Chapter 1, Problem 3.4EC

Controversy tends to surround the topic of whistleblowers. For example, should they be considered heroes or traitors? Many pro-whistleblowing policies have been enacted by the federal government to allow these individuals to reap significant monetary rewards for coming forward and giving information about behaviors and actions such as corporate fraud and unethical deeds. Many corporate whistleblowers face negative consequences of their actions, such as reassignment, revenge, and hate crimes, and are seen as traitors (e.g., Edward Snowden and Gina Gray). Yet Sherron Watkins and Cynthia Cooper were celebrated as heroes. Look up the stories of Sherron Watkins and Cynthia Cooper. Why do you think that some whistleblowers are vilified and others made to be heroes?

Do you think there are any circumstances when you should go outside the company to report financial wrongdoing? If so, to what person/organization would you go? Why? If not, why would you not take the information outside the company?

How can board members and senior managers actually monitor and control ethical behavior in a company?

how do compensation plans, including bonus structures, drive behavior?   How can transfer pricing, for example, lead to outcomes that are not in the best interests of the organization?  What do you think about executive bonuses tied to stock prices in a public company?   What other issues can you see with compensation plans?

CEO compensation design is effective in controlling the behavior in their decision making. How a compensation package could possibly work in adjusting a CEO’s risk taking behavior (in investments) and in balancing long-term vs. short term interests of a company?

What are some factors that can increase the risk that a corporation does not have a corporate culture that supports ethical decision making? Please explain.