1. Given strong profit growth, has there been any damage to Baidu.com’s reputation? 2. What would future reputational damage affect, and how could it be measured? 3. What steps could Baidu.com take to restore its reputation, and what challenges will it have to overcome? 4. Governments throughout the world have been slow to react publicly to serious problems such as SARS, mad cow disease, and now melamine contamination. Who benefits and who loses because of these delays? 5. In some cultures, a ‘culture of secrecy’ or manipulation of the news is tolerated more than others. How can this be remedied by other governments, corporations, investors, and members of the public? 6. Many other companies with long supply chains, including subcontractors in far-off lands, have found themselves in difficulty. For example, in 1995 Nike was accused of employing child labor in Pakistan and Cambodia through its subcontractors, and subsequently changed its policy and practices with respect to the minimum age of employees working in contract factories.
However, it is very difficult to verify age when people do not have birth certificates or when they can be bought cheaply on the black-market. a. Under such conditions, what are a firm’s responsibilities with respect to checking that each stage in the supply chain is complying with company policy? b. Are there organizations that can help companies set standards and confirm adherence to them? If so, what are the organizations’ mandates and website addresses? c. Should Menu Foods be held responsible for the melamine found in its products? d. Would your response be different if it was the lives of people that were at stake rather than the lives of animals? e. How and why does Nike disclose its policies and practices with regard to supply chain responsibility, and what are the major factors covered?
Bausch & Lomb’s Hazardous Contact Lens Cleaner Discussion of ethical issues 1. What lessons should be taken from B & L’s Renu experience? 2. What should Zarrella have done, and when?
Enron’s Questionable Transactions Discussion of ethical issues 1.Which segment of its operations got Enron into difficulties? 2.How were profits made in that segment of operations (i.e. what was the business model)? 3.Did Enron’s directors understand how profits were being made in this segment? Why not? 4.Enron’s directors realized that Enron’s conflict of interests policy would be violated by Fastow’s proposed SPE management and operating arrangements because they proposed alternative oversight measures. What was wrong with their alternatives? 5.Ken Lay was the Chair of the Board and the CEO for much of the time. How did this probably contribute to the lack of proper governance? 6.What aspects of the Enron governance system failed to work properly, and why? 7.Why didn’t more whistleblowers come forward, and why didn’t some make a significant difference? How could whistleblowers have been encouraged? 8.What should the internal auditors have done that might have assisted the directors? 10.How much time should a director of Enron have been spending on Enron matters each month? How many large company boards should a director serve on? 11.How would you characterize Enron’s corporate culture? How did it contribute to the disaster?
Arthur Andersen’s Troubles Discussion of ethical issues 1. What did Arthur Andersen contribute to the Enron disaster? 2. What Arthur Andersen decisions were faulty? 3. What was the prime motivation behind the decisions of Arthur Andersen’s audit partners on the Enron, WorldCom, Waste Management, and Sunbeam audits – the public interest or something else? Cite examples that reveal this motivation. 4. Why should an auditor make decisions in the public interest rather than in the interest of management or current shareholders? 5. Why didn’t the Arthur Andersen partners responsible for quality control stop the flawed decisions of the audit partners? 6. Should all of Arthur Andersen have suffered for the actions or inactions of fewer than 100 people? Which of Arthur Andersen’s personnel should have been prosecuted? 7. Under what circumstances should audit firms shred or destroy audit working papers? 8. Answer the “Lingering Questions” in the case (p. 111 in the text).
WorldCom: The Final Catalyst Discussion of ethical issues 1. Describe the mechanisms that WorldCom’s management used to transfer profit from other time periods to inflate the current period. 2. Why did Arthur Andersen go along with each of these mechanisms? 3. How should WorldCom’s board of directors have prevented the manipulations that management used? 4. Bernie Ebbers was not an accountant, so he needed the cooperation of accountants to make his manipulations work. Why did WorldCom’s accountants go along? 5. Why would a board of directors approve giving its Chair and CEO loans of over $408 million? 6. How can a Board ensure that whistleblowers will come forward to tell them about questionable activities?
