Preface xiii
Overview of the Book xxi
Part One:
The Ethics Environment
Chapter One: Ethics Expectations
1
2
The Ethics Environment for Business: The Battle for Credibility,
Reputation, and Competitive Advantage 2
New Expectations for Business 1 0
Responses and Developments 1 2
The Ethics Environment for Professional Accountants 22
Managing Ethics Risks and Opportunities 2 4
Questions 25
Case Insights 26
Martha Stewart's Lost Reputation 27
Bhopal-Union Carbide 31
The Betaseron" Decision (A) 33
Texaco: The Ecuador Issue 34
Where Were the Accountants? 36
To Resign or Serve? 38
Reading Insights
26
LYNN SHARP PAINE: Managing for Organizational Integrity 38
ANDREW W. SINGER: The Whistle-Blower: Patriot or Bounty Hunter? 48
L. 1. BROOKS: Law Case Summary: Caremark National Inc. 53
Chapter Two:
Governance, Accounting, and Auditing Reform, Post-Enron
Governance and Accountability Reform
The Enron Debacle 56
Arthur Andersrn's Role
55
55
73
Governance and Accountability Changes up t o WorldCom 8 2
WorldCom: The Final Catalyst 8 2
Governance Reform-The Sarbanes-Oxley Act of 2002 87
Impact on:
Governance, Accountability and Reporting, and Management Practice
93
vii
Contents
Accounting Profession and Auditing Practice
Business Ethics Trends 94
Questions 95
Case Insights 95
93
Enron's Questionable Transactions 96
Arthur Andersen's Troubles 107
WorldCom: The Final Catalyst 114
Waste Management, Inc. 118
Sunbeam Corporation and Chainsaw A1 124
P a r t Two
E t h i c a l Governance & A c c o u n t a b i l i t y
131
Chapter Three: Corporate Ethical Governance & Accountability
Emerging Governance & Accountability FrameworkTo Shareholders & Other Stakeholders 132
Threats to Good Governance and Accountability 140
132
'
Misunderstanding, Poor Risk Management, Conflict of Interests
140
Key Elements of Corporate Governance & Accountability
Deaeloping, lmplemmting, 6 Mnnnging an Ethics Culture
Corporate Codes of Conduct 157
Ethical Leadership 164
Director and Ojjicer Liability 166
Public Accountability Benchmarks 168
149
149
Questions 170
Case Insights 171
Lord Conrad Black's Fiduciary Duty? 174
Adelphia-Really the Rigas' Family Piggy Bank 177
TyceLooting Executive Style 180
Nortel Nehvorks Audit Committee Was In The Dark 183
Ford/Firestone Tire Recall 190
Conflicts of Interest on Wall Street 199
Loyalty, But to Whom? 201
Bankers Trust: Learning from Derivatives 203
Barings Bank: Rogue Trader 206
Dow Coming Silicon Breast Implants 208
Reading Insights
172
PATRICK E. MURPHY: Creating Ethical Corporate Structures 210
Chapter Four: Professional Accounting in the Public Interest, Post-Enron
Stakeholder Expectations Accountability and Governance Framework
Rededication of the Role of a Professional Accountant
218
217
217
Implications for Services Offered 226
Judgment and Values 229
Sources of Ethical Guidance 230
Professional Codes of Conduct 232
Conflicts of Interest and Global Independence Standards
Laws and Jurisprudence 260
When Codes and Laws Don't Help 262
Broadrning Role for Professional Accountants 262
247
Questions 264
Case Insights 265
Famous
Arthur Andersen, Enron, WorldCom, Sunbeam, and Waste Management in
Chapter 2 and Tyco in Chapter 3
HealthSouthCan 5 CFOs Be Wrong? 268
Parmalat-Europe's Enron 272
Royal Ahold-A Dutch Company with US-Style Incentives 278
Professional and Fiduciary Duty
The Lang Michener Affair 281
Locker Room Talk 284
Advice for Sam and Ruby 284
Accounting and Auditing Dilemmas
The Dilemma of an Accountant 285
Management Choice 288
To Qualify or Not? 288
Team Player Problems 290
Minimal Disclosure 291
Opinion Shopping 291
Lowballing a Fee Quotation 292
Fundamental Accounting and Auditing Issues
Societal Concerns 293
Economic Realities or GAAP 293
Multidisciplinary Practices-Ethical Challenges 293
Tax and Regulatory Cases
Italian Tax Mores 294
Tax Return Complications 296
Risk Management of Taxes PayableIs it Ethical? 297
Reading Insights
267
THE LIABILITY CRISIS IN THE UNITED STATES: Impact on the Accounting
Profession A Statement of Position 297
TOM LYNCH: Ethics in Taxation Practice 302
APPENDIX A: International Comparison of Main Aspects of Professional Codes of
Conduct 306
APPENDIX B: Trends in the Legal Liability of Accountants and Auditors and Legal
Defenses Available 318
-
Part Three:
S i g n i f i c a n t Ethics Issues Facing Business and
the Accounting Profession 325
Chapter Five: Approaches to Ethical Decision Making
326
Recent Developments 326
Ethical Decision-Making Framework (EDM) 327
Philosophical Approaches: Consequentialism, Deontology,
and Virtue Ethics 328
Stakeholder Impact Analysis-A Tool for Assessing
Decisions and Actions 334
Stakeholder Impact Analysis Decision-Making Approaches 342
Integrating Philosophical and Stakeholder Impact Analysis Approaches
Other Ethical Decision-Making Issues 349
Commons Problems, Der,eluping a Mure Ethical Action, Cummun Pitfalls 350
A Comprehensive Ethical Decision-Making Framework
Questions 354
Case and Illustrative Application Insights 354
352
Illustrative Application of Stakeholder Impact Analysis 356
Bribery or Opportunity in China Case 356
Proposed Audit Adjustment CaseXastle Manufacturing Inc. 359
When Does An "Aggressive Accounting" Choice Become Fraudulent? 364
Cases
Vioxx Decisions-Were They Ethical? 365
Just Make the Numbers! 368
Smokers Are Good for the Economy-Really 368
Ford Pinto 370
The Kardell Paper Co. 371
Reading Insights
355
LEONARD 1. BROOKS, JR.: Cost-Benefit Analysis 373
GRAHAM TUCKER: Ethical Analysis for Environmental Problem Solving 379
Chapter Six:
Managing Ethics Risks and Opportunities
383
Ethics Risk and Opportunity Management 383
EthicsStrategies and Tactics for Effective Stakeholder
Relations 389
Workplace Ethics-A Significant Ethical Problem Area 390
International Operations-A Significant Ethical Problem Area 395
Corporate Social Responsibility Performance and Accountability 398
Crisis Management-A Significant Ethical Problem Area 403
Questions 405
346
Case Insights 407
Ethics cases on workplace ethics 409
Texaco's Jelly Beans 409
Downsize or Bonus Allocation Decisions 412
Ethics cases on international operations 413
Jail and a German Sub-Contractor (Names are fictitious) 413
AIDS Medication in South Africa 413
Ethics cases on crisis management 414
The Exxon Valdez 414
The Brent Spar Decommissioning Disaster 417
Crisis at Wind River Energy Inc. 419
Reading Insights 408
NANCY L. ROTH, ET AL: Can't We All Just Get Along:
Cultural Variables in Codes of Ethics 420
THOMSON DONALDSON: Values in Tension: Ethics Away
from Home 427
IAN I. MITROFF: Effective Crisis Management 435
Appendices
APPENDIX A: Corporate Ethical Performance Indicators used
in the Corporate Ethics Monitor Sept.4ct. 1998 444
APPENDIX B: Ethics Audit Program Annual
Audit Questions 448
Index
450