"Family First" downfall of Adelphia Communications Corporation

The Adelphia Communications scandal is considered one of the highest-profile white-collar fraud cases in the post-Enron era. Adelphia Communications was a cable company founded by John Rigas in 1952. What could have been a great example of the American Dream ended up as a great unethical scandal and 15-20 years in prison for CEO John Rigas and his sons. Rigas came form a family of Greek Immigrants and founded Adelphia with a mere $300 and turned it into a multi-million dollar company. In March of 2002, the world discovered that the Rigas family borrowed $3.1 billion from Adelphia to buy Adelphia shares without disclosing the loan and many other family secrets became exposed. Investors had not been getting a clear picture of Adelphia's business since 1999, Adelphia misrepresented earnings by $160 million in 2000 and $210 million in 2001. Adelphia never managed to successfully transition from a family-owned operation to a public company with shareholders.

 John Rigas was not ethical because he did not seem to have concern with the values or morals that society found appropriate. He did not seem to represent what it means to be a morally decent being by misrepresenting earnings to his shareholders. He definitely is representing Ethical Egoism, which states that a person should act so as to create the greatest good for herself or himself. Adelphia prosecutors accuse Rigas of using complicated cash-management systems to spread money around to various family-owned entities and as a cover for stealing about $100 million for themselves. In this case John Rigas was looking out for the good of his family and did not stop at anything to provide them a wealthy life even at the cost of the companies shareholders. All of his family received special treatment,John Rigas gave his wife Doris, a $371,000 contract to decorate Adelphia buildings with $12.4 million in furniture from a Rigas family business. The Rigas family used the corporate jets for personal trips including a trip to African Safari. They also invested $130 million in the Buffalo Sabres hockey team and built a golf course on property owned by Adelphia. With Adelphia's money, the Rigas family secured two New York City apartments reserved for John Rigas' daughter and her husband, Peter Venetis.

Due to his passion for his company, close family relationships, compassion for the his employees and people in the community in which Adelphia was located I would have believed Rigas was an authentic leader. Which is interesting because his actions prove he wasn't and that brings up the question of what really is an authentic leader? Our book makes a great point on a criticism of authentic leadership where it asks the question of how moral values affect the components of authentic leadership. He might have been an authentic leader in the beginning of his career but his values might have changed placing his family and life style first and therefore affecting his authentic leadership.

Rigas claimed “In my heart and in my conscience, I’ll go to my grave really and truly believing that I did nothing but try to improve the conditions of my employees,” he said. I believe with this statement he used the third theleological approach of altruism that states actions are moral if their primary purpose is to promote the best interest of others. “Our intentions were good. The results were not,” says Rigas. He believes that he was helping out his employees out and that allowed him to act this way.


Liz Ramirez

Link:

http://www.msnbc.msn.com/id/8291040/ns/business-corporate_scandals/

Tony Hayward

I know we used Tony Hayward in our group presentation but I would like to bring him into our discussion on ethics. I think that Tony Hayward is a great example of "were his decisions ethical or not." recently I watched a show on trueTV that kind of exposed a little bit more about the BP oil spill than we had discovered in our team presentation. One of the main aspects that I found interesting was BP's ignorance in their methods of clean up as well as their ties to the corporations doing the clean up. This raises some ethical questions in Tony Hayward's leadership. We all saw that Tony Hayward had a very lazie-fair attitude toward leadership and I feel taht this raises some ethical questions as to why Tony Hayward sold so much of his stock right before this accident and why BP acquired subsidiaries involved in this clean up before it happened. The ethical questions here are riased because there is a possibility that BP and its subsidiaries made more money cleaning up the gulf oil spill than they would have made from selling the oil.

Poor Judgement

http://blogs.wsj.com/dailyfix/2011/03/09/two-games-too-few-for-tressel/?KEYWORDS=unethical

I thought this article was relevant to our blog because even though it was not an unethical behavior from a CEO, it was still a behavior of a leader.  In this case, the team is the organization that Jim Tressel is in charge of and the teammates would resemble employees.  There are many cases of unethical behaviors in sports and they often times get blown over.  In this case the coach, Jim Tressel, found out that some of his players were selling off some of their school memorabilia, which is strictly prohibited in the NCAA and did nothing to address the issue or confront it.

According to ethical egotism from Northouse, “a person should act so as to create the greatest good for herself or himself”.  In this case of Jim Tressel, he should have protected himself and brought the players misconduct to the attention of the NCAA.  This would have made him still look like a powerful leader and also would have shown that he does not tolerate any misconduct or unethical behavior.  After being a successful coach for over twenty five years, it was a poor choice to choose to protect his teammates who should not have been selling memorabilia.  By trying to hide what the players were doing, not only did he put himself at risk but he also tarnished the Ohio State name.  Since he tried to cover up the issue, he also portrays that he will put himself at risk to cover up the team member’s mistakes instead of dealing with them in the proper fashion. 

Jim Tressel should use Heifetz’s perspective on leadership.   This perspective states that, “leaders must use authority to mobilize people to face touch issues” and goes on to say “the leader provides a “holding environment” in which there is trust, nurturance and empathy.”  I feel that his is the best approach for a coach to have because this perspective takes into account the close relationship that he has with the players.  It also suggests that he should have confronted the issue and dealt with it in the proper method.  As a leader of such a successful organization, he should have a trustful, nurturing and empathetic relationship but also maintain his high level of authority.  This unethical conduct was a severe lack of judgment on his part and will always be in the shadows of all of his past and future successes.   

Thanks for looking,

Dan Condon

Ethical Leadership at Walmart: What's all the controversy about?

I posted this article to evaluate the recent ethics controversy going on at Walmart involving a new employee in Walmart's communications department and her decision to report a possible ethics violation within the department.  As with many of the ethics violations we have seen in corporate America, the employee (Chalace Lowry) was concerned about possible insider trading that may have gone on with the vice president of corporate communications (Mona Williams). She developed her concern because she heard of a $15 million dollar buy back option that Walmart was going to exercise just a few days after she had copied some papers for Williams which appeared to be about stock.  Lowry was mistaken in her assumption, but is upset of how the whistleblowing situation was handled by Walmart's Ethics Office. Lowry stated that her supervisor "made it seem like it was required (telling Mona). It was phrased to me like it was part of the complaint process to tell Mona that I had filed a complaint, I didn't know I had a choice." To read more about the topic, I have provided the link below:

http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070612_548611_page_2.htm

It bothers me that Walmart, a leader in it's perspective industry, would handle the situation in such a poor manner. I especially feel this way because Lowry states that she was told in her orientation to report anything that even has the appearance of being unethical.

Now, Lowry is looking for another job within Walmart because she feels like she can no longer be comfortable working an environment with Mona. Further, she may be fearful of her other coworkers thoughts about the entire situation. Northouse states that "ethical theories can be thought of as falling within two broad domains: theories about leaders' conduct and theories about leaders' character." Within this controversy, the theories about leader's conduct can apply to how Walmart and their leaders should handle the situation further. After all, it should be Walmart's first responsibility to ensure a whistleblower's privacy. However, since they have already given this up to Ms. Williams, they must now ensure that their whistleblower is in an environment which respects the fact that she was acting in the organizations interests in filing her complaint.

Northouse further breaks down ethical theories about conduct into teleological theories and deontological theories. Teleological theories deal with the consequences of actions.  From this perspective, Walmart and their leaders could demonstrate to the other employees both within the communications department and throughout Walmart that such whistleblowing behavior has produced positive results, is supported within the company, and will be rewarded. Northouse would contend that Lowry teleological approach to ethics considered the best interests of the greatest number of people (the utilitarian approach). He would also argue that she was acting from an altruistic perspective, attempting to promote the best interests others, and specifically the stakeholders of Walmart's company. Such sound ethical leadership exhibited by Lowry should be not only emphasized as a company standard, but celebrated by the leaders of the company who have position power. Northouse would strongly support Mona William's public confirmation of the positive results that the controversy has had within the company, reemphasizing the importance of ethic.

Additionally, Northouse's emphasis on ethical leadership uses Schumann's ideas about the deontological approach for handling leaders' conduct. Schumann contends that the actions of a deontological leader demonstrate his or her moral obligation and responsibilities to do the right thing. When Walmart is handling the controversy from this point forward, they could have their leaders, including Mona Williams, express thoughts to employees about how Lowry handled the situation in the right way. They could also express further support for Lowry's whistleblowing actions by continuing to emphasize to employees that any behavior that has the appearance of being unethical still needs to be reported, because that is the moral and right thing to do. Walmart should also provide the fact to employees that not all behavior that appears to be unethical actually is. To provide continuous ethics training and ethical leadership, that helps build trust among the members of all departments within Walmart, is also an essential result of this controversy.

Northouse provides Ronald Heifetz thoughts on ethical leadership stating, "the leader provides a 'holding environment' in which there is trust, nurturance, and empathy. In a supportive context, followers can feel safe to confront hard problems." The after effects of a confused whistleblowing development definitely could use the trust, nurturance, and empathy of such a "holding environment" described.

Thanks for reading,
Justin Fisher

A Current Event

This article is about a more recent ethical dilemma that has come to light. On Jan. 21st the SEC three New York investment firms for false representation. The CFO and a few other members of top management were moving money around within the company to create an account with $8.5 million in it that was not used for approved purpose by the firm, they also attracted investors with false positive returns and hiding fraudulent loans. My question that I have from this article is that unethical behavior has been a hot topic in the news since Enron and more and more people have been caught and prosecuted for unethical behavior so why are these executives still engaging in this behavior?

Scott

http://www.businessinsider.com/ny-investment-firms-slammed-for-false-representation-2011-1

Robert Moffat: IBM Insider Trading

Robert Moffat was IBM's senior vice president for technology who recently pleaded guilty and was sentenced to six months in jail for insider trading. This article covers various aspects of his life, how he became involved with Danielle Chiesi, a consultant at New Castle Funds and how that ultimately led to his downfall. According to the article Moffat would be the last person anyone expected to be caught up in a scandal, let alone a crime. He had a lot of money, a great family and was considered to be a candidate to succeed Samuel Palmisano, IBM's CEO. His main attributes were loyalty, inhuman work habits, and the mental bandwidth of an orchestra conductor. It is ironic that everyone describes Moffat as a very loyal and trusted individual when in reality he did just the opposite to both IBM ( he had worked at IBM for over 30 years) and his family. He was also always considered very intelligent, Moffat was able to develop many ingenious systems for IBM's operations. The first question that comes to mind is how does such a loyal and intelligent man get involved in this? Although he presented many leadership qualities, what leadership qualities is he lacking? Please share your comments on this case.

Thank you,

Liz Ramirez


http://money.cnn.com/2010/07/06/news/companies/ibm_insider_trading.fortune/





 

What Happened to Lou Pai?

I know a lot of us have had to watch the film "Enron, The Smartest Guys in the Room" throughout our college careers at Illinois State University. Every time I watch this film, either in class or in my spare time, I am always wondering the same thing at the end.  I wonder what ever happened to Lou Pai? I plan to research this further, but at the moment I would like to turn all followers of this blog's attention to an article written by Madeleine Brand titled, "Lou Pai, Enron's Elusive Mystery Man." In the article, Madeleine discusses some of the things that drove Lou Pai to his leadership position.  The main argument for his rise was his intelligence.  Ultimately, the article states that he built Enron with his market model for the deregulation of gas.

However, some of his personality traits and the things he did were not consistent with the qualities and expectations of a leader.  The article states that he was very quiet, failing to even make eye contact or speak to others in the elevators. How might he have become a leader at Enron when extraversion is seen as the most prevalent personality trait in leaders?   He also consistently went to strip clubs, which could deteriorate the image of the company. Were the multiple stakeholder groups of the company aware of his personal leisure activities?

I will continue to explore the whereabouts of Lou Pai in this blog. I am very interested to see if his "leadership" traits have been applied to his current lifestyle practices.

Below I have posted a link to the article in question.

http://www.npr.org/templates/story/story.php?storyId=5411422

Thanks,
Justin Fisher

J.P. Morgan Reputation

http://online.wsj.com/article/SB10001424052748703652104576122300990479090.html?mod=WSJ_business_whatsNews

My blog post relates to this article titled "Trustee: J.P. Morgan Abetted Madoff" by Michael Rothfeld.  My question is what would drive leaders and management teams at one of the most successful corporations in the financial services to involve themselves with a scandal like this?  This is a company that one would go to for investing and personal banking, but this is a serious blow to the companies judgement as well as reputation.  Please share you opinions.
Thanks,
Dan Condon

Dark Side of the Force

In this blog we would like to discuss the ethics of businesses in specific we want to discuss what has happened to those people who have behaved unethically. One company that we would like to focus on to begin this blog is Enron and what happened to its executives. Throughout this semester Scott Ferrebee, Dan Condon, Elizabeth Ramirez, and Justin Fisher will be discussing what has happened to unethical executives in many corporations and where they are now.