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One criticism is that although Dan Price’s motives were noble, he acted unilaterally without
input from other stakeholders. If we look at hypernorm values—those which are very widely
held—we could say that Price acted with honesty, and he believed he acted with utmost
2. Do you think that Price should have arbitrarily increased the minimum salary to $70,000?
Initially, no. A company survives, thrives, or dies because of its many stakeholders. By acting
unilaterally, Dan ignored all others and acted as a friendly dictator. Had he identified his
stakeholders and analyzed their expectations of the company, he may have acted differently. Or
would he?
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From Chapter 5 (p. 252): “The identification, assessment, and ranking of stakeholder interests
should help develop a comprehensive set of values for an organization. In the face of competing
value systems for the motivation of personnel, corporations should consider which set of values
most aligns with those of their shareholders, and of their most important stakeholders—those
that can most influence their largest consumer and capital markets, and their ability to achieve
their strategic objectives.”
One can infer that Dan was purposely radical from a video (Gravity Payments [n.d.]) posted on
the website in which he says,
“The company operates on one principle: we never want to make ‘screw–you money’ like
3. Should he have increased everyone’s salary, even those who were earning more than $70,000?
Those earning more—who didn’t get more — may, unfortunately, wonder why they need work
hard or take more stress…if they could do a lesser job and make the same. Price’s actions were
noble, but not everyone will think the same way. When people are consulted or included in the
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4. Do you think that this plan will motivate the Gravity employees to work harder?
The motivation to work well and with effort might be different for different people and different
for different types of jobs.
Low-pay employees: Because leaving a clerk’s job at that salary would be difficult, employees
who would otherwise undertake training for more and more challenging jobs may not do so,
because their Gravity salary would be unrealistic at other companies. In the short term, these
Professional employees: Employees in information technology (IT), financial and legal services,
as examples, have industry-based expectations that the training required of their jobs and the
Dan Price: Financially secure, Dan has a driven personality type and will look for challenges that
5. Should Price have consulted with his customers and his employees before he made the decision to
increase the minimum salary to $70,000?
Consultations lessen surprise—and often people like stability, not surprise. Consultation would
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Useful Articles, Links, and Videos
—. “CEO Dan Price: How Gravity Payments is Different [Video].” Gravity Payments. [n.d.].
Nash, Laura (November 1981). “Ethics without the sermon.” Harvard Business Review.
Newman, Jonathan (August 12, 2015). “How Did Gravity’s $70K Minimum Wage Work Out?” Four States
Business & Professional Ethics for Directors, Executives & Accountants, 8e
4. Merck and River Blindness (Chapter 5, pages 298-299)
What this case has to offer
This case concerns a company that follows its values and provides a life-enhancing drug for free to those
who cannot afford the drug.
Teaching suggestions
I begin the discussion by talking about organizational values. For the MBA students, I ask them to think
about the values of the firms where they’ve been employed. How did they learn these values? Were
they written down anywhere? How important is it for a firm to have a set of values?
Discussion of ethical issues
1. Pharmaceutical companies have to spend millions of dollars and years of research to find just one
successful drug. Merck spent time and money developing and then distributing Mectizan for free. Is
it possible for Merck to justify, to its shareholders, making a sizable investment in a product and
incurring ongoing costs in the distribution of that product when the product generates no revenue
for the company?
The donation generates reputational good will for the corporation and the price of that good
will, it could be argued, is probably much less than the marketing campaign for other drugs in
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In case anyone is cynical about the Mectizan donation program, it has “…become a paradigm for
successful public-private partnership in the international health arena.” (Coyne and Berk [2002],
26)
And, to prevent unwanted or substandard donations, the World Health Organization, together
with pharmaceutical companies, and non-governmental developmental organisations (NGDOs),
developed core principles of donation that require that product donations (Coyne and Berk
[2002]):
• are of maximum benefit to the recipient
Even so, there have been criticisms of the program, for example (Coyne and Berk [2002], 20):
• whether the US government should have allowed the tax deductions given to Merck
2. Did Merck have an ethical obligation to develop and distribute Mectizan for free?
While it may have had no legal obligation to distribute the drug for free, the program was in
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3. Do you think that Roy Vagelos, Merck’s CEO and chairman, demonstrated ethical leadership? What
value did it have/create?
Yes! Ethical leadership was demonstrated and showed that the company’s stated values were
4. Based on the river blindness example, how would you describe the organizational culture of Merck
in the 1980s?
The organizational culture would seem to have been values-based and someone had
responsibility for meeting with the World Bank to at least discuss philanthropy and, perhaps,
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Useful Articles, Links, and Videos
Coyne, Philip E., and David W. Berk [2002]. The Mectizan (Ivermectin) Donation Program for
Hanson, Karmen (July 1, 2015). “Marketing and Direct-to-Consumer Advertising (DTCA) of
Merck & Co., Inc. [USA]. “Our Values and Standards: The Basis of Our Success [Code of Conduct Edition
III].” View Our Code of Conduct (Our Values and Standards). [n.d.].
Business & Professional Ethics for Directors, Executives & Accountants, 8e
5. Lululemon’s Questionable Leadership (Chapter 5, pages 299-300)
What this case has to offer
This case describes what happened to the founder and the CEO after they made several gaffs and the
company unintentionally manufactured transparent yoga pants.
Teaching suggestions
I begin by asking how many students wear Lululemon clothing and why they like Lululemon products.
Normally, people talk about: the quality and durability of the products; the fact that they look good; that
they’re fashionable; and that they’re comfortable. Then we talk about the importance to the firm of
delivering quality products. This makes the discussion more personal because most of the students have
Lululemon clothing.
Discussion of ethical issues
1. Do you think that the executives at Lululemon demonstrated ethical leadership? Could it have been
improved?
Chip Wilson became a liability—a reputational risk – to his own company, because it outgrew his
vision, and his management ability. The company became a feel-good illusion, and cult fashion
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Christine Day increased the number of stores and increased stock value gain 250% year-over-
year from 2008 to 2011 (Taylor 2011) before she resigned in 2013, so was in the bad books with
loyal Lululemon followers who believed in the company’s manifesto (lululemon athletica 2011):
a series of pithy slogans written over its shopping bags, one of which is, “Friends are more
important than money.” Christine seemed to be all about making money. And expanding too
quickly resulted in a number of operations issues, including colour dye bleeding from pink and
red clothing in 2012; transparent pants and pilling and seam problems in 2013; and also
intentional product scarcity to increase demand in 2011. (Bhasin 2013)
2. Does a CEO have an ethical responsibility to step down as CEO when there is a production and
marketing disaster that requires a product recall?
Theoretically speaking, a CEO would not, ethically, need to step down if problems were handled
3. Does the chair of the board of directors have an ethical responsibility to step down as chair of the
board when there is a production and marketing disaster that requires a product recall?
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Theoretically speaking, a Chair would not, ethically, need to step down if problems were
handled differently than those at Lululemon. But in the case of Lululemon, the Chair is part of
4. Does the board of directors have an ethical responsibility to reprimand the chair of the board if the
chair makes controversial statements and comments to the press?
Yes! One of the responsibilities of a board is to imbed hypernorms in the corporate values
system (Chapter 5) and to guide corporation into develop and maintain an ethical corporate
Useful Articles, Links, and Videos
Bhasin, Kim (June 10, 2013). “Christine Day Steps Down as Lululemon CEO.” Huffington Post,
Business Insider. “Lululemon Athletica Inc. CEO Christine Day should be fired, fans say.” (March 20,
Friesner, Zach (June 26, 2014). “It’s Time to Look at Lululemon’s Corporate Governance Policies.” Motley
Lee, Adrian (July 11, 2014). “Lululemon boardroom fight part of a corporate culture war: Lululemon isn’t
the only company being accused of selling out its principles for short-term gain.” Maclean’s,
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Nelson, Jacqueline (April 29, 2011). “Loco for Lulu.” Canadian Business,
Petri, Alexandra (November 12, 2013). “How not to apologize, with Chip Wilson of Lululemon.”
Wilson’s apology.]
Strauss, Marina (March 19, 2013a). “Supplier of too-sheer yoga pants insists it stuck to Lululemon
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Cases on Bribery
6. SNC-Lavalin Missing Funds Topples CEO & Triggers Investigation (Chapter 5,
pages 300-302)
What this case has to offer
The SNC-Lavalin case illuminates the challenges of doing business in many foreign jurisdictions where
bribery is the normal practice and many businesses and businesspeople have come to believe that they
cannot operate successfully in those jurisdictions without bribing directly or through agents, foreign
Teaching suggestions
To get the class thinking about bribery, and to make the subject relevant, I ask if anyone has seen or
heard of a case of bribery, and we discuss several of those so that they understand the issues: can
Discussion of ethical issues
1. From a governance perspective, what can the Board of Directors do to make sure that the
company’s policies and procedure are adequate to ensure ethical and legal conduct by its
employees?
While the Independent Review (see case) concluded that the company’s codes had provisions
identifying bribery as bad, there was no requirement to report bribery to an official who could
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2. Mr. Aissa and Mr. Duhaime were not demonstrating strong ethical leadership. What can a firm do to
improve its ethical tone at the top?
A company should screen senior employees for their ethical values as indicated from
penetrating questions, reactions to scenarios posed, and reference checks, not only as to their
3. Is it appropriate for a company to do business in a country with an oppressive regime? Why and
why not?
It depends upon whether the company’s activities can be conducted in an ethical manner, and
whether the support given to the citizenry as a whole outweighs the favourable impact on the
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4. If the decision is made to do business in a country with an oppressive regime, what limitations that
should be put in place by the company to guide its employees against unethical involvement?
There should be an effective statement of policy, plus clear guidelines and rules where
future.
Update on charges
Useful Articles, Links, and Videos
The Fifth Estate (April 3, 2013). “Mission Improbable—Preview .” CBC,
Nagel, Edward (January 2014). “Taking a bite out of corruption, one bribe at a time.” Chartered
Professional Accountants of Canada (CPA): Conversations about Forensic Accounting, accessed
Business & Professional Ethics for Directors, Executives & Accountants, 8e
7. Rio Tinto’s Bribes in China (Chapter 5, pages 302-304)
What this case has to offer
Bribery cases often involve a company making illegal payments to government officials in order to land
lucrative contracts. Sometimes, however, bribery can be between two or more companies, as it was the
Teaching suggestions
There are several questions related to bribery between companies that may help to start the class
Discussion of ethical issues
1. The culture of giving and receiving payments is ingrained in China. On the other hand accepting and
paying bribes is a violation of Rio Tinto’s code of conduct. When does a payment stop being a gift
and turn into a bribe?
It is sometimes difficult to determine whether a gift is really a bribe. The following questions
should help to separate gifts from bribes.
• Is it nominal or substantial?
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Similarly, Rio Tinto’s Code of Conduct, a document named “The Way We Work” (Rio Tinto 2009),
states that:
“There are several questions that we should ask ourselves when confronted with a business
decision:
• Is it legal?
Moreover, the company’s Code of Conduct explicitly prohibits bribery:
“Rio Tinto prohibits bribery and corruption in all forms, whether direct or indirect. We do
not offer, promise, give, demand or accept any undue advantage, whether directly or
indirectly, to or from:
• a public official;
Finally, the company’s policy on gifts and entertainment is:
“Gifts and entertainment given and received as a reward or encouragement for preferential
treatment are not allowed.
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2. The smaller Chinese steel companies bribed the Rio Tinto executives because of Rio Tinto’s policy of
only dealing with large state-run steel companies. Can a business policy, such as giving priority to
only one set of firms, be unethical? Is Rio Tinto ethically responsible for the bribes that were given
to its employees because of its policy?
A business policy to give preferential treatment to some clients is not necessarily unethical.
Nevertheless, the company should think about whether the policy encourages its employees to
3. Why were these bribes prosecuted?
It is not entirely clear why these bribes were prosecuted. Several Australian officials criticized
the detention of the Rio Tinto employees and suggested that Beijing was retaliating against Rio
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4. What lessons should be taken from these convictions:
a. For foreign governments?
Foreign governments should warn their companies and citizens of the business conditions in
b. For corporations trading in and with China?
Companies trading in and with China should be careful and strengthen their internal controls.
Moreover, these companies have to be aware that businesses operate in China under strict
c. For individual employees?
Employees should be aware that even when they appear to be acting in the best interest of their
d. For possible investors in China?
Investors in China have to be aware of the potential ethical and reputational issues involved in
5. Should Rio Tinto have been charged?
The bribes were given over a number of years from 2003 to 2009. It is hard to believe that the
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Useful Articles, Links, and Videos
OECD (2010). Good Practice Guidance on Internal Controls, Ethics, and Compliance.
From the cover: “This Good Practice Guidance was adopted by the OECD Council as an integral
part of the Recommendation of the Council for Further Combating Bribery of Foreign Public
Officials in International Business Transactions of 26 November 2009.”
Rio Tinto (2009). The way we work. Our global code of business conduct.