Business and professional ethics for directors, executives, and accountants

Cover
Title Page
Copyright Page
About the Authors
Contents
Preface
Overview of the Book
CHAPTER 1: ETHICS EXPECTATIONS
The Ethics Environment for Business: The Battle for Credibility, Reputation, & Competitive Advantage
Environmental Concerns
Moral Sensitivity
Bad Judgments & Activist Stakeholders
Economic & Competitive Pressures
Financial Scandals: The Expectations Gap & the Credibility Gap
Governance Failures & Risk Assessment
Increased Accountability & Transparency Desired
Synergy among Factors & Institutional Reinforcement
Outcomes
New Expectations for Business
New Mandate for Business
New Governance & Accountability Frameworks
Reinforced Fiduciary Role for Professional Accountants
Responses & Developments
Emerging Governance & Stakeholder Accountability Models
Management Based on Values, Reputation, & Risks
Accountability
Ethical Behavior & Developments in Business Ethics
The Ethics Environment for Professional Accountants
Role & Conduct
Governance
Services Offered
Managing Ethics Risks & Opportunities
Developing a Culture of Integrity
Corporate Governance
Questions
Reading Insight
References
Case Insights
ETHICS CASES: Cases Involving Improper Behavior
Selling Only Sugary Drinks
Buying and Selling Blood
Pedophile Priests in the Catholic Church
Sexual Abuse by a Penn State Football Coach
LIBOR Manipulations Cause Widespread Impacts—located in Chapter 2
Advertising & Sales Promotion Cases
Tiger Woods: “Winning Takes Care of Everything
Pepsi’s iPhone App Stereotypes Women
Should Porn Be Sold by Cell Phone Companies
Virgin Mobile’s Strip2Clothe Campaign: Exploitive, Risqué, and Worthwhile
Cases Involving Financial Transactions
Goldman Sachs and The Greek Veil
Martha Stewart’s Lost Reputation
Cases Involving the Control of Information
Google versus China
China’s Tainted Baby Milk Powder: Rumored Control of Online News
Cases Concerning the Environment
Nestlé Bottles Water in a California Drought
Bhopal–Union Carbide
Texaco: The Ecuador Issue
Product Safety Cases
The Right to Be Informed? The Link between Talcum Powder and Cervical Cancer
Valeant Pharmaceuticals vs. Coca Cola—Which Business Model Is Worse: Price Gouging or Fostering Obesity & Diabetes
The Betaseron Decision (A
Magnetic Toys Can Hurt
Bausch & Lomb’s Hazardous Contact Lens Cleaner
Accounting & Auditing Cases
Where Were the Accountants
To Resign or Serve
READING: Andrew W. Singer: The WhistleBlower: Patriot or Bounty Hunter
CHAPTER 2: ETHICS & GOVERNANCE SCANDALS
Ethics & Governance: A Time Line of Important Events
Ethics & Governance: The Early Developments prior to 1970
Ethics & Governance: 1970–1990
Ethics & Governance: The Modern Era—1990 to the Present
Significant Ethics & Governance Scandals & Events
Enron—A Failure of the Board of Directors
Arthur Andersen—An Organizational Culture Gone Awry
WorldCom—Power in the Hands of One Man
Crisis of Confidence
Sarbanes-Oxley Act—Closing the Barn Door
Tax Shelters—Not in the Public Interest
Subprime Mortgage Meltdown—Greed without Due Diligence
Dodd-Frank Wall Street Reform and Consumer Protection Act
Bernard Madoff—If It’s Too Good to Be True
Public Disillusionment: The Occupy
Movement
Shareholder Disillusionment: Shareholder Resolutions
The LIBOR Scandal: How Banks Manipulated a Benchmark Interest Rate
Bribery Attracts Prosecutions and Huge Fines
Automaker’s Sins Come Home to Roost
Drugmakers Raise Prices, Gouging Patients
New Emphasis on Individual Accountability for Corporate Wrongdoing
Panama Papers Released
Signs of Ethical Collapse
Ethics & Governance: Trends
Ethics & Governance: Timetables of Important Events, 1929–2016
Useful Videos & Films
Questions
Case Insights
ETHICS CASES: Enron’s Questionable Transactions
Arthur Andersen’s Troubles
WorldCom: The Final Catalyst
Bernie Madoff Scandal—The King of Ponzi Schemes
Wal-Mart Bribery in Mexico
LIBOR Manipulations Cause Widespread Impacts
General Motors Ignores Obvious Ignition Faults
VW Cheats on Emissions Tests
CHAPTER 3: ETHICAL BEHAVIOR—PHILOSOPHERS’ CONTRIBUTIONS
Ethics & Moral Codes
Ethics & Business
Self-Interest & Economics
Ethics, Business & the Law
Major Ethical Theories Useful in Resolving Ethical Dilemmas
Teleology: Utilitarianism & Consequentialism—Impact Analysis
Deontological Ethics—Motivation for Behavior
Justice & Fairness—Examining the Balance
Virtue Ethics—Analysis of the Virtue Expected
Moral Imagination
Questions
Case Insights
Useful Video & Film
References
ETHICS CASES: Cases Involving Improper Behavior
An Illustration of Ethical Decision Making: Dealing with Disappointed Apple iPhone Customers
Art Forgeries: Is Deceiving Art Experts Unethical
Gender Discrimination at IKEA
Deciding Who Receives the Swine Flu Vaccine
Insurance and Genetically Inherited Diseases
Terrorist Payments
The Case of Cesar Correia
CHAPTER 4: PRACTICAL ETHICAL DECISION MAKING
Introduction
Motivating Developments for Ethical Learning
Ethical Decision Making Framework—An Overview
Philosophical Approaches—An Overview: Consequentialism (Utilitarianism), Deontology, & Virtue Ethics
Consequentialism, Utilitarianism, or Teleology
Deontology
Virtue Ethics
Sniff Tests & Common Heuristics—Preliminary Tests of Ethicality
Stakeholder Impact Analysis—Comprehensive Tool for Assessing Decisions & Actions
Overview
Fundamental Interests of Stakeholders
Measurement of Quantifiable Impacts
Assessment of Nonquantifiable Impacts
Stakeholder Impact Analysis—Modified Traditional Decision-Making Approaches
Integrating Philosophical & Stakeholder Impact Analysis Approaches
Other Ethics Decision-Making Issues
Commons Problems
Developing a More Ethical Action
Common Ethics Decision-Making Pitfalls
A Comprehensive Ethical Decision- Making Framework
Summary of Steps for an Ethical Decision
Conclusion
Questions
References
Illustrative Applications & Case Insights
ILLUSTRATIVE APPLICATIONS OF STAKEHOLDER IMPACT ANALYSIS:
Dealing with Disappointed Apple iPhone Customers Case
Bribery or Opportunity in China Case
Proposed Audit Adjustment Case—Castle Manufacturing Inc
When Does an “Aggressive Accounting” Choice Become Fraudulent
ETHICS CASES:
Concussions in the NFL
BP’s Gulf Oil Spill Costs
Tylenol Recalls (2010): It’s Still About Reputation
Vioxx Decisions—Were They Ethical
Just Make the Numbers
Smokers Are Good for the Economy—Really
Ford Pinto
The Kardell Paper Co
CHAPTER 5: CORPORATE ETHICAL GOVERNANCE & ACCOUNTABILITY
Modern Governance & Accountability Framework—To Shareholders & Other Stakeholders
New Expectations—New Framework to Restore Credibility
Corporate Governance Overview
Accountability to Shareholders or Stakeholders
The Shareholder Value Myth
Governance for Broad Stakeholder Accountability
Guidance Mechanisms—Ethical Culture & Code of Conduct
Threats to Good Governance & Accountability
Misunderstanding Objectives & Fiduciary Duty
Failure to Identify & Manage Ethics Risks
Conflicts of Interest
Key Elements of Corporate Governance & Accountability
Compelling Evidence for the Development of an Ethical Corporate Culture
Developing, Implementing, & Managing an Ethical Corporate Culture
Corporate Codes of Conduct
Ethical Leadership
Corporate Psychopaths
Director & Officer Liability
Public Accountability Benchmarks
Conclusion—Toward a Culture of Integrity
Questions
Case Insights
Reading Insights
References
ETHICS CASES: Cases on Ethical Corporate Culture
Hospital Governance Challenges Wal-Mart Bribery in Mexico—located in Chapter 2
SNC-Lavalin Missing Funds Topples CEO & Triggers Investigation
Siemens’ Bribery Scandal
Cases on Ethical Leadership
Salary Equality at Gravity Payments
Merck and River Blindness
Lululemon’s Questionable Leadership
Cases on Bribery
SNC-Lavalin Missing Funds Topples CEO & Triggers Bribery Investigation
Rio Tinto’s Bribes in China
Daimler’s Settles U.S. Bribery Case for $185 Million
HP Bribery for Russian Contract with Antibribery Prosecutor’s Office
Cases on Corporate Governance & Managerial Opportunism
Spying on HP Directors
Lord Conrad Black’s Fiduciary Duty
Manipulation of MCI’s Allowance for Doubtful Accounts
Stock Options and Gifts of Publicly Traded Shares
The Ethics of Repricing and Backdating Employee Stock Options
Cases on Fraudulent & Questionable Financial Reporting
Satyam Computer Services—The Enron of India
Nortel Networks’ Audit Committee Was in the Dark
Adelphia—Really the Rigas Family Piggy Bank
Tyco—Looting Executive Style
HealthSouth—Can Five CFOs Be Wrong
Royal Ahold—A Dutch Company with U.S.-Style Incentives
The Ethics of Bankruptcy: Jetsgo Corporation
Stock Market Cases
Société Générale’s Rogue Trader
Galleon’s Insider Trading Network
KPMG Partner Shares Confidential Information with a Friend—located in Chapter
Conflicts of Interest on Wall Street
Loyalty, but to Whom
Bankers Trust: Learning from Derivatives
Barings Bank: Rogue Trader
Cases on Product Safety
Dow Corning Silicone Breast Implants
Ford/Firestone Tire Recall
APPENDIX
Appendix A: Alternative Governance Theories
CHAPTER 6: PROFESSIONAL ACCOUNTING IN THE PUBLIC INTEREST
Professional Accounting’s Traditional Role
Historic Shortfalls in Meeting Professional Expectations
Professional Accounting and the Public Interest
Public Expectations Control Reputation
Public Expectations of a Professional Accountant
Dominance of Ethical Values Rather than Accounting or Audit Techniques
Priority of Duty, Loyalty, & Trust in a Fiduciary
Confidentiality: Strict or Assisted
Implications for Services Offered
Judgment & Values
Sources of Ethical Guidance
Professional Codes of Conduct
Purpose & Framework
Fundamental Principles & Standards
Discipline
Interpretations of Rules
Scandals & Expectations Motivate Changes in Professional Codes
AICPA, CPAO, & IFAC Codes of Professional Conduct
Shortfalls with and in Professional Codes
Issues Not Usually Resolved in Corporate Codes of Conduct
Conceptual Framework for Assessing Threats to Compliance
Conflict of Interest Threats to Independence
Assessing Conflicts of Interest Threats Using the Conceptual Framework Approach
Conflicts of Interest: A Stakeholder Impact Analysis
Conflicts of Interest Affecting Services Offered
Conflicts of Interest Involving Improper Use of Influence
Conflicts of Interest Involving Use or Misuse of Information (Confidentiality)
Questionable Tax Services and Practices
Laws & Jurisprudence
Moral Courage Is Vital to Professional Accounting: Globalization Heightens the Requirement
When Codes & Laws Do Not Help
Broadening Role for Professional Accountants
Conclusion
Questions
Reading Insights
Case Insights
References
ETHICS CASES: Famous Cases
Parmalat–Europe’s Enron
Arthur Andersen, Enron, and WorldCom cases— located in Chapter 2
Tyco, HealthSouth and Royal Ahold cases— located in Chapter 5
Lehman Brothers case—located in Chapter 8
Sunbeam and Waste Management cases— located in the BPE Digital Resources
Professional & Fiduciary Duty Cases
KPMG Partner Shares Confidential Information with a Friend
Livent—When Maria, When
The Lang Michener Affair
Wanda Liczyk’s Conflicts of Interest
Strategic Roles
Locker Room Talk
Advice for Sam and Ruby
Biker Nightmare
Budget Conflict
An Exotic Professional Accountant
Freebie Services for Staff
Summer Camp Holdback
Theft Reimbursement, Twice
Accounting & Auditing Dilemmas
Sino-Forest Fraud? Audit Challenges in China
Massive Acquisition Write-Downs in the Mining Industry
Accounting Rule Changes Increase Apple Computer’s Revenue
The Impact of International GAAP on Earnings
Auditor’s Dilemma
Management Choice
To Qualify or Not
Team Player Problems
Minimal Disclosure
Opinion Shopping
Lowballing a Fee Quotation
Fundamental Accounting and Auditing Issues Cases
Societal Concerns
Economic Realities or GAAP
Multidisciplinary Practices—Ethical Challenges
Tax and Regulatory Cases
Multinationals and Tax Planning
KPMG’s Questionable Tax Shelters
Italian Tax Mores
Tax Return Complications
Marketing Aggressive Tax Shelters
Providing Tax Advice
Risk Management of Taxes Payable—Is It Ethical
READING:
The Liability Crisis in the United States: Impact on the Accounting Profession—A Statement of Position—see BPE Digital Resources
CHAPTER 7: MANAGING ETHICS RISKS & OPPORTUNITIES
Ethics Risk & Opportunity Identification & Assessment
Enterprise Risk Management Must Include Ethics Risks & Opportunities
Ethics Risk Review or Audit—A Comprehensive Approach
Searching for Specific Ethics Risks
Ethics Risk & Opportunity Management
Effective Stakeholder Relations
Sustainability, Corporate Social Responsibility, & Corporate Citizenship
Workplace Ethics
Whistleblower Programs & Ethics Inquiry Services
Fraud & White-Collar Crime
Bribery & International Operations
Crisis Management
Conclusion
Questions
Case Insights
Reading Insights
References
ETHICS CASES: CSR Cases—Environmental Issues
Harry Potter and the Green Brigade
The Carbon Footprint of British Airways
The Pollution Caused by Cruise Ships
Workplace Ethics Cases—Discrimination and Abuse
Pedophile Priests in the Catholic Church—located in Chapter 1
Sexual Abuse by a Penn State Football Coach—located in Chapter 1
Texaco’s Jelly Beans
Gender Discrimination at Dell Inc
Novartis’ $250+ Million Gender Discrimination Case
Downsize or Bonus Allocation Decisions
Workplace Ethics Cases—White-Collar Crime
Walt Pavlo’s MCI Scams/Frauds
Whistleblower/Ethics Inquiry Case Hospital Governance Challenges—located in Chapter 5
Bribery & International Operations Cases
Jail and a German Subcontractor (names are fictitious)
AIDS Medication in South Africa
The following bribery cases are located in Chapter 5:
Siemens’ Bribery Scandal
Wal-Mart Bribery in Mexico
SNC Lavalin Missing Funds Topples CEO & Triggers Bribery Investigation
Rio Tinto’s Bribes in China
Daimler Settles U.S. Bribery Case for $185 Million
Bribery for Russian Contract with Anti-Bribery Prosecutor’s Office
Risk & Crisis Management Cases
BP’s Gulf Oil Spill Risk Management
BP’s Corporate Culture
Toyota’s Recall Problems
Digoxin Overdose—The Need for Skepticism, Courage, and Persistence
The Exxon Valdez
The Brent Spar Decommissioning Disaster
Crisis at Wind River Energy Inc
APPENDIX
Appendix A: Ethics Audit Program Annual Audit Questions
CHAPTER 8: SUBPRIME LENDING FIASCO—ETHICS ISSUES
The Economic Train Wreck—A Global Disaster
Stages of the Subprime Lending Fiasco
How Did the Subprime Lending Crisis Happen
Subprime Lending Developments
Transfer of Risk & the Liquidity Freeze
Contributions of Fannie Mae & Freddie Mac
The Conflicted Credit-Rating Sham
Regulators Looked in the Wrong Direction
Special Purpose Vehicles—Key to the Crisis
Unlimited Toxic Risk—Credit Default Swaps, Naked & Otherwise
Crisis, Bankruptcy, Bailouts, & New Regulations
Worldwide Contagion
Subsequent Events
Ethics Issues—The Subprime Lending Fiasco
Greed, Incompetence, Dishonesty, Conflicts of Interest, Non-transparency, Lack of Moral Courage, & Poor Risk Management
Corporate Psychopaths—Potential Role in the Subprime Lending Crisis
Lack of Regulation & Sound Decision Making
Are Mark-to-Market (M2M) Accounting Standards to Blame
The Ultimate Risk Bearers
Ethics Lessons
Questions
Case Insights
Useful Videos & Films
References
ETHICS CASES:
Questionable Values Produce Resignation at Goldman Sachs
Naked Short Selling—Overstock.com Lawsuit against Goldman Sachs & Merrill Lynch
Lehman Brothers Repo 105 Manipulation
Goldman Sachs Conflicts: Guilty or Not?
Mark-to-Market (M2M) Accounting and the Demise of AIG
Subprime Lending—Greed, Faith, and Disaster
Moral Courage: Toronto-Dominion Bank CEO Refuses to Invest in High-Risk Asset-Backed Commercial Paper
The Ethics of AIG’s Commission Sales
INDEX