What did Ken Lay do when Bethany McLean was researching Enron?
a. Called her editor and asked that she be removed from the story
b. Answered all her questions
c. Thanked her for Fortune naming Enron one of the 100 best companies to work for
d. None of the above
How much did the Boys and Girls Club plan increase sales in Richmond, Virginia?
a. 2%
b. 6%
c. 10%
d. 15%
The Oil Spill Act:
a. Requires oil companies to obtain environmental clearance from the federal
government and the city before entering a city’s port.
b. Requires double-hulled boats.
c. Imposes generic liability tax for oil tankers.
d. Existed before the Exxon Valdez spill.
e. None of the above
LeAnn Rimes, a country western singer, signed a contract at age 12 with Curb Records.
Curb Records is owned by Mike Curb, a long-standing presence in the music industry
who began his career with a group known as The Mike Curb Congregation. Under the
terms of that contract as it originally existed, and as it was signed by Ms. Rimes’
guardians, Ms. Rimes would have been 35 before she had delivered the 21 albums
required under the agreement. “At 12, I didn”t understand everything in my contract.
All I know is that I really wanted to sing,” was the explanation Ms. Rimes offered when
she later testified before the California Senate Select Committee on the Entertainment
Industry looking into the labor issues surrounding long-term album requirements
contracts. Which of the following would apply to Curb Records’ conduct with regard to
Ms. Rimes?
a. Taking unfair advantage
b. Conflict of interest
c. There is no ethical dilemma because Ms. Rimes’ guardians were involved
d. Taking something that does not belong to you.
According to Milton Friedman, an executive imposes taxes on shareholders when:
a. He or she uses corporate funds for social causes.
b. He or she fails to take all available deductions.
c. He or she pays dividends.
d. All of the above
What rationalization did the students at Stuyvesant High School offer for cheating?
a. They were under tremendous pressure for grade achievement.
b. They were high achievers to whom test scores were irrelevant.
c. They were helping each other.
d. The Warren Buffett rationalization.
What happened to WorldCom when its accounting issues and restatements were
announced?
a. Its share price fell to 13 cents
b. NASDAQ delisted the stock
c. Congress revoked WorldCom’s federal contract
d. All of the above
Which of the following resulted from the Burger King Frozen Coke issues?
a. Coke had an earnings restatement
b. The FBI investigated Coke
c. The SEC investigated Coke
d. Both b and c
e. All of the above
In the Penn State case, who was charged with criminal activity?
a. The president of the university
b. Joe Paterno
c. The janitor who did not report what he witnessed
d. Michael McQueary
Which of the following does Saul Gellerman believe is ineffective for preventing
company ethical lapses?
a. Ethics training
b. Screening out unethical employees
c. Both a and b
d. None of the above
National Medical Enterprises, Inc. (NME) is a multinational health care enterprise with
143 hospitals on four continents. NME was started by Richard K. Eamer, a tax attorney,
in the 1960s. Eamer’s development of NME was possible because of the
implementation of the Medicare and Medicaid programs. He saw the programs as
opportunities for a virtual guarantee of profits.
He began by acquiring six hospitals. He paid for these hospitals with promises to the
physicians on staff of stock in his company. After the six hospitals were acquired,
Eamer did a $25 million national stock offering and gave the physicians shares of stock
in NME.
Eamer adopted a decentralized structure for the company. Hospital managers were
simply given a financial goal and complete autonomy in their operations. Eamer
traveled a great deal and used a company plane to get to NME-owned condominiums in
London and Aspen. While Eamer was not a hands-on manager, he set very clear goals
for NME managers. Achievement of established goals was rewarded. Under NME’s pay
structure, it was possible for managers to double their pay by meeting goals. Eamer was
harsh when goals were not met. In meetings he would refer to those executives who had
failed to meet established goals as “morons.”
Eamer’s managerial style paid off in the form of earnings growth of 15% per year
through 1985. But, in 1986, earnings growth was off, down to 3%.
When informed by his managers of the decline in earnings growth, Eamer announced
that NME would now focus on operating and acquiring psychiatric, substance-abuse
and rehabilitation hospitals. NME had 62 psychiatric hospitals in 1986, but by 1991,
that number had grown to 86. Further, NME occupancy rates for its psychiatric
hospitals were 25% higher than any of its competitors. NME maintained an occupancy
rate of 84%.
The director of NME’s Fair Oaks Hospital in New Jersey, testified at a Congressional
hearing that NME executives circulated information on how to maximize insurance
payments. Strategies included longer stays and additional tests.
NME’s intake manual specified as a goal that one of every two people who came to the
hospital for a psychological assessment would be hospitalized.
Some adolescent patients were billed for as many as 10 therapy sessions per day. A
memo from one senior officer to the various NME hospitals stated that the length of a
patient’s stay would be determined “not by the patient’s individual medical needs, but
on the insurance or payor mix.” A controller for an NME hospital in Texas testified that
probation officers, clergymen and officers in corporation employee-assistance offices
were offered up to $2,000 in referral or “bounty hunter fees” for referring patients to
NME. The controller also testified that he was required to make “cold calls” on facilities
for purposes of soliciting referrals. He indicated that one of his cold calls was to a
nursery school.
Former executives of NME have provided information showing that physicians were
given 50-year leases for $1 per year by NME and then referred their patients
exclusively to NME hospitals. Many of these physician-occupied buildings operated at
a loss. Both Medicare and Medicaid regulations prohibit payment of referrals fees to
physicians.
By 1991, occupancy rates at NME psychiatric hospitals were down to 52%. Eamer
began selling of the psychiatric hospitals and announced to shareholders than NME
would return its focus to its core 35 general hospitals. In announcing the refocus to
shareholder, Eamer noted, “Our focus is on the patient. We know everything else will
follow.”
a. What type of ethical culture existed at NME? Why?
b. What does NME need to change?
c. Do you think NME’s strategies with respect to the psychiatric hospitals were ethical?
d. Evaluate the ethics of clergymen, counselors, and probation officers accepting
referral fees.
Stephen Ambrose, a popular historian with many books to his credit, admitted that some
segments of one of his recent books had language taken from the books of other
historians that was not in quotes. Mr. Ambrose did footnote the work of authors he
relied upon in doing his book.
a. The work of an author is protected by copyright laws.
b. The use of quotes without attribution is not a violation of the law.
c. The use of the material is fair use and need not be footnoted.
d. Both b and c
e. None of the above
How much did Coke pay to the employee who filed suit alleging wrongful termination?
a. $540,000: $100,000 in cash, $140,000 in benefits including health insurance, and
$300,000 in lawyer’s fees
b. $9,000,000 plus $300,000 lawyer’s fees
c. $37,000,000 plus lawyer’s fees
d. None of the above
Warren Buffett was paid less:
a. Than the average employee of his company.
b. Than the other officers of his company.
c. Than only one other CEO.
d. None of the above
Which of the following practices best helps prevent sweatshop conditions in factories?
a. Company training
b. Independent monitoring
c. Exclusion of outsiders
d. Varying country standards
e. None of the above
The subprime mortgage market grew :
a. From $35 billion to $40 billion from 1994 to 2004.
b. From $35 billion to $85 billion from 1994 to 2004.
c. From $35 billion to $401 billion from 1994 to 2004.
d. None of the above
The Graduate Management Admissions Council announced that it was canceling the
GMAT scores of 84 applicants and students. The Council found that the students were
active users of a now shut-down website, Scoretop.com, a site with origins in China that
posted live questions from the GMAT. The site had 5,000 to 6,000 subscribers who paid
$30 per month for access, but the Council is only canceling the scores of thoseagainst
whom it feels it has an airtight case. Two of the students whose scores were canceled
are currently enrolled at the University of Chicago’s MBA programandanother has
alreadygraduated from Stanford’s MBA program. Twelve of the students whose scores
were canceled had posted questions on Scoretop.com and the remaining 72 allowed the
site to post their testimonials that they had seen the Scoretop.com questions on their
GMAT. Ten of the 72 students had applied to Stanford but were denied admission.
Which ethical category does the conduct of the students who posted live questions fit
into?
a. Taking something that does not belong to you
b. Balancing ethical dilemmas
c. Interpersonal abuse
d. Organizational abuse
Whom did David Duncan contact about the proposed off-the-books entities that Enron
had proposed?
a. The Justice Department
b. Nancy Templeton
c. Benjamin Neuhausen, a standards partner
d. Both b and c
e. All of the above
What reason did Jimmy Dunne III of Sandler O”Neill give for dedicating his time and
resources to helping the families of his employees who were killed in the World Trade
Center attacks?
a. There was a clause in their employment contract that required it.
b. He wanted the attention his generosity would bring.
c. His son will also be judged by how Jimmy Dunne responded to his employees’
families’ needs.
d. None of the above
Steve has been disgruntled with his firm for some time and is secretly planning to leave
and start his own manufacturer representative firm with the contacts he has made. Steve
has been making copies of the firm’s file-secured customer lists, supplier lists, pricing
guides, and financial information which is routinely circulated to the staff.
a. If Steve leaves and contacts the customers of his former firm, there is a good chance
that he will be liable for damages caused by his taking this information.
b. Steve shouldn”t have made copies on the old firm’s copy machine but taken the
originals to an outside copy service.
c. Steve’s former firm will have a difficult time stopping Steve because it did not protect
its information.
d. Customers who switch to Steve’s new firm will be liable to Steve’s former firm for
lost profits.
What was Coke’s strategy for expanding fountain sales?
a. Sign up new fast-food franchises
b. Move Frozen Coke into fast-food franchises
c. Eliminate Frozen Coke from convenience stores
d. None of the above
What did internal documents at tobacco companies reveal?
a. That the companies were not targeting young people
b. That the companies were targeting age groups ranging from 14-24
c. That the companies were losing sales
d. Both b and c
Beth Williams is an exercise physiologist who serves as an expert consultant for
Women’s Walkers, Inc., a shoe company specializing in manufacturing walking shoes
for women. Dr. Williams is paid an annual consulting fee along with additional fees for
drafting reports and making media and public appearances for the company. Executive
Woman, a national magazine, has asked Dr. Williams to serve as one of three experts on
a panel that will evaluate the full market range of women’s walking shoes. Dr. Williams
will be paid a consulting fee by Executive Woman as well.
a. Dr. Williams has a conflict of interest and should decline the Executive Woman offer.
b. Dr. Williams can participate in the Executive Woman panel so long as her affiliation
with Women’s Walkers is disclosed.
c. Dr. Williams can participate in the Executive Woman panel if she waives her fee.
d. Dr. Williams is an academic with no conflict of interest and can participate in the
Executive Woman panel.
What happened to Andrew Fastow?
a. He was convicted of fraud
b. Nothing; he did nothing wrong
c. He testified against Skilling and Lay
d. Both b and c
Who spoke in protest of the Ice-T CD at Time Warner’s annual meeting?
a. Madonna
b. Charlton Heston
c. Jerry of Ben & Jerry’s Ice Cream
d. David Geffen
Repo 105:
a. Is a toll that Enron used for off-the-book entities.
b. Allowed debt instruments to be sold prior to public announcement of financial
results.
c. Was used by WorldCom to capitalize ordinary expenses.
d. Was Chases’ derivative trading strategy.
What type of clause did Starwood employees have in their employment contracts?
a. A clause to not take a job with a competing hotel chain
b. A clause to not take documents with them upon departure
c. A clause to not work in the resort industry
d. Both a and b
When Ann Hopkins submitted her application for partnership, how many female
partners did Price Waterhouse have?
a. 662
b. 7
c. 15
d. 3
What other criminal charges did Kozlowski face beyond the Tyco issues?
a. Insider trading
b. Sales tax evasion
c. Antitrust
d. Money laundering
Which of the following is true about Steve Cohen, the founder and owner of SAC
Capital?
a. He was banned from trading securities for life.
b. He was accused of insider trading in a civil suit.
c. He was an aggressive trader, but he was never fired.
d. He is under criminal indictment.
Stephen Ambrose, a popular historian with many books to his credit, admitted that some
segments of one of his recent books had language taken from the books of other
historians that was not in quotes. Mr. Ambrose did footnote the work of authors he
relied upon in doing his book.
a. The work of an author is protected by copyright laws.
b. The use of quotes without attribution is not a violation of the law.
c. The use of the material is fair use and need not be footnoted.
d. Both b and c
e. None of the above
What information did Yahoo turn over to the Chinese government?
a. The name of a Chinese dissident who was posting information on the net
b. Its list of customers
c. Yahoo’s proprietary information on its systems
d. All of the above
Pam purchased a quesadilla at Taco Bell for lunch. She also asked for a water cup,
which is free and to be used to get water at the soda fountain. Pam used the water cup to
get Pepsi. Which of the following is correct?
a. Pam has simply taken advantage of a loophole with no supervision over water cup
use
b. Pam has taken something that does not belong to her
c. Pam has done nothing wrong unless she was warned not to fill the water cup with
soda
d. Both a and c
Under Sarbanes-Oxley, a company must file an 8-K if it has waived its code of ethics
for a financial reporting officer.
Explain the impact of private equity firm acquisition of manufacturing and retail firms.
Commercial bribery is only a crime for the purchasing agent accepting the money.
Ikea fell into the either/or conundrum in solving its problems in dealing with Russian
authorities.
Nonprofits are permitted to use raised funds in any manner they deem acceptable.
The trend in international markets is away from regulating insider trading.
Payments of royalties from drug sales by a pharmaceutical firm to the university where
a researcher conducting studies has validated the firm’s claims is a conflict of interest.
What common characteristics do you see in the HealthSouth, Adelphia (Unit 3) , Fannie
Mae, FINOVA, Tyco, WorldCom and Enron cases?
Plato believed one cannot make ethical decisions without first developing virtue.
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.
Why does Michael Novak distinguish corporations’ responsibilities?
Physician referrals of patients to laboratories for work-ups when the physicians own all
or part of the labs, but do not disclose such, is a conflict of interest.
Employers can require that employees cover up tattoos at work.
What does the statement “Americans focus on wages paid, not what standard of living
those wages relate to” mean in the context of human rights?
A purchasing agent for a company could accept a Rolex from a supplier so long as there
is no bid pending.
Some recording artists use bankruptcy as a means for avoiding contract obligations.
Once begun, the regulatory cycle cannot be reversed.
Whistleblowers who turn to external avenues for dealing with issues are unethical.
A supplier has just been awarded a large contract by your company. As an employee in
purchasing, you were largely responsible for awarding that supplier the contract. The
supplier’s sales representative has just called and would like to take you to lunch to
thank you for the support. Going to lunch with the sale representative does not present
any ethical problems.
List the tools companies can use for getting information from employees to those who
can and will do something about the issues being raised.