This paper posits that organizational variables are the factors that lead to the moral decline of companies like Enron and Worldcom. The individuals involved created environments within the organizations that precipitated a spiral of unethical decision-making. It is proposed that at the executive level, it is the organizational factors associated with power and decision-making that have the critical influence on moral and ethical behavior. The study has used variables that were deemed to be surrogate measures of the ethical violations (...) (OSHA and EPA violations), the risky shift phenomenon (executive team size), banality of wrong-doing (reputation score for firms) and escalating commitment (tenure with the firm/change in revenue for declining firms). The research found that there were small correlations between ethical violations and the three organizational variables. (shrink)

The recent accounting scandals at Enron, WorldCom, and other corporations have helped to fuel a massive loss of confidence in the integrity of American business and have contributed to a very sharp decline in the U.S. stock market. Inasmuch as these events have brought ethical questions about business to the forefront in the media and public consciousness as never before, they are of signal importance for the field of business ethics. I offer some observations and conjectures about the bearing (...) of the recent scandals on the literature on business ethics. I defend the following contentions: 1. Recent events reveal serious weaknesses of the stakeholder theory about the social responsibilities of business which lacks prohibitions against fraud and deception. This is a glaring deficiency of standard versions of the stakeholder theory, but it is easily remedied by adding explicit prohibitions against fraud and deception. In addition, recent events highlight the stakeholder theory's very naive and unrealistic hopes and expectations for business executives as moral arbiters and agents of social improvement. 2. Recent events do not constitute an objection to the shareholder theory about the social responsibilities of business, however, these events make evident the implausibility of strong versions of the invisible hand theory. 3. Schemes of payment and reward often create perverse incentives for individuals to engage in unethical conduct. 4. Both the shareholder theory and the stakeholder theory need to add a constraint that requires executives to respect the professional obligations of employees. (shrink)

Recent scandals at Enron, WorldCom and Global Crossing have put the ethical spotlight on corporate malfeasance as never before. However, these are the situations in which management knew that they made the wrong choice. As professor Joseph Badaracco of Harvard Business School points out, the real ethical dilemmas arise when people must choose between right and right — where both choices can be justified, yet one must be chosen over the other. Whether or not to reprice stock options represents (...) one such ethical dilemma. Repricing can help exodus of talented employees and motivate them to improve firm performance. However, it alienates shareholders and other workers of the company who are left unprotected from the adverse economic consequences of a stock price decline.In this paper we examine the ethics and the economics of stock option repricing. We find that repricing runs counter to two key tenets of business ethics — distributive justice and ordinary decency. To examine the economics of repricing, we draw upon agency theory to identify situations where repricing has the potential to benefit shareholders. However, a survey of empirical research reveals that these benefits do not translate into reality. Repricing does not improve employee retention or firm performance. In addition, managers benefit by opportunistically timing the repricing. Due to weaknesses in corporate governance such as lack of independence and conflicts of interest, the current repricing practice seems to be at odds with the objective of shareholder wealth maximization, and at a more fundamental level, a violation of board's fiduciary duty to shareholders. We offer suggestions that mitigate the ethically undesirable effects of repricing in the wider context of prevailing corporate governance and regulatory environment. We believe that these suggestions, if properly implemented, can transform repricing from a greed-inspired evil to a valuable compensation tool to retain employees, boost their morale, and enhance stockholder wealth. (shrink)

The American regulatory model of corporate governance rests on the theory of self-regulation as␣the most effective and efficient means to achieve corporate self-restraint in the marketplace. However, that model fails to achieve regular compliance with baseline ethical and legal behaviors as evidenced by a century of repeated corporate debacles, the most recent being Enron, WorldCom, and Refco. Seemingly impervious to its domestic failure, Congress imprinted the same self-regulation paradigm on legislation restraining global business behavior, the Foreign Corrupt Practices Act. (...) This anti-bribery initiative prohibits unethical and illegal payments made to foreign public officials in an effort to eradicate bribery as a rational-choice global market entry strategy. However, this paper illustrates, using newly complied statistics from 1977 to 2008, that the FCPA has not had a dramatic impact on U.S. global corporate behavior despite its recent high profile coverage and the tough regulatory rhetoric about corporate compliance. The paper also extends the prior Cragg and Woof FCPA efficiency study and provides current empirical evidence to resolve several unanswered questions raised by that earlier study. (shrink)

Responsibility and accountability of CEOs has been a major ethical concern over the past 10 years. Major ethical dilemmas at Enron, Worldcom, AIG, as well as other well-known organizations have been at least partially blamed on CEO malfeasance. Interviews with Ken Lay, CEO of Enron, after his 2006 fraud convictions provides an opportunity to document his perceived role in the demise of Enron. Possibly no other CEO has had as much impact on the scrutiny and legalization of business ethics (...) as Ken Lay. This analysis is timely because of many information sources now available and the recent Supreme Court decisions on Enron conviction appeals. Using Ken Lay as the focal point, a review of literature provides the background for research questions to explore the role of the CEO in developing an ethical corporate culture. (shrink)

Of recent time, there has been a proliferation of concerns with ethical leadership within corporate business not least because of the numerous scandals at Enron, Worldcom, Parmalat, and two major Irish banks – Allied Irish Bank (AIB) and National Irish Bank (NIB). These have not only threatened the position of many senior corporate managers but also the financial survival of some of the companies over which they preside. Some authors have attributed these scandals to the pre-eminence of a focus (...) on increasing shareholder value in Western business schools and/or to their failure to inculcate ethical standards. In this paper, we challenge these accounts and the aetiological view of knowledge from which they derive but are grateful for the consensus that they convey regarding the importance of business ethics. The paper focuses on different approaches to ethical leadership concluding with a view that some hybrid of MacIntyre’s virtue ethics and Levinas’s ethics of responsibility may serve as an inspiration for both educators and practitioners. (shrink)

The global corporate scandals such as Enron, Worldcom and Global Crossing have raised fundamental issues of business ethics as well as economic, social and anthropological questions concerning the nature of business competition and global capitalism. The purpose of this conceptual paper is to introduce the concept of "welfare exchange" to the existing notions of economic, social and anthropological notions of business and exchange in markets and society in the 21st century. Global competition and business success in the 21st century (...) continue to raise the nature of economic value and the interaction among diverse actors in international markets, institutions and society. We believe that the nature of such exchange between consumers and organizations, which can also be termed social marketing, need to increasingly take into account a welfare and ethical component. In this paper, we introduce our concept of welfare exchange to emphasize the importance of such welfare and ethical issues in the global business environment of the 21st century. (shrink)

We began writing the first edition of this textbook in 2006, soon after a wave of major corporate scandals had shaken the financial world. Headlines made the companies involved in these ethical scandals household names: Enron, WorldCom, Arthur Andersen, KPMG, J.P. Morgan, Merrill Lynch, Morgan Stanley, Citigroup, Salomon Smith Barney. At that time, we suggested that, in light of such significant cases of financial fraud, mismanagement, criminality, and deceit, the relevance of business ethics could no longer be questioned.

Much light can be shed on events which characterize or underlie scandals at firms such as Enron, Arthur Andersen, Worldcom, ImClone, and Tyco by appealing to the notion of ethical distance. Various inquiries have highlighted the difficulties in finding or identifying particular individuals to blame for particular events, and in the context of situations as complex as these it can sometimes be helpful to investigate the comparative ethical distance of various participants in these events. In this essay I offer (...) a characterization of ethical distance in terms of moral responsibility, and in doing so I describe and illustrate the rough inverse correlation between moral distance and degrees of moral responsibility. I urge that the concept of ethical distance is capable of shedding light upon situations in which several people are involved in bringing about a state of affairs. I then argue that moral responsibility cannot do justice to all situations involving ethical distance. When the distance between a person and a state of affairs grows sufficiently large, a different type of treatment is called for, and I introduce the notion of moral taint to describe the moral status of agents in these situations. (shrink)

Recent highly publicized ethical breaches including those at Enron and WorldCom have focused attention on ethical behavior within the accounting profession. At the heart of the debate is whether ethical attitudes of accountants are to blame. Using a nationally representative sample of accounting practitioners and a multidisciplinary student sample at two Southern United States universities, we compare sample responses to 25 ethically charged vignettes to test whether they differ. Overall, we find no significant difference - even for a specific (...) "accounting tricks" vignette, which resembles the Enron and WorldCom situations. We do find, however, that the practitioners were more accepting of vignettes that involved physical harm to individuals and those that were legal. We postulate that accounting practitioners may apply a legalistic framework to their assessment of the acceptability of each vignette. Focusing on an "accounting tricks" vignette, we also find no significant difference between auditors and institutional practitioners compared to all other types of accountants in the sample. We conclude that ethical attitudes of accounting practitioners do not differ significantly by specialty area. (shrink)

In recent years, there has been increasing concern about unethical conduct within corporate business, not least because of the scandalous behavior of former chief executives at top blue chip companies such as Enron, Worldcom, Parmalat, and Volkswagen. These scandals have not only threatened the privileged position of senior corporate employees but also the solvency of the companies they manage and lead. The high profile cases of corporate crime and corruption that occurred in the early 2000s together with the 2008 (...) Wall Street bailouts and the growth in criminal prosecutions since have raised the profile of business ethics to an unprecedented level. Greater public sensitivity toward and awareness about the unlawful and immoral conduct of firms in the United States and elsewhere, has created demand for organizations to become more accountable and socially responsible and prompted greater regulatory scrutiny. It has also served to highlight the embryonic and delimited state of research and scholarship on business ethics, where the focus has tended to remain on leadership. A neglected, though important, line of ethical enquiry concerns followership. Corporate wrongdoing would be less formidable and extensive if it was not aided and abetted. Two key questions arise. First, what prompts followers to support rather than oppose bad leaders? Second, what can be done to stem or at least curtail their allegiance to bad leaders? (shrink)

The sheer impact of the recent global financial turmoil and scandals (such as Enron and WorldCom) has demonstrated that unbridled commercial entrepreneurs who are allowed to pursue their short-term opportunities regardless of the consequences has led to a massive depreciation of the wealth of nations, social livelihood and environmental degradation. This article suggests that the time has come for entrepreneurs to adopt a more integrative view of business that blends economic, social and environmental values. Social entrepreneurs present such a (...) proposition through their deep commitment towards the social vision, appreciation of sustainable practices, innovativeness, ability to build social networks and also generate viable financial returns. It could be expected that social entrepreneurs often possess certain distinct personality characteristics which define their behaviours/actions. Personality traits are partly developed by innate nurturing, socialization and education. These tacit traits are also formed values/beliefs held and play an important role in driving social entrepreneurial decision making. Thus, personality traits may influence the intentions and the manner in which the individual acts. We hold that if social entrepreneurship is to be effective and impactful, business and management education can facilitate the development of these critical personality traits. Thus, this study primes at determining the personality traits that influence social entrepreneurs’ start-up intentions. It also reinforces the findings that personality traits do influence entrepreneurship in general. This study examines the influence of the Big Five personality traits on social entrepreneurship dimensions. The findings reveal that agreeableness positively influences all dimensions of social entrepreneurship, whereas openness exerts a positive influence on social vision, innovation and financial returns. Methodologically, this study develops valid and reliable scales for social entrepreneurship and verifies the adopted Big Five personality measure of Schmit et al. (Pers Psychol 53:153–193, 2000) using the five-point Likert scale. The implication of this study is that element of appreciation of social responsibility, sustainability and character development needs to be integrated within the business education curriculum to support social entrepreneurs in realizing genuine value and impact to the causes and communities they serve. Future business leaders also need to be equipped with entrepreneurship skills, while exuding independent and reflective thinking in the pursuit life-long learning. The originality of this study lies in its focus on personality traits on social rather than commercial entrepreneurship. It is hoped that the findings will trigger a paradigm shift towards greater social entrepreneurship through education by nurturing sustainable development values in future business graduates. (shrink)

This paper posits that differences in corporate governance structure partly result from differences in institutional arrangements linked to business systems. We developed a new international triad of business systems: the Anglo-American, the Communitarian and the Emerging system, building on the frameworks of Choi et al. (British Academy of Management (Kynoch Birmingham) 1996, Management International Review 39, 257–279, 1999). A common factor determining the success of a corporate governance structure is the extent to which it is transparent to market forces. Such (...) transparency is more than pure financial transparency; as it can also be based on factors such as governmental, banking and other types of institutional transparency mechanism. There may also be a choice for firms to adopt voluntary corporate disclosure in situations where mandatory disclosure is not established. The Asian financial crisis of 1997–1999 and the more recent corporate governance scandals such as Enron, Andersen and Worldcom in the United States and Ahold and Parmalat in Europe show that corporate governance and business ethics issues exist throughout the world. As an illustration we focus on Asia’s emerging1 markets, as, both in view of the pressure of globalization and taking into account the institutional arrangements peculiar to the emerging business system, these issues are important there. Particularly for those who have to find an accommodation between the corporate governance structures and disclosure standards of the Emerging system and those of the Anglo-American and Communitarian systems. (shrink)

Corporations today have been engineered by CEOs and other business advocates to look increasingly green and responsible. However, alarming cases such as Enron, Parmalat and Worldcom bear witness that a belief in corporate goodness is still nothing other than naïve. Although many scholars seemingly recognize this, they still avoid touching on the most sensitive and problematic issues, the taboos. As a consequence, discussion of important though problematic topics is often stifled. The article identifies three ‘grand’ taboos of CSR discourse (...) and explicitly raises them for discussion. They are the taboos of amoral business, continuous economic growth, and the political nature of CSR. It is suggested that CSR can only be as advanced as its taboos. The critical potential of the field remains underdeveloped as a consequence of the taboos, and in many cases the CSR discourse merely produces alluring but empty rhetoric about sustainability and responsible business. (shrink)

Abstract:Opportunism impacts the behavior of firms in market situations where they purchase goods and services externally and create dependency relationships with other firms. Opportunism as a business issue is addressed in economics and marketing literature as an important factor in transaction cost analysis and market governance. Management and business ethics scholars, however, do not address this issue in depth, if at all.The recent bankruptcy of MCI WorldCom highlights some of the risks inherent in a world economy where customers and (...) companies of one society are dependent upon the business practices of partner companies in other societies. Telecommunications customers and companies in Asia, Europe and other places, who depended upon MCI WorldCom for connections to North America, now have important areas of their business in jeopardy because of the uncertainty about the fate of a critical business partner.MCI WorldCom’s situation appears to be the result of an attempt to obtain personal gain, at the expense of others, by at least one senior manager. This is called opportunism. Williamson (1985) defined opportunism as “self-interest seeking with guile.” It can wreak havoc with companies, customers, stock markets and economies and is demonstrated regularly in press accounts of misstatements on financial reports and other ways senior managers use their positions to enhance their personal wealth and influence.This paper will focus on the ethical issues surrounding business relationships and how Confucianism, with its focus on trust, reciprocity and mutual benefit in relationships, can offer a moral foundation to the inter-firm arrangements that are so much a part of the contemporary business landscape. (shrink)

Abstract:Opportunism impacts the behavior of firms in market situations where they purchase goods and services externally and create dependency relationships with other firms. Opportunism as a business issue is addressed in economics and marketing literature as an important factor in transaction cost analysis and market governance. Management and business ethics scholars, however, do not address this issue in depth, if at all.The recent bankruptcy of MCI WorldCom highlights some of the risks inherent in a world economy where customers and (...) companies of one society are dependent upon the business practices of partner companies in other societies. Telecommunications customers and companies in Asia, Europe and other places, who depended upon MCI WorldCom for connections to North America, now have important areas of their business in jeopardy because of the uncertainty about the fate of a critical business partner.MCI WorldCom’s situation appears to be the result of an attempt to obtain personal gain, at the expense of others, by at least one senior manager. This is called opportunism. Williamson (1985) defined opportunism as “self-interest seeking with guile.” It can wreak havoc with companies, customers, stock markets and economies and is demonstrated regularly in press accounts of misstatements on financial reports and other ways senior managers use their positions to enhance their personal wealth and influence.This paper will focus on the ethical issues surrounding business relationships and how Confucianism, with its focus on trust, reciprocity and mutual benefit in relationships, can offer a moral foundation to the inter-firm arrangements that are so much a part of the contemporary business landscape. (shrink)

In this article, I suggest and support a utilitarian approach to business ethics. Utilitarianism is already widely used as a business ethic approach, although it is not well developed in the literature. Utilitarianism provides a guiding framework of decision making rooted in social benefit which helps direct business toward more ethical behavior. It is the basis for much of our discussion regarding the failures of Enron, Worldcom, and even the subprime mess andWallStreetMeltdown. In short, the negative social consequences are (...) constantly referred to as proof of the wrongness of these actions and events, and the positive social consequences of bailouts and other plans are used as ethical support for those plans to right the wrongs.I believe the main cause of the neglect of the utilitarian approach is because of misguided criticisms. Here, I defend utilitarianism as a basis for business ethics against many criticisms found in the business ethics literature, showing that a business ethics approach relying onJohnStuartMill's utilitarianism supports principles like justice, is not biased against the minority, and is more reasonable than other views such as aKantian view when dealing with workers and making other decisions in business. I also explain utilitarian moral motivation and use satisficing theory to attempt to defend utilitarian business ethics from questions raised regarding utilitarian calculus. (shrink)

:Opportunism impacts the behavior of firms in market situations where they purchase goods and services externally and create dependency relationships with other firms. Opportunism as a business issue is addressed in economics and marketing literature as an important factor in transaction cost analysis and market governance. Management and business ethics scholars, however, do not address this issue in depth, if at all.The recent bankruptcy of MCI WorldCom highlights some of the risks inherent in a world economy where customers and (...) companies of one society are dependent upon the business practices of partner companies in other societies. Telecommunications customers and companies in Asia, Europe and other places, who depended upon MCI WorldCom for connections to North America, now have important areas of their business in jeopardy because of the uncertainty about the fate of a critical business partner.MCI WorldCom’s situation appears to be the result of an attempt to obtain personal gain, at the expense of others, by at least one senior manager. This is called opportunism. Williamson defined opportunism as “self-interest seeking with guile.” It can wreak havoc with companies, customers, stock markets and economies and is demonstrated regularly in press accounts of misstatements on financial reports and other ways senior managers use their positions to enhance their personal wealth and influence.This paper will focus on the ethical issues surrounding business relationships and how Confucianism, with its focus on trust, reciprocity and mutual benefit in relationships, can offer a moral foundation to the inter-firm arrangements that are so much a part of the contemporary business landscape. (shrink)

This clever and insightful book reveals the depth and breadth of high moral character and competence in the corporate world. The good news is that the corporate world, by and large, is in good shape. The bad news is that the bad apples number enough to make the rest of us vulnerable to their whims. A Knight?s Code of Business is the first book to arrive in the aftermath of high profiles disasters such as Enron and WorldCom. It presents (...) both the misadventures that befall corporations, as well as guidance to help upcoming managers achieve high moral character and competence in the corporate world. It?s a fun and insightful read. The lessons discussed come from the author?s 20+ years of experience, stories contributed by nearly two dozen other business professionals all across America, and the new survey of marketing executives. (shrink)

This paper describes a presentation on ethics for accounting and business students. In 2001 and 2002, major corporate failures such as Enron and Worldcom, combined with questionable accounting practices, made ethics a paramount concern to persons working in business and accounting. While financial statement analysis and regulatory requirements are important technical topics, the issue of ethics provides faculty a unique and very appropriate setting to discuss deeper truths about doing business and living life well. This paper briefly describes the (...) development and assessment of one approach to presenting ethics built around a computerized slide show (PowerPoint). The goal of the presentation is to increase students’ understanding of the essential role of ethics to accounting and business. Following the presentation, students indicated a heightened recognition of the importance of ethics. Educators should do all that they can to encourage students to do the “right” thing, even in difficult circumstances. This encouragement may serve them well in school and later in their careers. (shrink)

The Enron debacle, the demise of Arthur Andersen, questionable practices at Tyco, Qwest, WorldCom, and a seemingly endless list of others have pushed public regard for business and business leaders to new lows. The need for smart leaders with vision and integrity has never been greater. Things need to change-- and it will not be easy. We can take a first step toward producing better business leaders by changing some of our own ideas about what it means to "win." (...) Noel M. Tichy and Andrew R. McGill have brought together a stellar group of contributors from a variety of perspectives-- including General Electric CEO Jeffrey Immelt, former Secretary of State James A. Baker III, and renowned management gurus Robert Quinn and C. K. Prahalad, among others-- to offer insights that will help build better leaders, communities, and organizations. They show how to present a "Teachable Point of View" about business ethics that will help all leaders within an organization: Internalize core values Build a values-based culture across the organization Become engaged to teach the same values lessons to their staff Take action and raise the ethical bar Successful business leaders must be able to articulate their own unique Teachable Point of View on business ethics and drive it through their organization to ensure that everyone knows the ethical line and is neither shy nor silent if others risk crossing it. (shrink)

In the aftermath of scandals such as those at Enron and WorldCom, there is a growing suspicion of the corporate world. For this reason it is more important than ever for firms to maintain a good reputation. In Building Reputational Capital, Kevin T. Jackson offers a practical guide to taking the high road--the only path that leads to lasting success. Based on extensive research and real-world experience, Building Reputational Capital reveals basic principles of integrity and fairness with which firms (...) can build an enduring reputation. More than image, a firm's reputation is a form of capital often neglected in the boardroom and overlooked in conventional analyses of financial statements. Speaking directly to the work experience of real people in practical business settings, Jackson couples each principle with straightforward actions that drive management systems, and he provides tested strategies--from downsizing techniques to e-commerce tips--that cultivate the hidden power of a good reputation. He outlines the advantages of a superior reputation, describes the vital role the firm's leader must play, offers ways to build and protect your reputation on the Internet, and shows how to rescue your reputation once disaster hits. Perhaps most important, he shows how to strike the right balance of virtues like authenticity, honesty, responsibility, and stewardship of the environment, employees, and the economy. Highlighted with real-life success stories--from giants like Hewlett-Packard to small firms like Thanksgiving Coffee Company, Building Reputational Capital offers a simple but effective guide for executives, managers, entrepreneurs, legal professionals, and corporate consultants. (shrink)

Individual and/or co-offenders fraudulent activities can have a devastating effect on a company’s reputation and credibility. Enron, Xerox, WorldCom, HIH Insurance and One.Tel are examples where stakeholders incurred substantial financial losses as a result of fraud and led to a loss of confidence in corporate dealings by the public in general. There are numerous theoretical approaches that attempt to explain how and why fraudulent acts occur, drawing on the fields of sociology, organisational, management and economic literature, but there is (...) limited empirical evidence published in accounting literature. This qualitative inductive study analyses perceptions and experiences of forensic accountants to gain insights into individual fraud and co-offending in order to determine whether the conceptual framework developed from literature accurately depicts the causes of fraud committed by individuals and groups in the twenty-first century. Findings from the study both support and extend the conceptual framework, demonstrating that strain and anomie can result in fraud, that deviant sub-groups recruit and coerce members by providing relief from strain, and that inadequate corporate governance mechanisms both contribute to fraud occurring, and provide the opportunity for fraudulent activities to be executed and often remain undetected. Additional factors emerging from this study were also identified as contributors to fraud, particularly relevant to the twenty-first century, and consequently, a refined conceptual framework is presented in the discussion and conclusion to the paper. (shrink)

Do you want to make sure you · Don’t invest your money in the next Enron? · Don’t go to work for the next WorldCom right before the crash? · Identify and solve problems in your organization before they send it crashing to the ground? Marianne Jennings has spent a lifetime studying business ethics---and ethical failures. In demand nationwide as a speaker and analyst on business ethics, she takes her decades of findings and shows us in The Seven Signs (...) of Ethical Collapse the reasons that companies and nonprofits undergo ethical collapse, including: · Pressure to maintain numbers · Fear and silence · Young ’uns and a larger-than-life CEO · A weak board · Conflicts · Innovation like no other · Belief that goodness in some areas atones for wrongdoing in others Don’t watch the next accounting disaster take your hard-earned savings, or accept the perfect job only to find out your boss is cooking the books. If you’re just interested in understanding the (not-so) ethical underpinnings of business today, The Seven Signs of Ethical Collapse is both a must-have tool and a fascinating window into today’s business world. (shrink)

Although the particular cases and dilemmas regarding business ethics alter and change with time, the underlying principles and theoretical issues rarely do. Business ethics is about doing "the right thing for the right reason" in our private and public lives, especially in our work and on the job. Business ethics asks: What ought we do in relation to others? Beyond rules and requirements, what do I owe the people I work with (fellow employees), work for (managers-owners), and the people I (...) come to work to serve (customers)? Given the basic fact of change, textbooks, like the times, also need to change. The fifth edition of Case Studies in Business Ethics offers a series of new and updated cases and essays on some of the most pertinent ethical issues in today's business environment. This edition has replaced 80 percent of the cases and essays and offers two entirely new sections entitled "Privacy, Ethics, and Technology" and "Leadership." New Cases/Essays: Sex, Lies, and Advertising Racism in the Workplace Is Your Family Wrecking Your Career? Enron: Paragon to Pariah? The Good Old Boys at WorldCom Ford-Firestone Edible Rugs, Anyone!? Sweatshops Rippers, Portal Users, and Profilers Moral Leadership/Moral Mazes Besides a number of cases that are drawn from current news headlines, this edition continues to offer a selection of classical cases and essays that exemplify a number of perennial topics and questions in the field: Tylenol's Rebound Ford Pinto Sex Discrimination at Eastern Uptown, Dakota, and Powermaster Let the Buyer Beware Truth Pays Deceit, Denial, Cover Up Gender Bias, Public Image Advertisement Profits versus Principles. (shrink)

The spectacular corporate scandals and bankruptcies of the past decade have served as a powerful reminder of the risks that are involved in the ownership of enterprise. Unlike other patrons of the firm, owners are residual claimants on its earnings.1 As a result, they have no explicit contract to protect their interests, but rely instead upon formal control of the decision-making apparatus of the firm in order to ensure that their interests are properly respected by managers. In a standard business (...) corporation, it is the shareholders who stand in this relationship to the firm. Yet as the recent wave of corporate scandals has demonstrated once again, it can be extraordinarily difficult for shareholders to exercise effective control of management, or more generally, for the firm to achieve the appropriate alignment of interests between managers and owners. After all, it is shareholders who were the ones most hurt by the scandals at Enron, Tyco, Worldcom, Parmalat, Hollinger, and elsewhere. For every employee at Enron who lost a job, shareholders lost at least US$4 million.2 Furthermore, employees escaped with their human capital largely intact. Creditors and suppliers continue to pick over the bones of the corporation.3 But as far as shareholders are concerned, their investments have simply evaporated, beyond any realistic hope of retrieval. (shrink)

Fraud, speculative bubbles and collapse, plus the resulting bankruptcies and hard times are a continuing part of the corporate environment. The 21st century is no exception, and its first decade has seen more than its share of abuse. This is somewhat surprising, given the level of regulation and oversight required. The focus here is primarily on Enron as a microcosm of all that can go wrong in a sophisticated, high-tech environment. Enron represents the long-term use of greed based primarily on (...) executive compensation incentives; poor corporate governance; executives willing to break the law or overlook others who did; the use of political lobbying; plus accommodating auditors, attorneys, analysts and regulators. Other fraud and abuse cases considered include WorldCom, Tyco, and Adelphi. In addition, the widespread corruption associated with the stock options scandals and the current housing collapse/banking crisis are reviewed, suggesting that the massive regulatory effort of Sarbanes-Oxley and other reforms have not solved the underlying problems. (shrink)

Citing recent examples including Enron, Arthur Andersen, and WorldCom, _Permission to Steal _explores what went wrong and advocates a universal reassessment of what is considered “good” in corporate America. A fascinating exploration of the recent corporate scandals which have rocked the global business community. Written with sharp and compelling style, suitable for students, professionals, and general readers. Companion website offers discussion points for the book as well as an up-to-date chronology of ongoing corporate scandals.

Citing recent examples including Enron, Arthur Andersen, and WorldCom, _Permission to Steal_ explores what went wrong and advocates a universal reassessment of what is considered “good” in corporate America. A fascinating exploration of the recent corporate scandals which have rocked the global business community. Written with sharp and compelling style, suitable for students, professionals, and general readers. Companion website offers discussion points for the book as well as an up-to-date chronology of ongoing corporate scandals.

Individual and/or co-offenders fraudulent activities can have a devastating effect on a company’s reputation and credibility. Enron, Xerox, WorldCom, HIH Insurance and One.Tel are examples where stakeholders incurred substantial financial losses as a result of fraud and led to a loss of confidence in corporate dealings by the public in general. There are numerous theoretical approaches that attempt to explain how and why fraudulent acts occur, drawing on the fields of sociology, organisational, management and economic literature, but there is (...) limited empirical evidence published in accounting literature. This qualitative inductive study analyses perceptions and experiences of forensic accountants to gain insights into individual fraud and co-offending in order to determine whether the conceptual framework developed from literature accurately depicts the causes of fraud committed by individuals and groups in the twenty-first century. Findings from the study both support and extend the conceptual framework, demonstrating that strain and anomie can result in fraud, that deviant sub-groups recruit and coerce members by providing relief from strain, and that inadequate corporate governance mechanisms both contribute to fraud occurring, and provide the opportunity for fraudulent activities to be executed and often remain undetected. Additional factors emerging from this study were also identified as contributors to fraud, particularly relevant to the twenty-first century, and consequently, a refined conceptual framework is presented in the discussion and conclusion to the paper. (shrink)

In this paper we describe and explore a management tool called the Caux Round Table Self-Assessment and Improvement Process (SAIP). Based upon the Caux Round Table Principles for Business — a stakeholder-based, transcultural statement of business values — the SAIP assists executives with the task of shaping their firm’s conscience through an organizational self-appraisal process. This process is modeled after the self-assessment methodology pioneered by the Malcolm Baldrige National Quality Award Program. After briefly describing the SAIP, we address three topics. (...) First, we examine similarities and differences between the Baldrige approach to corporate self-assessment and the self-assessment process utilized within the SAIP. Second, we report initial findings from two beta tests of the tool. These illustrate both the SAIP’s ability to help organizations strengthen their commitment to ethically responsible conduct, and some of the tool’s limitations. Third, we briefly analyze various dimensions of the business scandals of 2001–2002 (Enron, WorldCom, Tyco, etc.) in light of the ethical requirements articulated with the SAIP. This analysis suggests that the SAIP can help link the current concerns of stakeholders — for example, investors and the general public — to organizational practice, by providing companies with a practical way to incorporate critical lessons from these unfortunate events. (shrink)

“There's a new whistleblower in Washington,” according to CNN News. He is Food and Drug Administration scientist David Graham, who claims that the FDA failed to warn the public about certain drugs' dangerous side effects and pressured him to change his research's conclusion that the arthritis drug Vioxx caused heart attacks. Another Washington whistleblower, Dr. Jonathan Fishbein of the National Institutes of Health, alleged that he was fired because “he had raised concerns about sloppy practices that might endanger patient safety” (...) in a study of the AIDS drug nevirapine.Graham and Fishbein thus joined the ranks of whistleblowers who have gained some prominence in recent years for their reporting of corporate or institutional misconduct. The best-known whistleblowers—the FBI's Coleen Rowley, Enron's Sherron Watkins, and WorldCom's Cynthia Cooper, who together received Time magazine's Whistleblower Person of the Year Award in 20024 - focused public attention on the reform of corporate accounting and legal practices. (shrink)

While corporate failures, such as Enron and WorldCom, have focused attention on issues of business ethics, corporate governance and risk management, there is nothing intrinsically new in the reasons behind their collapse. Neither is there anything fresh in the media's rush to identify a scapegoat. An examination of the financial collapse of Mirror Group Newspapers and Barings Bank, demonstrates failures within both these companies' corporate cultures and management systems, which allowed, if not encouraged, unethical behaviour by key individuals. It (...) is argued that a combination of legislation, regulation, effective risk management and appropriate sanctions are needed, if such unethical behaviour, and resulting corporate failure, is to be prevented in future. (shrink)

Recent highly publicized ethical breaches including those at Enron and WorldCom have focused attention on ethical behavior within the accounting profession. At the heart of the debate is whether ethical attitudes of accountants are to blame. Using a nationally representative sample of accounting practitioners and a multidisciplinary student sample at two Southern United States universities, we compare sample responses to 25 ethically charged vignettes to test whether they differ. Overall, we find no significant difference – even for a specific (...) “accounting tricks” vignette, which resembles the Enron and WorldCom situations. We do find, however, that the practitioners were more accepting of vignettes that involved physical harm (PH) to individuals and those that were legal (but ethically questionable). We postulate that accounting practitioners may apply a legalistic framework to their assessment of the acceptability of each vignette. Focusing on an “accounting tricks” vignette, we also find no significant difference between auditors and institutional practitioners compared to all other types of accountants in the sample. We conclude that ethical attitudes of accounting practitioners do not differ significantly by specialty area. (shrink)

The corporate meltdowns of this and the previous decade in the US - WorldCom, Enron, Tyco, and in Australia - FAI, HIH and AWB being among the many examples - have resulted in the governments of those two countries introducing legislation and policy guidelines aimed at minimising future corporate misbehaviour. -/- The US has introduced the Sarbanes Oxley Act, with requirements on corporate accountants and auditors, as well as its whistleblowing provisions. It has revised the Federal Sentencing Guidelines for (...) Organizations. New rules for the NYSE and NASDAQ have also been introduced. In addition, the U.S. Securities and Exchange Commission and U.S. Department of Justice have further strengthened the Foreign Corrupt Practices Act 1977, last revised in 1997. -/- Australia has revised the Corporations Act to include whistleblower protection clauses as well as adopted the ASX Corporate Governance guidelines. Standards Australia has issued its handbook on corporate governance. Although not a business issue, the Australian government has also announced that it will introduce whistleblower protection legislation for the public sector by the end of its first term in office. This legislation will likely influence whatever the private sector does in this respect. The inclusion of whistleblower protection in both Sarbanes–Oxley and the Corporations Act reflects a growing body of research that finds that people internal to an organisation are the most effective way to identify corporate wrongs. The Commonwealth Treasury has recently issued an options paper, stating that the Corporations Act has been ineffectual. It has sought submissions on revisions to the legislation that the Australian Government could take. This paper examines the policies advocated by over 20 organisations and academics concerned with whistleblowing issues. It draws the conclusion that on current indications, even after further reform, Australian legislation and policies are still likely to be less effectual than overseas practices. -/- --------------------------------- . (shrink)

Recent scandals such as those involving Enron and WorldCom (USA), Nortel and Crocus (Canada), and Parmalat and Royal Ahold (EU) exposed failures in corporate governance that shook the capital markets in developed countries and put the spotlight on weak corporate governance in developing, emerging and transitional economies. Companies from developing economies with weak financial transparency and governance will find it difficult to raise capital and attract foreign investors. We investigate the challenges and evaluate the progress of corporate governance in (...) Egypt. Using historical, empirical and interview data, we review the development of stock markets and accounting and financial reporting standards. We analyse the structure of capital markets, major players in the economy, the privatisation policy, board structure and the cultural and legal environment of corporate governance. We review initiatives and impediments for improving corporate governance, including the establishment of the Egyptian Institute of Directors. The implications of this study are important for Egypt, developing countries and global investors seeking international diversification. (shrink)

Individual and/or co-offenders fraudulent activities can have a devastating effect on a company’s reputation and credibility. Enron, Xerox, WorldCom, HIH Insurance and One.Tel are examples where stakeholders incurred substantial financial losses as a result of fraud and led to a loss of confidence in corporate dealings by the public in general. There are numerous theoretical approaches that attempt to explain how and why fraudulent acts occur, drawing on the fields of sociology, organisational, management and economic literature, but there is (...) limited empirical evidence published in accounting literature. This qualitative inductive study analyses perceptions and experiences of forensic accountants to gain insights into individual fraud and co-offending in order to determine whether the conceptual framework developed from literature accurately depicts the causes of fraud committed by individuals and groups in the twenty-first century. Findings from the study both support and extend the conceptual framework, demonstrating that strain and anomie can result in fraud, that deviant sub-groups recruit and coerce members by providing relief from strain, and that inadequate corporate governance mechanisms both contribute to fraud occurring, and provide the opportunity for fraudulent activities to be executed and often remain undetected. Additional factors emerging from this study (the ‘technoconomy’, addiction and IT measures) were also identified as contributors to fraud, particularly relevant to the twenty-first century, and consequently, a refined conceptual framework is presented in the discussion and conclusion to the paper. (shrink)

This article makes the case for servant leadership as a model for business in its analysis of the leadership style of former Philippine president, Corazon C. Aquino. Premised on the idea that self-management requires deep spirituality lived integrally (and sustained by an interior or inner life), we identify specific traits and virtues of Aquino and their implications on her leadership and effect on people. The article begins with an introduction to establish the contribution of servant leadership on business. It continues (...) with a summary of key points in servant leadership literature. Then, we analyze Aquino as a person and leader and find that the former spilled over to the latter. We conclude by providing a model based on Aquino’s journey into the role of servant leader; thus, presenting a framework that charts the path toward servant leadership to help businesses address the leadership crisis brought on by an Enron-WorldCom-Tyco dominated business culture. (shrink)

When a series of corporate scandals erupted soon after the collapse of the 1990s bull market in equities, policy makers and reformers chiefly responded by augmenting and refining the checks and balances surrounding publicly traded corporations. Through measures such as the Sarbanes-Oxley Act of 2002, securities regulations were intensified and corporate governance was tightened. In essence, reformers followed the tradition of modern political philosophy, developed in the 17th and 18th centuries, in its insistence that pro-social outcomes are best produced through (...) institutional mechanisms that harness self-interest. The empirical evidence, however, suggests the institutional approach will do little to prevent future ethical breakdowns. To corroborate this finding, we survey the literature on board composition, auditor consulting practices, shareholder activism, and executive compensation. Consequently, we look to another stream of political philosophy, the ancient tradition comprising Plato and Aristotle, which argues that social groupings, such as corporations, work best when led by individuals of good character. Applying the ancient view to modern commercial realities, the paper concludes that Benjamin Franklin's attempt to connect virtuous character with enlightened self-interest offers a compelling ethic for corporate leaders. (shrink)

The purpose of this research is to present the major factors that lead to ethical dissolution in an organization. Specifically, drawing from a wide spectrum of sources, this study explores the impact of organizational, individual, and contextual factors that converge to contribute to ethical dissolution. Acknowledging that ethical decisions are, in the final analysis, made by individuals, this study presents a model of ethical dissolution that gives insight into how a variety of elements coalesce to draw individuals into decisions that (...) result in the ethical undoing of an otherwise healthy organization. ENRON, TYCO and WorldCom did not happen in a vacuum. Nor can such debacles be explained as simply one or two individuals who were morally corrupt. The ethical breakdowns that occurred in these companies happened over a period of time, involved numerous individuals both inside and outside of the organization, and brought about the implosion of viable companies. Seeking to extend the work of previous researchers, this study attempts to tie together a disparate set of factors into a cohesive explanation of ethical breakdowns in organizations. (shrink)

Ethics researchers have scrutinized ethical business problems, which have been demonstrated through the actions of managers at Enron, WorldCom, and Arthur Andersen, among others. In response to these business transgressions, the US government has implemented the Sarbanes–Oxley Act to shore up businesses’ ethics infrastructures. However, universities, too, struggle with ethics problems. These include NCAA (National Collegiate Athletic Association) violations, discrimination issues, sexual harassment, endowment admits, plagiarism, and research funding manipulation. Despite these problems, we have little knowledge regarding universities’ ethics (...) infrastructures and codes of conduct, and insignificant empirical research on academic ethics issues (Kelley & Chang, Journal of Higher Education, under review, 2006; Morgan & Korschgen, College Student Journal, Sept., 2001). This lack of knowledge exists despite the critical role universities play in shaping the moral behavior of future generations (Langlais, The Chronicle of Higher Education, January 13:B11, 2006; Woo, BizEd, May/June:22–27, 2003). In this paper, we conduct exploratory research to identify the elements of universities ethics’ infrastructures. From our research, we develop an understanding of the ethics policies and infrastructure elements in place at a representative group of universities. We compare these infrastructures to those in business as well as across Carnegie Classifications. We then conclude with recommendations for developing university ethics infrastructures and suggestions for future research. (shrink)