FCPA: Only as Good as a Company’s Internal Controls

Many of us now have to take annual FCPA (Foreign Corrupt Practices Act) training to validate/confirm that we are in compliance with the requirements of the act. Essentially, the FCPA prohibits bribes (which may be acceptable in other cultures) from being paid by US-based companies while conducting business outside of the US. Companies that are well-prepared for this have policies and processes in-place to ensure that not only bribes are not paid, but also that the appearance of a bribe is not paid.

Walmart is not one of those companies.

For months, rumors have been in and out of the news regarding the bribes paid by their Mexican subsidiary in the course of conducting business; primarily around obtaining permits and zoning for new stores. Their shares are down further after NYT published their investigation into the issue. The worst part: it appears as though Walmart shut down the internal investigation as soon as it started to “look bad” so that they would not be obligated to report any wrong-doing.

Was the price worth it?

Sadly, for Walmart: maybe. They have become one of the largest corporations in the world based on volume and cost, often at the expense of the communities around them, their employees, and now, apparently, ethical business practices. The general motto seems to be to move forward with “the plan” (employee benefits, cost of goods, location of stores, etc.) regardless of the cost.

In the short term, this seems to be working. Walmart also has a favorable economy for their business model as low-cost and convenient are two of the most important things to many of today’s consumers. Many households are on such tight budgets that they cannot “make a statement” with their purchases (or lack of purchases): they need to buy their groceries and other goods at the lowest cost possible. So they continue to shop at Walmart despite the less than stellar business practices.

So, the $1MM question: will it continue to work for Walmart?

Maybe, maybe not. I would like to believe not as the price the communities and individuals are paying to the benefit of Walmart cannot be worth it in the long-run. But, commercialism is powerful. If enough people either: (1) read the news and do not care or (2) do not read the news, then Walmart will continue to have customers and sales despite the business practices.

The other unknown is whether Walmart will face fines and/or it’s employees will face jail time. If this happens, then the equation likely changes for Walmart and the need for internal controls and policies will be greater. (Which is the entire point of the legislation: to make it more painful to not comply than to comply.)






Are Smartphones Too Smart For Our Own Good?

Although the term is commonly know, identity theft is when someone pretends to be someone else by assuming that person’s identity.  This is usually to obtain some sort of financial information or some other benefit.

In years past, it was common for someone to have their wallet stolen and their accounts drained.  However, today there is a spike in a new form of identity theft.  Certain banking branches are releasing applications that allow users to access their financial information via their smartphone.  For example, Chase’s smartphone application allows for the user to check their financial balance, transfer funds, and even deposit checks.   This initially seems to be very convenient for smartphone users.  However, this has become a very serious issue today.

Recently there has been a number of seminars taking place.  These seminars began in 2008 courtesy of the National Foundation for Credit Counseling.  The seminars have shifted gears.  They are now strongly urging the protection of financial information as it is used through smartphones.  “Although smartphones brought great convenience into people’s lives, they also brought with them another opportunity for thieves to access personal data and use it to their advantage,” foundation Vice President Gail Cunnigham said.

After this statement, the article explains that this form of identity theft is taking place due to weak security by the smartphones.  “A study by Javelin Strategy & Research found that smartphone users are 33 percent more likely than non-users to become victims of ID theft.”  I don’t know about you, but I don’t want to fall into that 33 percent.

The article expresses a number of ways to help protect yourself from this form of identity theft; one example, “protect your smartphone with strong passwords.”  This seems to be somewhat of a give-in; however, what part do the smartphone manufacturers, designers, and producers play in all of this?

Do you think it would be an ethical undertaking for companies such as Apple to make it a requirement that you use a password?  Would it look good on Apple’s behalf if you had to set up a password when you turn your new iPhone on the for the first time?  I know that certain varieties of Motorola phones have a fingerprint option for a lock.  Do you think this type of need or feature only appeals to people who might have “more to lose,” or would it appeal to the average college student as well?

If these companies were to implement a new security strategy, do you think it would be beneficial for them to zero in on, or forecast based on specific demographics who would see more value in the added security measures?

Here is an interesting video about this topic:  http://www.youtube.com/watch?v=g5_H9dxUO_g

Link:  http://bit.ly/RnqhFc

GNC and Vitamin Shoppe: Controversy of Bodybuilding drugs


As we all know, GNC (General Nutrition Center) and Vitamin Shoppe are two of the largest over the counter supplemental manufacturers and carriers; but some of us may not know that they are being targeted by the FDA (Food and Drug Administration) since they began carrying something called DMAA (DMAA is found in Geranium oil, which is found in flowers). (Lahart) The bodybuilding world is always looking for new and improved products to create high adrenaline, intensity, and energy. Most people that come to GNC are searching for something to either get them bigger with muscle mass or smaller to look more chiseled and defined. The DMAA ingredient can do both of those, its that type of uniqueness that will separate it from other drugs by spiking up the energy and adrenaline through the roof whilst narrowing your blood vessels and increasing the blood flow to the muscles. And it has helped GNC and Vitamin Shoppes stocks skyrocket.

The issue comes in the fact of natural occurrence. GNC and Vitamin Shoppe are claiming that DMAA  (1,3-Dimethylamylamine- also meaning Geranamine) is a naturally occurring substance that is found in a Geranium oil in a flower base. (Lahart) The FDA is cracking down on GNC and Vitamin Shoppe for carrying the suppliers (such as USPlabs, Muscletech, Cellucor, and etc.) that have no evidence that it is a safe product and that it is actually found in flowers. (Lahart) USPlabs went out of there way to create a website saying that DMAA is safe and naturally made (the website can be found at http://usplabsdirect.com/dmaa-research) I know that it might not sound like a big deal, but you need to understand that if a dietary supplemental is not found to be created naturally, the FDA can say that it needs their approval since it is a ‘pre-market product’ and not a dietary ingredient. Once that takes place they can take over that product and recall it from all shelves in the nation since it is a ‘pre-market product.’

The FDA did research in four different labs (3- domestic and 1-international) and found no traces of DMAA in multiple samples of Geranium oil. (Lahart) A lot of the suppliers that GNC and Vitamin Shoppe are carrying have rebelled against the FDA by providing their own research taken from their labs.  But for now, the FDA is just frowning on the product (which I have to say to most of my customers at GNC if there hesitant on getting one of the awesome products that carry DMAA).  Unfortunately, I feel that most products that still carry DMAA at GNC or Vitamin Shoppe (Especially at my GNC store) are in the decline period of of the product life cycle. I don’t believe that it’s in its decline because it can’t offer the organization anything anymore, but the FDA is pressing down so hard on any DMAA products that it’s getting harder to carry them with all the rules and regulations.(Operation’s Management textbook, CH. 5 Figure 2.5) (PPT Ch.5 Slide 11)

Do you think the FDA is doing right by pressing down on an active ingredient just because they suppliers cant claim that it is naturally made? Would you take a product that wasn’t naturally made? Even if it is not naturally made, do you think it should still be on the market and not taken off like ephedrine and steroids were? Do you agree with the fact that it should be kept on the market and that it should be left up to the people to take it or not? Is GNC, Vitamin Shoppe and the FDA being ethical and moral about this issue?

Concerning Environmental Sensitivity: Where Does Responsibility Fall?

Bill Hoffman – owner of Aptos Jewelers
Click the above image to be taken to the New York Times article associated with this post.

As students in an operational management class, we study all issues involved with operating a business.  We are taught that operating in an ethical manner is paramount and all-encompassing.  That an organization’s leaders must be cognizant of the impact their decisions have internally and externally – specifically in regard to the environment.  The article used for this post describes what happens when the government forces businesses to function in a certain way.  I found this article intriguing and in reading it, I found myself extremely conflicted.  Below is a brief synopsis.


More than two-dozen cities in California have enacted a ban on the use of plastic shopping bags and have begun charging between 5 to 10 cents to use a paper bag.  The movement has created a divide between shop owners like Bill Hoffman – owner of Aptos Jewelers in Aptos, California – and their counties.   Hoffman, who has been one of the more vocal opponents of the regulation, feels that charging his customers (who are often spending thousands in his store) for paper bags is crass.  Hoffman also is of the belief that the way he packages his product is part of the experience he offers.  He is offering a high-end product that requires high-end packaging.  After filing with Santa Cruz County for an exemption from the ordinance, Hoffman was turned down.

The push toward reusable bags has also upset the plastics industry, which is pursuing legal action against counties in California that have enacted a plastic bag ban.  Industry representatives claim that there is insufficient evidence to support that banning plastic bags will have any drastic impact on the environment.

Stephen Joseph, who is the primary voice and attorney for the Save the Plastic Bag Coalition, has argued that bans in cities that have a high tourist presence (such as San Francisco – which is initiating a plastic bag ban this month) will be particularly ineffective because tourists typically don’t travel with reusable shopping bags.  This has led Joseph to deduce that tourists will begin buying reusable plastic bags when they arrive in a location, and will dispose of them upon their departure.  This, of course, would make a huge dent in the purpose of the ban.

When questioned, many consumers voiced a frustration with the ban/paper bag charge, but expressed that it’s ultimately necessary.*

Questions to consider:

  • How do you feel about a movement of this type?
  • Should the government step in and ban materials that are harmful to the environment?
  • Should it be up to the business owner to ensure he/she is operating his/her business in an environmentally responsible manner?
  • Should consumers take the responsibility?


* The information provided in this post was drawn from the following New York Times article: http://www.nytimes.com/2012/09/29/business/energy-environment/communities-curb-use-of-paper-and-plastic-shopping-bags.html?pagewanted=all

No more DrawSomething? No More Farmville?

http://money.cnn.com/2012/10/04/technology/social/zynga-outlook/index.htmlWhat do you think ZYNGA could’ve done differently to remain a successful company?


In an article from CNN, Julianne Pepitone shares some breaking news about the dynamic gaming company, Zynga, who hit the jackpot a couple years ago with their popular game, FarmVille, which they originally offered solely on Facebook. When first starting out the company flourished and became one of the most profitable gaming companies in America. Their strategy for competitive advantage in their industry is Differentiation, which offers better games, connected to a social media website that everyone in the world uses, and best of all is free of charge. Recently however, the company has gone through multiple financial and ethical struggles and has been working hard to hold on to their “loyal” users and to increase their stock share price. Unfortunately, because of CEO and founder Mark Pincus’s irrational decisions, the company is slowly burying themselves in a hole that they must crawl out of before they are in too deep.

The article starts off by sharing a couple of forecasts that the company has publicly stated, many of which are gloomy and downgraded. By blaming most of its gloomy 2012 forecast on “reduced expectations for certain web games and a delays on launching several new games,” Zynga has given nothing but excuses to its angry investors and things getting worse. With Zynga’s shares  down 75% in afternoon trading on Friday, things are pretty bad

In class, we learned about forecasting and the significance of it in a successful company. Zynga’s purchase of a company called OMGPOP, which released its hit “Draw Something” early in March. If Zynga had used some kind of a demand forecast, they could’ve predicted sales of the existing product (Farmville) and prevented all the money that was lost through the buy out of the new product, “Draw Something”  Although forecasting is seldom perfect, it is better to forecast and to have some kind of idea about what you’re getting your company into, then walking into something new completely blind.

Also, Zynga is infamous for buying out its competitors when they are feeling threatened. This has usually worked for them and is one of the main factors as to why they are so successful but also why a lot of people dislike them/feel that they are unethical. Unfortunately, Zynga’s CEO decided to buy the company for the sole purpose of Draw Something’s popularity and didn’t use any demand forecasts to predict future sales of the game. Draw Something unfortunately turned out to be a “short lived fad” and has cost Zynga lots and of lots money in the past couple of months. When Pincus was asked if he thought that he paid too much for OMGPOP considering its unpopularity, he calmed replied by saying”I’d say it’s too early to call it after one quarter.” Unfortunately, this nonchalant attitude will get the company going nowhere and will further decrease its profitability.


What do you believe was ZYNGA’s biggest mistake?

Would you invest in ZYNGA?

Drug Dealers Beware!


How can improved quality control and diminishing quality control both work to save lives?


In the world of quality assurance, it is a rare thing to talk about quality within the public sector.  The public assumes that quality exists but nothing is ever thought of in regards to the measures are needed to make sure things are done correctly.  While reading this you will find two sides of the FDA.  One side of the FDA ensures the safety of people through increased quality control measures.  The other side of the FDA is hoping to remove some quality control measures in hopes of saving lives.


The FDA has begun rigorous efforts to take counterfeit and harmful drugs off of the internet.  http://www.reuters.com/article/2012/10/04/us-fda-baddrugs-idUSBRE8930SN20121004


In a time of rising health care costs and pricey prescriptions, consumers have looked to various other sources to save money.  A great source to purchase prescription medication is online.  However, many of these online retailers are distributing “counterfeit and illegal” medicine.   The FDA has joined forces with international regulatory and law enforcement agencies in an effort to take some of these dangerous drugs off the market.    18,000 online pharmacies have been shut down in the matter of just one week starting September 25th.    This is essentially a form of quality checking within the public sector.  The FDA is hoping to make sure that the medicines available to the public have gone through the testing process.  All of these regulatory agencies are working towards a pharmaceutical industry with high standards of quality.


In contrast, the FDA is also working to remove some of the quality processes associated with the drug approval process.  This comes mainly from a Republican push hoping to remove regulations across the board.  These deregulations are not meant to send harmful drugs out on the market prematurely.  This measure is hoping to assist immediately ill individuals that cannot wait through the testing process.  The FDA has been doing this since the 1990’s.  Currently patients within this characterization include aids and cancer patients.  However, the FDA is hoping to include various other threatening diseases/conditions to this “accelerated approval” process.  “Of 35 medicines termed innovative by the FDA and approved during fiscal 2011, 16 have some sort of shortened review or expedited approval” (Burton 2012).  The key is that people with “life threatening” conditions are more willing to try riskier drugs.  These people do not have the luxury of time to wait through the quality assurance process.


The point of this shows how quality assurance is paramount in some regards and in other circumstances it serves as handcuffs for progress.  The latter tends to be rare but it does point out that too many regulations have harmful effects.  We can clearly relate this to the upcoming elections as republicans and democrats battle over the topic of increased regulations.  There are clear positives for both sides.  Too many regulations impede progress and at times create a feeling of too much governmental control.  Not enough regulations also have catastrophic results.  Going back to the initial topic, if the FDA did not thoroughly check items that came through their department, people’s lives would be in danger.   People would not be aware of the harmful side effects of the things they are ingesting.  The perfect middle ground is a difficult thing to find and seems to be an ongoing battle within our society.





Jobs Running Away

Jobs Running Away

Outsourcing is something that we are use in the United States because our labor is too expensive. In business, we find the most effective, efficient, and the cheapest way to go with our operating cost. Outsourcing is one way to cut labor cost in production and services and provide the same results.  There are many advantages of outsourcing not just cutting cost but also maintaining a competitive advantage than competitors with the same product. A company like Nike who outsources to China, Indonesia, and Vietnam are gaining an advantage for the price but many disadvantages as well. Outsourcing is an advantage for immediate but in the long run this decreases jobs domestically and creates many risks. Ricks contain ‘inappropriate planning and analysis’ because of corrupt or local government rules, managers that might not be capable, and employees only working because that’s the only earning they will receive. Outsourcing not only impacts domestic jobs but overseas because if the company were to decide to leave that would demolish their economy in some counties.

Indiana is planning to outsource their State Lottery operations, it is currently postponed but like many other operations, they want to pass it to larger vendors. They want to determine if this will be beneficial to them to gain more money or suppress their gain. They want to use outsourcing for their advantage in improving operating and service, and for outside technology and expertise which they believe will bring more people to play the lottery and help the state. Even though many other states have outsourced their lottery services with Indiana will become 95%.

Operations has much to do with maintaining and process where for the overall product or services can provide a better, shorter, and cheaper outcome for the business to grow. Outsourcing is one big operation in which product are shipped overseas for their cheap labor or technology and brought back to be sold domestically. Strategically they have to plan if this will help with the future growth because it is a large investment or they will have to spend even more backsourcing.

I believe a lot of strategic planning that goes into deciding whether a company should outsource. Even though I believe keeping is domestic, will have the local jobs and grow our economy. Even though many companies find it as an advantage to ship the labor I think ethically, paying the workers domestically will help with the current or future recession and avoid the risks and disadvantages that goes into outsourcing. Do you think ethically outsourcing is a good plan for any product or services?


“Ben & Jerry’s”-The Ethical Approach

We have learned about ethics, environmental sustainability, conservation and the renewal of resources through the product life cycle. In operations management sustainability refers to the ecological stability of the environment. The ethical approach extends through the design, production and destruction of the product. Ben & Jerry’s is one of the most ethical and socially responsible companies in existence today. Ben & Jerry’s views product design from a systems perspective by weighting the costs to the firm compared to the cost to society.

  • Design-Ben & Jerry’s realize the importance of creating packaging that will reduce negative impacts on the environment. In 2009, they began using a certified paperboard for the entire stock of U.S. pint containers that comes from a forest managed for the protection of wildlife. Moreover, the boxes used for Ben & Jerry’s ice cream bars are made from 100% post consumer recycled paperboard. (Developing safe and environmentally sound practices)


  • Production– In the Vermont manufacturing plants, Ben & Jerry’s has invested heavily in energy-efficient technology. This includes cooling systems, lighting, water and waste management systems. (minimizing waste of resources)


  • Destruction– Ben & Jerry’s sends dairy waste from the Vermont plants to two of the farms that supply them with fresh dairy ingredients. The waste is put into methane digesters along with other farm waste where it produces energy to power the farm. (Reduce environmental liabilities)


Social Responsibility

Here are some ways Ben & Jerry’s focuses on ethics, the environment and social responsibility:

Ben & Jerry’s has always been focused on the communities in which they serve. In the UK, they have a bus that travels through the streets during festivals selling ice cream. The profits gained are used to support charitable causes in the local community such as “Childline” and “Trees for Cities”.

The company offered stock options to its hometown of Vermont where it began when it decided to expand into other cities. Ben & Jerry’s wanted the community who supported its beginning to be the first to benefit from its success.

Ben & Jerry’s uses certified humane cage-free eggs in their ice cream products in Europe. In the US, Ben & Jerry’s ice cream products are 99% cage-free. The existing 1% is in the novelty ice cream bars sold in the US and Asia.

What are some things your employer has done to become environmentally friendly with respect to design, production and destruction?








Tracking employees? Is project management technology crossing the line?

I recently came across an article about Google’s newest product called “Maps Coordinate” which is an enhanced version of its regular Google Maps product; however, it can provide employers with the real-time record of worker locations.  Google presents the product as a tool to make companies more efficient by assigning work more effectively by location.  They will charge $15/month for the use of the map.  There are even features to monitor where employees are within an office setting.  The article shares a reaction from a gaming CEO who was horrified by the application.  He stated that companies should be more concerned about production levels and outcomes, rather than how employees are producing. However, while there are privacy settings that can make a person invisible after hours, it begs the question, would a technology like this really create more efficiency in project or operations management or does this technology cross the lines of privacy and ethical boundaries with employees?

My initial reaction is shock that a company would consider tracking their employees like this. Also, it makes me wonder how much technology is needed to be efficient versus technology becoming a distraction.  Additionally, what are the legal and ethical implications of a program that crosses the lines of privacy between employees’ personal (via mobile phone) and professional lives?  It appears to be a potential human resource concern. 

Technological advances will continue, but do we necessarily need all of them?  I can see a tracking tool like this to be useful for operations like a pizza delivery service or UPS service, where knowing the location of a person or product adds value to the customer and overall operational management; however, I think the issue of privacy and respect brings up ethical concerns as well.   According to a recent case I read regarding social media and human resource recruitment, there is evidence that people need some level of privacy in order to deal with stress and to maintain a level of control in their life, psychologically speaking.  When tracking employees through their phones, regardless of whether the company pays for them or not, I think it’s a violation of privacy and lack of respect.  There is the argument that people can turn their settings to “invisible,” but given how there is an increasing pressure to available at all times in our corporate culture, I can’t imagine that being “unavailable” will be accepted culturally.

Also, when working with people from different generations, it’s important to recognize the differences in how people prefer to work.  While the millennial workforce may not be concerned with their employer using a tracking tool, a baby boomer may be very uncomfortable and even allow it to adversely affect their level of productivity.  The lesson here may be that even though technological advances are available to use, there are times where project managers may need to reconsider if the tool will make them more efficient, or potentially hinder them from achieving their goals.

NY Times, “Google Maps Where Your Workers Are”
Link:  http://bits.blogs.nytimes.com/2012/06/21/google-maps-the-worker-bees/

Kelley School of Business, Indiana Universary, “You’ve Been Tagged!”, Willaim P. Smith, Deborah Kidder

Project Crashing & Ethics

Project management was something I learned fairly recently. In particular, I found the concept of crashing to be intriguing. Unfortunately, I have not had any internships where I was actually exposed to a physical project such as building a house. However, I have had three accounting internships where I have done various accounting projects.

Initially, I thought accounting processes could generally not be crashed. This is because it is the accountants that are completing the process and as such are limited by the number of hours a person can feasibly work. After all, people need to sleep (of course, some of the larger accounting firms seem to disregard this fact).

I then realized this is actually done all the time in accounting firms, I just never had an official name for it. When a project turns out to be too massive, such as completing an important audit in a tight deadline, an outside consultant is hired to shoulder the extra load. This was actually what happened at one of the companies I interned at. I was an internal auditor and near the end of my term, it turned out there was simply too much work to be done. We could not keep up with our schedule due to unforeseen circumstances arising (our CFO had us work on ad-hoc project he wanted very badly). As a result, my director hired an outside consultant. I didn’t realize until now that my director was technically crashing the project. By spending the money to hire this contractor on a short-term basis, my company was able to complete and file all regulatory SOX testing by the appropriate deadline. I thought this was an excellent and well used moment of project crashing as I had felt extremely overloaded at the time.

As I thought further, especially in a field such as audit, project crashing can sometimes be more than just about meeting deadlines and choosing the most cost efficient crash. In the anecdote of my time as an internal auditor, my director could have easily asked me to stay and work the extra hours at hardly any additional cost. However, because he knew that I was only an intern and that the high pressure and volume might lower the quality of audit, he purposely crashed with the much more costly option. Perhaps it’s due to the field I work in, but I’ve often found impending deadlines and ethics to be close together, hand in hand. As a result, I feel that project crashing can often be a very ethical process.

To the class: Where there ever any instances where you were ethically bound to crash or not crash a project?