SOLUTION MANUAL
BUSINESS AND PROFESSIONAL ETHICS
,Business & Professional Ethics
For Directors, Executives &
Accountants, 9e
Leonard J. Brooks And Paul Dunn
© 2021, 2018 Cengage Learning, Inc.
Chapter 1—Ethics Expectations
Chapter Questions And Case
Solutions
Chapter Questions ................................................................ 2
Case Solutions ........................................................................ 8
, Pa ge |2
Chapter Questions
1. Why Have Concerns Over Pollution Become So Important For Management And Directors?
Because The Public Perceive That Our Environment Is Finite And That Our Well-Being Is
Threatened. In Turn They Have Influenced Politicians To Enact Tougher Laws And Heavier
Penalties...Up To $2 Million/Day, With The Prospect Of Personal Liability And Jail. In Addition,
U.S. Courts Have Agreed To Hear Lawsuits Brought By Foreigners For Pollution On Foreign Soil
(See Ethics Case “Texaco: The Ecuador Issue” In Chapter 1). Finally, Pollution Can Erode The
Trust Necessary To Preserve Stakeholder Support, And This Will Be Seen By Stakeholders With
Resultant Negative Consequences In Consumer And Capital Markets.
2. Why Are We More Concerned Now Than Our Parents Were About Fair Treatment Of
Employees? Our Social Consciousness Is Higher Due To The Reasons Listed In Chapter 1.
3. What Could Professional Accountants Have Done To Prevent The Development Of The Credibility Gap
And The Expectations Gap?
See The Discussion On The Treadway, Metcalf And Macdonald Commissions. Also See Case
“Arthur Andersen’s Troubles,” In Chapter 2.
4. Why Might Ethical Corporate Behavior Lead To Higher Profitability?
Because Attention To Ethical Concerns Can Keep Corporations Out Of Costly Problems Such As
Clean-Up Of Pollution, Fines, Low Morale, And Loss Of Reputation And Stakeholder Support;
And It Can Open Up Profitable Opportunities Such As Developing Green Product Lines.
5. Why Is It Important For The Clients Of Professional Accountants To Be Ethical?
Because Auditors Don't Check 100% Of All Transactions And, Even If They Did, There Would Be
Conflicts Of Interest And Other Hidden Issues Which Would Be Found Only By Chance. Making
Sure That Clients Are Ethical Provides Assurance That They Will Not Be Hiding Things From The
Auditors Or Engaging In Unethical Activities. The Value Of The Auditor's Opinion Depends Upon
It.
6. How Can Corporations Ensure That Their Employees Behave Ethically?
By Developing Ethical Corporate Cultures Based On Codes Of Conduct To Provide Guidance;
Training To Provide Awareness And Understanding; Monitoring To Assure Compliance; And
Rewards Or Sanctions To Reinforce The Desired Behavior. Also, The Top Executives Should Set
The Best Example Possible.
7. Why Didn’t Some Corporations Protect Women Employees From Sexual Abuse Before 2017–2019?
Many Factors Have Contributed To Changes In Workplaces And Attitudes Toward Sexual Abuse
Over The Last Decade, Including The Following Reasons.
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |3
Sexual Abuse Was Once A Taboo Subject, But When Media Reported On Sometimes Decades-
Old Abuses Associated With Pedophile Priests, Residential Schools, And Sports Coaches, Etc.,
Taboos Were Eroded, Particularly Because Abuses Had Been Directed Toward Boys And Men.
Public Outrage, Media Appetite, And Victims Realizing That They Were Not Alone, Increased
Coverage Of The Topic.
At The Same Time, Cultural Norms Concerning The Roles And Treatment Of Women Were Changing.
The Advent Of Desktop Computers Even Played A Role, Because Corporate Employees Were
Expected To Type Their Own Documents And Not Rely On “Traditional” Secretarial Work By
Women. In Professions And Workplaces, More And More Women Were Moving Into Non-
Traditional Jobs. In Still Male-Dominated Workplace And Professions, Women In New Roles
Feared Reprisal If They Complained Of Sexual Abuse—If, Indeed, They Could Find Anyone To
Complain To. Complaints In Male-Dominated Workplaces—Particularly Against A High-Power Or
High-Profile Abuser–May Have Fallen On Deaf Ears. As More Women Gained Roles Of Influence,
Recognition Of Workplace Discrimination Led To Employment Equity And Pay Equity Programs.
As Workplace Norms Changed, So Did Cultural Ones. Through Continued Media Coverage,
People Learned More About The Pervasiveness Of Abuse And Its Recipe: Abusers Were Usually In
Positions Of Power And Worked To Isolate Insecure Or Vulnerable Victims And Pressure Them
Into Secrecy Through Shame Or Threats Of Reprisal. Old Attitudes Of Victim Blaming—That
Women Were Responsible For Or Complicit In Abuse, And That “No!” Did Not Mean “No”–Were
Being Dispelled.
Social Media, Used As A Vehicle By The #Metoo Movement In 2017, Rocketed The Awareness Of
Abuses Against Women To New Heights. The Movement Spread A Feeling Of Strength-In-
Numbers And An Attitude Of “We’re Not Going To Take It Anymore.” Emboldened By
Widespread Support, Changing Attitudes Among Women And Men, And More Women In Roles
Of Influence, Corporations Were Forced To Appear Proactive And Intolerant Of Abuse.
Prior To 2017, There Were Relatively Few Instances Were Powerful Men Were Successfully
Prosecuted In Court With Serious Fines Or Prison As Outcomes. That All Changed With Cases
Involving Bill Cosby (Convicted In 2018) And Harry Weinstein (Convicted In 2020).12 Corporations
Took Note, And They Took Action Against Executives They Formerly Excused.
See Also The Answer To Question 13, Chapter 7, Page 590: “The #Metoo Movement Has Finally
Succeeded In Getting Women’s Allegations Of Sexual Abuse To Be Taken Seriously By
Management And Boards Of Directors. Why Did It Take So Long For This Tipping Point To Be
Reached?”
8. Should Executives And Directors Be Sent To Jail For The Acts Of Their Corporation's
Employees? Yes, They Should, If The Executives And Directors Act Negligently Or Without
Engaging In Due
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |4
1
Eric Levenson, ―Harvey Weinstein's Trial Is Closely Tracking Bill Cosby's. But There's 1 Major Difference,‖
CNN.Com, January 28, 2020, Https://Www.Cnn.Com/2020/01/28/Us/Harvey-Weinstein-Bill-Cosby-
Trial/Index.Html. 2 Mike Hayes And Meg Wagner, ―Harvey Weinstein Found Guilty,‖ CNN.Com, February
24, 2020, Https://Www.Cnn.Com/Us/Live-News/Harvey-Weinstein-Verdict/Index.Html.
Diligence Procedures, Which Are Designed To Ensure That Reasonable And Proper Actions Are
Taken.
9. Why Are The Expectations Of A Corporation’s Stakeholders Important To The Reputation Of
The Corporation And To Its Profitability?
Without The Support Of Key Or Primary Stakeholders Such As Customers And Employees,
Sustained Profitability Is Not Possible. A Corporation’s Reputation Is Based On The Elements
That Such Stakeholders Find Relevant To Their Support, Including Credibility, Reliability,
Trustworthiness And Accepting Responsibility.
10. How Can A Corporation Show Respect For Its Stakeholders?
By Taking Their Interests Into Account (Respecting Them) When Making Decisions.
11. How Can Conflicts Between The Interests Of Stakeholders Be Resolved By A
Corporation’s Management?
By Displaying Sensitivity To Each Side, Ranking The Interests Involved, And Using This Ranking To
Favor The Most Important, As Discussed In The Text, Chapter 4. Stakeholders Should Be Made
Aware Of The Ranking And Decision Process Where Possible. In The End, Tough Trade-Off
Decisions May Be Involved, But Stakeholders Should Have Confidence In The Process.
12. Why Are Philosophical Approaches To Ethical Decision Making Relevant To Modern Corporations
And Professional Accountants?
The Philosophical Approaches To Ethical Decision Making (Utilitarianism, Deontology, And
Virtue Ethics—See Text, Chapters 3 & 4) Are Relevant Because Of Stakeholders’ Greater And
Growing Ethical Awareness, Sensitivity, And Power. Stakeholders Can Make A Difference To The
Reputations And Fortunes Of Companies And Of Professional Accountants. Their Support Is
Needed Now More Than Ever.
13. What Are The Common Elements Of The Three Practical Approaches To Ethical Decision Making
That Are Briefly Outlined In The Chapter?
The Common Elements Are Measures Of Well-Offness, Fairness, Right(Ness), And Virtues Expected.
14. Is A Professional Accountant A Businessperson Pursuing Profit Or A Fiduciary That Is To Act In
The Public Interest?
Both, But When There Is A Conflict Between These Roles, The Professional Accountant Must
Place Fiduciary Duty Above Personal Profit. Otherwise, The Public Interest Will Not Be Protected
(Which Is The Primary Goal Of A Professional—See Later Chapters In The Text, Particularly
Chapter 6, For Discussion).
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |5
15. Will The NOCLAR Standards Assist Or Hurt The Accounting Profession?
For The Most Part, The NOCLAR Standards Will Assist The Accounting Profession By Bolstering Its
Reputation For Serving The Public Interest. They Will:
Help The Profession Recover From Recent Scandals By Demonstrating That
Professional Accountants Have Uniform Ethical Behavior (Text, Pages 10, 15) And
Stress “…That The Primary Purpose Of Professional Accountants Is To Serve The
Public Interest…” (Text, Page 15.)
Help Pas Serve The Public Interest By Requiring Pas To Internally Disclose (And
Potentially Externally Disclose) Violations Or Potential Violations Of Law Or Regulation,
By A Client Or Employer, That Are Not In The Public Interest.
Allow Them/Oblige Them To Report Malfeasance And Be Pardoned For Breaking
Client Confidentiality
“*W]Ill Require Professional Accountants In Assurance Or In Business As Employees To
Report When They Discover When Their Client Or Employer Is Not Complying With Laws
Or Regulations. This Will Significantly Change The Role Of Professional Accountants
Depending On How And When These Rules Are Adopted By The Professional Body In
Each Jurisdiction. These Changes Should Help Reduce The Serious Expectations Gaps
That Have Become Apparent Between The Expectations Of Public For Corporations And
The Accounting
Profession.” (Text, Page 13.)
“…*W]Ill Require A Professional Accountant Who Discovers Or Suspects That His Or Her
Employer Or Client Is Not Complying With Laws Or Regulations To Report This Internally
And Then Externally If No Or Insufficient Action Is Taken.” (Text, Page 15.)
Be Included In The 2018 IESBA International Code Of Ethics For Professional
Accountants (See Text, Chapter 6) To Which Over 170 Professional Accounting Bodies
Worldwide Including The AICPA, CPA Canada, And ICAEW—As Members Of The
International Federation Of Accountants (IFAC), Have Pledged To Harmonize Their
Local Codes In The Near Future. (Text, Page 15.)
May Make Tax Practice Less Aggressive.
On The Negative Side:
Some Worry That Pas Must Know And Comply With More And More Rules. However,
Wide Acceptance Of The NOCLAR Standards And Harmonization Of Codes Will Help
Reduce This Concern.
Others Worry That To Avoid Being Reported Upon, Companies Might Hire Non-Pas Who
Have No Professional Obligations. In Canada, The Majority Of CFO Roles Are Filled By
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |6
Cpas. In The United States, However, An Increasing Number Of CFO Positions Are Being
Filled By Mbas.3
16. Why Is It Important For A Professional Accountant To Understand The Ethical Trends Discussed In
This Chapter?
So That The Expectations For Business Can Be Understood And So That Advice Can Be Given Or
Actions Can Be Screened According To What Might Be Acceptable And Desirable, Now And In
The Future, With Regard To Operations As Well As Financial Matters. Also, The Accounting
Profession Is Subject To The Same Set Of Expectations—And Is Expected To Rise To Higher
Standards Of Performance–Than Business.
17. Why Should A Professional Accountant Be Aware Of The Ethics Code Of The International
Federation Of Accountants (IFAC)?
Because The IFAC Code Is The Newly Defined Standard To Which All IFAC Member
Organizations, Including The AICPA, PA (Formerly CICA) And ICAEW, IMA And SMAC Have
Pledged To Harmonize Their Codes. The IFAC Code Contains The Common Elements To Which
All Professional Accountants Will Adhere Worldwide. (See Also Text, Chapter 6.)
18. Why Is An Ethical Corporate Culture Important?
An Ethical Corporate Culture—Also Called A Culture Of Integrity–Is One In Which Ethical
Behavior Is Considered Normal And Expected. This Behavior Is Supported By Codes, Policies,
And Compliance That Can Be Passed On To Employees And Agents. Developing And Maintaining
An Ethical Corporate Culture Are Now Expected Aspects Of Good Governance And Are,
Therefore, Part Of What Directors And Senior Executives Must Ensure Are Included In Their
Responsibilities And Duties.
19. What Three Ethics Risks Must A Company Guard Against, And
Why? From Text, Table 1.7 (Ethics Risks), Page 23:
Organizational Culture Risks Exist When An Organization’s Culture Fails To
Provide Sufficient Support And Guidance To Ensure A Culture Of Integrity.
Mindset Risks Exist When Decision Makers, Employees, And Agents Are:
o Improperly Motivated, Or
o Use Ethically Unsound Rationales For Their Decisions.
3
Jamal, Karim. ―Developments In The U.S. CPA Profession: Will They Be Replicated In Canada?‖ (Keynote
Speech, University Of Toronto At Mississauga, September 14, 2018), PAC Annual Conference On Professional
Accounting Futures, Https://Www.Utm.Utoronto.Ca/Pac/Pac-Events/Pac-Annual-Conference-Professional-
Accounting-Futures- September-14-2018.
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |7
Systemic Risks Often Originate Outside An Organization And Affect An Entire System
Of Activity.
Each Of These Ethics Risks Can Result In Failure To Meet The Ethical Expectations Of
Stakeholders. The Consequences Can Be The Loss Of Reputation, Loss Of Stakeholder Support,
And Prevention Of Full And/Or Efficient Achievement Of Strategic Objectives. Several Topics
Associated With The Management Of Ethics Risks And Opportunities, Such As Developing A
Culture Of Integrity, Are Discussed In The Text, Chapters 4 To 7.
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |8
Case Solutions
Cases Involving Improper Behavior
1. Selling Only Sugary Drinks (Chapter 1, Page 36)
What This Case Has To Offer
This Case Looks At Actions That Might Be Legal, But Not Ethical; Individual Rights Versus The Common
Good; And Companies That Dare To Ignore Key Stakeholders. The Case Can Be Examined At A More
General Level By Examining, For Example, Increases In Diabetes And Obesity Levels; Attempts By
Governments To
Influence Companies To Reduce Sugar, Salt, And Fat In Their Offerings; And Companies’ Willingness—Or
Not—To Be Influenced.
Teaching Suggestions
I Find It Useful To Start Off By Asking If The Class Members Were Surprised To Learn How Much Sugar Is
In Normally Consumed Sizes Of Sugary Drinks. That Raises Awareness, And I Go On To Explore The
Relationship Of Sugar To Diabetes And Obesity Problems, And The Growing Concern For Each. I Then
Ask What The Ethical Issues Are In The Case, Which Leads To Discussion Of The Following Issues.
The Case Introduces The Conflict Between Business Freedom (The Right Of The Doughnut Chain To
Choose To Sell Profitable Sugary Drinks) Versus The Harm Sugary Drinks Can Cause To Health And Health
Habits. The Company Shows A Lack Of Responsibility For The Possible Health Consequences Of Its
Products, But It May Be Satisfying Shareholders’ Demand For Profits. In The Context Of This Particular
University, The Case Also Suggests That The Company Ignores Customer Feedback And Refuses To
Change Its Offering Despite Consumer Demand For Healthy Alternatives.
Over The Last Decade Or More, Pressure Has Increased On Food Companies And Fast-Food Chains To
Improve The Health Of Their Product Offerings In Order To Fight A Nearly Global Increase In Diabetes
And Obesity Rates—From New York Mayor Michael Bloomberg’s 2012 Attempt To Reduce Sugary Soda
Size, To The United Kingdom’s 2010 “Public Health Responsibility Deal,” To A 2016 Canadian Senate
Report On Taxing Sugar. This Case Offers The Opportunity To Examine Many Stakeholders Associated
With The Issue And Their Often Conflicting Desires, And The Attempts Made By Governments (E.G.,
Through Taxation) And Companies (Through Voluntary Measures Or All-Out Opposition, For Example, By
The American Beverage Association To Bloomberg’s Proposal) That May Or May Not Have Expected Or
Desired Outcomes. For Example, Governments (Health-Care Systems) See Rising Costs With Adverse
Health Outcomes, And Reduced Productivity. Shareholders Want Profits, And Sugary Drinks Offer Good
Margins. Some Consumers Want Sugary Offerings; Others (For Example, Health-Care-Associated
Individuals And Associations) See The Dangers Of Those Offerings.
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |9
Discussion Of Ethical Issues
1. Why Do You Think That The Doughnut Chain Continued To Sell Only Sugary Soft Drinks Even
Though It Was Under Pressure To Sell Diet Soft Drinks As Well?
The Profit Margin On Sugary Drinks Increases With The Size Of The Beverage, Because Drinks
Are Made By Adding Water To Syrup. The Marginal Cost Of A Larger Sugary Drink Is Small, So
The Profit Is Greater For The Larger Drink, And The Business’s Owners And/Or Shareholders
Need Profitability. The Profit Margin On Diet Drinks May Be Smaller If, For Example, They Are
Sold As Units, Rather Than On Tap. Or, The Chain May Have Made A Deal With One Drink
Supplier Over Another Whose Offerings Include Predominantly Sugary Beverages.
Henry Ford Said About The Model-T Produced At The Turn Of The 20th Century That Consumers
Could Have Any Color They Wished, As Long As It Was Black. In The Fast-Food Industry, Limiting
Choice Can Speed Up Customer Flow-Through And Simplify Supply Ordering, Order Filling,
Storage, Employee Training, Etc., But It Is A Company-Centric Decision. Given This Particular
Doughnut
Chain’s Customers’ Reluctance To Shop At More Than One Place When Time Is Limited, The
Strategy Might Have Been A Profitable One In The Short Term, Particularly If The Chain Had
Little Competition. In The Long Term, However, Especially If Product Substitution Is Possible,
Customers Can Vote With Their Feet If They Feel Their Needs Are Not Being Met By The
Doughnut Chain. Henry Ford’s Strategy, For Example, Was Ultimately Used Against Him By A
Rival Company That Was More Than Willing To Offer Cars In Other Colors.
2. Was Selling Only Sugary Soft Drinks Ethical?
Consider The Questions Of Self-Interest (The Doughnut Chain’s) Versus The Common Interest
(Its Consumers’ Health; Health Problems And Societal Costs Associated With Excessive Sugar
Consumption) And Consumer Feedback (Desire For Other Beverages). It Seems That The Chain
Doesn’t Demonstrate The Hypernorm Values Of Compassion Or Fairness, And Lacks
Responsibility, So Its Decisions Appear To Be Unethical.
In The Short Term, Ignoring Changing Consumer Tastes And Preferences Could Be A Viable
Strategy, Particularly If Consumers Have No Substitute Offerings If The Chain Has No
Competition, But Over The Long Term, Particularly As More Health Effects Of Sugar Are
Exposed, Consumer Trust In The Chain Is Eroded When It Is Clear That Company Interest Is
Greater Than Consumer Interest. Turning Its Back On A Major Stakeholder As A Long-Term
Strategy Will Very Likely Backfire On The Company. As Noted In The Text, Chapter 1, Without
The Support Of Key Or Primary Stakeholders Such As Customers And Employees, Sustained
Profitability Is Not Possible. A Corporation’s Reputation Is Based On The Elements That Such
Stakeholders Find Relevant To Their Support, Including: Credibility, Reliability, Trustworthiness
And The Taking Of Responsibility. Not Taking Their Interests Into Account Shows A Lack Of
Respect For Customers. And Where Product Substitution Is Possible, Consumers Can Walk Away.
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
BUSINESS AND PROFESSIONAL ETHICS
,Business & Professional Ethics
For Directors, Executives &
Accountants, 9e
Leonard J. Brooks And Paul Dunn
© 2021, 2018 Cengage Learning, Inc.
Chapter 1—Ethics Expectations
Chapter Questions And Case
Solutions
Chapter Questions ................................................................ 2
Case Solutions ........................................................................ 8
, Pa ge |2
Chapter Questions
1. Why Have Concerns Over Pollution Become So Important For Management And Directors?
Because The Public Perceive That Our Environment Is Finite And That Our Well-Being Is
Threatened. In Turn They Have Influenced Politicians To Enact Tougher Laws And Heavier
Penalties...Up To $2 Million/Day, With The Prospect Of Personal Liability And Jail. In Addition,
U.S. Courts Have Agreed To Hear Lawsuits Brought By Foreigners For Pollution On Foreign Soil
(See Ethics Case “Texaco: The Ecuador Issue” In Chapter 1). Finally, Pollution Can Erode The
Trust Necessary To Preserve Stakeholder Support, And This Will Be Seen By Stakeholders With
Resultant Negative Consequences In Consumer And Capital Markets.
2. Why Are We More Concerned Now Than Our Parents Were About Fair Treatment Of
Employees? Our Social Consciousness Is Higher Due To The Reasons Listed In Chapter 1.
3. What Could Professional Accountants Have Done To Prevent The Development Of The Credibility Gap
And The Expectations Gap?
See The Discussion On The Treadway, Metcalf And Macdonald Commissions. Also See Case
“Arthur Andersen’s Troubles,” In Chapter 2.
4. Why Might Ethical Corporate Behavior Lead To Higher Profitability?
Because Attention To Ethical Concerns Can Keep Corporations Out Of Costly Problems Such As
Clean-Up Of Pollution, Fines, Low Morale, And Loss Of Reputation And Stakeholder Support;
And It Can Open Up Profitable Opportunities Such As Developing Green Product Lines.
5. Why Is It Important For The Clients Of Professional Accountants To Be Ethical?
Because Auditors Don't Check 100% Of All Transactions And, Even If They Did, There Would Be
Conflicts Of Interest And Other Hidden Issues Which Would Be Found Only By Chance. Making
Sure That Clients Are Ethical Provides Assurance That They Will Not Be Hiding Things From The
Auditors Or Engaging In Unethical Activities. The Value Of The Auditor's Opinion Depends Upon
It.
6. How Can Corporations Ensure That Their Employees Behave Ethically?
By Developing Ethical Corporate Cultures Based On Codes Of Conduct To Provide Guidance;
Training To Provide Awareness And Understanding; Monitoring To Assure Compliance; And
Rewards Or Sanctions To Reinforce The Desired Behavior. Also, The Top Executives Should Set
The Best Example Possible.
7. Why Didn’t Some Corporations Protect Women Employees From Sexual Abuse Before 2017–2019?
Many Factors Have Contributed To Changes In Workplaces And Attitudes Toward Sexual Abuse
Over The Last Decade, Including The Following Reasons.
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |3
Sexual Abuse Was Once A Taboo Subject, But When Media Reported On Sometimes Decades-
Old Abuses Associated With Pedophile Priests, Residential Schools, And Sports Coaches, Etc.,
Taboos Were Eroded, Particularly Because Abuses Had Been Directed Toward Boys And Men.
Public Outrage, Media Appetite, And Victims Realizing That They Were Not Alone, Increased
Coverage Of The Topic.
At The Same Time, Cultural Norms Concerning The Roles And Treatment Of Women Were Changing.
The Advent Of Desktop Computers Even Played A Role, Because Corporate Employees Were
Expected To Type Their Own Documents And Not Rely On “Traditional” Secretarial Work By
Women. In Professions And Workplaces, More And More Women Were Moving Into Non-
Traditional Jobs. In Still Male-Dominated Workplace And Professions, Women In New Roles
Feared Reprisal If They Complained Of Sexual Abuse—If, Indeed, They Could Find Anyone To
Complain To. Complaints In Male-Dominated Workplaces—Particularly Against A High-Power Or
High-Profile Abuser–May Have Fallen On Deaf Ears. As More Women Gained Roles Of Influence,
Recognition Of Workplace Discrimination Led To Employment Equity And Pay Equity Programs.
As Workplace Norms Changed, So Did Cultural Ones. Through Continued Media Coverage,
People Learned More About The Pervasiveness Of Abuse And Its Recipe: Abusers Were Usually In
Positions Of Power And Worked To Isolate Insecure Or Vulnerable Victims And Pressure Them
Into Secrecy Through Shame Or Threats Of Reprisal. Old Attitudes Of Victim Blaming—That
Women Were Responsible For Or Complicit In Abuse, And That “No!” Did Not Mean “No”–Were
Being Dispelled.
Social Media, Used As A Vehicle By The #Metoo Movement In 2017, Rocketed The Awareness Of
Abuses Against Women To New Heights. The Movement Spread A Feeling Of Strength-In-
Numbers And An Attitude Of “We’re Not Going To Take It Anymore.” Emboldened By
Widespread Support, Changing Attitudes Among Women And Men, And More Women In Roles
Of Influence, Corporations Were Forced To Appear Proactive And Intolerant Of Abuse.
Prior To 2017, There Were Relatively Few Instances Were Powerful Men Were Successfully
Prosecuted In Court With Serious Fines Or Prison As Outcomes. That All Changed With Cases
Involving Bill Cosby (Convicted In 2018) And Harry Weinstein (Convicted In 2020).12 Corporations
Took Note, And They Took Action Against Executives They Formerly Excused.
See Also The Answer To Question 13, Chapter 7, Page 590: “The #Metoo Movement Has Finally
Succeeded In Getting Women’s Allegations Of Sexual Abuse To Be Taken Seriously By
Management And Boards Of Directors. Why Did It Take So Long For This Tipping Point To Be
Reached?”
8. Should Executives And Directors Be Sent To Jail For The Acts Of Their Corporation's
Employees? Yes, They Should, If The Executives And Directors Act Negligently Or Without
Engaging In Due
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |4
1
Eric Levenson, ―Harvey Weinstein's Trial Is Closely Tracking Bill Cosby's. But There's 1 Major Difference,‖
CNN.Com, January 28, 2020, Https://Www.Cnn.Com/2020/01/28/Us/Harvey-Weinstein-Bill-Cosby-
Trial/Index.Html. 2 Mike Hayes And Meg Wagner, ―Harvey Weinstein Found Guilty,‖ CNN.Com, February
24, 2020, Https://Www.Cnn.Com/Us/Live-News/Harvey-Weinstein-Verdict/Index.Html.
Diligence Procedures, Which Are Designed To Ensure That Reasonable And Proper Actions Are
Taken.
9. Why Are The Expectations Of A Corporation’s Stakeholders Important To The Reputation Of
The Corporation And To Its Profitability?
Without The Support Of Key Or Primary Stakeholders Such As Customers And Employees,
Sustained Profitability Is Not Possible. A Corporation’s Reputation Is Based On The Elements
That Such Stakeholders Find Relevant To Their Support, Including Credibility, Reliability,
Trustworthiness And Accepting Responsibility.
10. How Can A Corporation Show Respect For Its Stakeholders?
By Taking Their Interests Into Account (Respecting Them) When Making Decisions.
11. How Can Conflicts Between The Interests Of Stakeholders Be Resolved By A
Corporation’s Management?
By Displaying Sensitivity To Each Side, Ranking The Interests Involved, And Using This Ranking To
Favor The Most Important, As Discussed In The Text, Chapter 4. Stakeholders Should Be Made
Aware Of The Ranking And Decision Process Where Possible. In The End, Tough Trade-Off
Decisions May Be Involved, But Stakeholders Should Have Confidence In The Process.
12. Why Are Philosophical Approaches To Ethical Decision Making Relevant To Modern Corporations
And Professional Accountants?
The Philosophical Approaches To Ethical Decision Making (Utilitarianism, Deontology, And
Virtue Ethics—See Text, Chapters 3 & 4) Are Relevant Because Of Stakeholders’ Greater And
Growing Ethical Awareness, Sensitivity, And Power. Stakeholders Can Make A Difference To The
Reputations And Fortunes Of Companies And Of Professional Accountants. Their Support Is
Needed Now More Than Ever.
13. What Are The Common Elements Of The Three Practical Approaches To Ethical Decision Making
That Are Briefly Outlined In The Chapter?
The Common Elements Are Measures Of Well-Offness, Fairness, Right(Ness), And Virtues Expected.
14. Is A Professional Accountant A Businessperson Pursuing Profit Or A Fiduciary That Is To Act In
The Public Interest?
Both, But When There Is A Conflict Between These Roles, The Professional Accountant Must
Place Fiduciary Duty Above Personal Profit. Otherwise, The Public Interest Will Not Be Protected
(Which Is The Primary Goal Of A Professional—See Later Chapters In The Text, Particularly
Chapter 6, For Discussion).
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
, Pa ge |5
15. Will The NOCLAR Standards Assist Or Hurt The Accounting Profession?
For The Most Part, The NOCLAR Standards Will Assist The Accounting Profession By Bolstering Its
Reputation For Serving The Public Interest. They Will:
Help The Profession Recover From Recent Scandals By Demonstrating That
Professional Accountants Have Uniform Ethical Behavior (Text, Pages 10, 15) And
Stress “…That The Primary Purpose Of Professional Accountants Is To Serve The
Public Interest…” (Text, Page 15.)
Help Pas Serve The Public Interest By Requiring Pas To Internally Disclose (And
Potentially Externally Disclose) Violations Or Potential Violations Of Law Or Regulation,
By A Client Or Employer, That Are Not In The Public Interest.
Allow Them/Oblige Them To Report Malfeasance And Be Pardoned For Breaking
Client Confidentiality
“*W]Ill Require Professional Accountants In Assurance Or In Business As Employees To
Report When They Discover When Their Client Or Employer Is Not Complying With Laws
Or Regulations. This Will Significantly Change The Role Of Professional Accountants
Depending On How And When These Rules Are Adopted By The Professional Body In
Each Jurisdiction. These Changes Should Help Reduce The Serious Expectations Gaps
That Have Become Apparent Between The Expectations Of Public For Corporations And
The Accounting
Profession.” (Text, Page 13.)
“…*W]Ill Require A Professional Accountant Who Discovers Or Suspects That His Or Her
Employer Or Client Is Not Complying With Laws Or Regulations To Report This Internally
And Then Externally If No Or Insufficient Action Is Taken.” (Text, Page 15.)
Be Included In The 2018 IESBA International Code Of Ethics For Professional
Accountants (See Text, Chapter 6) To Which Over 170 Professional Accounting Bodies
Worldwide Including The AICPA, CPA Canada, And ICAEW—As Members Of The
International Federation Of Accountants (IFAC), Have Pledged To Harmonize Their
Local Codes In The Near Future. (Text, Page 15.)
May Make Tax Practice Less Aggressive.
On The Negative Side:
Some Worry That Pas Must Know And Comply With More And More Rules. However,
Wide Acceptance Of The NOCLAR Standards And Harmonization Of Codes Will Help
Reduce This Concern.
Others Worry That To Avoid Being Reported Upon, Companies Might Hire Non-Pas Who
Have No Professional Obligations. In Canada, The Majority Of CFO Roles Are Filled By
Business & Professional Ethics for Directors, Executives & Accountants, 9e
Leonard J. Brooks and Paul Dunn, ©2021, 2018 Cengage Learning, Inc.
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Cpas. In The United States, However, An Increasing Number Of CFO Positions Are Being
Filled By Mbas.3
16. Why Is It Important For A Professional Accountant To Understand The Ethical Trends Discussed In
This Chapter?
So That The Expectations For Business Can Be Understood And So That Advice Can Be Given Or
Actions Can Be Screened According To What Might Be Acceptable And Desirable, Now And In
The Future, With Regard To Operations As Well As Financial Matters. Also, The Accounting
Profession Is Subject To The Same Set Of Expectations—And Is Expected To Rise To Higher
Standards Of Performance–Than Business.
17. Why Should A Professional Accountant Be Aware Of The Ethics Code Of The International
Federation Of Accountants (IFAC)?
Because The IFAC Code Is The Newly Defined Standard To Which All IFAC Member
Organizations, Including The AICPA, PA (Formerly CICA) And ICAEW, IMA And SMAC Have
Pledged To Harmonize Their Codes. The IFAC Code Contains The Common Elements To Which
All Professional Accountants Will Adhere Worldwide. (See Also Text, Chapter 6.)
18. Why Is An Ethical Corporate Culture Important?
An Ethical Corporate Culture—Also Called A Culture Of Integrity–Is One In Which Ethical
Behavior Is Considered Normal And Expected. This Behavior Is Supported By Codes, Policies,
And Compliance That Can Be Passed On To Employees And Agents. Developing And Maintaining
An Ethical Corporate Culture Are Now Expected Aspects Of Good Governance And Are,
Therefore, Part Of What Directors And Senior Executives Must Ensure Are Included In Their
Responsibilities And Duties.
19. What Three Ethics Risks Must A Company Guard Against, And
Why? From Text, Table 1.7 (Ethics Risks), Page 23:
Organizational Culture Risks Exist When An Organization’s Culture Fails To
Provide Sufficient Support And Guidance To Ensure A Culture Of Integrity.
Mindset Risks Exist When Decision Makers, Employees, And Agents Are:
o Improperly Motivated, Or
o Use Ethically Unsound Rationales For Their Decisions.
3
Jamal, Karim. ―Developments In The U.S. CPA Profession: Will They Be Replicated In Canada?‖ (Keynote
Speech, University Of Toronto At Mississauga, September 14, 2018), PAC Annual Conference On Professional
Accounting Futures, Https://Www.Utm.Utoronto.Ca/Pac/Pac-Events/Pac-Annual-Conference-Professional-
Accounting-Futures- September-14-2018.
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Systemic Risks Often Originate Outside An Organization And Affect An Entire System
Of Activity.
Each Of These Ethics Risks Can Result In Failure To Meet The Ethical Expectations Of
Stakeholders. The Consequences Can Be The Loss Of Reputation, Loss Of Stakeholder Support,
And Prevention Of Full And/Or Efficient Achievement Of Strategic Objectives. Several Topics
Associated With The Management Of Ethics Risks And Opportunities, Such As Developing A
Culture Of Integrity, Are Discussed In The Text, Chapters 4 To 7.
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Case Solutions
Cases Involving Improper Behavior
1. Selling Only Sugary Drinks (Chapter 1, Page 36)
What This Case Has To Offer
This Case Looks At Actions That Might Be Legal, But Not Ethical; Individual Rights Versus The Common
Good; And Companies That Dare To Ignore Key Stakeholders. The Case Can Be Examined At A More
General Level By Examining, For Example, Increases In Diabetes And Obesity Levels; Attempts By
Governments To
Influence Companies To Reduce Sugar, Salt, And Fat In Their Offerings; And Companies’ Willingness—Or
Not—To Be Influenced.
Teaching Suggestions
I Find It Useful To Start Off By Asking If The Class Members Were Surprised To Learn How Much Sugar Is
In Normally Consumed Sizes Of Sugary Drinks. That Raises Awareness, And I Go On To Explore The
Relationship Of Sugar To Diabetes And Obesity Problems, And The Growing Concern For Each. I Then
Ask What The Ethical Issues Are In The Case, Which Leads To Discussion Of The Following Issues.
The Case Introduces The Conflict Between Business Freedom (The Right Of The Doughnut Chain To
Choose To Sell Profitable Sugary Drinks) Versus The Harm Sugary Drinks Can Cause To Health And Health
Habits. The Company Shows A Lack Of Responsibility For The Possible Health Consequences Of Its
Products, But It May Be Satisfying Shareholders’ Demand For Profits. In The Context Of This Particular
University, The Case Also Suggests That The Company Ignores Customer Feedback And Refuses To
Change Its Offering Despite Consumer Demand For Healthy Alternatives.
Over The Last Decade Or More, Pressure Has Increased On Food Companies And Fast-Food Chains To
Improve The Health Of Their Product Offerings In Order To Fight A Nearly Global Increase In Diabetes
And Obesity Rates—From New York Mayor Michael Bloomberg’s 2012 Attempt To Reduce Sugary Soda
Size, To The United Kingdom’s 2010 “Public Health Responsibility Deal,” To A 2016 Canadian Senate
Report On Taxing Sugar. This Case Offers The Opportunity To Examine Many Stakeholders Associated
With The Issue And Their Often Conflicting Desires, And The Attempts Made By Governments (E.G.,
Through Taxation) And Companies (Through Voluntary Measures Or All-Out Opposition, For Example, By
The American Beverage Association To Bloomberg’s Proposal) That May Or May Not Have Expected Or
Desired Outcomes. For Example, Governments (Health-Care Systems) See Rising Costs With Adverse
Health Outcomes, And Reduced Productivity. Shareholders Want Profits, And Sugary Drinks Offer Good
Margins. Some Consumers Want Sugary Offerings; Others (For Example, Health-Care-Associated
Individuals And Associations) See The Dangers Of Those Offerings.
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Discussion Of Ethical Issues
1. Why Do You Think That The Doughnut Chain Continued To Sell Only Sugary Soft Drinks Even
Though It Was Under Pressure To Sell Diet Soft Drinks As Well?
The Profit Margin On Sugary Drinks Increases With The Size Of The Beverage, Because Drinks
Are Made By Adding Water To Syrup. The Marginal Cost Of A Larger Sugary Drink Is Small, So
The Profit Is Greater For The Larger Drink, And The Business’s Owners And/Or Shareholders
Need Profitability. The Profit Margin On Diet Drinks May Be Smaller If, For Example, They Are
Sold As Units, Rather Than On Tap. Or, The Chain May Have Made A Deal With One Drink
Supplier Over Another Whose Offerings Include Predominantly Sugary Beverages.
Henry Ford Said About The Model-T Produced At The Turn Of The 20th Century That Consumers
Could Have Any Color They Wished, As Long As It Was Black. In The Fast-Food Industry, Limiting
Choice Can Speed Up Customer Flow-Through And Simplify Supply Ordering, Order Filling,
Storage, Employee Training, Etc., But It Is A Company-Centric Decision. Given This Particular
Doughnut
Chain’s Customers’ Reluctance To Shop At More Than One Place When Time Is Limited, The
Strategy Might Have Been A Profitable One In The Short Term, Particularly If The Chain Had
Little Competition. In The Long Term, However, Especially If Product Substitution Is Possible,
Customers Can Vote With Their Feet If They Feel Their Needs Are Not Being Met By The
Doughnut Chain. Henry Ford’s Strategy, For Example, Was Ultimately Used Against Him By A
Rival Company That Was More Than Willing To Offer Cars In Other Colors.
2. Was Selling Only Sugary Soft Drinks Ethical?
Consider The Questions Of Self-Interest (The Doughnut Chain’s) Versus The Common Interest
(Its Consumers’ Health; Health Problems And Societal Costs Associated With Excessive Sugar
Consumption) And Consumer Feedback (Desire For Other Beverages). It Seems That The Chain
Doesn’t Demonstrate The Hypernorm Values Of Compassion Or Fairness, And Lacks
Responsibility, So Its Decisions Appear To Be Unethical.
In The Short Term, Ignoring Changing Consumer Tastes And Preferences Could Be A Viable
Strategy, Particularly If Consumers Have No Substitute Offerings If The Chain Has No
Competition, But Over The Long Term, Particularly As More Health Effects Of Sugar Are
Exposed, Consumer Trust In The Chain Is Eroded When It Is Clear That Company Interest Is
Greater Than Consumer Interest. Turning Its Back On A Major Stakeholder As A Long-Term
Strategy Will Very Likely Backfire On The Company. As Noted In The Text, Chapter 1, Without
The Support Of Key Or Primary Stakeholders Such As Customers And Employees, Sustained
Profitability Is Not Possible. A Corporation’s Reputation Is Based On The Elements That Such
Stakeholders Find Relevant To Their Support, Including: Credibility, Reliability, Trustworthiness
And The Taking Of Responsibility. Not Taking Their Interests Into Account Shows A Lack Of
Respect For Customers. And Where Product Substitution Is Possible, Consumers Can Walk Away.
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