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Cases in Business Ethics

Preparing SCU students for the ethical challenges of a career in business and fostering a broad community of ethical support both on campus and in the working world. These cases were written by Santa Clara University seniors Alexis Babb, Saayeli Mukherji, Amanda Nelson, and Noah Rickling as part of their work as Hackworth Fellows in Business Ethics at the Markkula Center for Applied Ethics.

  •  An Intern’s Dilemma: When You Disagree with Your Supervisor

    Megan was working as a summer intern at a small Silicon Valley company. She had interned at the company the year before and was happy to return. Her job was to review, revise, and create documents that outlined key department processes. Megan had worked in the department and reported to the same manager, Cindy, as the previous summer. Cindy was a "big-picture" manager, while Megan considered herself more detail-oriented. Despite this difference, Megan and Cindy got along well and had a good working relationship.

    Towards the end of the summer, Megan was tasked with creating a document that described how the company renews client contracts and obtains quotes for customers. Although parts of the process had been documented elsewhere, Megan had to outline the extensive process in one document because various teams in the company referred to it on a frequent basis. For example, Megan's manager, Cindy, used this particular renewal process document as a training guide for new employees.

    In order to successfully complete her assignment, Megan spent a significant amount of time communicating with Sarah, a company manager based in Ireland. In fact, Sarah's team managed the renewal process that Megan was working to document, so Sarah was quite familiar with how the process worked. During this phase of the project, Cindy made it clear to Megan that she did not work well with Sarah and did not appreciate her work style.

    Megan began creating her report, once completed, sent it on to Cindy, Sarah, and other managers for feedback and revisions. Not before long, Megan found herself in the middle of each manager's differing opinion. Cindy felt the document should be written at a “higher level,” and did not want to confuse new trainees with “once in a blue moon” scenarios that could be handled on a case-by-case basis. Sarah, on the other hand, wanted every detail and discrepancy of the process included so her team could use it as a comprehensive reference guide. During the editing process, Cindy would visit Megan's desk, wanting to gossip about her experience working with Sarah and "how awful the project must be" for Megan.

    Megan was conflicted: she wanted to remain on good terms with her manager, Cindy, and it was clear that there was a great deal of tension between her and Sarah. At the same time, she felt that Sarah's opinion was more representative of what the company actually needed from the final document.

    What should Megan do?

    posted June 2013

  •  Quality or Quantity: When Incentives Don’t Match Your Values

    Frank, a recent Santa Clara University graduate, recently landed a sales job for a Silicon Valley tech company. He is part of a team that qualifies sales opportunities. After talking to potential customers, Frank decides whether or not they are quality leads. If they are, he refers them to an account executive (AE) to close the deal, saving the company precious time in money in avoiding low probability contracts. If not, he will not pass them on and the sales opportunity is not pursued. Account executives expect prescreening of potential leads in order to maximize their time. Each referral Frank passes to the AE is added to a tally that counts toward his target monthly total, and there is a monetary bonus for all sales staff members who reach their monthly quota.

    This creates some controversy among Frank's team members, who are faced with conflicting incentives; pass on low quality leads to hit your quota, or focus on quality and risk missing the monthly target.  The pressure to "hit your number" comes from both the monetary incentive and management, who benefit when their sales team hits their quotas. To further complicate matters, since each sales representative self-reports how many leads they passed along, they can inflate their numbers in order to reach the monthly target goal: a common occurrence among Frank's coworkers.

    As Frank tries to adjust to his new job, he is finding it difficult to balance his own moral compass with the pressure of hitting his monthly number.

    How would you handle the dilemma between hitting the quota and submitting quality work you stand behind? What factors would weigh into your decision? What solutions would best solve this dilemma?

    posted June 2013

  •  Financial Reporting: Do Small Errors Need to be Reported?

    Ben is a recent Santa Clara University graduate who has just started his first job in the finance department of a publicly traded Silicon Valley company. One of his main responsibilities is to create and distribute extensive Microsoft Excel reports that analyze costs and revenues for different divisions. Ben sends completed reports to his direct supervisor and the CFO. The CFO then uses the information to create the company's financial reports, in addition to the strategy and forecasting formulation.

    While Ben considers himself to be detailed-oriented, the complicated nature of and the sheer volume of data sometimes overwhelm him, which is exacerbated by their strict deadlines. While Ben works hard to prepare the reports as accurately as possible, he often finds errors after he has submitted his final report. When the errors are critical, he revises the reports and resends them. However, some of the errors are minor, in Ben's estimation, and he doubts that the CFO will use or look at these figures. Ben is ambitious and wants to be promoted, but worries that if he frequently sends out revised reports he will appear unreliable and unqualified. At the same time, the potential consequences from inaccurate financial reports put the company, the CFO and CEO, and Ben himself at risk.

    What actions should Ben take when he catches a mistake? Is he obligated to report every error, particularly since he works for a publicly traded company? Is there such a thing as a small error in this context?

    Posted June 2013

  •  Startup Management: Friend or Liability?

    Edward is CEO of a nonprofit startup. He hired Charlie, a high school friend, last summer, to stabilize the company while Edward finished his degree. Charlie is from a prominent family, with a powerful network that has raised a large amount of money for Edward's nonprofit. Both Edward and Charlie are committed to the mission of helping low-income students go to college, and with this shared vision they get along well.

    Although Charlie is great at strategy formulation, Edward finds that he is poor at executing plans and taking action. Now that Edward is graduating, he wants to take the nonprofit to the next level, but is concerned about Charlie's lack of execution will hold the company back. On the other hand, Charlie made a major contribution keeping the company afloat the past year, in addition to his family's contributions, not to mention the two have been friends for some time now.

    What should Edward do?

    Posted June 2013

  •  Bullpen Dilemma: Sexual Harassment in Investment Banking

    Victoria, a recent college graduate, recently started a new job as an analyst at a boutique investment bank. The office is a small, all- male environment, known as "The Bullpen.” After her first two months at work, the company is set to hold its annual summer outing.

    As the outing is some distance from her house, Victoria is pleased when one of the executives, Luke, offers to drive her home. During the drive, Luke invites Victoria for "a casual dinner." She feels pressured to accept. Since they are currently working together on a deal, she hopes that the dinner will be a great opportunity to collaborate on business. Instead, she is ill at ease when Luke continuously brings up personal matters.

    Back in the car, Luke is even more insistent that Victoria comes to his house. She is extremely uncomfortable, but sees no way out of the situation, feeling as if she cannot decline. At his house, Luke makes a direct advance toward Victoria. By this point she has had enough and is visibly upset. Immediately, she confronts Luke as to why he is placing her in such an inappropriate situation. Victoria then calls a cab and departs, mulling over her options.

    Victoria is unsure what action to take. Her first two months on the job were going so well and she wonders what impact this incident will have on her work environment. She does not feel comfortable approaching her firm's HR department, a one-man operation who seems to exhibit and condone the firm's “bullpen” attitude. Victoria fears that if she does not speak up the advances will continue, but considering that she has to work with Luke on their current deal, she wonders if forgetting the incident will make it go away faster.

    What should Victoria do?

    Posted June 2013

  •  Breaking the Bro Code: Sexual Misconduct at the C-Level

    Arnold is the Chief Operating Officer of a multibillion-dollar public company in Silicon Valley. The staff is predominantly male, and holds quarterly upper management meetings offsite. Arnold attends one of the meetings, along with the company's CEO, CFO, and numerous VPs. The opening speaker is the Vice President of Operations, Jordan Tompkins, who was brought into the organization by the CEO, having been close friends in college.

    Jordan, who has college-age daughters, starts his presentation by sharing that he was out late the night before "partying," and that he “threw together” his slides. His first slide is a photo of a cheerleader from a local team—in a hot tub. He jokes that he is a big fan of this particular team. He goes on to cover some highlights of the company's recent performance. His last slide, however, is formatted to resemble a motivational poster. Entitled “Opportunity,” it is a photo of an apparently intoxicated college girl lying on the floor wearing only her underwear.

    Despite the widespread laughter, the consensus was that Jordan had pushed the envelope too far, but no harm, no foul. The CEO covered for Jordan, stating “That's just Jordan being Jordan.” Arnold was the exception, finding Jordan's behavior to be completely out-of-line and deserving of immediate termination. Arnold, being the COO, technically has the power to fire Jordan at any time, but it is clear that he is under the protection of the CEO.

    What should Arnold do?

    Posted June 2013

  •  Fraudulent Reporting: A Case in Accounting Ethics

    After majoring in accounting at Santa Clara University, Scott was hired as an associate auditor for a Bay Area accounting firm. He is currently auditing a local company's financial statements, a project he's been working on for about two months. The senior associate responsible for tracking billable hours has been pressuring Scott and other associates to report fewer hours than they actually worked. The senior associate would appear more successful if his team reported fewer hours, and the firm would also be better positioned to win similar contracts in the future. Scott is salaried, so billable hours don't affect his compensation directly. However, he knows that underreporting billable hours is against company policy.

    In accounting firms, offering low billable hours is attractive to potential customers, as the bid with the lowest overall cost will get the business. At the start of any bid, the client agrees to pay a fee for the company's services, including all staff time. If the employees report fewer hours, the company looks more attractive and will more likely get the contract.

    Pressure to report fewer billable hours comes from the "utilization metric" used to determine how efficiently an employee is working. Employees who report fewer hours than their peers will be seen as more efficient, due to a higher utilization rate. Scott remembers a case where one of his colleagues was promoted, partially because of his extremely high utilization rate. He knows that if he were to clock all of his actual hours worked, he would be at a disadvantage for the year-end performance review.

    If Scott decides to clock all his billable hours per company policy, he risks losing the competitive edge with his colleagues, nearly all of which participate in under billing. Scott is uncomfortable with the practice, but fears his options are limited.

    What should Scott Do?

    Posted June 2013

  •  Job Promotion: At What Cost?

    Dan is an up-and-coming district manager at Tradewell Bank, one of the largest commercial banks in the country. Dan reports directly to Robert, the regional manager, who also happens to be a close friend from high school. Robert has been at the company longer than Dan, but there is some talk within the company that his region's numbers have been falling behind.

    One afternoon, the bank's VP of Sales offers Dan a promotion to regional manager—Robert's job. To his dismay, Dan is told that Robert has not been similarly promoted, and instead Dan would be replacing Robert outright.

    Dan's been working ridiculous hours in surpassing expectations for his district, and certainly feels deserving of the promotion, but replacing his friend is the last thing he wants to do.

    What should Dan do?

    Posted June 2013

  •  Bank Fraud: A Case In Accounting Ethics

    Joe Mann, a senior consultant, was working with a small company that created capital equipment for semiconductor manufacturers such as Intel. The company's products were quickly becoming obsolete, and the management had taken on a considerable amount of debt. As the semiconductor market stalled in 1985-1986, there was not a significant need for new production equipment, and the future looked grim for the company.

    Joe and his partner proposed a new add-on for existing systems, which they hoped could help rejuvenate sales. The consulting team acknowledged that the company had a cash flow problem, and agreed to take a minimal fee upfront for the design, and royalties from product sales thereafter. The consultants designed and tested the equipment themselves, and eventually the new product had all the makings of a smash hit for the struggling company.

    One day, Joe entered the company's warehouse to do final testing on his products, only to find that a series of partially assembled, untested systems were ready to be shipped out. When he investigated further, a worker told him: “We're only shipping it to the inventory facility so we can use it as collateral for an asset based loan. We'll ship the products back after we get the loan.”

    Joe was genuinely concerned that company's shipping practice was an instance of bank fraud. But at the same time, his future success was intertwined with the company with his future royalty earnings being dependent on the company succeeding.

    What should Joe do?

    Posted June 2013

  •  On the Board: When the CEO is a Close Friend

    Bob Harris, a recently retired CFO, has served on the Board of a Silicon Valley tech company for several years. He was initially asked to join the Board by the CEO. The two initially met while serving on another Board and now have become close friends. Recently, the Board was confronted with allegations that the CEO had been having a sexual relationship with a mid-level sales manager at the company. Staff had observed that the individual in question had received numerous promotions and bonuses, and many employees expressed resentment over her seemingly preferential treatment.

    Bob shares in the widespread concern that the incident is affecting morale and needs to be addressed. At the same time, a public firing would damage the company's image, and in turn the stock price. He considers confronting the CEO directly, but fears that would be putting his friendship before his duty to the company, its employees, and shareholders. The board has scheduled a meeting for later that day to deliberate on the issue.

    What should Bob do?

    Posted June 2013

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