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4. Wal-Mart Mexico seemed to have a culture of the goal justifying the means. How can the Board of
Directors ensure that the operational activities of the company do not subvert proper governance
objectives?
The Board should be concerned about how the company makes it profits, not just how much.
This means that the Board should consider whether senior executives have the right perspective
Useful Articles, Links and Videos
Wal-Mart Hit by Mexican Bribery Claims [video] – Bloomberg Television [April 23, 2012], accessed at
In this report introduced by Erik Schatzker on Bloomberg Television’s “InsideTrack”, Sara Eisen
reports on that Wal-Mart is investigating allegations of bribery of Mexican officials by its
Mexican subsidiary to speed the opening of stores in that country. In damage-control mode,
Wal-Mart is dealing with more allegations that senior executives may have tried to cover up the
bribes by shutting down the company’s own investigation.
“Not just Wal-Mart: Dozens of U.S. companies face bribery suspicions,” Stephen Gandel, Fortune, April
The author writes that “at least 81 public companies [are] under investigation by the Securities
and Exchange Commission or the Department of Justice for running afoul of the Foreign Corrupt
Practices Act, which makes bribery in foreign countries punishable in the U.S. In addition, a
growing number of companies have started placing disclosures in their financial documents that
say their employees may at times violate the U.S.’s overseas bribery law, despite the company’s
best efforts to prevent it.”
6. LIBOR Manipulations Cause Widespread Impacts (Chapter 2, pages 138-140)
What this case has to offer
The LIBOR Manipulations Case, which describes an important scandal in easily understood terms,
exposes the problem of banks that rely upon public goodwill and trust to operate successfully, abusing
that trust to enhance the financial position or profits of the banks and/or their employees at the
Teaching suggestions
I would suggest beginning the case discussion by asking a class member to provide an overview of the
case facts. Then I would ask the class how important they thought reputation and trust were to banks.
This should trigger a discussion to the effect that they were very important because banks don’t sell
durable goods like autos, they sell trust.
Then I would ask the class:
• If they were on the board of directors, how they would ensure that the bank’s reputation and
Discussion of ethical issues
1. Which groups were most at fault for the LIBOR manipulations: brokers, traders, bank executives,
bank boards of directors, or regulators? Why?
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I would argue that the boards and the regulators were most at fault because theirs is the
2. What should the regulatory bodies do with the fines paid by these banks? Reduce tax rates for the
general public? Use the funds to re-educate investment bankers?
3. Robert Diamond continues to receive his £2 million pension annually. Should he suffer financially by
having to forfeit this pension because the LIBOR scandal occurred while he was CEO of Barclays?
It is possible to argue this question either way. If, for example, he did not know of the scandal,
Useful Articles, Links and Videos
What’s Behind the Libor Scandal? – Bloomberg Television [July 3, 2012], accessed at
Topic: New developments: LIBOR scandal
“Lloyds not off hook yet after $370 million Libor fines,” Matt Scuffham and Huw Jones, Reuters, July 28,
Lloyd’s was not yet fined and so does not appear in the text’s list of players fined over the LIBOR
scandal (see Chapter 2, page 86). The article says that Lloyds’ penalty is the seventh penalty “but
“This New Libor ‘Scandal’ Will Cause a Terrifying Financial Crisis,” Jesse Colombo, Forbes, March 6, 2014,
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“First day of business for new LIBOR administrator: ICE Benchmark Administration Ltd take responsibility
for administrating LIBOR,” Her Majesty’s Treasury and The Rt Hon Sajid Javid MP [Financial
Secretary to the Treasurer], February 3, 2014, accessed at
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7. General Motors Ignores Obvious Ignition Faults (Chapter 2, pages 140–142)
What this case has to offer
The case explores how GM made millions of cars with faulty ignition switches that malfunctioned, killing
Teaching suggestions
Most students do not understand what happens to power steering and power braking when a car’s
motor stops working, so I begin by clarifying what the faulty switch causes. This approach grabs student
attention very powerfully, and paves the way for an animated discussion of how cheap the fix would
Discussion of ethical issues
1. Why didn’t GM act effectively on suspicions that their ignition switches were faulty?
GM personnel, who identified the problem, either did not understand the significance of it, or
were not instructed to bring safety problems to their superiors for assessment and disposition.
2. Who was at fault for the deaths and injuries involved, and why?
Fault cascades with this case, because it comes at many levels:
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3. Should a company be able to escape liability for harming individuals by declaring bankruptcy?
No. After bailouts of 2008-2009, public outcry was loud against GM’s attempt to close the books
4. Should any GM personnel go to jail over the ignition switch failures? If so, who?
Yes (see Question 2): those responsible, despite the fact that they were not accountable.
Engineers are given a great deal of responsibility that must be taken seriously. In the U.S. and
5. Would you trust GM enough to buy one of their cars in the future?
No. Given the problems exposed by the Valukas Report, the company would need to prove that
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6. Was Mary Barra paid enough for the job she was required to do?
At an annual salary of “just” $1.6M, Mary Barra seemed underpaid compared to male CEOs, but
Useful Articles, Links and Videos
Brustein, Joshua. “Mary Barra’s GM Pay Could Top $14 Million, Putting Her in the Big Three.” 10
Colvin, Geoff. “How CEO Mary Barra is using the ignition-switch scandal to change GM’s culture.” 18
Valukas, Anton R. “Report to board of directors of General Motors Company regarding ignition switch
Business & Professional Ethics for Directors, Executives & Accountants, 8e
8. VW Cheats on Emissions Tests (Chapter 2, pages 143–144)
What this case has to offer
This case describes the almost incredible gamble VW engineers took to cheat on vehicle emission tests
Teaching suggestions
It is useful to raise the student’s interest by drawing their attention to the fact that VW had cheated on
emissions tests twice before, and had been caught both times, and yet they tried it again. After
discussing the defeat software functionality, I deal with the case questions.
1. Why would VW engineers think they could get away with a defeat device when the technique had
been caught twice before?
VW engineers thought they could get away with the deceit, because they weren’t counting on
anyone to challenge or compare the results of the Environmental Protection Agency (EPA) or
2. If they thought they would be caught, why did they try the defeat device?
It may be that the engineers reasoned that when the emission control devices were turned off,
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3. Why didn’t one of the several design engineers and test engineers and technicians involved blow the
whistle to top management, or and/or the regulators?
It is important to look at the reward system and corporate culture at VW: were engineers and
others being rewarded for clean cars or for selling more cars? Once the decision to cheat had
been made in about 2004, because the cars couldn’t meet the EPA and CARB emission limits,
4. VW has a governance system, where the Supervisory Board is different from North American Boards
of Directors. a) How is it different from North American governance models?
In North America, corporations are overseen by a Board of Directors elected by shareholders at
least once per year. VW has two boards: a Management Board, and a Supervisory Board. The
Supervisory Board seats are split evenly between representatives of the union and of
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4b) The VW governance system does not appear to have had a whistleblower encouragement and
reporting system. Could the differences in governance have contributed to the decision to cheat,
and to keeping it a secret? If so, how?
Yes. Without independence and an established reporting and investigative mechanism, there is
proper discussion.’”
5. Describe how VW would have to change to institute a culture of integrity.
At a minimum, the Supervisory Board would require independence (and more outsiders) and
6. How would VW ensure that their policy on environmental protection be upheld?
The compensation system could reward meeting or improving environmental protection policy
7. Should VW engineers, managers and the CEO be sent to jail? Why and why not?
Those shown responsible or taking part in the cover up should be held responsible. The defence
8. Would you buy a VW? Why and why not?
Consumers who intended to purchase or did purchase VWs for better mileage than gas-fuelled
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Useful Articles, Links and Videos
Gates, Guilbert, Jack Ewing, Karl Russell, and Derek Watkins. “Explaining Volkswagen’s Emissions
Scandal.” New York Times. Updated September 12, 2016.
Lienert, Paul, and Timothy Gardner. “Volkswagen’s ‘clean diesel’ strategy unraveled by outside emissions
Milne, Richard. “Volkswagen: System failure: VW’s culture has been blamed for fostering dysfunction
but the company’s politics may hinder change.” Financial Times. November 4, 2015.
Vincent, Michael. “Volkswagen emissions scam: Man who uncovered VW fraud wants other carmakers
under spotlight.” ABC [Australian Broadcasting Corporation] News. September 22, 2015.