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  • 1. Business Ethics: Cases andSelected Readings, 7th Ed.Marianne M. JenningsUnit 10© 2012 Cengage Learning. All Rights Reserved. May not bescanned, copied or duplicated, or posted to a publicly accessiblewebsite, in whole or in part.
  • 2. Falling Short on the Basics:Board Issues• Arizona Baptist Foundation− Board lacked expertise− Board did not raise sufficient questions− Board members were involved in thetransactions− Board allowed management too much control− Nonprofit board and assumptions aboutintegrity© 2012 Cengage Learning. All Rights Reserved. May not bescanned, copied or duplicated, or posted to a publicly accessiblewebsite, in whole or in part.351
  • 3. Mistakes United Way BoardMade• Board met semi-annually and an Executive Committee of the Board alsomet twice each year• Neither received material information• Board approved creation of spin-off corporations per Aramonys requestsand despite full information• The UWA Board lost control and supervision over the spin-offs• Spin-offs provided compensation perquisites to some individuals andengaged in questionable business transactions which might not have beenauthorized if the UWA Board had scrutinized them• Annual audits failed to disclose numerous abuses of the UWA accountingsystem, including: avoiding control procedures, using restricted funds forpurposes other than those stipulated, paying questionable fees, andfinancing transactions with the spin-off corporations• Board had no compensation committee• Board played almost no role in evaluating officers or setting their salaries© 2012 Cengage Learning. All Rights Reserved. May not bescanned, copied or duplicated, or posted to a publicly accessiblewebsite, in whole or in part.352
  • 4. Falling Short on the Basics:Board Issues• William Aramony and the failure to supervise– Failure to rein in expenses– Personal lives and bad judgment– Nonprofit, assumptions about integrity– Icon statusFelicity Barringer, United Way Head is Forced Out in a Furor Over His LavishStyle, N.Y. Times, Feb. 28, 1992, at A1; United States v. Aramony, 88 F.3d1369 (4th Cir. 1996), cert. denied, 520 U.S. 1239 (1999).© 2012 Cengage Learning. All Rights Reserved. May not bescanned, copied or duplicated, or posted to a publicly accessiblewebsite, in whole or in part.353
  • 5. Stakeholders at Cornell• Those who funded the research• Those using the research: physicians andpatients• The journal editors• The journal readers• Cornell• The foundation• Other researchers© 2012 Cengage Learning. All Rights Reserved. May not bescanned, copied or duplicated, or posted to a publicly accessiblewebsite, in whole or in part.354