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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.

  •  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?

  •  Caught in the Middle: Where Does Your Loyalty Lie?

    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

  •  Gender Discrimination: Preferential Treatment in the Workplace

    Will is an intern at a government engineering office where he works within a team of four other interns; they all report to one primary boss, Jim. Will notices that Jim has drastically different approaches in dealing with male and female interns. He often sends Will and his fellow male interns on faraway projects or tedious tasks that he never assigns to the only female intern, Meghan. On her part, Meghan is also unhappy with this extra attention as she only gets in-office engineering projects working alone with Jim and no experience of being in the field. As a prestigious conference approaches, Jim predictably selects Meghan as a representative for the office without even informing the other interns about the opportunity.

    The interns collectively get a little more curious about Jim's background and realize that numerous sexual harassment cases have been filed against Jim in the past, though he has never been prosecuted. They are informed that these types of charges in government offices have to be followed with strict adherence to state policies including having an investigator ask the whole office specifics regarding the situation.

    Despite the urgings of her teammates, Meghan is reluctant to file her own report as she does not want to confront Jim directly and an anonymous report would easily be traced to her. Fearing that the report will compromise her prospects at full-time employment at the office, she tells Will that she will just deal with it for the rest of the internship: “It's only another three months anyways.”

    What should Will do?

    Posted June 2013

  •  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?

  •  Quality Management: Signing Off on a Substandard Product

    Lauren's first job after graduation from Santa Clara University was working as a quality engineer with a highly respected technology company. She had to monitor the manufacturing process and make sure that all products met customer specifications. Just three months into her position, the company booked a very large deal with a strategic customer, helping establish the company's dominance in the industry.

    Specifically, Lauren's company was designing a device that would be integrated into another company's product. The customer contracted out this work because they were experiencing rapid growth and cannot meet demand otherwise. They picked Lauren's company because of its good reputation and fast turnaround time. Lauren's role was to test the new device and make sure it met technical and environmental specifications, particularly functionality under extreme conditions, such as high humidity.

    The test results showed that the products did not meet the quality standards agreed upon, but only by a very small margin. Her general manager instructed her to push it through anyway, stating that the risk of failure was not great enough to delay mass production. Moreover, the likelihood of the product ever being placed in such extreme situations was so small that the manager did not feel jeopardizing the contract was worth it.

    Lauren spoke to her immediate boss, who worked under her general manager, and he also advocated pushing the product through to production. She was faced with the choice of ignoring company protocols or going against management. Sweeping the problem under the rug would require Lauren to sign off on a report that she knew to be fraudulent. She also knew that if she went to upper management her working relationships with her immediate bosses would be strained, maybe even preventing her success in the company. Not to mention, the company would have to delay production and possibly lose the contract.

    What should Lauren Do?

  •  Protected Class: Externalities of Age Discrimination Safeguards

    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?

  •  Startup Fundraising: In the Name of the Greater Good?

    Ian is Founder and CEO of a non-profit organization that helps low-income high school students prepare for higher education. He founded the organization shortly after college, and it is currently on the cusp of a major breakthrough. But like many nonprofits, the funding necessary to fuel that growth is lacking. Ian's organization is applying to a research foundation that could promise millions of dollars in funding. However, before Ian can apply, the foundation requires a formal evaluation of the group's organizational success, which must be conducted by a third party.

    The foundation requires one of the following experiments:

    1) Randomized control experiment: This type of experiment is the most scientifically valid because it allows the greatest reliability of statistical estimates of treatment effects. In the case of Ian's organization, half of a group of eligible students would be randomly selected to do the college prep program while the other half not do the program but would still be tracked. If Ian selects this method, his group would receive significantly more funding because the method is more "scientifically valid.” On the other hand, this poses an ethical dilemma because it would involve actively withholding services from half of the eligible students who would otherwise be selected.

    2) Quasi experiment: This type of experiment is an observation-based study that measures the causal impact of an intervention on a target population.  It does not require random assignment of students into treatment and control groups. All the students at a partner school would be admitted to the program, and the experiment results and statistics would be compared to historical averages of the school district, mitigating the ethical concerns raises in the randomized control experiment. However, if Ian selects this option, there will be less funding available for the program, negatively affecting the number of students that the program can reach in the future.

    What should Ian do?

  •  Cultural Barriers: When Equality Compromises Efficiency

    Ralph was a sales representative of a small but fast-growing mobile and social advertising platform. Working directly with the co-founder, Mike, Ralph was responsible for door-to-door sales, pitching the company's platform that helped clients gain a virtual following of customers.

    The business owners in the area often spoke English as a second language, making clear communication between the two parties a key concern for Ralph.

    On one sales call, Ralph approached a small hair salon and secured a contract along with a $100 signup fee. However, the situation soon turned sour, as the hairdresser was furious after learning that she would have to operate the online platform herself, as opposed to the full service deal she thought she had signed.

    Mike, Ralph's boss, now found himself stuck in tough situation. Ralph claimed that he was blatantly clear what the contract was offering, though mentioned communication was strained due to the language barrier. Under the company's philosophy of putting the customer first, Mike refunded the $100 signup fee and voided the contract.

    This was not the first time Mike had to refund a contract under these conditions, causing Mike to revisit both the contract and Ralph's sales pitch to ensure that the language was a clear as possible. After this incident, it was clear that adjustments have not made an impact, and the company continued to lose money on negated contracts and time wasted not pursuing interested customers. Mike began to consider redrawing their target areas away from those where English is not the predominantly spoken language, but is concerned that would be an injustice to those potential customers.

    Should Mike make the decision to work only with English-speaking customers? Is that an ethical solution? Are there any alternatives?

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