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