern to a professional accountant: actual or apparent?
> Independence, as defined on p. 432, seems very straightforward. Why did the IFAC-IESBA 2018 International Code of Conduct for Professional Accountants allocate roughly 50% of its space to cover the International Independence Standards that make up Parts
> Why do more professional accountants not report ethical wrongdoing? Consider their awareness and understanding of ethical issues as well as their motivation and courage for doing so.
> Where on the Kohlberg framework would you place your own usual motivation for making decisions?
> Why did the SEC ban certain non-audit services from being offered to SEC-registrant audit clients even though it has been possible to effectively manage such conflict of interest situations?
> What is the difference between exercising “due care” and “exercising professional skepticism”?
> How do the NOCLAR Standards change the traditional practice of maintaining confidentiality of audit or client information? Why?
> What is the difference between an honest financial statement and one with integrity?
> Sam, I’m really in trouble. I’ve always wanted to be an accountant. But here I am just about to apply to the accounting firms for a job after graduation from the university, and I’m not sure I want to be an accountant after all.” “Why, Norm? In all those
> What is the role of an ethical culture and who is responsible for it?
> How can a company control and manage conflicts of interest?
> Can an apparent conflict of interest where there are adequate safeguards to prevent harm be as important to an executive or a company as one where safeguards are not adequate?
> When should an employee satisfy his or her self-interest rather than the interest of his or her employer?
> What should an employee consider when considering whether to give or receive a gift?
> Explain why corporations are legally responsible to shareholders but are strategically responsible to other stakeholders as well.
> What is the role of a board of directors from an ethical governance standpoint?
> Do professional accountants have the expertise to audit corporate social performance reports?
> Should professional accountants push for the development of a comprehensive framework for the reporting of corporate social performance? Why?
> Descriptive commentary about corporate social performance is sometimes included in annual reports. Is this indicative of good performance, or is it just window dressing? How can the credibility of such commentary be enhanced?
> On April 13, 2006, Bausch & Lomb (B&L) CEO Ron Zarrella indicated that B&L would not be recalling their soft contact lens cleaner Renu with MoistureLoc. Drugstores in the United States were, however, removing the product from their shelves due to a conce
> In Canada, selling body parts, such as organs, sperm and eggs, is illegal. Selling blood is not. Canadian Blood Services, which manages the blood supply for Canadians, neither pays for nor sells blood. It is freely available to whoever needs it. A simila
> If Lynn Stout is correct, that the drive for shareholder value is a myth, why do so many companies continue to use it as a goal?
> Why is it suspected that corporate psychopaths gravitate to certain industries, and what should corporations within those industries do about it?
> If you were asked to evaluate the quality of an organization’s ethical leadership, what would the five most important aspects be that you would wish to evaluate, and how would you do so?
> Why should an effective whistle-blower mechanism be considered a “failsafe mechanism” in SOX Section 404 compliance programs?
> Is the SOX-driven effort being made to check on the effectiveness of internal control systems worth the cost? Why and why not?
> Other than a code of conduct, what aspects of a corporate culture are most important and why?
> How can a corporation integrate ethical behavior into their reward and remuneration schemes?
> How could you monitor compliance with a code of conduct in a corporation?
> Why should codes focus on principles rather than specific detailed rules?
> Are one or more of the fundamental principles found in codes of conduct more important than the rest? Why?
> Mega Brands has been selling Magnetix toys for many years. It also sells Mega Bloks, construction toys based on Spider-Man, Pirates of the Caribbean, as well as other products in over 100 countries. In 2006, Mega Brands had over $547 million in revenue,
> What is the most important contribution of a corporate code of conduct?
> Must a company be incorporated as a benefit corporation in order to legally consider actions other than those in pursuit of profit?
> From a virtue ethics perspective, why would it be logical to put in place a manufacturing process beyond legal requirements?
> How can a decision to down-size be made as ethically as possible by treating everyone equally?
> How would you convince a CEO not to treat the environment as a cost-free commons?
> Under what circumstances would it be best to use each of the following frameworks: the philosophical set of consequentialism, deontology, and virtue ethics; the modified 5-question; the modified moral standards; and the modified Pastin approach?
> Is the modified 5-question approach to ethical decision making superior to the modified moral standards or modified Pastin approach?
> If a framework for ethical decision making is to be employed, why is it essential to incorporate all four considerations of well-offness, fairness, individual rights and duties, and virtues expected?
> Is it wise for a decision maker to take into account more than profit when making decisions that have a significant social impact? Why?
> Before the recent financial scandals and governance reforms, few corporate leaders were selected for their “virtues” other than their ability to make profits. Has this changed, and if so, why?
> On July 23, 1993, the U.S. Food and Drug Administration (FDA) approved interferon beta-1b (brand name Betaseron), making it the first treatment for multiple sclerosis to get FDA approval in twenty-five years. Betaseron was developed by Berlex Laboratorie
> Give an example of behavior that might be unethical even though ‘‘everyone is doing it.”
> List the companies that have faced ethical tragedies due to the following failings in their ethical culture: a. Lack of ethical leadership b. Lack of clarity about important values c. Lack of ethical awareness and expectations by employees d. Lack of mon
> Commuters who have more than one passenger in the car are permitted to drive in a special lane on some highways while all the other motorists have to contend with stop-and-go traffic. Does this have anything to do with ethics? If so, then assess this sit
> How does a business executive demonstrate virtue when dealing with a disgruntled shareholder at the annual meeting?
> Assume that Firm A is a publicly traded company that puts its financial statements on the web. This information can be accessed and read by anyone, even those who do not own shares of Firm A. This a free-rider situation, where an investor can use Firm A
> Is there any categorical imperative that you can think of that would have universal application? Isn’t there an exception to every rule?
> Since happiness is extremely subjective, how do you objectively measure and assess happiness? Do you agree with J. S. Mill that arithmetic can be used to calculate happiness? Is money a good proxy for happiness?
> Is someone who makes an ethical decision based on enlightened self-interest worthy of more or less praise than someone who makes a similar decision based solely on economic considerations?
> How would you respond when someone makes a decision that adversely affects you while saying, “it’s nothing personal, it’s just business”? Is business impersonal?
> It was a battle of titans. Warren Buffet, long considered the world’s most successful value investor through his Berkshire Hathaway Inc. and a major shareholder in Coca Cola Co., claimed that Valeant Pharmaceuticals business model was “enormously flawed.
> It seems likely that the top executives of the major banks involved in the manipulation of the LIBOR rate were aware of the manipulations, and of the massive profits and losses caused by those manipulations. Why did they think that such manipulations co
> The lack of corporate accountability, and an increased awareness of inequities and other questionable practices by corporations, led to the Occupy Movement. Identify and comment upon additional recent instances which have led to concerns over the legiti
> In each case discussed at some length in this chapter – Enron, Arthur Andersen, WorldCom, and Bernie Madoff – the problems were known to whistleblowers. Should those whistleblowers each have made more effort to be heard? How?
> Rank the three worst villains in the film Wall Street: Money Never Sleeps (2010). Explain your ranking.
> Use the Jennings “Seven Signs” framework to analyze the Enron and WorldCom cases in this chapter.
> Many cases of financial malfeasance involve misrepresentation to mislead boards of directors and/or investors. Identify the instances of misrepresentation in the Enron, Arthur Andersen, and WorldCom cases discussed in this chapter. Who was to benefit, an
> Is there anything else that can be done to curtail this sort of egregious business behavior other than legislation?
> The events recorded in this chapter have given rise to legislative reforms concerning how business executives, directors, and accountants are to behave. There is a recurring pattern of questionable action followed by more stringent legislation, regulatio
> Is the 2019 Business Roundtable Statement (BRS) redefining the purpose of corporations likely to make any difference to boards of directors and to activists?
> The J & J (talcum powder) and Wells Fargo (unethical incentives) scandals suggest that even companies whose reputations are based on ethical conduct can suffer ethical scandals. Why is this?
> Decades after the event, Johnson & Johnson (J&J), the 130-year-old American multinational, is still praised for swiftly recalling nearly 31 million bottles of Tylenol in 1982 when in-store tampering resulted in several cyanide poisoning–related deaths. T
> The legal consequences for frauds, bribery, or other malfeasance have become very severe, particularly since 2009. Why has this happened? Are higher legal consequences having much of an impact?
> What are the reactions and outcomes that can be attributed to the leaked Panama and Paradise Papers?
> The CEOs of Valeant Pharmaceuticals and Turing Pharmaceuticals took the view that they could jack up the price of their drugs by huge percentages because they could, and they failed to consider seriously enough whether they should. Whose fault was this?
> At GM and Takata, whose improper actions finally came to light, a whistleblower raised objections to the actions before or very early in the production process. Why were their concerns ignored and risks taken? In VW’s case, why didn’t a whistleblower com
> The new anti-bribery prosecution regime involves serious charges and penalties for bribery in foreign countries during past times when many people were bribing in the normal course of international business, and penalties were not levied. Is it unreason
> Do you think that the events recorded in this chapter are isolated instances of business malfeasance, or are they systemic through the business world?
> What three ethics risks must a company guard against, and why?
> Why is an ethical corporate culture important?
> Why should a professional accountant be aware of the Ethics Code of the International Federation of Accountants (IFAC)?
> Why is it important for a professional accountant to understand the ethical trends discussed in this chapter?
> In 1964, at the1 invitation of the Ecuadorian government, Texaco Inc. began operations through a subsidiary, TexPet, in the Amazon region of Ecuador. The purpose of the project was to “develop Ecuador’s natural resources and encourage the colonization of
> Will the NOCLAR standards assist or hurt the accounting profession?
> Is a professional accountant a businessperson pursuing profit or a fiduciary that is to act in the public interest?
> What are the common elements of the three practical approaches to ethical decision making that are briefly outlined in the chapter?
> Why are philosophical approaches to ethical decision making relevant to modern corporations and professional accountants?
> How can conflicts between the interests of stakeholders be resolved by a corporation’s management?
> How can a corporation show respect for its stakeholders?
> Why are the expectations of a corporation’s stakeholders important to the reputation of the corporation and to its profitability?
> The advantage of commission sales is that if the salesperson puts in effort and makes a sale, then both the company and the sales- person benefit. The salesperson receives a commission, and the company receives the proceeds of the sale, net of the commis
> Although the Canadian banks did not suffer as much as other financial institutions around the world, they were not immune from the economic consequences of the subprime mortgage meltdown. In Canada, the earliest crisis concerned the liquidity of asset-ba
> In December 2002, Stan O’Neal became CEO of Merrill Lynch & Co. Inc., the world’s largest brokerage house. Known as “Mother Merrill” to insiders, the firm had a nurturing environment that accepted lower profit margins so that veteran employees could rema
> On April 24, 1985, Warren M. Anderson, the sixty-three-year-old chairman of Union Carbide Corporation, had to make a disappointing announcement to angry stockholders at their annual meeting in Danbury, Connecticut. Anderson, who had been jailed briefly b
> American International Group, Inc. (AIG) was the world’s largest insurance company with major offices in New York, London, Paris, and Hong Kong. From 2005 to 2008, the company had a series of accounting problems. First, it was convicted of fraudulent fin
> During the depths of the subprime lending crisis in 2008, a major U.S. investment banking firm, Goldman Sachs, required a $10 billion bailout from the U.S. government’s Troubled Asset Relief Pro- gram (TARP) to stay afloat. But in 2009, Goldman’s fortu
> On September 15, 2008, Lehman Brothers Holdings Inc., one of the world’s most respected and profitable investment banks, filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court in the Southern District of New Yo
> Short selling occurs when a seller borrows shares from a brokerage house and then sells those shares. At a later date, the seller buys the shares and delivers them to the brokerage house. If the price falls during the shorting period, then the short sell
> Allegations of serious impropriety and perhaps illegality surrounding Goldman Sachs’s contribution to the 2008 financial crisis have been well publicized. Allegations included trading for their own benefit directly against the interests of its clients (e
> In 2007, Danske Bank, Denmark’s largest bank, bought Finland’s Sampo Bank, which had a tiny branch office in Tallinn, Estonia. From 2007 until 2015, €200 billion of suspicious money flowed through the Tallinn branch, approximately ten times the gross dom
> Headquartered in London, Barclays is an investment and financial services bank with operations throughout the world. In December 2015, Barclays hired Jes Staley as CEO. Previously, Staley had been a 30-year veteran with JP Morgan in its investment bankin
> Assume that you have just been placed in charge of the Claims Investigation Unit of a small insurance company based in Minneapolis. Your personnel department has provided the following details on your personnel. However, because your insurance company is
> On May 17, 2010, a federal jury in New York decided that Novartis, a Swiss- headquartered drug company, was guilty of discriminating against women and should pay the twelve women plaintiffs who testified in the trial $3.37 million in compensatory damages
> In October 2008, Jill Hubley, a former senior strategist in the Dell Americas human resource group, a Dell Inc. division located in Texas, filed a lawsuit against the world’s second-largest maker of personal computers. She alleged that Dell had systemati
