The Atlanta Cheating Scandal's Tough Lessons for Business Leaders

The Atlanta Cheating Scandal's Tough Lessons for Business Leaders

Atlanta’s public school system about how over “178 teachers and principals at 44 different public schools” cheated on standardized tests by “fudging” the scores of the student.  Most of this is blamed due to Superintendent Beverly Hall and her corporate background which created a “culture of fear, intimidation and retaliation.”  This is because the superintendent wanted to see only results on paper and did not care whether or not the students actually learned.  She only cared about the big bonuses received and given out the employees.  I feel that this is very unethical because it makes the students feel that they actually “learned” when they did not because the public school staff only cared about keeping their jobs and/or getting a big bonus for the results they reported.  It is not fair to the students and I feel that all of these teachers and principals should be fired.  This reminds me of the Enron scandal because both Enron and the Atlanta public school system are publishing results that are not true so that their supporters keep on investing in them.  

The school’s supporters happen to be local businesses which work with and donate money to the schools.  However, they come under fire because they are linked to the public school system.  The business leaders liked what they were hearing about the schools but never verified any of these results with anyone.  This in turn makes the local businesses look bad.  All of the business leaders of the community can learn from this event that ethical leadership is important anywhere, even in public schools.  An ethical leader needs two-way communication to fully learn and verify results, not only one-way communication.  Overall, I feel that the Atlanta public school system showed unethical leadership to receive more money from the state and make their wallets fatter which relates to the many corporate scandals we learn about.

-Dave Harbeck, Team 7

Cheers or Tears? What Confucius Would Say About Texas Executions

http://www.huffingtonpost.com/rodney-l-taylor-phd/cheers-or-tears-texas-or-_b_1002603.html

This article focuses on the long-helf debate of capital punishment.  What brought Professor Rodney Taylor to write about this topic was a 2012 Republican campaign.  There was a moment in the Republican debates that Governor Perry of Texas was asked about the number of executions carried out in the state of Texas, a number far surpassing all other states, and in particular the number of executions carried out during his tenure as governor, a number far exceeding any previous governor.  Before the Governor was able to respond, the audience broke out into applause and shouts of support.  The audience response seemed to demonstrate not only the acceptance of, but celebration of, a system of state-condoned execution. After the applause, Governor Perry's response suggested that in Texas there is a law and people know that if they violate that law they may have to pay the ultimate penalty of execution. 
For the audience to burst out in applause and shouts of approval over the issue of taking someone's life seems ethically problematic at best.  The Professor then referenced a prominent confucian follower who stated that, "If someone has committed a serious crime, then the person should be executed for the crime. The problem is that when you have to execute the person, you would do so while you were at the same time crying, crying and continuing to believe in the basic goodness of human nature."  This suggests that there is a penalty for hanous crimes, but it is a very sad picture of society.  Crying at the occurrence of such punishment is a far cry indeed from the celebratory response witnessed in front of a national audience.
So why would the Governor or Texas condone such behavior by the audience?  Aren't politicians, let alone Governors, supposed to remain ethically conscious and concerned with society's values and morals?  Leaders who serve are altruistic: They place their followers' welfare foremost in their plans.  Keeping Texas "safe" by having such a harsh captial punishment legal system in place may be looking out for Texans, but there is a difference in being Just and being Barbarous. 
Do you think that Governor Perry should be looked up to for holding the highest number of executions under his tenure as Governor? Do you believe the audience's response was ethically and morally wrong?

Caterpillar Accused of Demoting CPA Discovering Tax Dodge

http://www.businessweek.com/news/2011-07-08/caterpillar-accused-of-demoting-cpa-discovering-tax-dodge.html

This article is about Caterpillar and how they used their offshore subsidiaries to avoid U.S. taxes.  It was said that between 2000 and 2009, the company saved about $2 billion. Daniel Schlicksup, tax strategy manager at Caterpillar from 2005 to 2008, filed a lawsuit against the company in 2009.  He claims that Caterpillar moved his job to one that has less promotional opportunities because he brought up the fact that the structure in Switzerland does not follow the tax rules in the U.S.  The job that he was moved to he knew nothing about, was paid less, and there was a smaller bonus.  He wants to get his old job back, prevent any further retaliation from the company, and seeks stock options that were wrongly withheld from him.

The company’s spokesman, Jim Dugan, said that Caterpillar has not broken any laws and that Schlicksup’s move was not a demotion.  He stated that “Caterpillar complies with applicable tax laws and regulations.”  It has been shown that Caterpillar’s effective tax rate is 26%; 35% being the top federal corporate income tax rate.  Caterpillar has also stated that they “pay more tax to Switzerland and less tax to the United States than it would have without” the strategy.  

“Schlicksup’s lawsuit, which is in the evidence-gathering phase, alleges that the Swiss structure is improper because it has no legitimate business purpose beyond cutting Caterpillar’s U.S. tax bills.”  In September of 2008, Schlicksup boss, CIO John Heller, drafted an agreement stating that Schlicksups would “stop accusing Caterpillar of any “unlawful, unethical or improper conduct”.  To this day, Schlicksup still remains employed at Caterpillar and ended up receiving a raise of $14,292.  There is now a trial date set for January 16, 2012. 

This is a great example of unethical leadership for two reasons.  First, at this point, Caterpillar can be seen as making their decisions based on ethical egoism.  This is because the decisions were made to have offshore sites to minimize their taxes by $2 billion had their own selfish interests in mind.  The company made the decisions with the mindset of maximizing profit by minimizing taxes in the U.S.  The leaders at Caterpillar are also being dishonest.  It seems that Caterpillar has offshore sites to reduce taxes, not to maximize profits through that site. If they were being honest about their procedures, they would not be in the lawsuit that they are in right now.

A few questions for thought and discussion:

·         -Do you think that what Caterpillar is doing is unethical?

·         -Do you think it was fair to “demote” Schlicksup?

·         -Why do you think people customarily punish whistleblowers instead of rewarding them for bring unethical behavior to others’ attention?

-Danielle Huff

Ex-Citigroup Executive Guilty of Bank Fraud

http://www.bloomberg.com/news/2011-09-06/ex-citigroup-vice-president-said-to-plan-guilty-plea-in-19-million-scheme.html

A former Citigroup vice president, Gary Foster, was accused for embezzling $22.9 million and ended up pleading guilty to one count of bank fraud.  Foster would wire money from a Citigroup accounts into his own account at J.P. Morgan Chase bank.  He would make entries into the Citigroup records so that nobody would notice that he was taking money and moving it to his own account.  As a Vice President of a well-known company makes me and other people question all of the executives at Citigroup.  If this one executive  is willing to conduct fraudulent activities then who knows what other executives are going to do, and not only in this company but other banks too.  Foster conducted his business from September 2003 to June 2011.  If Foster was able to conduct this fraud for 8 years then who knows who else is doing the same things.  It took officials a very long time to realize what was going on.  Foster led in a very unethical way and is being punished for it.  If Foster would have made ethical decisions then he would not have been in this position.  I do not understand how someone who is in such a high position in a well known company can make these types of unethical decisions.  I feel that some of the blame can be put on Citigroup for not detecting these wire transactions earlier.  Citigroup needs to have higher ethical standards for their employees and especially for their executives. Here are some questions to think about. 
Do you trust that the bank you bank at (if you do) is conducting their activities in an ethical manner?
If you bank at Citigroup, how do you feel after reading this article?
How do you feel that the fraud lasted 8 years before it was detected?
Why do you think that there are so many frauds and conspiracies that happens on to executives in well known companies?

Daniel Itami

Top Ten Lessons Steve Jobs Can Teach Us

http://www.forbes.com/sites/ericjackson/2011/09/19/the-top-ten-lessons-steve-jobs-can-teach-us-if-well-listen/2/

The article conveys that Steve Jobs is the best CEO ever.  There are lessons that he can teach us about great leadership in a highly successful organization.  From the lessons listed, Steve Jobs “wants the best from himself and everyone who works for him.”  He is a leader that serves others, which is the definition of ethical altruism (Ch. 15).  Steve Jobs mentors, empowers subordinates, and team builds his organization because he cares so much and wants to see the organization succeed along with the individuals that have helped him along the way.  I can agree with this because after he is gone, his followers will still have his ideas and values that they can take with them to innovate the future.  Furthermore, not only did he motivate others, he motivates himself to show his followers that they can succeed “through hard work, determination, and sense of vision.”  These were some of the characteristics that led to the success of Apple after almost going bankrupt.  Furthermore, Jobs surrounded himself with many “talented” minds and by respecting them, he allowed them to be themselves and think creatively.  This is what helped integrate the needs, values and purposes of Jobs’ followers with his own needs, values and purposes.   I agree with respecting people because they can contribute new ideas and thoughts to a group which can benefit an organization in the long run.  By doing this, Jobs and his followers were able to make Apple into a highly successful business.

How would you feel about working with Jobs? Do you think his leadership style led to the success of Apple? 

-Dave Harbeck

Wal-Mart's Latest Ethics Controversy

http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070612_548611.htm

This article involves a controversial ethical decision made by a vice president of corporate communications, Mona Williams, at Wal-Mart.  The article states that when Chalace Lowry accept a job as an administrative assistant at Wal-Mart that ethics was very important to the company's mission and vision.  With that being said, Lowry reported a suspicious incident about her boss and she could not disclose her name when filing the form; therefore, her boss, Williams, knew it was her that filled out the form concerning William's ethics.  Lowry suspected that Williams had insider information about exercising her stocks before Wal-Mart planned a $15 billion stock buyback.  Lowry did not have full proof, but "acted in good faith" because Wal-Mart emphasized the importance of proper ethics and to report an incident if suspicious.  Now, Lowry has to look for a new job because Wal-Mart started to make her feel uncomfortable and rumors were started about her.

Based upon the article, some ethical questions come to concern about how the incident was handled.  Our book states that ethics are morals and values that are found appropriate by members of society and individuals, it helps us decide what is right or wrong in any situation.  Leadership ethics is based upon a leaders character, what they do, their actions and behaviors.  This entire incident at Wal-Mart I feel was handled very wrong.  Lowry did what she thought was right, even if it could have been a mistake, and it backfired on her.  I don't understand how the human resources department can show complaints to the people that they were based on.  I feel that since it was a senior executive who got complained on is why it was brought to their attention.  This should not be allowed because senior executives should not feel that they can break the rules when other subordinates cannot.  Also, Wal-Mart went so far as to make Lowry feel uncomfortable at the work place and when she asked for a transfer, they did not help her much and told her she needs to find a new position in Wal-Mart within 90 days or she had to look for a new job.  I feel that Lowry did indeed catch William's in an unethical act because of the way Wal-Mart acted in order to get her to leave.  Overall, I feel that Wal-Mart handled this situation in a very unethical way and go as far to make the worker feel uncomfortable and start rumors.  I would not want to work with this organization if they insist on good ethics then act opposite to employees when senior executives get caught acting unethically.  I felt that an investigation could have occured but clearly Wal-Mart was in no rush to get rid of the senior executive.  And if they get away with it once, it will occur again and again.

Would you want to work for an organization like this?  What are some thoughts about how the situation was handled? 

-Dave Harbeck

Visa Fraud Sparks Arrests Nationwide

http://www.businessweek.com/bwdaily/dnflash/content/feb2009/db20090212_920784.htm

With all of the immigration laws that are being put into place all around our country there are still people who get their hands on illegal documents that allows them to get visas to stay in the U.S.  Thirteen people in six different states were arrested because there was an investigation with visa fraud.   Not only did the federal government arrest certain people, they also went after a group call Vision Systems Group.  Vision Systems Group is based out of Iowa and was indicted on 10 federal counts that include conspiracy and mail fraud charges.  Based on the definition our book gives for ethics which is, "The word ethics has its roots in the Greek word ethos, which translates to customs, conduct, or character.  Ethics is concerned with the kinds of values and morals an individual or society finds desirable or appropriate".  Based on the books definition this company was being run in a very unethical way.  The company is based out of Iowa so they know all about our immigration problem, yet they still went on with doing illegal business.  Vision Systems was most likely conducting this illegal because of the profits they were gaining.  With all of the greed in the world today and how bad our economy is, it is hard for a company not to do something that will make them profitable.  Even if something is illegal or unethical people's greed will usually win and they will make unethical decisions.  Vision Systems thought that this was the best way to run their company but it has back fired.  The government now is trying to collect $7.4 million from them because they think that is how much they made by doing all of this illegal business.  The owner of this company was not running this company from a teleological perspective but rather was a ethical egoism approach.  If the company was run in a teleological perspective then none of this would have happened because they would have answered the question "What is right?".  Instead they didn't answer the question and worked in a ethical egoism way because they were looking out only for themselves and acting for the greatest good for the company.  This company is a very unethical company and was operated with the wrong approach.  They are now reaping the consequences from their illegal actions and it could very well hurt them so bad that they have to go out of business.

Do you guys feel that I was right with the analysis about the company being ethically egoism rather than running it in a teleological perspective?
What do you think about this company how their illegal business?
If you had no idea if you were going to get caught or not would you have have ran the company the same way if you knew you were going to be able to make millions in profits.
What approach would you take to ran this company?

Daniel Itami

"Orchestrating" a Massive Fraud

The Greatest Financial Scandals: R. Allen Stanford

This scandal happened in 2009, with the loss of about $8 billion.  R. Allen Stanford was the founder of Stanford Financial Group and the Antigua-based Stanford International Bank.  The Securities and Exchange Commision, SEC, charged him and two of his associates with organizing a massive fraud, similar to the one composed by Bernard Madoff in 2008. The company had promised high returns on certificates of deposits. 

Financial historians believe that frauds, such as the ones orchestrated by Stanford and Madoff, happen when the asset bubbles pop.  As the market goes up, people invest their money to make money, like they believe everyone else is doing.  However, when the country goes into a recession, like the one that has happened in the last couple of years, the bubble pops.  This is when all of the financial scandals start to unfold because the companies cannot afford to pay back money from investors when they want to withdrawal.

It is hard for me to understand how people can do this to other innocent people. So let me pose this question to you to start a small discussion.  Do you think that these investment bubbles pop because of the fraud scandals themselves? Or is the only correlation that the fraud scandals are revealed because the financial bubbles pop due to the economy?

Danielle Huff

Ethics, Politics and the Law

http://www.nytimes.com/2011/07/01/opinion/01fri1.html?ref=ethics

After reading over chapter 15: Leadership Ethics, and then reading an article from the New York Times written this past June titled "Ethics, Politics and the Law" it was very clear to me that there is a huge disconnect between how Supreme Court Justices have behaved and the way ethical way leaders are expected  to behave.  This editorial discusses how Supreme Court Justices are making it hard for the court to maintain its legitimacy as guardian of the rule of the law by behaving like politics instead of independent, impartial Justices. Justices have involved themselves in activities that maks it less likely that the court’s decisions will be accepted as nonpartisan judgments, such as Justices Antonin Scalia and Samuel Alito Jr. appearing at political events. Also, the 82 rulings in the past term reveal the court’s fundamental inclination to the right, with the conservative majority further expanding the ability of the wealthy to prevail in electoral politics and the prerogatives of businesses against the interests of consumers and workers.  One issue that stands out in this situation is that Justices are not bound by an ethics code. Justices of the Supreme Court are supposed to be impartial from politics and anything outside their main purpose of serving as guardians of the law. Therefor, it is their duty, or moral obligation and responsibility to do the right thing and remain impartial from politics.   Justices are given life tenure so they are free to upset the powerful and have no need to cultivate political support.  Justices should always be tied to altruism, promoting the best interests of others and protecting the purity of the law.  Because the Supreme Court Justices have not made themselves 100% accountable to a strict code of conduct, and therefor appearing to be acting out of ethical egoism by not making decisions that are pure and legitimate to the law. The word "Justice" is in these professional's title and duty.  It is demanded of Supreme Court Justices that they place fairness at the center of their decision making and to not grant special treatment or consideration except in situations that demand it.  It is the Justices duty to serve others by fairly set law apart from all else and to put the plaintiffs and defendants welfare foremost in their rulings.  When leaders are dishonest with themselves and others about the way in which they are behaving, others come to see them as undependable and unreliable.  People can lose faith in what they say and stand for, and as a consequence, the leader's impact is compromised.  This is completely unacceptable for Supreme Court Justices because of the astounding impact they have on the United State's legal system.  These Justices must begin to address doubts about the court's legitimacy so that their rulings are seen as seperate from politics and 100% ethical. I ask that my team members review this article and give any insights on how they feel about the Supreme Court Justices actions in the past term.

Faith Gephart Elmore

Here's What We're About!

This is Faith Gephart-Elmore, Dave Harbeck, Danielle Huff and Daniel Itami and we are team 7.  We have chosen the theme of "The Good, the Bad, and the Ugly" regarding ethical decisions.  This will include scandals, ethical decisions, leadership ethics, social responsibility, and any other ethical issue that has had a good or bad outcome.  These cases can involve individual leaders or many leaders.  We will go into discussion about many different cases relating to our theme then analyze the overall case as to why these ethical decisions (good or bad) were made.  We invite all of you to share your personal thoughts and opinions on our blog site.

-Team 7