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SECTION 7B – WORKPLACE LOYALTY
CASE 7.6 – AARON FEUERSTEIN AND MALDEN MILLS
Use PowerPoint Slide 275.
Answers and Key Discussion Items
1. Mr. Feuerstein’s conduct demonstrated that it is possible to consider employee well-being in a
Mr. Feuerstein indicated that he made the decision for his conscience and not on the basis of what
Point out to the students that Malden Mills had a set of circumstances in which employees would
2. Point out to the students that Mr. Feuerstein has his grounding in both his faith and in the example of
his parents and grandparents. He has a sense of obligation about who he is and how he should
3. Mr. Feuerstein did not have the publicly-held company syndrome in which he must be accountable to
large and small shareholders and the outcry they often produce when they disagree with the CEO or
resent the resulting impact on their earnings. Nonetheless he did have creditors and obligations as
4. Have the students discuss whether ethics and social responsibility always mean success. Discuss all
the components of business working together, including ethics, as the secret to success. Be sure to
CASE 7.7 – JCPENNEY AND ITS WEALTHY BUYER
Go over with the students the categories of ethical breaches in the case (Use PowerPoint Slide 276):
Taking things that don’t belong to you
Personal decadence
Conflicts of interest
False impressions
Interorganizational abuse
Discuss who was harmed (Use PowerPoint Slide 277). Those harmed include:
Shareholders of Penney’s
Penney’s customers
Other buyers
Other vendors, suppliers, manufacturer’s reps
Penney’s employees
Locklear’s family(ies?)
Answers and Key Discussion Items
1. Locklear was doing well in his job at Penney’s. Why rock the boat? Why question? Still, Locklear
2. It is an “everybody does it” philosophy; a rationalization; doesn’t make it ethical.
3. Yes, both have engaged in act; both are unfair to others.
4. The advantages: no line-drawing; no benefits; all quid pro quo is removed. The simplest policies
seem to be the easiest for employees to follow. And with a definitive rule, there are less likely to be
5. Poor products; pricing issues; bad choices in lines; product liability. The buyer becomes conflicted –
6. Mr. Locklear acknowledged that it was his personal life that was fueling his taking the kickbacks. He
Mr. Locklear’s minister makes an incisive remark in that many good people who do fine things in the
community lose sight of their values in the business world. It’s as if they see their lives as
CASE 7.8 – THE TRADING DESK, PERKS, AND “DWARF TOSSING”
Use PowerPoint Slides 278 - 282.
Answers and Key Discussion Items
1. A conflict is a conflict is a conflict. Use PowerPoint Slide 278 to discuss the ONLY two ways to
manage a conflict: don’t do it or disclose it. Saying, "But I was not influenced by that" ex post facto is
not managing a conflict. You are managing damage control at that point. Investment firms may well
be about the same, and there is a critical point. Any one of them can give stuff. As a strategy, this is
We worry because of the failure to concentrate on our duty of loyalty to our companies and our
clients. Also, we worry because the line slips gradually and we become compromised without even
2. All of these self-regulators and regulators worry about "stuff" because of what happened in the
Traders are conflicted by receiving stuff. That is, these kinds of material gifts turn a head and change
3. Some people have a "no stuff" rule, Walmart for one. Others put limits on stuff. Still others insist that
4. Some of the brokers were terminated, but some were not. The concern is that the failure to enforce
the policy against all, including Mr. Lynch, sets a tone for the culture. The lack of consistent
5. Research shows that when a top performer crosses an ethical line, we tend to look the other way,
rationalize it, and provide only a slap on the hand. For those in the lower ranks, we impose harsher
CASE 7.9 – THE ANALYST WHO NEEDED A PRESCHOOL
Use PowerPoint Slide 283.
Answers and Key Discussion Items
1. Yes, there were several layers of conflicts of interest here. Mr. Grubman was conflicted in his
recommendations on WorldCom because of his desire to recruit WorldCom’s business for his
The IPO allocations were conflicts for the CEOs (they profited personally by giving their company’s
business to the investment bank that gave them the first shot). Mr. Grubman was also conflicted over
his preschool enrollment desires as well as the IPO allocations because they were not disclosing
Mr. Weil had conflicts by using his company to achieve personal goals for himself and others.
2. The credo elements clearly relate to involving personal wants and needs in business relationships
and the dangerous bargains that can be struck in the name of something that is personally important,
3. No. The behavior of “everybody” is not the ethical standard. When all of this conduct was revealed,
analysts had an epiphany regarding their drift away from standards. This was a classic industry
practice, but, remember, there always remains the individual level and the ability to say no. Also,
Disclosure: The author has assisted, as a consultant, the Chartered Financial Analysts Association
(now the CFA Institute) in revamping its disciplinary processes.
4. Whether laws were violated is a tougher call. The IPO allocation has resulted in an investigation and
Mr. Spitzer used state criminal statutes that were obscure and focused on the common law crimes of
conspiracy, obstruction, etc.
5. E-mails at work are not private. The employer has a right of access and they are all discoverable. For
Compare & Contrast
Whitley had some very clear lines and also the courage to raise issues. Whitley had some values that
gave him the gumption to raise an issue that would create at least ripples in the company. Grubman, on
the other hand, was unable to see what his actions did and that he was conflicted on his personal goals
CASE 7.10 – TASER AND STUNNING BEHAVIOR
Answers and Key Discussion Items
1. While Taser pays officers on active duty $195 per session to instruct other officers on how to use
Tasers, the officers also received stock options after recommending their agencies adopt Taser
products for use by officers. Taser could have been “greasing the skids” if the intent of issuing the
options was to accelerate an important decision. If the department did adopt the Taser product, they
could use the reasonable-man defense proving they made a reasonable choice of product. If the
The appearance of impropriety, particularly with something that involves as much public trust as the
2. The stock options to police officers who recommend their products to their departments is bribery or
at least a conflict of interest. These officers are responsible for recommending products and are
Taser may have opportunities to embrace the concerns of the opposition and industry, and make
positive strategic changes. Apple did this when they launched iTunes with $.99 downloadable songs
while record labels fought to prevent the pirating of CDs. There is so much in jeopardy with Taser that
3. The non-lethal self-defense device industry is in the regulatory stage. Litigation with regards to the
Taser devices are also regulated by the TSA. Taser products are also regulated internationally. It is
important for the company to address the reasons why certain states and companies have prohibited
Another step Taser should consider is to initiate some public awareness campaigns regarding their
products. Negative press travels fast, so to alleviate any negative word of mouth, Taser should
embrace the opportunity to educate people about their products’ safety and the small likelihood that
4. There will always be close relationships between Taser and the agencies that use its products. But
those relationships need to be based on mutual respect and trust, not because of payments to
officers to recommend the product. The public is really a client as well, in terms of public relations
Ethical issues arise when considering the use of self defense weapons by private citizens. The
devices are truly a matter of controversy – much like guns – because of their potential for injury or
death. Self defense laws are very subjective and vary from state-to-state. A claim of self defense must
be comparable to the threat of danger. People who have self defense devices may experience a
CASE 7.11 – BOEING AND THE RECRUITING OF THE GOVERNMENT
PURCHASING AGENT
Answers and Key Discussion Items
1. The category of ethical dilemma is a conflict of interest. Along the way those involved did not tell the
truth, left false impressions, took unfair advantage, and violated the law with conspiracy and
2. Mr. Sears focused on self-interest or Boeing benefiting from access to and hiring Ms. Druyun. Ethical
3. Ms. Druyun also had self-interest, even including the jobs for her daughter and son-in-law. She did
4. Heather started the chain rolling with her involvement. She was looking to set up a conflict of interest
and violation of the law. Heather was clearly a beneficiary of her mother’s conduct in her being hired
CASE 7.12 – KODAK, THE APPRAISER, AND THE ASSESSOR: LOTS OF
BACKSCRATCHING ON VALUATION
Answers and Key Discussion Items
1. Those who were hurt included the other taxpayers in the community whose valuations were not
negotiated by the assessor as a means of making money, the community for the loss of revenue.
Kodak did not benefit – it only postponed the payment of taxes and had to grapple with the fallout
2. Trust in government officials is paramount in economic systems. Capitalism is based on trust and to
the extent that businesses cannot count on equal application of the law, there is the introduction of
additional risks and costs that cannot be anticipated and planned for as well as uncertainty about
3. Yes, the contingent fee arrangements do open the door for this kind of activity. The wave of subprime
problems has caused a new wave of regulation of appraisers in terms of process and computation.
New regulations will, once again, try to curb the temptations business people have to involve
4. The three could probably rationalize that no one was truly hurt by their scheme and that, in fact,
Kodak benefited. It was perhaps difficult for them to see that spreading the savings around a bit was
more than just an inconsequential action among friends that served everyone well. They also
probably realized that it would be difficult to track and discover and that they enjoyed some protection
there. That assumption, as so many cases have shown, is wrong. There will always be room for
CASE 7.13 – MEDTRONICS, JOURNAL ARTICLES, CONSULTING, AND ETHICS
Answers and Key Discussion Items
1. These gifts fall into the ethical category of conflicts of interest. The doctors’ decisions could be
clouded by their acceptance of various perks, the type of perks, level of perks, etc. from the various
companies. Use PowerPoint Slide 284.
2. The doctors have melded together the line between independence and being beholden. The
continual barrage can break down barriers on duties and cloud judgment. Doctors often insist that
The issue is not resolved because people keep trying to find ways around the new rules and codes of
There are two ways to manage a conflict of interest (which is what funded research is): don’t or
disclose it. Research funded by a pharma presents a conflict for a researcher because obviously the
pharma wants the research to come out in its favor. The doctor should disclose the funding and
perhaps both the doctor and the pharma would want to set up some checks and balances so that the
3. Ms. Kelley was fired because she was interfering with what was a very simple sales model that those
in the field felt was working, that everyone else was doing (industry issue), and that would result (they
believed) in a substantial reduction in sales and, hence, their compensation. Whistleblowers do have
significant federal protection, particularly when it comes to the pharma industry because blowing the
4. Use PowerPoint Slide 285. A conflict is a conflict is a conflict. That the good doc’s payment was not
for Avandia does not change the fact that he received compensation from a company whose fate he
CASE 7.14 – CORNELL RESEARCHERS AND FOUNDATION FUNDING
Answers and Key Discussion Items
1. There are no grades of conflicts of interest – there are only two ways to manage a conflict of interest:
2. Use PowerPoint Slide 286:
Those who funded the research
Those using the research: physicians and patients
The basics on conflicts will cover this situation with the additional caveat – you cannot one-step away
yourself from a conflict – indirect ties are still a conflict. Companies should require disclosure in the
research of those who are funded – in the long run it helps the company because it does not lose trust in
