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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.

The following postings have been filtered by tag Technology. clear filter
  •  When Extra Attention Crosses the Line

    Annie has been recently hired full time at a major tech company where she interned for two summers during her college career. Annie loves her job and has established many strong relationships with her co-workers over the time she has worked there. The company encourages the interns and new hires to interact with VPs and upper management in order to create an open and friendly atmosphere.

    During her time as an intern, Annie began to notice that one of the VPs paid her extra attention. When he was around he would always make an extra effort to stop by Annie's cubicle and chat: something he did not do with any of the other interns. He reached out to her over social networking sites and even invited her to a gathering at his house. Some of her co-workers began to make offhand comments to Annie about the extra attention.

    Now that she was in a full time position, Annie began to dread that she would soon have to work with this VP directly. While he has not done or said anything explicitly inappropriate, the extra attention—and the fact that her co-workers noticed it—made her very uncomfortable and undermined her concentration on work. When she was hired, she was told that she should always speak to her manager if she was uncomfortable or had issues with the work environment. While at the same time, she is afraid to come across like a tattletale since the VP hasn't explicitly done anything wrong.

    What course of action should Annie take?

    Posted June 2013

  •  Cooking the Books: Stretching the Principles of Revenue Recognition

    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
  •  Unchartered Territory: When Innovation Outpaces Regulation

    David Johnson holds a major leadership position within an established biotechnology firm. The firm has successfully pursued wildly innovative research utilizing DNA that has pushed the boundaries of science. Many potential clients – from universities and medical centers to private institutions – expressed a strong interest in the company's technology. Knowing that this technology was both powerful and relatively unregulated by the government, both Johnson and the company were keen to monitor who they sold their products to.

    The company's solution was to investigate potential clients and only sell to those who demonstrated “bona fide use,” i.e. a legitimate use that would be carried out in good faith. However, determining what was and was not bona fide use proved to be tricky. Some researchers wanted to use the technology to investigate the genes of specific ethnic groups in order to understand common genetic diseases within that group. While this particular project was intended to benefit people, the company was concerned about how that information could potentially be used in the future, not to mention the company's culpability for that use given that its technology was used in the research.

    The company was concerned that the kind of information the potential customer would have access to could be used to discriminate against people with certain genetic markers, particularly by insurance companies looking to increase rates for clients at a higher risk for illness. At the same time, the investors of the biotech firm expect a return, given the high costs of research and development as well as the amount of risk they took on funding the project.

    Does the firm have an obligation to self-regulate their product? Are their “bona-fide use” standards sufficient?

  •  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

  •  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

  •  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