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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 Fraud and Corruption. clear filter
  •  Odd One Out: Confronting Corruption in the Workplace

    Jenny recently completed her master’s degree and was extremely excited to be hired for her dream job working for the local county government. During her first year, she began to notice that funds from grants were being mismanaged and misallocated. Some of her coworkers were also using county-owned materials, including cars, for personal business.

    However, Jenny was most shocked by the hiring practices she witnessed at the office. Prospective applicants were supposed to take exams that were proctored by government employees. The results of these exams determined whether or not the applicants were hired and what they were hired for. Jenny began to notice that the proctors were allowing applicants to cheat on the tests because the applicants had already been chosen for the job. Many of these pre-chosen applicants were friends of current employees.

    Jenny reported what she witnessed to Matt, the department’s business manager, who was second-in-command to the department head. Matt told her, “You heard nothing, you saw nothing, you say nothing.” Jenny was absolutely shocked; not only by the corruption, but that it was deliberately being swept under the rug.

    Jenny felt trapped. She really needed the job to pay off loans from graduate school, and she loved the actual content of the work she was doing. She was also concerned that it would look bad to leave her first job out of school in less than a year, as well as tarnish future chances to work in government. On the other hand, she felt extremely uncomfortable in her work environment due to the culture of corruption.

    What should Jenny do?

  •  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