Corporate Ethics and Financial Scandals: A Report on Key Issues

This report provides a detailed analysis of corporate ethics and responsibility, examining several key case studies. It begins with an overview of Starbucks' Corporate Social Responsibility (CSR), highlighting its ethical sourcing practices, commitment to farmers, and environmental initiatives. The report then delves into the perspective of Starbucks CEO Howard Schultz on social responsibility, emphasizing the importance of giving back to the community and creating value for stakeholders. Following this, the report explores issues in financial and accounting fraud, discussing factors that contribute to unethical behavior and the importance of ethical standards within companies. The report also examines the Wal-Mart bribery scandal in Mexico, analyzing the ethical implications of bribery and the impact on the company's reputation. Finally, it analyzes the rise and fall of Arthur Andersen, exploring the accounting firm's unethical practices and the consequences of its actions. The report concludes by summarizing key themes and offering insights into promoting ethical business practices.

Running head: CORPORATE ETHICS
Corporate Ethics and Responsibility
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Table of Contents
1. Starbucks Corporate Social Responsibility 300.......................................................................3
2. Starbucks CEO Howard Schultz on Social Responsibility......................................................3
3. Issues in financial and accounting fraud..................................................................................5
4. The Bribery Aisle: How Wal-Mart Used Payoffs to Bribe Its Way Through Expansion
in Mexico.........................................................................................................................................6
5. The Rise and Fall of Arthur Andersen.....................................................................................7
References........................................................................................................................................9

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1. Starbucks Corporate Social Responsibility
Starbucks has become the coffee capital of the whole world. They have become a brand over the
years after going to public. The main criteria that they have maintained over the years is to build
a good relationship with all of their stakeholders(Dane and Sonenshein 2015) Being socially
responsible has always been the motto of their company. Starbucks buys coffee from different
parts of the world (ProfTabOkWU, 2010). For example,Asian pacific region, central America
and Arabian countries. They also feel responsible to the farmers they buy coffee from. Therefore,
I think they maintain ethics in sourcing the coffees from different sources. They also maintain
ethical approach while dealing with the government of different countries(Dane and Sonenshein
2015) As the coffee industry is going through a crisis by over production, they are trying to save
farmers who have higher productions. Starbucks also takes care of the community they belong in
different country by providing education and environment development programs for the
nonprofit organization. It is not just a Public relation stunts, their ethical sourcing also includes
global alleviation of farmer’s economic situation (Watts et al. 2017). They also help in fair price
trade of the farmers. Environment friendliness is also part of their corporate social responsibility
strategy. The initiation to build a farmer support center shows their commitment to the farmers of
Costa Rica. The profit from the premium price of their coffee boils down to their farmers so that
they can keep the firm business running. They aim to demonstrate that that their core value
includes profitability as well as social responsibility of the company (Watts et al. 2017). It has
also build this brand based on the social image of the company.
2. Starbucks CEO Howard Schultz on Social Responsibility
Howard Schultz, the CEO of Starbucks highlights the value they always relied upon while doing
the business. Not just making profits, but “giving something back to the community” has always

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been the motive of the company (genConnect, 2013). After going public in 1992, they also have
taken care of the shareholders and equity holders (genConnect, 2013). Taking care of all the
direct and indirect stakeholders of the company has driven them to initiate new programs and
supporting facilities in the company(Ferrell and Fraedrich 2015). The employers always seem
happy and taking care of them was also main characteristics of Starbucks. As told by the CEO,
the budget deficit of American states is staggeringly low therefore, it must be considered by
business people in the country and they must come forward to help the community to improve.
They have also faced challenges in building this reputation in the community as well as seek
social reputation. The shareholders are also happy with the public relation they maintain. “The
only way you can create value for your shareholders is to create value for your people”, this is
also a main mantra they have abide by over the years (genConnect, 2013). According to the
CEO, the social services should be recognized by people and thus must lead to improvement, it
also achieves the target of the reaching desired goal of increasing bottom line. Collective
achievement plan is what they focus on while helping the people in the company to develop their
career and economic health. Their commitment to employment opportunities is effective for
growing for ambitious people. Thus it also helps in creating value addition for the shareholders.
Their social value considers ethical sourcing, environment friendliness and building value for all
stakeholders in the company(Dane and Sonenshein 2015)Corporate social responsibility of
Starbucks incudes sustainability and regulatory compliance in operating different country. Thus
it is one of the most important thingin social compliance (Watts et al. 2017). The statutory
requirement goes beyond the social responsiveness of the corporates. The ethical consideration is
one of the most important part of CSR policies.

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3. Issues in financial and accounting fraud
The financial aspect of business is one of the most critical part of business. There have been
cases where this aspect of business has faced rather ethical confusions. This matter has destroyed
different giant corporation like Enron and Arthur Anderson. It is not that this people wanted to
commit this fraud while remaining in the system, but there was some situation that contributed to
this fraudulent. The financial situation of the people is one of the main feature that has
contributed to this situation(Ferrell and Fraedrich 2015). The pressure, opportunity is the
beginning of this frauds in the company. The unethical approaches only come when the company
are not able to make proper profits and the people there are pressurized generate profits. The
main criteria of the e=public companies to generate proper revenue based on the analyst’s
prediction. Thus the companies find itself in unfavorable situations. If the companies perform
less than that is expected, then they lose shareholders base in the company (Drumwright et al.
2015). According to the speaker, the main reason for the company to fall in this unethical
pattern, is that there focus into the short term profit as well as the reflecting in the analysts
expected results. Thus it can be said that the people in the corporation must be guided by the
CFO, who can develop ethical standards in the company. The employer should keep those in
mind. A long term view of things also must be considered in the company. Keeping the volatility
of the market in mind, the main goals and values of abiding by the ethics should be kept in mind
(Drumwright et al. 2015). According to my view in the subject, alleviation of the fraud free
culture in the organization is needed for companies. The regardless character of the company
should also be promoted. A regardless character is a no go from the time of hiring. The financial
prospect also lies in the hand chief financial officer. “Doing the right thing, but being smart
about it” is a key thing that should be main motive (Markkula Center for Applied Ethics at Santa

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Clara University, 2014). Overall, ethics should be maintained in all operations, that includes the
financial functions of the company. The main criteria of maintaining “high ethics and high
integrity” is one of the most important factor that should be incorporated in the company’s
hierarchical level (Drumwright et al. 2015). That will boil down to other mid and junior level of
the company. The responsibility to put the proper standards of ethics should be written. This will
be communicated to the employees during the time of induction. Government legislations cannot
be only thing to depend on.
4. The Bribery Aisle: How Wal-Mart Used Payoffs to Bribe Its Way Through
Expansion in Mexico
Wal-Mart has become the giant retailer in the supermarket industry. Their presence has
become most important part in the world of trade. They are also accused of major bribery
scandal, which they have denied. A sacred place of Mexico was destroyed in order to build the
supermarket, which now only dominates the people in the market. The expose on the article of
Wal-Mart Mexico is one of the most important foreign subsidiary of its parent company of Wal-
Mart (Democracy Now, 2012). Whenever a company wants to expand, it should be taken into
consideration of the religion, and ethical attitudes of that place, which Wal-Mart ignored in
Mexico. Moreover, they committed a crime while bribing the then Mayor of Mexico. Though it
can be passed as facilitating payments, nonetheless it is a crime. The code of conduct in business
prohibits this practice in US as well as Mexico(Goetschand Davis 2014). This infiltration of
ethical approaches has been committed by the particular lawyer in the company. When the
investigation started, reasonable evidences were there, that the bribery has been done in initiating
the project in the city. As a large corporation the, Wal-Mart though started an investigation, they
handed the case to a general council of Mexico. This is where another unethical part committed

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by Wal-Mart begins. As the councilor was one of the prime suspect of the investigation done by
US veteran (Democracy Now, 2012). Wal-Mart’s focus on this community was very important
as Mexico became a foreign hub for Wal-Mart. In many countries bribery is considered to bring
economic efficiency. Though there are many perspectives that can be discussed in Wal-Mart’s
Bribery case, as the increase in employment in Mexico (Democracy Now, 2012). The main focus
of this is the zoning community wanted to keep the alpha alpha ground of the pyramid
undisturbed. The emotion associated of this Mexican community should have been taken into
consideration. This unethical approach also ruined this giant corporation’s identity as
well(Ferrell and Fraedrich 2015). Moreover, the loss of heritage of the community were also
avoided, in Wal-Mart’s aggressive approach to build a supermarket. The corruption policy of
Mexico was also a dilemma. The bribery case only happened because the code of conduct and
ethics are not in practice in Wal-Mart. This leads to fall of different giant corporation’s fall. The
short term profit gain motive led people to do such things, which should be avoided by strong
hold of corporate governance (Drumwright2015).
5. The Rise and Fall of Arthur Andersen
Arthur Anderson was an accounting firm of Chicago, which became a brand in the industry.
They also started doing business with integrity. Such values and ethics were integral part of
Arthur Anderson. They were in business with different firms handling their accounting and
financial aspects and earned a name among the big five accounting firm all over the world. In the
late 1980’s they expand their business in the consulting firm (Nick Lodato, 2012). This division
wanted to separate themselves as a result the employees were pressurized to make huge profits
for the firm. Thus they got involved in unethical approaches and started to making fraudulent
accounts, false report and book keeping accounts. The main weakness of the company was in its

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strategic decision making to expand without having proper backup. It also got involved with the
corporate giants who failed to abide by proper code of conduct. Accounting irregularities and
fraudulent details of the company were accepted in abundant(Goetsch and Davis 2014). The
previous corporate culture of the company was transparent, which made it possible for the
company to be part of the Big Five firms. The main reason of the downfall of Arthur Anderson
started when they started accounting fraud for Enron and Sunbeam. This two company was also
a part of the downfall of the company. The corporate culture was infiltrated to the level of
company’s policies. In this case, short term gain and aggressive expansion strategy were one of
the most important factor that should have been avoided (Drumwright et al. 2015).
Conclusion
From the above analysis can be concluded that five different articles has been discussed
such as Starbucks CRS, Starbuck CEO Howard Schultz on Social Responsibility, Issues in
financial and accounting fraud and The Bribery Aisle and The rise and fall of Arthur Anderson.
The topic has been chosen as it is one of the crucial situation and issues faced in the business and
the company has to take care of such problems.

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References
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Drumwright, M., Prentice, R. and Biasucci, C., 2015. Behavioral ethics and teaching ethical
decision making. Decision Sciences Journal of Innovative Education, 13(3), pp.431-458.
Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases.
Nelson Education.
Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence.
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Kaptein, M., 2015. The effectiveness of ethics programs: The role of scope, composition, and
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Vitell, S.J., Singhapakdi, A. and Nishihara, C.M., 2015. The influence of ethics
institutionalization on ethical decision-making in marketing. Handbook on ethics and
marketing, pp.61-88.

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Watts, L.L., Medeiros, K.E., Mulhearn, T.J., Steele, L.M., Connelly, S. and Mumford, M.D.,
2017. Are ethics training programs improving? A meta-analytic review of past and present
ethics instruction in the sciences. Ethics & behavior, 27(5), pp.351-384.
Markkula Center for Applied Ethics at Santa Clara University (2014). Issues in Financial
and Accounting Fraud. [online] Available at: https://www.youtube.com/watch?
v=YZcfq2pa5pQ [Accessed 28 Jan. 2018].
genConnect U (2013). Starbucks CEO Howard Schultz on Social Responsibility. [online]
Available at: https://www.youtube.com/watch?v=uHIoK4LviCc [Accessed 28 Jan. 2018].
ProfTabOkWU (2010). Starbucks Social Responsibility Video. [online] Available at:
https://www.youtube.com/watch?v=Nly_OdvORQY [Accessed 28 Jan. 2018].
Democracy Now! (2012). The Bribery Aisle: How Wal-Mart Used Payoffs to Bribe Its Way
Through Expansion in Mexico. [online] Available at: https://www.youtube.com/watch?
v=hmr6uHjoV8o [Accessed 28 Jan. 2018].
Nick Lodato (2012). The Rise and Fall of Arthur Andersen. [online] Available at:
https://www.youtube.com/watch?v=G8RqguCAoG4 [Accessed 28 Jan. 2018].