CASE QUESTIONS (60 points total). Read the cases below from the Jennings “Business Ethics” textbook in this class (see syllabus) and answer the questions listed. As you are reading, think of what current events might remind you of ethical issues you see raised below.* Case 8.17: Frozen Coke and Burger King and the Richmond Rigging, P. 506. Q. 3, 5.* Case 8.18: Wells Fargo and Selling Accounts, or Making Them Up?, P. 509. Q. 2, 3.* Case 7.23: Ann Hopkins and Price Waterhouse, P. 465. Q. 2, 5.CURRENT NEWS EVENT (WITHIN LAST 30 DAYS) THAT RELATES TO ANY OF THE CASES STUDIED IN UNIT 9 (40 POINTS). Pick any of the cases studied in Unit 7 or 8, and discuss one current event (i.e. something in the news recently within the past 30 days that you can hyperlink to) that makes you think of an ethical situation raised in that case. (1) You MUST hyperlink to the news article, or attach article as a pdf in your submission), to a recognized news organization, and it must show the news article as current within the last 30 days. Note: Videos do not count for purposes of this assignment. (2) Summarize the news article; (3) Discuss which of the Cases assigned in this assignment it reminds you of and why; (4) and discuss how you would resolve the issue given what you have learned.Case 8.17
Frozen Coke and Burger King and the Richmond
Tom Moore, president of Coca-Cola’s Foodservice and Hospitality Division, was looking at
sales in the fountain division, a division responsible for one-third of all of Coke’s revenues.
The fountain division sells fountain-dispensed soda to restaurants, convenience marts, and
theaters. Sales were stagnant, and he knew from feedback from the salespeople that Pepsi
was moving aggressively in the area. In 1999, Pepsi had waged a bidding war to try to seize
Coke’s customers. Coke held about 66% of the fountain drink business and 44.3% of the
soda market overall. Pepsi held 22% of the fountain market and 31.4% of the overall soda
market. The war between the two giants had been reduced to a price war. One might say
that Coke’s fountain sales were flat.
However, Moore envisioned a potential new product line as he looked at the Frozen
Coke products. At that time, Frozen Coke was a convenience store item only. Frozen Coke
was still a little-known product, and Moore’s team at Coke pitched the idea of having
Frozen Coke at Burger King, along with a national advertising push that would push Coke’s
fountain sales but also increase food sales at Burger King as customers came in to try the
newly available product. Their pitch to Burger King was that Frozen Coke would draw
We are very disappointed in the actions … confirmed today by the Coca-Cola audit committee. We expect and
customers and that the sales of all menu items would increase as a result. Burger King was
demand the highest standards of conduct and integrity in all our vendor relationships, and will not tolerate any
not ready for a marketing push because it had just lived through two marketing disasters. deviation from these standards.
The first was the failure of the introduction of its new fries, and another was a costly ad
Coke’s president and chief operating officer, Steve Heyer, sent an apology to Mr. Blum:
campaign to boost sales of the Whopper, with no impact but a great many angry franchise
These actions were wrong and inconsistent with values of the Coca-Cola Co. Our relationships with Burger King
owners who had been required to help pay for the ads. Before Burger King would invest
and all our customers are of the utmost importance to us and should be firmly grounded in only the highest-
in another ad campaign, it wanted to see some test marketing results. Burger King asked integrity actions. 129
Coke to do a promotion of Frozen Coke in a test market. Burger King chose the Richmond,
Coke had to scramble to retain Burger King’s business because Burger King threatened
Virginia, area as a good test market.
to withdraw Coca-Cola products from its restaurants. Burger King is Coke’s second largest
If the Richmond market did not show sales during the marketing test, Moore knew that fountain customer (McDonald’s is its largest). The settlement requires Coke to pay $10
Coke risked not only no more growth in fountain sales but also loss of Burger King’s confi- million to Burger King and up to $21.2 million to franchisees who will still have the right
dence and perhaps an open door for Pepsi to win Burger King over.
to determine whether they will continue to carry the Frozen Coke products.
Promotions and the marketing test in Richmond began in February 2000. Initial sales Coke continued with its litigation against Whitley, maintaining that he was “separated”
were not good. Burger King executives made what Coke employees called “excoriating” calls from the company because of a restructuring and that his “separation” had nothing to do
to Coke team members about the poor performance. Coke pulled out all the stops and hired with his raising the allegations. However, in October 2003, Coke settled the lawsuit for
mystery shoppers to make sure that Burger King employees were offering the Frozen Coke to $540,000; $100,000 in cash, $140,000 in benefits including health insurance, and $300,000
customers as had
in lawyer’s fees. Mr. Whitley said when the settlement was reached, “I have reflected on my
tional items to Burger King managers to encourage them to promote Coke sales. John Fisher, relationship with Coca-Cola, a company I still respect and love … the company has taken
the Coke executive who had just been given the Burger King account to manage, was getting Deval Patrick, then-executive vice president and Coke’s general counsel, also issued the
more nervous the closer Coke got to the end of the Richmond promotion time frame. following statement when the settlement was reached:
The Coke team told its own employees to buy more value meals at Burger King, the
Mr. Whitley was a diligent employee with a solid record. It is disappointing that he felt he needed to file a lawsuit
menu item that was being promoted with the Frozen Coke. Finally, Robert Bader, the Coke in order to be heard. We want everyone in this company to bring their issues to the attention of management
marketing manager who was in charge of the Richmond test, decided to hire a market- through appropriate channels. 131
ing consultant, Ronald Berryman, to get more purchases at Burger King. Mr. Berryman,
Mr. Fisher was promoted to a top marketing position in the fountain division at Coke
who had worked with Coke in the past, developed a plan that included working with the in 2003. However, In April 2003, Coke’s internal auditors raised questions with Mr. Fisher
Boys & Girls Clubs in the area. Using $9,000 wired to him by Mr. Bader from Mr. Bader’s about why he exchanged two Disney theme park tickets that had been purchased by the
personal Visa card, Berryman gave cash to directors of these clubs and developed a home- company for Notre Dame football tickets. Mr. Fisher resigned shortly after, but no one at
work reward program: if the kids came to the clubs and did their homework, they could go Coke has offered an explanation.
and buy a value meal at Burger King. The directors at the clubs assumed that the money for
Mr. Bader is still a marketing manager in the fountain division, but he does not work on
the value meals was a donation from either Burger King or Coke.
the Burger King account.
Tom Moore resigned following both the settlements. A spokesperson for Coca-Cola
The result of the Berryman plan was that the Richmond area Burger Kings had a 6% said, “As he reflected on the events, he felt that change was necessary to avoid distractions
increase in sales during the Frozen Coke promotion. Other Burger King stores had only 0% and move the business forward.” 132 Sales of Frozen Coke at Burger King have fallen to half
to 2% growth during the same period. As a result, Burger King agreed to invest $10 million of Coke’s original estimates. Burger King has proposed changing the name to Icee. 133 Coke
in an ad program to promote Frozen Coke. Burger King also invested $37 million in equip- did sign the Subway chain for its fountain beverages
, a contract that gave Coke the three
ment, training, and distribution in order to carry the Frozen Coke in its franchises, but largest fountain drink contracts in the country: McDonald’s, Burger King, and Subway. 134
sales did not follow the Richmond pattern. Estimates are that Burger King’s total invest- Pepsi had previously held the Subway contract.
ment in the Frozen Coke promotion was $65 million.
As a result of the Whitley lawsuit, the SEC and the FBI began investigating Coke. Coke
Matthew Whitley, who had been with Coke since 1992, was its finance director in cooperated fully with the government investigations. In 2005, those investigations were
2000. During some routine audit work at Coke, he ran across an expenses claim from marketing scenario or the response to Mr. Whitley’s report on the consultant’s conduct
closed, with no action taken against the company or any individuals with regard to the
Mr. Berryman in the amount of $4,432.01, a claim that was labeled as expenses for the in the Richmond test market. 135 Coke also settled the channel-stuffing charges in 2005.
“mystery shop.” Mr. Whitley questioned Mr. Bader about this amount and others, what Although channel-stuffing issues at Coke had emerged in the 1997–1999 time frame, reg-
the funds were for, who Mr. Berryman was, and what the “mystery shop” submission label ulatory interest was rekindled when the Burger King issue became public.136 As part of the
represented. Mr. Bader responded that the methods might be “unconventional” but they settlement, in which Coke neither admitted nor denied the allegations, Coke agreed to put
were “entrepreneurial” Mr. Fisher wrote in a memo in response:
compliance and internal control processes in place and work to ensure an ethical culture.
Coke was also able to settle private suits on the channel-stuffing issues. 137 Federal prosecu-
I would never have agreed to move forward if I believed I was being asked to commit an ethics code or legal trans-
gression…. We had to deseasonalize the data in order to have an accurate measure. These actions were wrong
tors investigated the Frozen Coke marketing tests for possible fraud. 138
and inconsistent with values of the Coca-Cola Co. Our relationships with Burger King and all our customers are of Discussion Questions
the utmost importance to us and should be firmly grounded in only the highest-integrity actions. 127
1. Why did the executives at Coke decide to go forward marketing test. What did the expert mean with this
Mr. Whitley recommended that Mr. Fisher be fired because of the excessive expense
with the marketing studies? What questions from the observation?
and his authorization for it. Coke did not fire Mr. Fisher, but Mr. Moore took away half
models you have studied could they have asked them- 4. List the total costs to Coke of the Richmond rigging.
selves in order to avoid the problems that resulted? Be sure to list any costs that you don’t have figures
of his bonus for the year, saying in his memo of explanation to Mr. Fisher, “These actions 2. Make a list of everyone who was affected by the deci- for but that Coke would have to pay. Do you think
exposed the Coca-Cola Co. to a risk of damage to its reputation as well as to the relationship
sion to fix the numbers in the Richmond test market. those costs are done and over?
3. Make a list of all of the consequences Coke expe-
with a major customer.”128
5. What lessons should companies learn from the
rienced as a result of the Richmond rigging. “The Whitley firing and lawsuit? What changes do you
initial decision was flawed, and the rest of the prob- think Coke has made in its culture to comply with
However, Coke did fire Mr. Whitley, who then filed suit for wrongful termination. Coke
lems resulted from that flawed decision,” was an the SEC settlement requirements? Are there some
first told Burger King of the issues the day before Mr. Whitley filed his suit. Mr. Whitley’s observation of an industry expert on the Richmond lessons and elements for a credo in the conduct of
lawyer had contacted Coke and offered to not file the suit if Coke would pay Mr. Whitley
$44.4 million within one week. Coke declined the offer and disclosed the Whitley and Fro-
zen Coke issues to Burger King. The Coca-Cola board hired the law firm of Gibson, Dunn
& Crutcher and auditors Deloitte & Touche to investigate Whitley’s claim.
Mr. Whitley then filed his suit. The Wall Street Journal uncovered the lawsuit in court
documents when a reporter was doing some routine checking on Coke and ran a story on
August 20, 2003, describing Mr. Whitley’s experience and suit.
The reports of the law and audit firms concluded that the employees had acted improp-
erly on the Richmond marketing test. Also, as a result, Coca-Cola issued an earnings
restatement of $9 million in its fountain sales.
Burger King’s CEO, Brad Blum, was informed of the report following the investigation
and calling the actions of the Coke employees “unacceptable and he issued the following
individuals in this case?
As early as 2005 (2007 was the year Mr. Stumpf became CEO), an employee had notified
HR about what she was witnessing: “employees opening sham accounts, forging customer
signatures, and sending out unsolicited credit cards??142 In 2007 Mr. Stumpf received two
similar letters from employees. In 2010, the chairman of the Wells board received such a
letter. Mr. Stumpf had the sales quality manual updated to remind employees to get the
customer’s signature before opening an account. One of the employees who wrote to cor-
porate was fired, but her supervisors remain with Wells. Congressional hearings and whis-
tleblower lawsuits document these percolating events.
If an employee demonstrates either the chutzpah or courage to write to corporate,
the trenches need some attention. One-on-one conversations with employees by culture
experts from outside the company provide the clearest picture of what employees are doing
and witnessing. Culture surveys, employee satisfaction surveys, and ethics surveys will not
tell executives what is going on in the trenches. As long as there are demographics in the
questions, fear keeps employees quiet. Even without the demographics, employees fear
detection. In some cases, supervisors about their responses warn them because the super-
visors are measured by the survey results.
Letters from employees could be complaints from a crank, or they could be evidence of
culture issues. Assume the latter. My eldest son was one of the Wells letter writers. He had
a part-time job at a Wells branch during his senior year in college. When he began work,
he was quite proud of his hourly wage as well as the potential for the quarterly bonuses
based on new accounts and services. In the early days of his employment, he often reported
on how many new accounts and services he had set up and how his check for the quarter
would be fabulous.
However, a few months into his job he stopped by to talk with me about his work. His
branch was located in a retirement area, and not a wealthy retirement area. He said that the
customers were coming back in, concerned about charges and extra services they did not
need. Some even closed their accounts. My son said, “I am the one who did this to them.”
Case 8.18
Wells Fargo and Selling Accounts, or Making
Them Up?139
Lou Gerstner, former CEO of IBM and RJR Nabisco, wrote a Wall Street Journal op-ed
piece on then-Wells Fargo CEO John Stumpf’s comment that the bank’s employees did not
do what Wells’ culture required, “Put the customer first.”140 For not honoring that culture,
5,300 Wells employees were terminated. These incorrigibles were meeting their quarterly
growth goals by setting up accounts for themselves, sending customers credit cards that
they did not request, and having friends and family members open accounts that would
be closed quickly once the quarter ended. Mr. Gerstner wrote that the CEO allowed the
culture to “eat” the bank’s reputation. Indeed, that was the result, but the recently departed
Mr. Stumpf appears to be saying that the employees ate the culture he had worked so care-
fully to establish. Just like when the dog ate our homework. Back in our homework days,
we found a convenient “scape dog.” However, the problem was always our inaction, not the
dog’s action.
As the sheer scope of the Wells activity unfolded, Mr. Stumpf seemed as stunned as the
Volkswagen CEO (the first of two CEOs in VW’s rough past year) when the falsified emis-
sions scam emerged. Martin Winterkorn declared that the actions did not represent VW’s
culture. GM CEO Mary Barra quickly proclaimed, when the GM engine switch issue (that
of a near billion-dollar fine) emerged, that such behavior was, likewise, not GM’s culture.
If we could talk with all of them one-on-one, they probably would ask, trying to deter-
mine how they could have been so wrong about their real cultures, “What more could
I have done?” There is a tragic look of helplessness that befalls leaders of organizations
that make international headlines for pervasive organizational ethical and legal downfalls.
There is little consolation that comes to mind during the apparent helplessness of these
crises. However, for other CEOs who have thus far stayed out of the headlines, there are
important lessons and simple fixes.
1. Acknowledgement: If It Happens at Your Company, It Is Your Culture
To CEOs everywhere: if it happens at your company, it is your culture. Indeed, this latest
foray into the depths of culture denial is a tough sell. If we believe the denial, what we had
were 5,300 wild and corrupt incorrigibles working at Wells Fargo. If there were, then HR
has some serious screening issues to address. Perhaps before the terminations of a substan-
tial portion of its workforce, Wells should have answered this question, “Why did so many
employees believe that what they were doing was acceptable behavior here?” Indeed, given
the professed commitment to customer service, why such betrayals of customer trust?
2. Be Careful What You Incentivize: You Will Get There, but It Might Not Be Real
In a one-day period during the time that Wells struggled, there were some additional tell-
ing pieces about this culture “stuff.” One Wall Street Journal article bemoaned the SEC’s
record of amassing a great number of small cases even as it missed the big frauds. 141 The
SEC has gone after tricksters such as City of Devils Lakes, N.D. after having missed the
Madoff and Stanford frauds. The agency has incentivized a fast and furious approach: Get
as much as you can from as many as you can as quickly as you can. Oh, agency employees
responded, but are perhaps shying away from the cases that require time, patience, pains-
taking work, and experience in breaking down the clever covers that elude those in North
Dakota but are the stuff of multinational and webbed frauds.
In the same section was an article about Steven A. Cohen promising even bigger
bonuses to his top traders, as long as they beat the market performance with their funds.
The payout for beating the market will take bonuses from 20% to 25%. Mr. Cohen once
owned SAC Capital, a firm that he closed to go private after having paid in $1.8 billion in
fines because so many of his traders were charged with insider trading. Mr. Cohen escaped
criminal charges because there was no proof that he ever knew about his employees’ activ-
ities. Of course, he did not know. Nor did Mr. Stumpf know directly about the phony
account creation practices of 5,300 employees. Nor did Mary Barra know that engineers
were burying the serious problems with the engine switch. And Mary Jo White is proud of
the work of the SEC because she does not know what the agency’s investigators and lawyers
are missing. Except for Ms. Barra, the CEOs here have all paid the price for what happened
at their organizations.
Realign incentives from numbers to behaviors. If management theory is correct, the
behaviors should generate numbers. Rolling averages on performance numbers are a
pressure-relief valve for employees. Learn to measure not just by numbers but how those
numbers are being attained. There are rumblings in the HR field as companies work to
find ways of measurement that do not undermine the culture messages. It does not matter
what you say about your culture if your incentives countermand the language. Employees
respond to what causes pain, and missing bonuses and lower performance evaluations are
both painful.
3. Those Trenches: What Is Really Going On
No matter how many times you recite, chant, or plaster your break room walls with post-
ers of “Put the customer first” you do not create a culture. Cultures do not live by words
alone. In the case of Wells, other things the bank, leaders, and managers were doing
made the customer-first mantra a trite slogan to be ignored because of devotion to bonus
programs, performance evaluations based on new account metrics, and promotions for
numbers achieved. Employees saw the writing, not the posters, on the wall. They knew
who moved up and who did not. They witnessed those quarterly bonus checks and per-
haps witnessed the treatment of those who questioned the wisdom of not putting the
customer first.
We talked about how he should discuss his concerns with his supervisor. Understanding
how anyone in banking could believe that what was going on would bring continuing
growth to the bank was a tall order. When my son talked with his supervisor, he was told
that he would be measured by the accounts he landed and the services he added to exist-
ing customer accounts. If he expected to get ahead, he needed to accept these measures of
success. His supervisor also told my son that if he did not meet his goals that he would be
assigned to the drive-thru all the time. No one wants to set up accounts via the drive-thru,
so my son saw the writing on the wall. We talked again, and my son, in a proud parenting
moment, decided to resign. He resigned with notice and gave a letter to his supervisor
explaining why he was quitting. The supervisor laughed and crumpled the letter.
When the news of Wells Fargo broke, I texted my son. He responded, “I already posted
it on Facebook, along with the letter I had kept on my computer. I feel so vindicated” My
son has been out of college for four years. His experience was an attempt to offer leaders
front-line insights into their culture. He had also sent his resignation/explanation letter to
corporate headquarters. He never heard from anyone.
News from the trenches does not come in marching-band format, “Your culture is a
problem!!!” There is a slow drumbeat, and without attention, the marching band goes to
the headlines.
4. Mind Your Mantras
Ironically, cultures are often undermined by the mantras or words CEO use. Washing-
ton Mutual’s mantra was “Get to yes!” Employees were writing mortgages that smelled of
fraud, lacked proof of income, and had appraisals that covered different properties. Who
writes such mortgages? Employees who experienced that omnipresent and oft repeated
mantra and were evaluated and rewarded by the number of times they got to yes. Going
back to our school days, we understood the principles of mantras. When we were trained
on taking true/false tests, we were told that when the statement has “always” or “never” in
it, to go with false because exceptions do exist. So, when a company has absolutes for man-
tras, “100% results, 100% of the time,” or “On time, every time,” why is anyone surprised
when the results are fake or the pizza delivery person is driving recklessly? Employees meet
incentivized mantras in clever ways. But clever sometimes hurts customers, thereby defeat-
ing the very purpose of the business. The employees don’t eat the culture—the culture eats
them when leaders do not understand that there are influences beyond the mantras. The
mantra is not the culture, the resulting behavior is, no matter how good the intentions.
Discussion Questions
1. Discuss whether my son did all that he could in his 3. What should companies do to encourage employ-
ees to express concerns about sales tactics?
2. Many employees who raised concerns were termi-
nated or otherwise retaliated against. If you were in
their position, what would you have done?
Case 7.23
Ann Hopkins and Price Waterhouse
Ann Hopkins was a senior manager in the Management Advisory Services division of the
more appealing lady partner candidate.”104 In order for Hopkins to improve her chances
Price Waterhouse Office of Government Services (OGS) in Washington, DC. After earning for partnership, Thomas Beyer, a partner who supervised Hopkins at OGS, suggested that
undergraduate and graduate degrees in mathematics, she taught mathematics at her alma she “walk more femininely, talk more femininely
, dress more femininely, wear make-up,
mater, Hollins College, and worked for IBM, NASA, Touche Ross, and American Manage-
have her hair styled, and wear jewelry.”105 Ms. Hopkins said she could not apply makeup
ment Systems before beginning her career with Price Waterhouse in 1977.91 She became because that would require removing her trifocals and she would not be able to see. Also,
the firm’s specialist in large-scale computer system design and operations for the federal her allergy to cosmetics made it difficult for her to find appropriate makeup. Mr. Beyer
government. Although salaries in the accounting profession are not published, estimates also suggested that she should not carry a briefcase, should stop smoking, and should not
put her salary as a senior manager at about $65,000.
drink beer at luncheon meetings. Dr. Susan Fiske, a social psychologist and associate pro-
At that time, Price Waterhouse was known as one of the “Big 8” or one of the top public fessor of psychology at Carnegie-Mellon University who would testify for Hopkins in her
accounting firms in the United States. 92 A senior manager became a candidate for partner-
suit against Price Waterhouse, reviewed the Price Waterhouse selection process and con-
ship when the partners in her office submitted her name for partnership status. In August cluded that it was likely influenced by sex stereotyping. Dr. Fiske indicated that some of
1982, at the end of a nomination process that began in June, the partners in Hopkins’s the partners’ comments were gender biased, and even those comments that were gender
office proposed her as a candidate for partner for the 1983 class of partners. Of the 88 can-
neutral were intensely critical and made by partners who barely knew Hopkins. Dr. Fiske
didates who were submitted for consideration, Hopkins was the only woman. At that time,
concluded that the subjectivity of the evaluations and their sharply critical nature were
Price Waterhouse had 662 partners, 7 of whom were women.” Hopkins was, however, a
probably the result of sex stereotyping.’
stellar performer and was often called a “rainmaker.” She was responsible for bringing to
However, there were numerous comments such as the following that voiced concerns
Price Waterhouse a two-year, $25 million contract with the U.S. Department of State, the
about nongender issues:
largest contract ever obtained by the firm. 94 Being a partner would not only bring Hopkins In July/Aug 82 Ann assisted the St. Louis MAS practice in preparing an extensive proposal to the Farmers Home
status, but her earnings would increase substantially. Estimates of the increase in salary
Admin (the proposal inc 2800 pgs for $3.1 mil in fees/expenses & 65,000 hrs of work). The proposal was com-
were that she would earn almost double, or $125,000 annually, on average (1980 figures).
pleted over a 4 wk period with approx 2000 plus staff/ptr hrs required based on my participation in the proposal
effort & sub discussions with St. L MAS staff involved. Ann’s mgmt style of using “trial & error techniques” (ie,
The partner process was a collaborative one. All of the firm’s partners were invited to sending staff assigned off to prepare portions of the proposal with little or no guidance from her & then her
submit written comments regarding each candidate, on either “long” or “short” evaluation
subsequent rejection of the products developed) caused a complete alienation of the staff towards Ann & a fear
forms. Partners chose a form according to their exposure to the candidate. All partners
that they would have to work with Ann if we won the project. In addition, Ann’s manner of dealing with our staff
& with the Houston sr consultant on the BIA project, raises questions in my mind about her ability to develop &
were invited to submit comments, but not every partner did so. Of the 32 partners who motivate our staff as a ptr. (No) [indicates partner’s vote]107
submitted comments on Hopkins, one stated that “none of the other partnership candi-
I worked with Ann in the early stages of the 1st State Whelan Dept proposal. I found her to be a) singularly dedi-
dates at Price Waterhouse that year [has) a comparable record in terms of successfully cated, b) rather unpleasant. I wonder whether her 4 yrs with us have really demonstrated ptr qualities or whether
procuring major contracts for the partnership.”95 In addition, Hopkins’ billable hours were we have simply taken advantage of “workaholic” tendencies. Note that she has held 6 jobs in the last 15 yrs, all
impressive, with 2,442 in 1982 and 2,507 in 1981, amounts that none of the other partner-
with outstanding companies. I’m also troubled about her being (having been) married to a ptr of a serious compet-
ship candidates’ billable hours even approached.
itor.108 (Insuff—but favor hold, at a minimum)
After reviewing the comments, the firm’s Admissions Committee made recommenda- Ann’s exposure to me was on the Farmers Home Admin Blythe proposal. Despite many negative comments from
tions about the partnership candidates to the Price Waterhouse Policy Board. The recom-
other people involved I think she did a great job and turned out a first class proposal. Great intellectual capacity
mendations consisted of accepting the candidate, denying the promotion, or putting the
but very abrasive in her dealings with staff. I suggest we hold, counsel her and if she makes progress with her
interpersonal skills, then admit next year. (Hold)109
application on hold. The Policy Board then decided whether to submit the candidate to a
vote, reject the candidate, or hold the candidacy. There were no limits on the number of Although Hopkins and 19 others were put on hold for the following year, her future
persons to whom partnership could be awarded and no guidelines for evaluating positive looked dim. Later, two partners withdrew their support for Hopkins, and she was informed
and negative comments about candidates. Price Waterhouse offered 47 partnerships to the that she would not be reconsidered the following year. Hopkins, who maintains that she
88 candidates in the 1983 round; another 27 were denied partnerships; and 20, including was told after the second nomination cycle that she would never be a partner, then resigned
Ms. Hopkins, were put on hold. Ms. Hopkins had received more “no” votes than any other and filed a discrimination complaint with the Equal Employment Opportunity Commis-
candidate for partnership, with most of those votes coming from members of the partner- sion (EEOC). 110
ship committee outside the firm’s government services unit.
The EEOC did not find a violation of Title VII of the Civil Rights Act of 1964 (which
The comments on Hopkins were extensive and telling. Thirteen of the thirty-two part- prohibits discrimination in employment practices) because of the following: (1) Hopkins
ners who submitted comments on Hopkins supported her, three recommended putting had resigned and not been terminated; and (2) at that time, the law was not clear, and the
her on hold, eight said they did not have enough information, and eight recommended assumption was that Title VII did not apply to partnership decisions in companies. With
denial. The partners in Hopkins’s office praised her character as well as her accomplish- the EEOC refusing to take action, Hopkins filed suit against Price Waterhouse. She has
ments, describing her in their joint statement as “an outstanding professional who had stated she filed the suit to find out why Price Waterhouse made “such a bad business deci-
a “deft touch” a “strong character, independence, and integrity. Clients appear to have sion.”Ill After a lengthy trial and numerous complex appeals through the federal system,
agreed with these assessments. One official from the State Department described her as the Supreme Court found that Ms. Hopkins did indeed have a cause of action for discrimi-
“extremely competent, intelligent” “strong and forthright, very productive, energetic, and nation in the partnership decision.
creative.” Another high-ranking official praised Hopkins’s decisiveness, broad-mindedness, Hopkins was an important employment discrimination case because the Supreme Court
and “intellectual clarity”; she was, in his words, “a stimulating conversationalist?96 Hopkins recognized stereotyping as a way of establishing discrimination. However, the case is also
“had no difficulty dealing with clients and her clients appear to have been very pleased known for its clarification of the law in situations in which employers take action against
with her work.”97 She “was generally viewed as a highly competent project leader who employees for both lawful and unlawful reasons. Known as mixed-motive cases, these cases
worked long hours, pushed vigorously to meet deadlines, and demanded much from the involved forms of discrimination that shift the burden of proof to the employer to establish
multidisciplinary staffs with which she worked.98
that it would have made the same decision if using only the lawful considerations and in
On too many occasions, however, Hopkins’s aggressiveness apparently spilled over into spite of unlawful considerations that entered into the process. The “same-decision” defense
abrasiveness. Staff members seem to have borne the brunt of Hopkins’s brusqueness. Long requires employers to establish sufficient grounds for termination or other actions taken
before her bid for partnership, partners evaluating her work had counseled her to improve against employees that are independent of the unlawful considerations.
her relations with staff members. Although later evaluations indicate an improvement, In 1990, on remand, Ms. Hopkins was awarded her partnership112 and damages. She
Hopkins’s perceived shortcomings in this important area eventually doomed her bid for was awarded back pay plus interest, and although the exact amount of the award is unclear,
partnership. Virtually all of the partners’ negative remarks about Hopkins—even those of Hopkins later verified that she paid $300,000 in taxes on her award that year and also paid
partners who supported her—concerned her “interpersonal skills” Both “[s]upporters and her attorneys the $500,000 due to them. Ms. Hopkins was also awarded her partnership
opponents of her candidacy indicated that she was sometimes overly aggressive, unduly and rejoined Price Waterhouse as a partner in 1991.
harsh, difficult to work with, and impatient with staff?99
In accounting firms generally, the number of female principals has grown from 1% in
Another partner testified at trial that he had questioned her billing records and was left
1983 to 18% today. Ms. Hopkins retired from PricewaterhouseCoopers in 2002, and she
with concern because he found her answers unsatisfying:
has written a book about her experience as a litigant.
I was informed by Ann that the project had been completed on sked within budget. My subsequent review indi- Discussion Questions
cated a significant discrepancy of approximately $35,000 between the proposed fees, billed fees [and] actuals
in the WIPS. I discussed this matter with Ann who attempted to try and explain away or play down the discrep-
1. What ethical problems do you see with the Price 4. To what extent did the partners’ comments reflect
ancy. She insisted there had not been a discrepancy in the amount of the underrealization. Unsatisfied with her
Waterhouse partnership evaluation system?
mixed motives (i.e., to what extent did their points
responses, I continued to question the matter until she admitted there was a problem but I should discuss it with
2. Suppose that you were a partner and a member express legal factors while at the same time
Krulwich (a partner at OGS). My subsequent discussion with Lew indicated that the discrepancy was a result of
of either the admissions committee or the policy expressing illegal ones)?
500 additional hours being charged to the job (at the request of Bill Devaney … agreed to by Krulwich) after it
board. What objections, if any, would you have 5. Ms. Hopkins listed three factors to help companies
was determined that Linda Pegues, a senior consultant from the Houston office working on the project had been
made to any of the comments by the partners? avoid what happened to her: (1) clear direction from
instructed by Ann to work 12–14 hrs per day during the project but only to charge 8 hours per day. The entire inci-
What would have made it difficult for you to object? the top of the enterprise, (2) diversity in manage-
dent left me questioning Ann’s staff management methods and the honesty of her responses to my questions. 10
How might your being a female partner in that posi- ment, and (3) specificity in evaluation criteria. Give
tion have made objection more difficult?
examples of how a company could implement these
Clear signs indicated, though, that some of the partners reacted negatively to Hopkins’s 3. In what ways, if any, do you find the subjectivity of factors.
personality because she was a woman. One partner described her as “macho,” whereas
the evaluation troublesome? What aspects of the
evaluation would you change?
another suggested that she “overcompensated for being a woman,” and a third advised
her to take “a course at charm school.”101 One partner wrote that Hopkins was “univer-
sally disliked.”102 Several partners criticized her use of profanity. In response, one partner
suggested that those partners objected to her swearing only “because it[*]s a lady using
foul language ??103 Another supporter explained that Hopkins “ha[d] matured from a tough-
talking somewhat masculine hardnosed manager to an authoritative, formidable, but much

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