Discuss the dangers in earnings management.
Kyphon employees sold, sold, sold Kyphon’s products for spinal fracture repairs. One
rep took his territory’s sales from $16,000 a month to $200,000 per month in less than a
year. Incentive programs do produce miracles.
Kyphon, now Medtronics Spine, faced Medicare fraud allegations when two former
employees brought suit under the False Claims Act. Medtronics acquired Kyphon in
2007 while the former employee suits for Medicare fraud were pending. According to
documents in the case, Kyphon sales reps didn”t just tout the benefits of Kyphon
products, and indeed there are many. The sales reps offered the doctors and hospitals a
way to keep patients overnight. Helping docs and hospitals bill Medicare for an
overnight stay on what was only a one-hour, walk-away outpatient procedure was a
boon. Kyphon created a mutually beneficial triangle: more sales for Kyphon, more
commissions and bonuses for reps, and more revenue for docs and hospitals.
Discuss the ethical issues in this scenario. Was it a violation of the law in terms of
Medicare reimbursement?
The asbestos industry moved down the cycle very rapidly.
Labeling infertility surgery as “diagnostic surgery” in order to allow the patient to
recover the costs from an insurer is unethical.
List the categories of ethical dilemmas.
It is illegal for an employer to look on MySpace in screening potential employees.
Accepting gifts from suppliers and vendors is not a problem so long as no bid decisions
are pending.
Slotting fees are always disclosed.
If I discover that a fellow employee is reporting falsely his overtime hours, it is best for
me to say nothing and ignore the situation.
Why do companies refuse to use top-secret material from competitors that is brought to
them?
Explain the role of group think in the decision to launch the Challenger.
A physical fitness expert retained by a fitness magazine to evaluate walking shoes has a
conflict of interest if she has an endorsement contract with one of the shoe companies
that manufactures the shoes she will be evaluating.
Following positive law is not the full extent of ethics.
Bribery is a cultural issue and generally not regulated by law.
Although you are not part of your company’s engineering group, you have discovered a
major flaw in the company’s new paper-thin solar calculator. The calculator adds when
the subtract button is pressed if there are more than three figures to the right of the
decimal point. Since it is not your area, you should do and say nothing.
Goodwill was not a part of Tyco’s accounting and financial reports.
Copyright owners cannot control the use of copyrighted materials by charities.
An ethical breach is not necessarily a violation of the law.
Compare the behaviors of William Aramony with those of Dennis Kozlowski. Are there
signals these CEOs send with their behaviors?
Purchasing agents accepting a pleasure trip from a supplier when no bids are pending is
still an ethical violation.