Discipline-Specific Issues

The following sections highlight the key topics relating to Ethics, CSR and Sustainability as it pertains to the various disciplines within the College of Business. Click on the hyperlinks to access a detailed list of topics for each discipline

Accountancy

Economics

Finance

Information Technology Management

Management

Marketing

Supply Chain Management

Accountancy

Ethics in Accountancy

• Accounting is a profession; CPAs owe a duty not only to their clients/employers, but to the public as well.
• CPAs are subject to detailed, minimum ethical standards established by professional bodies (e.g., the AICPA Code of Conduct and the AICPA Statements on Standards for Tax Services) and government authorities (e.g., IRS Circular 230)
  • CPAs in auditing, for example, must maintain independence (in fact and in appearance) from the companies they audit
  • Auditors that meet the technical requirements to be independent may still be acting unethically if they let other relationships with clients (e.g., lucrative consulting contracts) affect their auditing judgments
  • E.g., Enron
  • E.g., Cookie jar reserves/earnings smoothing
• CPAs in tax practice have a duty to our self-assessment tax system as well as to their clients
  • CPAs may be lured into taking a hyper-technical view of the law, resulting in tax benefits for clients that were never intended by Congress
  • E.g., Selling of aggressive tax shelters by KPMG and others
• Coverage:  The above issues permeate the curriculum, but are particularly discussed in ACCT 302 (Survey of Federal Income Tax), ACCT 405 (Auditing), and ACCT 350 (Accounting Information Systems).

CSR and Sustainability in Accountancy

General comment about CSR and Sustainability in Accountancy:

• These are at an early stage in the accounting world.  They are not big issues now but may be down the road.
• Accounting will be a follower rather than a leader on these issues (as one faculty member put it “we can’t even get net income right—and that involves numbers”).
• There is little time to incorporate these concerns into the current curriculum—which is already overloaded (as noted above).
• If and when CSR and sustainability are brought into the curriculum, it will likely be at the graduate level.  Our graduates that will most likely be the future leaders in the profession will likely come out of our graduate programs.

CSR in Accountancy

• Discussion in ACCT 350 of protecting customer’s private data
• Research on the issue of whether companies should forego tax planning strategies as a form of CSR
  • Depends on how one views the role of the corporation and CSR in general
    • Artificial entity created by state:  corporations have an obligation not to engage in aggressive tax planning since the government gives them unique status
    • Corporation as real individual:  no duty to minimize tax; duty to comply with the tax law.  Comply with the law, minimize taxes on ordinary business transactions but not engage in aggressive tax planning
    • Corporation as an aggregate:  sole function is profit maximization; failure to save taxes whenever possible reduces shareholder value and should not be done
  • Discussion in ACCT 302 of the American Express case, which applied the business judgment rule to find that directors were not liable for failure to structure a transaction in the most-tax advantaged manner (given offsetting business concerns)
• Denise English has her MBA accounting class read and discuss Coke’s sustainability/CSR report
  • Student reaction: it is all public relations (e.g., Coke claims to be fighting obesity.)

Sustainability in Accountancy

• Financial Accounting:
  • New FASB Rules require that firms accrue, at purchase, a liability for the cost to retire assets when legally required to restore assets at retirement
    • E.g., restoring landfills or oil wells
• Accounting Information Systems:
  • Disposal of old technology equipment
  • Celia Renner may be developing a one-unit course on sustainability and CSR issues (as a possible add on to ACCT 303—Mastering the Accounting Cycle)
• Cost Accounting:
  • Capital budgeting should consider the cost of recycling and disposal of assets
    • Not currently covered in the curriculum re: no space
    • Not a “hot” issue yet
  • “Lean Accounting” (eliminating all costs that don’t add value to the customer) may even be anti-sustainability, depending upon how one views “value”
• Taxation:
  • Issue of carbon taxes to encourage companies to reduce carbon emissions (research/policy issue); not current covered in any courses (which deal with things “as is”)
    • Perhaps this is more of an economic issue(?)
    • Shawn Novak has done some work in this area
  • Congress directed Treasury to engage the National Academy of Sciences to review the Internal Revenue Code and identify any provisions that have a large effect on carbon emissions
    • Some scholarship says this won’t matter—Congress did not even succeed in getting rid of the “SUV Loophole” that allows business owners to in many cases immediately deduct the cost of SUVs over a certain weight
• New SEC disclosuresregarding the impact of climate change risk (Denise English and Diane Schooley are working on a paper investigating this issue)
  • Compare mandatory SEC disclosures on climate change risk to voluntary sustainability reporting via GRI for redundancies
  • Claim CPAs have a role to play but so far engineers have been the once providing assurance for the data
• Accounting firms are starting to form sustainability assurance practices—but are drawing on seasoned staff for the time being

Economics

ECON303 – Intermediate Micro (one specific section)

• A discussion of a small paperpack book entitled The Morality of Capitalism.  It’s an edited volume containing essays by Nobel Laureate in Economics Vernon Smith; Nobel Laureate in Literature Mario Vargas Llosa; Co-founder of Whole Foods Market John Mackey; economist Deirdre McCloskey

ECON322 – Urban Economics

• issues related to housing, crime, pollution, poverty, financial and transportation problems

ECON333 – Natural Resource Economics

• Valuation techniques for non-market resources and non-use values (travel cost model, hedonic models, contingent valuation, benefits transfer)
• Pollution haven hypothesis/race to the bottom
• Environmental kuznets curve
• Externalities
• Economic efficiency with transactions costs and barriers to trade
• Equimarginal principle
• Analysis of the clean air and water acts
• Managing public goods and common property resources and the role of well defined property rights (Coase theorem)
• The socially efficient level of pollution (Pareto optimality)
• The complexities involved with managing mobile pollution sources vs. stationary sources
• The complexities involved with managing pollutants that don’t distribute evenly in the environment
• Management of renewable natural resources (fisheries, forests, water) — (optimal harvest/ rotation strategy, bioeconomic equilibrium, socially optimal harvest, optimal tax, tax and quotas on catch and effort, cooperatives)
• Management of nonrenewable natural resources (coal, oil, natural gas, endangered species, unique habitats, etc.)
• Discounting and net present value of future costs/benefits (compounding, interest rates, backstop prices)
• Regulatory techniques for environmental pollutants: emission standards, technology standards, market based trading programs, emission charges, ambient emission permit systems
• The economics of global climate change, and the Kyoto protocol
• The incidence of regulatory efforts

ECON440 – Health Economics

• Production and delivery of health care and the economic and ethical aspects of health policy issues. Comparative analysis of other nations’ health care systems.

Special Topics classes

• Environmental Markets
• Economics of Climate Change
• Water Economics
• The Economics of Sustainability

Finance

• Selling financial products that may be unsuitable for the customer (individual, pension, city government, etc)
• Financial managers handling of financial accounts (excessive trading)
• Socially responsible investing
• Looking out for shareholder interests versus other interests (debt holders, employees, community)
• Measuring financial impact of pursuing socially enlightened policies:  costs versus benefits
• Mergers and Acquisitions – layoffs/downsizing
• Manager compensation – the best way to align incentives of managers with shareholders (and other stakeholders)
  • Options backdating
  • Benchmarking in compensation & the Lake Wobegon effect – all companies want their managers to have compensation above the median
• Ethics in agency relationships – looking out for interests of principal
  • Board of directors and their responsibilities
• Long-term vs. short term focus of financial reporting (quarterly/annual reports), hitting analyst estimates for earnings, etc.
• Manipulation of financial statements – window dressing and fraud
• Shadow banking – avoiding burdens of regulation by using financial products outside the system
• Ethics in lending/borrowing – foreclosures/free riders
• Retirement financing – defined benefit vs. defined contribution (whose responsibility is it to fund retirement)
  • Public union benefits
  • Corporate raiding of pensions
• Insider trading & conflicts of interest in investing
  • Congress trading
  • Buffett’s one-time heir

Information Technology Management

• Storage and use of users’ personal information
• Monitoring of customers’ behavior and employees behavior at work
• Copyright issues with electronic content
• Warning users about potentially wasteful printing–e.g., requiring confirmation before printing with black backgrounds
• Educating faculty about putting more materials online via Blackboard rather than printing them Monitoring paper and toner usage by individual and providing them data comparing their usage to others
• Educating faculty and staff about use of screen savers, PC and printer sleep settings, etc.
• Researching energy usage of devices, using devices such as a Kill-a-Watt (which we already have)
• Using thin clients, small form-factor PCs, solid state drives, LED-backlit screens, etc. that have lower power requirements
• Considering Energy Star and other relevant standards when acquiring equipment Using server virtualization and possibly cloud computing to reduce the number of physical servers required Mounting best practices posters near faculty, staff, and student printers
• Considering recycled paper and other supplies Setting printer defaults to duplex printing and managed toner density
• Printing vs. tablets?
• Properly disposing of e-waste, recycling where practical.
• Offering equipment no longer needed for reuse by other colleges when we move buildings. For example, a major issue for data centers is no longer just MIPS but MIPS per watt.

Management

Management is a broad enough topic that it covers many of the ethical issues that also arise and are relevant in other disciplines (such as accounting, marketing and sales, supply chain).  Therefore, this section will focus primarily on human resources / employment law which are a primary focus of the management discipline.

The following is a list of possible topics, with examples, where the issues of ethics, corporate social responsibility, and sustainability are addressed in Management / Human Resource courses:

• Hiring / Terminations
  • Discrimination: age, disability, race, color, religion, gender, national origin, sexual orientation, etc.
  • Privacy: drug testing, Internet / social media searches
  • Workforce reductions: discrimination, impact on community
• Training and supervision
  • Discrimination and harassment: tension between “reasonable accommodation” v. harassment
  • Favoritism: discrimination, seniority, gender inequity, nepotism
  • Privacy / Employee monitoring: drug testing, social networking, location-monitoring, off-the-job activities
  • Whistle-blowing: Sarbanes-Oxley, workers’ compensation
  • Benefits and pay: gender inequity, seniority
  • Labor / union issues:tract negotiation / duty to bargain in good faith, union organizing, strikes
• Workplace issues
  • Safety: OSHA, Workplace violence
• Leadership
  • Strategic management: creating ethical cultures, integrating CSR into the firm
  • Abdicating responsibility: under-achieving, scape-goating of lower employees
  • “Turf-guarding”: teamwork, productivity
  • Over-promising: employee recruiting, sales
  • Business governance: duty of loyalty, duty of care, ethics programs and codes of conduct
  • Plant closures / relocation: discrimination, impact on community relationships
• Product issues
  • Advertising: misleading claims / Deceptive practices, price fixing
  • Labeling: duty to warn, misleading claims
  • Product liability: negligent or defective design or manufacture, duty to warn
  • Supply chain: supplier hiring practices, health and safety practices,
• Privacy and confidentiality
  • Employees: drug testing
  • Customers / suppliers: data retention, sales practices
• Contracts
  • Negotiation and performance: disclosure; conflicts of interest
  • Statutory requirements (e.g. federal contracts): drug-free workplace requirements, discrimination,
• Environment
  • Pollution: air, water, hazardous waste, liability
  • Reporting: hazardous waste storage and disposal, permitting
  • Supply chain management: carbon footprint, life cycle assessment, recycling
• Globalization
  • Fair trade: tariffs, treaties
  • Gifts / bribes / kick-backs: foreign Corrupt Practices Act
  • Workplace issues: safety, human rights and abuses

Marketing

• Strategy: The effects of CSR and ethical behavior on market position, using CSR as part of your corporate and/or product brand.
• Distribution: managing channel relationships, negotiating with both upstream and downstream channel partners, managing horizontal channel conflict.
• Personal selling: misleading sales practices, long-term vs. short-term effects of unethical sales practices, bribes and kickbacks, influence tactics, territory design, hiring, compensation and reward design.
• Pricing: bait and switch tactics, using loss leaders, predatory pricing, price discrimination, artificial list prices,
• Promotion: misleading advertising, Green marketing, puffery, the use of negative or harmful advertising images.
• Ethical decision making: The actual mechanics of ethical decision making has been, and continues to be, an extensively researched topic in the marketing literature.  The primary reason for this focus is that ethical issues touch all aspects of the practice of marketing.

Supply Chain Management

The following are examples of topics where the issues of ethics, CSR and sustainability addressed in Supply Chain Management courses:

• Environmental impact of operations/supply chain: carbon footprint, pollution, life cycle assessment, recycling, remanufacturing and reverse logistics. Examples:
  • Wal-Mart’s recent new strategic orientation towards sustainability and “green” supply chain management practices.
  • UPS developed a software to help drivers saving time and gas by maximizing the number of right turns (especially at traffic lights), thereby reducing gas expenditures and minimizing their impact on greenhouse gas emissions.
• Control of suppliers: supplier hiring practices, labor practices at suppliers (sweatshops, child labor, work schedules, income inequalities), health and safety practices (exposure to toxic products, pollution standards, food poisoning), union practices. Examples:
  • Wal-Mart’s reliance on suppliers who employ illegal immigrants; alleged discrimination practices towards women.
  • Apple labor practices (excessive workload) at its main assembly plant operated by FoxConn in Shenzhen (China)
  • Product recall at Mattel because of the lead paint in many plastic toys made in China caused. The root of the problem was fraudulent practices at a second tier supplier in China.
  • Nike labor practices (sweatshops, child labor) in Indonesia in the late 1990s.
• Relationship with suppliers / negotiation: opportunistic behaviors over suppliers, bribes and kickbacks, influence tactics (gifting, tickets to a sport event, meals at fancy restaurants, clubs…), conflicts of interest.
  • Wal-Mart is accused of arm-twisting tactics with suppliers, virtually taking some of them out of business.
  • Oil companies commonly deal with representatives from countries where bribery is considered an accepted way of conducting business negotiation.
• Product design and development: reverse engineering and copyright laws, protecting intellectual property (patents), environmental issues (pollution standards, toxic components, product disposal, packaging/overpackaging), addictive products (gambling products, chemical compounds in cigarettes). Examples:
  • In the late 1990s, Napster designed a service to share music files online which infringed copyright laws.
  • Cigarette makers have been accused of using chemical compounds to make their cigarettes more addictive
  • Overpackaging: is it necessary to sell candies that are individually wrapped?
  • Mattel poor design in playsets caused magnets to fall off. Some children swallowed the tiny magnets which resulted punctures of their intestines (two magnets swallowed by the same child get connected through the intestine walls creating holes).
• Competitive practices: illegal government subsidies (Boeing vs. Airbus), collusion, price rigging, price discrimination. Examples:
  • Boeing accused Airbus of receiving illegal help from European governments
  • Airbus accused Boeing to received illegal government subsidies through its military branch.
  • Micron and Hynix have been accused of colluding to dominate the RAMBUS memory market.
• Quality practices: selling unsafe products, selling untested products, scrap and wastage, energy consumption waste. Examples:
  • Servier, a French drug company sold a weight-loss medicine called “Mediator” with serious side effects which resulted in 500-2000 deaths in France. It appears that the firm tried to hush down the safety problem.
  • Toyota was accused of knowingly selling cars with the “sticky pedal” problem. If true, it would be highly unethical but further investigations seem to rule out any foul play from Toyota.