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o Develop monitoring controls to keep track of hiring, promoting and firing
decisions by gender, race, religion, age, etc. Conducting pay audits to uncover
4. Were the lawyer’s fees fair?
More than one fourth of the total damages went on legal fees. On average, every woman was
awarded an amount between $15,000 and $20,000, while the partners of the legal firm
representing them shared $40 million. This could be considered unfair and may motivate a
number of other class action lawsuits without merit.
On the other side, given the complexity of this case, its length, and the legal resources available
to Novartis, the lawyers’ fee may be commensurate to the skills and effort necessary to win the
5. Could this case have been successfully prosecuted if it were not a class action?
It would have been very difficult for a single person to prove sexual discrimination. Moreover, it
would have been difficult to attract and retain the services of a large legal firm to aid a single
plaintiff.
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Useful Articles, Links, and Videos
Sanford, Wittels & Heisler LLP [website]. 2011. Our Cases.
Business & Professional Ethics for Directors, Executives & Accountants, 8e
7. Downsize or Bonus Allocation Decisions (Chapter 7, page 568)
What this case has to offer
This case forces the class to consider a common scenario involving often gut wrenching decisions. In the
process of making these decisions, students must confront their biases. They should also be aware that
Teaching suggestions
1. What would your answers be, and what would your reasoning be for each?
To answer Question 1, I usually use the question of downsizing first. I ask which employee the
class would chose, and why. Usually there will be a range of choices and I encourage this range
by playing devil’s advocate by indicating that their choice signals that they are ignoring or don’t
Seniority can also be considered a proxy for loyal performance.
In the end, students realize that trade-offs must be made. I ask for a vote on which staff
member to cut just to drive home that different decisions can be made by reasonable people.
The important question is what kind of a team is needed to fulfill the company’s goals. Should
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Sometimes I push the class to use their moral imagination to come up with a different and
perhaps better solution favoring shared values. If the class does not come forward with a
suggestion, I indicate that the manager might call a meeting of the team and ask for their input.
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Workplace Ethics Cases – White Collar Crime
8. Walt Pavlo’s MCI Scams and Frauds (Chapter 7, pages 569-571)
What this case has to offer
This case illustrates some of the techniques that fraudsters can use in order to hide their fraudulent
activities. These include:
• kiting payments,
Teaching suggestions
Have the students read the case in advance of the discussion. If any students have auditing experience
ask them about the importance of internal controls, and how they would test the strength of an internal
control system. If they encountered any problems or weaknesses in the system, ask them how they
addressed these weaknesses.
Discussion of ethical issues
1. What aspects of the schemes described in this case were a) unethical? b) illegal? c) fraudulent?
a) There are a variety of ethical aspects to the case, including greed, deception and treating
people as a means to achieve personal objectives.
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2. When would a healthy skepticism by senior management or professional skepticism by an
accounting or legal professional have been useful in combating the opportunities faced by Walt?
Skepticism means that an individual does not accept explanations at their face value, but
continuously challenges and compares what people say to other credible evidence. For example,
3. Was the Hilby caper a victimless crime and therefore okay?
“Victimless crime” is a euphemism to pretend that no one (that matters) is significantly harmed
or that if the victim is not readily observable, then there is no victim. Pavlo and Mann cheated
Business & Professional Ethics for Directors, Executives & Accountants, 8e
4. What ethical issues should have occurred to Walt and MCI in regard to the schemes described?
The major ethical issue in this case is cheating, putting personal interest ahead of all other
5. What governance measures might have protected MCI if they had been in place and enforced?
There are numerous governance mechanisms that might have prevented this fraud from
occurring.
• Management is responsible for setting a positive ethical attitude. If the tone at the top
is based only on self-interest, then employees will mimic that attitude and only look out
for their personal welfare. The objective of management was to show high net income,
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6. What is the role of internal auditors in regard to such schemes?
Depending upon the size of the firm and the internal audit staff, internal auditors have a variety
of responsibilities. At a large firm, such as MCI, they would be responsible for evaluating the
firm’s internal controls to ensure that they were not flawed and were operating effectively. This
Useful Articles, Links, and Videos
Bashir, Martin (January 30, 2006) “Walt Pavlo: The Visiting Fellow of Fraud” ABC News,
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Bribery & International Operations Cases
9. Jail and a German Subcontractor (Chapter 7, pages 571-572)
What this case has to offer
This is a real-life example, with the names changed. The case is useful in pointing out the differences in
Teaching suggestions
In a brief introduction to the case, I stress that foreign operations are not always in jurisdictions of lower
levels of legality. A real effort should be made to find out and respect those aspects of foreign legal and
Discussion of ethical issues
a) Is this a fair law?
Question 1 asks about the fairness of the German law. The point of the question is that it doesn’t
b) If you were Harold Johns, how would you ensure that Baranca executives and Baranca itself would
never be vulnerable to such problems again?
Question 2 gets the class thinking about how to prepare the executives and the company to
keep out of trouble. This would involve actions such as:
• Collecting knowledge about local legalities and customs
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In addition to the issues dealt with above, students should be made aware of the discussions in
the text about universal codes of conduct vs. tailored codes, and of the pursuit by Tom
Donaldson and Richard De George of hypernorms and or general principles of conduct. The
readings by Donaldson and Roth are very good.
Business & Professional Ethics for Directors, Executives & Accountants, 8e
10. AIDS Medication in South Africa (Chapter 7, pages 572)
What this case has to offer
This case presents a dilemma that will confront directors and executives repeatedly in the future – the
problem of political leaders who over-ride legally protected corporate property rights because of a
declared national emergency. The nations involved will not always be from the developing world. The
Canadian government decided (when faced with post-9/11 terrorism threats) to go ahead and
manufacture an anthrax remedy (CIPRO) through a low-cost Canadian manufacturer instead of buying
Teaching suggestions
I ask the students to read the case in advance. After recapping the case details, I ask the class to provide
and discuss answers to the first two questions listed at the end of the case. Inevitably, the class is
uncertain of the differences between moral and ethical behavior – some don’t see the difference form
legal behavior either, but they are rapidly declining in number.
To resolve the discussion over differences, I offer the class the following scheme for discussion:
Legal behavior – compliance with laws – usually the difference between domestic and local foreign
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Discussion of ethical issues
The answers to the questions posed at the end of the case are as follows:
1. Is it legal, moral or ethical for South Africa to override aids medication patents?
See discussion above. Currently, legality depends upon the definition of a finational emergency’.
2. Is it legal, moral or ethical for drug patent holders to resist?
While it may be legal, resistance without a humanitarian alternative program is likely to be
3. If you were a senior executive in an affected drug patent holder, what solution would you suggest?
Here, I am looking for a discussion of alternative humanitarian programs, and all ideas are
Useful Articles, Links, and Videos
Simmons, Anne M. (April 20, 2001). “South Africa, Manufacturers Settle Over AIDS Medication.” The
“Head–to-head: Aids drugs.”( April 19, 2001). BBC News,
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Swarns, Rachel (March 12, 2001). “South Africa May Cite Crisis To Lower Cost of AIDS Drugs.” New York
Times,
Business & Professional Ethics for Directors, Executives & Accountants, 8e
11. BP’s Gulf Oil Spill Risk Management (Chapter 7, pages 573-576)
What this case has to offer
This case documents how BP, their consultants, and suppliers mismanaged the risks leading to the extremely
tragic 2010 Deep Horizon/Macondo oil spill. This is a good case to discuss the elements of a risk
management system. BP’s risk management system systematically failed to assess, mitigate and monitor
risks.
Teaching suggestions
I start asking students what are the elements of a comprehensive risk management system. Following
that, I list how BP failed to assess, mitigate and monitor risk with disastrous consequences. Ultimately, it
Discussion of ethical issues
1. Why did BP fail its oversight and decision capabilities?
BP’s history of negligence is thoroughly examined in PBS’ documentary The Spill. There were
some specific issues with the Macondo well project, mainly that the project was over budget in
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According to the Final Report on the Investigation of the Macondo Well Blowout, prepared by
The Deepwater Horizon Study Group (DHSG) in 2011, the disaster was preventable and had its
roots on a culture of complacency (p. 9):
“This disaster was preventable if existing progressive guidelines and practices been
followed—the Best Available and Safest Technology. BP’s organizations and operating teams
did not possess a functional Safety Culture. Their system was not propelled toward the goal
2. Describe your vision of a good risk management process that BP should have been following.
The 2004 Enterprise Risk Management Framework, provided by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), explains the general ideas behind enterprise
risk management:
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objectives.”
The COSO framework proposes the following good principles of enterprise risk management:
• “Aligning risk appetite and strategy – Management considers the entity’s risk appetite in
evaluating strategic alternatives, setting related objectives, and developing mechanisms
to manage related risks.
• Identifying and managing multiple and cross-enterprise risks – Every enterprise faces a
myriad of risks affecting different parts of the organization, and enterprise risk
management facilitates effective response to the interrelated impacts, and integrated
responses to multiple risks.
In addition, the COSO guidance on “Effective Enterprise Risk Management Oversight: The Role
of the Board of Directors” (2009), highlights that the company’s board of directors has a
preeminent role in the risk management process. The board of directors should:
• “Understand the entity’s risk philosophy and concur with the entity’s risk appetite. Risk
appetite is the amount of risk, on a broad level, an organization is willing to accept in
pursuit of stakeholder value. Because boards represent the views and desires of the
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• Review the entity’s portfolio of risk and consider it against the entity’s risk appetite.
Effective board oversight of risks is contingent on the ability of the board to understand
and assess an organization’s strategies with risk exposures. Board agenda time and
information packets that integrate strategy and operational initiatives with enterprise-
wide risk exposures strengthen the ability of boards to ensure risk exposures are
3. What aspects of a good risk management process appear does BP not appear to have been using?
BP’s risk management process had severe deficiencies in risk assessment, risk mitigation and in
risk oversight.
• Problems with risk assessment: The risk assessment process is critical to take adequate
actions to mitigate risks and BP failed to properly assess the major technological
Moreover, BP ignored not only the inherent risks of its activities, but also the consequences of
skipping safety measures to cut costs in the Macondo well project. The lack of risk management
processes is described in the DHGS’ report (2011, p. 86):
“The available evidence does not indicate that any one person or group was keeping
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Finally, BP repeatedly ignored red flags raised by previous accidents.
• Problems with risk mitigation: Once risks have been identified and assessed, a company
can choose to take any of the following actions to deal with risk: avoidance, mitigation,
4. Has BP had other ecological disasters since 2000 that should have alerted the company to improve
its risk management process?
The company experienced at least three previous incidents that should have raised red flags
regarding the deficiencies in the company’s risk management system:
• An accident at the company’s Texas City refinery in 2005, were 15 people lost their lives,
Useful Articles, Links, and Videos
Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2009). “Effective
Committee of Sponsoring Organizations of the Treadway Commission (COSO). (2004). “Enterprise Risk
Deepwater Horizon Study Group (DHSG) (2011). Final Report on the Investigation of the Macondo Well
Business & Professional Ethics for Directors, Executives & Accountants, 8e
12. BP’s Corporate Culture (Chapter 7, pages 576-577)
What this case has to offer
This case examines a number of weaknesses in BP’s corporate culture and a continuous disregard for
safety practices. Moreover, it fosters the discussion of the factors that may motivate systemic issues
within a company’s culture.
This case is related to two other cases in the book:
• BP’s Gulf Oil Spill Cost (Chapter 4), discussing the potential costs of the oil spill and whether it is
Teaching suggestions
BP’s history of negligence is thoroughly examined in the PBS documentary The Spill, at
Discussion of ethical issues
1. Analyze whether BP`s corporate culture was ethical.
The PBS’ documentary highlights several issues that shaped a culture of unethical standards and
continuous disregard to safety within the company:
• BP’s board of directors operated in a continuous “crisis mode”;
• BP grew too fast through a strategy of mergers and acquisitions;