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.
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Cindy recently graduated from Santa Clara University and was working in a sales position in a growing tech company. She worked very closely with her team and had a good rapport with them. She was the only woman on the team, but she still felt at ease with her colleagues. Part of her job involved traveling across the country and going to meetings and events outside of work with her team and other sales people from different organizations.
During certain non-customer, internal events, she noticed that some of her married co-workers were bringing women other than their wives. Although she was uncomfortable with the situation, she wanted to keep her distance so as not to become too directly involved with her co-workers and their personal decisions. She had knowledge of what was going on but didn't think it was her place to intervene.
One day, at an office party, the wife of one of her co-workers approached her. She wanted to know exactly what was going on during these trips. Cindy was frustrated to be put in this situation by her co-workers and she didn't know what to say. Should she put herself in the middle of a coworker's marriage and tell the truth about the situation? Is there another option? She didn't want to damage the team and be looked at as an outsider. She knew that she was not involved at all in these behaviors, but she still felt very uneasy about the situation.
How should Cindy react in this situation? Is it Cindy's place to step in and say anything, or should she stay out of the situation all together? With so many different loyalties, between her co-worker, her own values, her co-worker's wife, and her job, what is most important in this situation?
Posted June 2013
John is CFO at a venture-backed tech startup with revenues of $20 million and approximately 80 employees. He's worked at the company for several years, and now reports to Ralph, the company's newly hired CEO.
The company had been doing really well, but recently big customers have been placing fewer orders and Ralph is feeling pressure to show growth. This pressure is amplified because the company is venture-backed, and the investors expect results. While the company did well in the first round of funding, if they don't perform now, they may have trouble with gaining sufficient funding in the second round, which could mean the end of the company.
All of this was on John's mind when Ralph came to him about recording a major order that was still under negotiation. The deal had not gone through, although both parties expected to complete the deal in the next week. With the current quarter ending in the next few days, including this order would give a significant boost to the company's financial reports. Nonetheless, under the generally accepted accounting principles (GAAP), it is clear that this order does not qualify as revenue.
Even so, Ralph was adamant about John booking the order, which could make all the difference in the company's ability to stay afloat. John knew that doing so would constitute fraud; particularly because the Sarbanes Oxley Act requires the CEO and CFO to sign off on all quarterly reports. At the same time, John knew that this order could make all the difference.
What should John do?
Posted June 2013
Lindsey worked as a top manager at a struggling technology company in Silicon Valley. As part of a company wide initiative, she had the task of downsizing her department by a considerable margin. Among the most troubling decisions involved eliminating a position within her department's most productive teams: eight people for seven jobs. As she considered each team members'; contributions and merits, there were two employees whose performance reviews were far behind the rest of the team.
Dianne was a 38-year-old woman, an employee at the company for 12 years, and an average performer. She worked hard and did a decent job overall, but failed to thrive at the company. She worked for a mediocre manager and Lindsey thought Diane's performance would improve if she worked for a more competent manager. Lindsey felt that Diane had more potential than Ron, but up until now it had not been realized.
Ron was a 42-year-old male with tenure and experience in the firm similar to Diane. Like Diane, he was an average performer but was not a rising star in the organization. He did not show as much potential as Dianne. However, because Ron was over 40, he was considered a member of a "protected class," giving him special protections against discrimination based on age. If Lindsey fired him, he could, and most certainly would, sue the company with a claim that he was being let go because of age discrimination.
Lindsey felt that Dianne was the slightly better candidate, given her potential to grow into a top contributor. On the other hand, eliminating Ron's position would expose the company to a lawsuit and the expenses associated with it, perhaps outweighing any benefit the company would gain by choosing Diane over Ron.
What should Lindsey do?
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
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
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