Business & Professional Ethics for
Directors, Executives &
Accountants, 10e
Leonard J. Brooks and Paul Dunn
© 2027 Cengage Learning, Inc.
INSTRUCTOR GUIDE
Chapter 1—Ethics Expectations
Chapter Questions................................................................................................................3
Case Solutions......................................................................................................................7
Case Involving the Challenges of AI
AI Due Diligence & Responsibility (Ch. 1, pp. 41-42).......................................................................7
Cases Involving Questionable Business Models
Shein Fast Fashion (Ch. 1, p. 42-43).................................................................................................9
The Travails of Valeant Pharmaceutical (Now Bausch Health) (Ch. 1, p. 43-45)..........................12
Valeant Pharmaceuticals vs. Coca-Cola – Which Business Model is Worse? (Ch. 1, p. 45-46).....16
Cases Involving Improper Behavior
Buying & Selling Blood (Ch 1, p. 47)..............................................................................................23
Pedophile Priests in the Catholic Church (Ch. 1, pp. 47-48)..........................................................27
Sexual Abuse by a Penn State Football Coach (Ch. 1, pp. 48-49)..................................................30
Advertising & Sales Promotion Cases
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 1
publicly accessible website, in whole or in part.
, Tiger Woods: “Winning Takes Care of Everything” ( Ch. 1, p. 49).................................................33
Should Porn Be Sold by Cell Phone Companies? (Ch. 1, pp. 49-50)..............................................35
Cases Involving Financial Transactions
Goldman Sachs & the Greek Veil (Ch. 1, pp. 50-51)......................................................................38
Martha Stewart’s Lost Reputation (Ch. 1, pp. 51-54)....................................................................40
Cases Involving the Control of Information
Google versus China (Ch. 1, p. 55-56)............................................................................................45
China’s Tainted Baby Milk Powder: Rumored Control of Online News (Ch. 1, pp. 56-57)............47
Cases Concerning the Environment
Nestlé Bottles Water in a California Drought (Ch. 1, p. 58)...........................................................52
Bhopal–Union Carbide (Ch. 1, pp. 59-60)......................................................................................54
Texaco in Ecuador (Ch. 1, pp. 60-62)..............................................................................................58
Product Safety Cases
The Right to Be Informed? The Link Between Talcum Powder & Cervical Cancer
(Ch. 1, pp. 63-64)...........................................................................................................................61
J & J Dances the Texas Two-Step (Ch. 1, pp. 64-65).......................................................................63
The Betaseron Decision (A) (Ch. 1, p. 65-66).................................................................................65
Magnetic Toys Can Hurt (Ch. 1, p. 67)...........................................................................................68
Bausch & Lomb’s Hazardous Contact Lens Cleaner ( Ch. 1, pp. 67-68)........................................70
Accounting & Auditing Cases
Where Were the Accountants? (Ch. 1, pp. 68-69).........................................................................73
Resign or Serve? (Ch. 1, pp. 69-70)................................................................................................75
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 2
publicly accessible website, in whole or in part.
, CHAPTER QUESTIONS
1. Why have concerns over pollution become so important for management and directors?
Concerns over pollution have intensified because stakeholders now understand that environmental
resources are finite and that corporate activities can impose severe harms on communities and ecosystems.
Chapter 1 explains that this awareness has driven the development of international standards and
commitments thereto, tougher environmental laws, heightened penalties (including personal liability for
directors), cross-border litigation exposure for pollution on foreign soil, and reputational scrutiny. Pollution
and perceived environmental indifference directly erode trust, social license, and access to capital, making
responsible environmental management a core governance and strategic issue rather than a peripheral cost.
2. Why are we more concerned now than our parents were about fair treatment of employees?
Public concern about fair treatment has grown as civil rights, feminist, labor, disability, and human rights
movements have reshaped norms around equality and dignity at work. Chapter 1 notes that this heightened
moral sensitivity, amplified by media and stakeholder activism, has increased expectations that organizations
prevent discrimination and harassment, provide safe and respectful workplaces, and treat employees as key
stakeholders whose rights and voices must be taken seriously.
3. What could professional accountants have done to prevent the development of the credibility gap and the
expectations gap?
The credibility and expectations gaps emerged when confidence in corporate reporting and audits thereon
failed to live up to the public’s expectations due to repeated financial scandals and failures in professional
skepticism. Professional accountants could have mitigated these gaps by more consistently asserting
independence, resisting aggressive or misleading reporting, communicating concerns more transparently,
and prioritizing their public-interest mandate over client or employer pressure. Chapter 1’s discussion of past
fact-finding commissions and key cases illustrates that stronger ethical stances and clearer communication
about risks and limitations of assurance would have strengthened public trust in financial reporting and the
profession.
4. Why might ethical corporate behavior lead to higher profitability?
Ethical corporate behavior reduces exposure to fines, lawsuits, clean-up and remediation costs, regulatory
sanctions, and reputational crises that can destroy value. Chapter 1 links sustained profitability to
stakeholder trust: organizations that manage environmental, social, and governance responsibilities credibly
are better positioned to retain customers, attract and motivate employees, secure investment, and access
emerging markets for responsible products and services. Ethical conduct is framed not as philanthropy, but
as a condition for durable competitive advantage.
5. Why is it important for the clients of professional accountants to be ethical?
The accuracy of the audit/assurance function depends largely on clients’ honesty and cooperation. Because
auditors do not test every transaction and must rely on internal controls and representations, unethical
clients who conceal information, override controls, or mislead auditors undermine the reliability of financial
statements and the value of the audit opinion. Chapter 1 stresses that when clients lack integrity, public
confidence is damaged not only in the company but also in the accounting profession associated with it.
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 3
publicly accessible website, in whole or in part.
, 6. How can corporations ensure that their employees behave ethically?
Chapter 1 emphasizes that ethical conduct is best secured through an ethical corporate culture, supported
by clear values, codes of conduct, and consistent demonstrated leadership behavior. Effective measures
include explicit expectations and apparent leadership support, ethics and compliance training, credible
reporting and whistleblower mechanisms, aligned incentives, and fair disciplinary processes. When senior
management and boards model integrity and back it with systems, ethical behavior becomes normal and
expected rather than exceptional.
7. Why didn’t some corporations protect women employees from sexual abuse before 2017–2019?
Failures to protect women employees have often reflected power imbalances, fear of retaliation, weak reporting
mechanisms, and a culture that prioritized key performers’ interests and short-term secrecy over safety,
accountability, and long-term reputational damage. As presented in Chapter 1, the #MeToo movement exposed
systemic misconduct and challenged patterns of silence, forcing organizations and professions to confront the
ethical and governance failures inherent in ignoring harassment and abuse and to recognize this as a breach of
duty to employees and the public. Before 2017, women’s complaints about harassment, or worse, were
customarily dismissed. But public sentiment has now changed, thanks to the efforts of #MeToo and shocking
court cases involving Bill Cosby and Harry Weinstein, and women’s concerns are now taken quite seriously.
8. Should executives and directors be sent to jail for the acts of their corporation's employees?
Yes. Executives and directors are responsible for establishing effective controls, promoting an ethical culture,
and responding to warning signs. Chapter 1 suggests that where leaders are negligent and knowingly permit,
encourage, or recklessly disregard wrongdoing, or fail to exercise basic due diligence, personal legal
consequences may be appropriate and necessary to reinforce accountability. This reflects an expectation
that ethical governance and oversight are expected duties.
9. Why are the expectations of a corporation’s stakeholders important to the reputation of the corporation
and to its profitability?
Stakeholder expectations define what is considered legitimate and acceptable corporate behavior. Chapter 1
explains that meeting expectations related to honesty, reliability, fairness, environmental responsibility, and
responsiveness sustains reputation, trust, and ongoing support from customers, employees, investors,
regulators, and communities. When expectations are breached, stakeholders can withdraw support, impose
sanctions, or mobilize public and political pressure, directly threatening profitability and long-term viability.
10. How can a corporation show respect for its stakeholders?
Respect is demonstrated when the corporation recognizes stakeholders’ legitimate interests and
incorporates them meaningfully into decisions that affect them. Chapter 1 highlights transparent
communication, responsiveness to concerns, and efforts to avoid unjustly imposing risks or harms on
vulnerable or voiceless groups as markers that stakeholder interests are treated as real constraints and
considerations, not as mere public relations language.
11. How can conflicts between the interests of stakeholders be resolved by a corporation’s management?
Chapter 1 recommends addressing stakeholder conflicts through sensitivity, fairness, and clarity about the
reasoning behind decisions. Management should strive to understand each stakeholder’s perspective,
consider the relative importance and legitimacy of competing claims, seek options that minimize avoidable
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 4
publicly accessible website, in whole or in part.
Directors, Executives &
Accountants, 10e
Leonard J. Brooks and Paul Dunn
© 2027 Cengage Learning, Inc.
INSTRUCTOR GUIDE
Chapter 1—Ethics Expectations
Chapter Questions................................................................................................................3
Case Solutions......................................................................................................................7
Case Involving the Challenges of AI
AI Due Diligence & Responsibility (Ch. 1, pp. 41-42).......................................................................7
Cases Involving Questionable Business Models
Shein Fast Fashion (Ch. 1, p. 42-43).................................................................................................9
The Travails of Valeant Pharmaceutical (Now Bausch Health) (Ch. 1, p. 43-45)..........................12
Valeant Pharmaceuticals vs. Coca-Cola – Which Business Model is Worse? (Ch. 1, p. 45-46).....16
Cases Involving Improper Behavior
Buying & Selling Blood (Ch 1, p. 47)..............................................................................................23
Pedophile Priests in the Catholic Church (Ch. 1, pp. 47-48)..........................................................27
Sexual Abuse by a Penn State Football Coach (Ch. 1, pp. 48-49)..................................................30
Advertising & Sales Promotion Cases
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 1
publicly accessible website, in whole or in part.
, Tiger Woods: “Winning Takes Care of Everything” ( Ch. 1, p. 49).................................................33
Should Porn Be Sold by Cell Phone Companies? (Ch. 1, pp. 49-50)..............................................35
Cases Involving Financial Transactions
Goldman Sachs & the Greek Veil (Ch. 1, pp. 50-51)......................................................................38
Martha Stewart’s Lost Reputation (Ch. 1, pp. 51-54)....................................................................40
Cases Involving the Control of Information
Google versus China (Ch. 1, p. 55-56)............................................................................................45
China’s Tainted Baby Milk Powder: Rumored Control of Online News (Ch. 1, pp. 56-57)............47
Cases Concerning the Environment
Nestlé Bottles Water in a California Drought (Ch. 1, p. 58)...........................................................52
Bhopal–Union Carbide (Ch. 1, pp. 59-60)......................................................................................54
Texaco in Ecuador (Ch. 1, pp. 60-62)..............................................................................................58
Product Safety Cases
The Right to Be Informed? The Link Between Talcum Powder & Cervical Cancer
(Ch. 1, pp. 63-64)...........................................................................................................................61
J & J Dances the Texas Two-Step (Ch. 1, pp. 64-65).......................................................................63
The Betaseron Decision (A) (Ch. 1, p. 65-66).................................................................................65
Magnetic Toys Can Hurt (Ch. 1, p. 67)...........................................................................................68
Bausch & Lomb’s Hazardous Contact Lens Cleaner ( Ch. 1, pp. 67-68)........................................70
Accounting & Auditing Cases
Where Were the Accountants? (Ch. 1, pp. 68-69).........................................................................73
Resign or Serve? (Ch. 1, pp. 69-70)................................................................................................75
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 2
publicly accessible website, in whole or in part.
, CHAPTER QUESTIONS
1. Why have concerns over pollution become so important for management and directors?
Concerns over pollution have intensified because stakeholders now understand that environmental
resources are finite and that corporate activities can impose severe harms on communities and ecosystems.
Chapter 1 explains that this awareness has driven the development of international standards and
commitments thereto, tougher environmental laws, heightened penalties (including personal liability for
directors), cross-border litigation exposure for pollution on foreign soil, and reputational scrutiny. Pollution
and perceived environmental indifference directly erode trust, social license, and access to capital, making
responsible environmental management a core governance and strategic issue rather than a peripheral cost.
2. Why are we more concerned now than our parents were about fair treatment of employees?
Public concern about fair treatment has grown as civil rights, feminist, labor, disability, and human rights
movements have reshaped norms around equality and dignity at work. Chapter 1 notes that this heightened
moral sensitivity, amplified by media and stakeholder activism, has increased expectations that organizations
prevent discrimination and harassment, provide safe and respectful workplaces, and treat employees as key
stakeholders whose rights and voices must be taken seriously.
3. What could professional accountants have done to prevent the development of the credibility gap and the
expectations gap?
The credibility and expectations gaps emerged when confidence in corporate reporting and audits thereon
failed to live up to the public’s expectations due to repeated financial scandals and failures in professional
skepticism. Professional accountants could have mitigated these gaps by more consistently asserting
independence, resisting aggressive or misleading reporting, communicating concerns more transparently,
and prioritizing their public-interest mandate over client or employer pressure. Chapter 1’s discussion of past
fact-finding commissions and key cases illustrates that stronger ethical stances and clearer communication
about risks and limitations of assurance would have strengthened public trust in financial reporting and the
profession.
4. Why might ethical corporate behavior lead to higher profitability?
Ethical corporate behavior reduces exposure to fines, lawsuits, clean-up and remediation costs, regulatory
sanctions, and reputational crises that can destroy value. Chapter 1 links sustained profitability to
stakeholder trust: organizations that manage environmental, social, and governance responsibilities credibly
are better positioned to retain customers, attract and motivate employees, secure investment, and access
emerging markets for responsible products and services. Ethical conduct is framed not as philanthropy, but
as a condition for durable competitive advantage.
5. Why is it important for the clients of professional accountants to be ethical?
The accuracy of the audit/assurance function depends largely on clients’ honesty and cooperation. Because
auditors do not test every transaction and must rely on internal controls and representations, unethical
clients who conceal information, override controls, or mislead auditors undermine the reliability of financial
statements and the value of the audit opinion. Chapter 1 stresses that when clients lack integrity, public
confidence is damaged not only in the company but also in the accounting profession associated with it.
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 3
publicly accessible website, in whole or in part.
, 6. How can corporations ensure that their employees behave ethically?
Chapter 1 emphasizes that ethical conduct is best secured through an ethical corporate culture, supported
by clear values, codes of conduct, and consistent demonstrated leadership behavior. Effective measures
include explicit expectations and apparent leadership support, ethics and compliance training, credible
reporting and whistleblower mechanisms, aligned incentives, and fair disciplinary processes. When senior
management and boards model integrity and back it with systems, ethical behavior becomes normal and
expected rather than exceptional.
7. Why didn’t some corporations protect women employees from sexual abuse before 2017–2019?
Failures to protect women employees have often reflected power imbalances, fear of retaliation, weak reporting
mechanisms, and a culture that prioritized key performers’ interests and short-term secrecy over safety,
accountability, and long-term reputational damage. As presented in Chapter 1, the #MeToo movement exposed
systemic misconduct and challenged patterns of silence, forcing organizations and professions to confront the
ethical and governance failures inherent in ignoring harassment and abuse and to recognize this as a breach of
duty to employees and the public. Before 2017, women’s complaints about harassment, or worse, were
customarily dismissed. But public sentiment has now changed, thanks to the efforts of #MeToo and shocking
court cases involving Bill Cosby and Harry Weinstein, and women’s concerns are now taken quite seriously.
8. Should executives and directors be sent to jail for the acts of their corporation's employees?
Yes. Executives and directors are responsible for establishing effective controls, promoting an ethical culture,
and responding to warning signs. Chapter 1 suggests that where leaders are negligent and knowingly permit,
encourage, or recklessly disregard wrongdoing, or fail to exercise basic due diligence, personal legal
consequences may be appropriate and necessary to reinforce accountability. This reflects an expectation
that ethical governance and oversight are expected duties.
9. Why are the expectations of a corporation’s stakeholders important to the reputation of the corporation
and to its profitability?
Stakeholder expectations define what is considered legitimate and acceptable corporate behavior. Chapter 1
explains that meeting expectations related to honesty, reliability, fairness, environmental responsibility, and
responsiveness sustains reputation, trust, and ongoing support from customers, employees, investors,
regulators, and communities. When expectations are breached, stakeholders can withdraw support, impose
sanctions, or mobilize public and political pressure, directly threatening profitability and long-term viability.
10. How can a corporation show respect for its stakeholders?
Respect is demonstrated when the corporation recognizes stakeholders’ legitimate interests and
incorporates them meaningfully into decisions that affect them. Chapter 1 highlights transparent
communication, responsiveness to concerns, and efforts to avoid unjustly imposing risks or harms on
vulnerable or voiceless groups as markers that stakeholder interests are treated as real constraints and
considerations, not as mere public relations language.
11. How can conflicts between the interests of stakeholders be resolved by a corporation’s management?
Chapter 1 recommends addressing stakeholder conflicts through sensitivity, fairness, and clarity about the
reasoning behind decisions. Management should strive to understand each stakeholder’s perspective,
consider the relative importance and legitimacy of competing claims, seek options that minimize avoidable
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 4
publicly accessible website, in whole or in part.
