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Business & Professional Ethics for Directors, Executives & Accountants, 8e
L.J. Brooks & P. Dunn, Cengage Learning, 2018
“Derivatives: Alive, but oh so Boring.” (January 30, 1995). Business Week,
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27. Barings Bank: Rogue Trader (Chapter 5, pages 361-363)
What this case has to offer
Nick Leeson was definitely a rogue trader, but he didn’t get into trouble on his own – he had help. The
story of how he did so involves conflicts of interest, a poor corporate ethical culture and compliance
system, misguided motivational systems, poor control reports, and unwitting advice from senior
management.
Conflicts of Interest, Cultural Aspects, Relevance of Controls
This case offers interesting insights into typical problems in the three areas noted. Students can readily
Teaching suggestions
I would begin by having a class member or two recap the salient points of the case. This should show
that Nick was operating on his own. He had evidently decided to make unhedged investments on his
own to increase his profits to recoup his losses that had been hidden in the Error Account No. 88888.
Discussion of ethical issues
1. How would you deal with a star trader who would be extremely sensitive to additional controls that
implied he or she wasn’t trusted or would generate more time on paperwork and explanations?
Unfortunately, exceptions to compliance or control systems usually end up badly. The star gets
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2. What ethical and accounting controls would you advise ING to institute at Baring’s?
I would recommend instituting the following in order to move the firm away from reliance on
faith in the “old boy” or “old school tie” networks:
• a full ethical culture program, including: a code of conduct, training, initial and annual
sign-off, reinforcement and encouragement mechanisms, whistleblower protection
plan, generic reporting to a board committee, etc.
3. Who was more at fault – top management or Nick Leeson?
Management was more at fault than Nick Leeson. They had early warning of inadequate
Useful Articles, Links, and Videos
Curtis, Adam (Producer) (1996). 25 Million Pounds [video], available at
Documentary video about Nick Leeson and The Barings Bank Collapse.
Leeson, Nick (1996). Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World.
London: Little, Brown & Co.
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Autobiography of Nick Leeson written while in prison
Movie about Nick Leeson.
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Cases on Product Safety
28. Dow Corning Silicone Breast Implants (Chapter 5, pages 364–365)
What this case has to offer
This case offers the chance to examine why an excellent code of conduct, and an excellent ethics audit or
ethical assurance program may prove to be ineffective. Dow Corning Inc. had a celebrated ethics
control system which did not surface the problem of health risk associated with their silicone breast
implants, which were prone to rupture. The investigation of why involves looking at the following
ethical issues:
• What are the critical success factors involved in making a code of conduct and an ethical
assurance program effective?
Teaching suggestions
The case builds upon a Harvard Case which provides the details of the company’s code of conduct, the
process of preparation of that code and of the audit process used to examine compliance with the code.
This is a very useful discussion of background details, which can be very instructive for those facing the
refinement of less developed systems. I have the students come to class having read the full case, and
begin the discussion with a short statement covering the issues laid out above.
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Discussion of ethical issues
Vanity vs. utility: Although men usually see the breast implant as just a response to female vanity, the
women in the class are quick to point out that many breast implants are installed as part of the after-
treatment for breast cancer involving mastectomy. Consequently, these implants are not considered to
1. Why didn’t the Dow Corning ethics audit program reveal any concerns about the silicone-gel breast
implant line?
Usually the class suggests several reasons for the failure of the ethics audit program to surface
the breast implant issue at an early stage so that it could be acted upon and resolved as early as
possible, including the following:
• the audit team may not have been tuned in to women’s problems (a single sex issue),
These faults can be summarized under the following topics some of which relate to the code and
culture of the company:
• audit team: expertise and sensitivity
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• audit focus
2. What are the critical factors necessary to make such an ethics audit program work effectively?
This case offers an opportunity to reinforce the issues discussed in the text on pages 104-108. In
particular, the following are germane to the case:
• continued endorsement of the process by top executives,
3. Was the March 20th announcement well-advised and ethical?
The short answer is no on both counts. The spokesman did not convey much empathy for the
women who had suffered from the leakages. He would have been better advised to
acknowledge the possibility of a problem and indicate that further investigations were under
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4. Are there any other ethical dilemmas raised by the case?
This case opens up the chance to discuss the need to keep ethics in mind when handling a crisis.
Crisis management, which is discussed in Chapter 5, offers approaches minimize the harm from
Subsequent Events
For a chronology of events see Frontline (1995-2014). “Breast Implants on Trial: Chronology of Silicone
Useful Articles, Links, and Videos
Kolata, Gina (June 21, 1999). “Panel Confirms No Major Illness Tied to Implants.” New York Times,
Feder, Barnaby (May 16, 1995). “Dow Corning In Bankruptcy Over Lawsuits.” New York Times,
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29. Ford/Firestone Tire Recall (Chapter 5, pages 366-376)
What this case has to offer
The Ford/Firestone Tire Recall is a classic in many ways. Here are two companies that have had a history
of damaging recalls, but they did not learn or retain enough to avoid a repeat the errors of handling
Teaching suggestions
This is a case that students find most interesting. After asking several students to recap the case, I deal
with the questions at the end of the case. I frequently use this case as an assignment, and have
Discussion of ethical issues
Since I have used this case as an assignment, I have developed for feedback “Overview Comments” and
Overview Comments on Ford/Firestone Case
I have returned a “Full Set of Comments” that were raised about the Case, and another page that shows
(by underlining) the comments raised by your group and my overall comments and mark. In general …
My take on the Ford/Firestone Tire disaster is that they failed to recognize and develop an effective
response because their corporate cultures had not embraced a risk assessment dimension focused on
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EMBA 20 Ford/Firestone Tire Grading Answer/Comments – Full Set of
Comments
______________________________________________
Ethics Issues/Case Questions:
1. Why no learning from earlier disasters: no culture/philosophy change, no training,
short-term focus, concealment vs. disclosure, past evasion success – low cost & no
2. Why not earlier discovery: No safety related data bank, insufficient analysis and
awareness of downside, lax employees, inspectors, labor unrest and poor risk
3. Why no report earlier to NHTSA: Not technically/legally required if case by case
treatment, could wait out 8 year limit, $1,000 per document withheld cap on fines if
4. Largest cost: Lost reputation: revenue and costs estimates made – note that previous
fine cost only 5 cents per car
5. CBA Corrections – most depend upon assumptions: Lost reputation estimate
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6. Ethical risks involved: Definition of ethical risk – see text, To each stakeholder group –
7. Ethics Risk Management Advice: Create or enhance Culture, Code, Cooperation with
NHTSA, Stakeholder Analysis, Decision Analysis, Cost Benefit Analysis, Public Relations,
more proactivity, strategic issue management team, factor in reputation losses, more
8. Other Questions Raised:
a) Was recall ethical? No, it was unfair (slow) to many warm weather customers
Other Factors Considered:
• Thoroughness/Depth of Analysis/Exhibits
• Creativity
Overall Grade
Subsequent Events
From: Easton, Pam (March 16, 2004). “Judge approves $149 million Bridgestone-Firestone settlement.”
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“At least 271 U.S. traffic deaths [and over 800 injuries] have been blamed on the tires, most of
which were sold with the Ford Explorer… but the settlement [pertains only to those who had
not] suffered any injury or property damage.
October 13, 2005
[Reuters and Bloomberg] (October 13, 2005). “Bridgestone and Ford settle tire recall feud”, Toronto
Star, D16.
Bridgestone agreed to pay $240 million to Ford covering about 11 percent of Ford’s cost of
replacing up to an estimated 13 million tires in 2001.
Useful Videos, Films & Links
Witnesses testify about the recall of Firestone tires while Ford and Firestone officials insist on
each other’s culpability.
Shaffer, Marc and Goodman, Barak (February 21, 2002). “Rollover: The Hidden History of the SUV