Business and professional ethics for directors, executives, and accountants

698 Pages·2018·14.123 MB·English

by  Len Brooks, Paul Dunn

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71455_cvr_ptg01_hires.indd 1 SE/Brooks, Business and Professional Ethics, 8th Edition ISBN-978-1-305-97145-5 ©20xx 12/23/16 8:34 AM
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Business and Professional
ETH CS
FOR DIRECTORS, EXECUTIVES & ACCOUNTANTS 8E
LEONARD J. BROOKS PAUL DUNN
Professor of Business Ethics & Accounting Associate Professor of Business Ethics
Executive Director, Clarkson Centre for Business Goodman School of Business
Ethics & Board Effectiveness Brock University
Joseph L. Rotman School of Management
University of Toronto
Australia (cid:129) Brazil (cid:129) Mexico (cid:129) Singapore (cid:129) United Kingdom (cid:129) United States
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DEDICATION
Business and Professional Ethics for Directors, Executives & Accountants is focused
on deepening the understanding of how best to incorporate ethical values into gover-
nance, strategies, and actions to the benefit of us all.
Our preparation of the Eighth Edition has been enriched by the contributions of
many, but none more than our wives and families who have supported and encour-
aged us and to whom we dedicate this work. It is with great pride, thankfulness, and
love that we acknowledge Jean and Kathy and our growing families.
Leonard J. Brooks, FCPA, FCA
Paul Dunn, CPA, CA
Toronto, Canada
August2016
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
ABOUT THE AUTHORS
Leonard J. Brooks is Professor of Business Ethics & Accounting at the Rotman School of
Management of the University of Toronto. He is the Executive Director of the Rotman
School’s Clarkson Centre for Business Ethics & Board Effectiveness, Director of the
University’s Professional Accounting Centre, and Director of its Master of Forensic
Accounting Program.
Professor Brooks served for fourteen years on the Editorial Board of the Journal of
Business Ethics and continues to serve as a reviewer for that as well as other journals. He
haspublishedarticlesonethicsissuesintheJournalofBusinessEthics,AccountingOrgani-
zations and Society, and Business & Society and has authored or coauthored/edited the
research monograph Canadian Corporate Social Performance and books or publications
entitled Business & Professional Ethics for Accountants, 2e; Principles of Stakeholder Man-
agement: The Clarkson Principles; and Ethics & Governance: Developing and Maintaining
an Ethical Corporate Culture, 4e.
Before joining the University of Toronto, Professor Brooks obtained his Chartered
Accountant (C.A.) designation in Canada and subsequently became an audit manager
and Director of Manpower for Touche Ross & Co. (now Deloitte LLP) in Toronto. He
has served as a member, then Chairman, of the CAs’ national Board of Examiners, and
Chairman of their national Syllabus Committee. Professor Brooks became a Fellow of the
Institute of Chartered Accountants of Ontario in 1982. He became a Chartered Profes-
sional Accountant (CPA) and a Fellow of the Chartered Professional Accountants
(FCPA) of Ontario in 2012.
Paul Dunn is an Associate Professor of Business Ethics at the Goodman School of
Business, Brock University. He attended the University of Toronto, graduating with a BA
inphilosophyandthenanMAinphilosophy.HeworkedasaCharteredAccountant(now
a CPA) in downtown Toronto in accounting, finance and controllership before returning
to school to receive his doctorate in accounting from Boston University. Formerly
an accounting theory professor, Professor Dunn now teaches business ethics at both the
graduate and undergraduate levels.
Dr. Dunn’s research focuses on issues in corporate governance, corporate social
responsibility, and business ethics. His work has been published in a variety of scholarly
journals including the Journal of Business Ethics, the Journal of Management, Business
Ethics Quarterly, and Business & Society. He sits on the editorial boards of the Journal of
Business Ethics and Business & Society. Professor Dunn is the Treasurer for the Society
of Business Ethics, and is also the Treasurer for the Social Issues in Management division
oftheAcademyofManagement.Heisafrequentmediacommentatoroncorporategover-
nanceissues,especiallytheroleandfunctionoftheboardofdirectors.
v
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Copyright 2018 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203
CONTENTS
PREFACE xv
OVERVIEW OF THE BOOK xxv
CHAPTER 1 ETHICS EXPECTATIONS 1
The Ethics Environment for Business: References 30
TheBattleforCredibility,Reputation,&
Case Insights 31
Competitive Advantage 1
ETHICSCASES:
EnvironmentalConcerns 2
MoralSensitivity 4 CasesInvolvingImproperBehavior
BadJudgments&ActivistStakeholders 4 SellingOnlySugaryDrinks 33
Economic&CompetitivePressures 6 BuyingandSellingBlood 34
FinancialScandals:TheExpectations PedophilePriestsintheCatholicChurch 35
Gap&theCredibilityGap 6 SexualAbusebyaPennStateFootball
GovernanceFailures&RiskAssessment 7 Coach 36
IncreasedAccountability&Transparency LIBORManipulationsCauseWidespread
Desired 8 Impacts—locatedinChapter2
SynergyamongFactors&Institutional Advertising&SalesPromotionCases
Reinforcement 8 TigerWoods:“WinningTakesCareof
Outcomes 10 Everything” 36
Pepsi’siPhoneAppStereotypesWomen 37
New Expectations for Business 10
ShouldPornBeSoldbyCellPhone
NewMandateforBusiness 10
Companies? 38
NewGovernance&Accountability VirginMobile’sStrip2ClotheCampaign:
Frameworks 12
Exploitive,Risqué,andWorthwhile? 39
ReinforcedFiduciaryRoleforProfessional
Accountants 12 CasesInvolvingFinancialTransactions
Responses & Developments 13 GoldmanSachsandTheGreekVeil 40
MarthaStewart’sLostReputation 41
EmergingGovernance&Stakeholder
AccountabilityModels 13 CasesInvolvingtheControlofInformation
ManagementBasedonValues,Reputation,
GoogleversusChina 46
&Risks 18
China’sTaintedBabyMilkPowder:Rumored
Accountability 21
ControlofOnlineNews 47
EthicalBehavior&DevelopmentsinBusiness
Ethics 22 CasesConcerningtheEnvironment
The Ethics Environment for Professional NestléBottlesWaterinaCaliforniaDrought 49
Accountants 24 Bhopal–UnionCarbide 50
Texaco:TheEcuadorIssue 53
Role&Conduct 24
Governance 25 ProductSafetyCases
ServicesOffered 26
TheRighttoBeInformed?TheLinkbetween
Managing Ethics Risks & TalcumPowderandCervicalCancer 56
Opportunities 26 ValeantPharmaceuticalsvs.CocaCola—Which
BusinessModelIsWorse:PriceGougingor
DevelopingaCultureofIntegrity 26
FosteringObesity&Diabetes? 57
CorporateGovernance 27
TheBetaseronDecision(A) 59
Questions 29 MagneticToysCanHurt 60
Reading Insight 30
vii
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viii CONTENTS
Bausch&Lomb’sHazardousContactLens ToResignorServe? 63
Cleaner 61
READING:
Accounting&AuditingCases AndrewW.Singer:TheWhistleBlower:Patriotor
BountyHunter? 64
WhereWeretheAccountants? 62
CHAPTER 2 ETHICS & GOVERNANCE SCANDALS 72
Ethics & Governance: A Time Line of BriberyAttractsProsecutionsandHuge
Important Events 73 Fines 98
Automaker’sSinsComeHometoRoost 98
Ethics & Governance: The Early
DrugmakersRaisePrices,Gouging
Developments prior to 1970 74
Patients 101
Ethics & Governance: 1970–1990 75 NewEmphasisonIndividualAccountability
forCorporateWrongdoing 102
Ethics & Governance: The Modern
PanamaPapersReleased 102
Era—1990 to the Present 76
Signs of Ethical Collapse 103
SignificantEthics&GovernanceScandals
Ethics & Governance: Trends 103
& Events 76
Enron—AFailureoftheBoardofDirectors 76 Ethics & Governance: Timetables of
ArthurAndersen—AnOrganizationalCulture Important Events, 1929–2016 104
GoneAwry 79
Useful Videos & Films 105
WorldCom—PowerintheHandsofOne
Man 80 Questions 106
CrisisofConfidence 81
Case Insights 107
Sarbanes-OxleyAct—ClosingtheBarnDoor 83
TaxShelters—NotinthePublicInterest 84 ETHICSCASES:
SubprimeMortgageMeltdown—Greed Enron’sQuestionableTransactions 108
withoutDueDiligence 86 ArthurAndersen’sTroubles 112
Dodd-FrankWallStreetReformand WorldCom:TheFinalCatalyst 120
ConsumerProtectionAct 89 BernieMadoffScandal—TheKingofPonzi
BernardMadoff—IfIt’sTooGoodtoBe Schemes 127
Wal-MartBriberyinMexico 137
True 90
LIBORManipulationsCauseWidespread
PublicDisillusionment:TheOccupy
Impacts 138
Movement 91
GeneralMotorsIgnoresObviousIgnition
ShareholderDisillusionment:Shareholder
Faults 140
Resolutions 92
VWCheatsonEmissionsTests 143
TheLIBORScandal:HowBanksManipulated
aBenchmarkInterestRate 93
CHAPTER 3 ETHICAL BEHAVIOR—PHILOSOPHERS’
CONTRIBUTIONS 145
Ethics & Moral Codes 146 Justice&Fairness—Examiningthe
Balance 162
Ethics & Business 149
VirtueEthics—AnalysisoftheVirtue
Self-Interest & Economics 150 Expected 168
Ethics, Business & the Law 152 Moral Imagination 171
Major Ethical Theories Useful in Questions 171
Resolving Ethical Dilemmas 153
Case Insights 172
Teleology:Utilitarianism&Consequentialism
—ImpactAnalysis 153 Useful Video & Film 172
DeontologicalEthics—Motivationfor References 172
Behavior 159
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CONTENTS ix
ETHICSCASES: DecidingWhoReceivestheSwineFlu
CasesInvolvingImproperBehavior Vaccine 178
InsuranceandGeneticallyInherited
AnIllustrationofEthicalDecisionMaking:Dealing
Diseases 179
withDisappointedAppleiPhoneCustomers 173
TerroristPayments 179
ArtForgeries:IsDeceivingArtExperts
TheCaseofCesarCorreia 181
Unethical? 176
GenderDiscriminationatIKEA 177
CHAPTER4 PRACTICALETHICALDECISIONMAKING 182
Introduction 182 CommonEthicsDecision-Making
Pitfalls 206
Motivating Developments for Ethical
Learning 183 A Comprehensive Ethical Decision-
Making Framework 209
Ethical Decision Making Framework—An
SummaryofStepsforanEthical
Overview 183
Decision 209
Philosophical Approaches—An Overview:
Conclusion 210
Consequentialism (Utilitarianism),
Questions 211
Deontology, & Virtue Ethics 185
Consequentialism,Utilitarianism,or References 212
Teleology 186
Illustrative Applications & Case
Deontology 187
Insights 212
VirtueEthics 188
Sniff Tests & Common Heuristics— ILLUSTRATIVEAPPLICATIONS
OFSTAKEHOLDERIMPACT
Preliminary Tests of Ethicality 190
ANALYSIS:
Stakeholder Impact Analysis— DealingwithDisappointedAppleiPhone
Comprehensive Tool for Assessing CustomersCase 213
BriberyorOpportunityinChinaCase 215
Decisions & Actions 191
ProposedAuditAdjustmentCase—Castle
Overview 191
ManufacturingInc. 218
FundamentalInterestsofStakeholders 193
WhenDoesan“AggressiveAccounting”
MeasurementofQuantifiableImpacts 194
ChoiceBecomeFraudulent? 223
AssessmentofNonquantifiableImpacts 198
ETHICSCASES:
Stakeholder Impact Analysis—Modified
ConcussionsintheNFL 224
Traditional Decision-Making BP’sGulfOilSpillCosts 225
Approaches 201 TylenolRecalls(2010):It’sStillAbout
Reputation 228
Integrating Philosophical & Stakeholder
VioxxDecisions—WereTheyEthical? 231
Impact Analysis Approaches 205
JustMaketheNumbers! 233
Other Ethics Decision-Making SmokersAreGoodfortheEconomy—
Issues 206 Really 234
FordPinto 236
CommonsProblems 206
TheKardellPaperCo. 237
DevelopingaMoreEthicalAction 206
CHAPTER 5 CORPORATE ETHICAL GOVERNANCE &
ACCOUNTABILITY 240
Modern Governance & Accountability AccountabilitytoShareholdersor
Framework—To Shareholders & Other Stakeholders? 246
Stakeholders 240 TheShareholderValueMyth 247
GovernanceforBroadStakeholder
NewExpectations—NewFrameworkto Accountability 249
RestoreCredibility 240 GuidanceMechanisms—EthicalCulture&
CorporateGovernanceOverview 242 CodeofConduct 253
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