Ethics Case Studies


Christine was not pleased with her current assignment as a relief branch manager at Commerce Trust Bank, but it was a means to an end. Employed by the bank for almost two years as a branch management trainee, Christine wanted to escape the training program and become a full branch manager. She had earned strong praise from his superiors throughout the training program and Christine hoped to successfully complete this last training assignment.

As a relief (or temporary) manger, she assumed all management functions in the branch when the regular manager was absent for a day. As a temporary branch manager, Chris was required to make immediate decisions on various banking matters, despite not personally knowing the employees or customers.

One recent branch assignment was very difficult. The branch had recently opened and the tellers were generally inexperienced. At the end of the day, all tellers are required to reconcile and review their transactions for compliance and accuracy. A novice teller (Carol) was $900.00 short. Since Carol was on probation as a new teller, any significant error would result in her dismissal. This was a very significant error.

Carol was extremely upset when she reported the error to Christine. They audited Carol’s transactions and discovered that, when a regular customer cashed a check for $100.00, Carol entered the transaction for $1,000.00 and gave the customer $1,000.00 instead of $100.00, resulting in the $900.00 shortage. It was a relief to discover the error. Christine called the customer to explain the problem, assuming that the regular customer did not realize what happened and would return the extra money. Unfortunately, the customer stated that she only received $100.00.

The normal procedure is to report the error to the bank audit department. This most likely would result in Carol’s dismissal. However, Christine believed the customer was lying. Since the customer maintained other accounts at the bank, Christine could unilaterally withdraw the money to correct the error. Alternatively, they could return the money using other funds and money provided by Christine or Carol. This would violate bank procedures, but avoid dismissal of Carol.

What should Carol do? Should she, by any means necessary, seek to secure her job position? Or, correspond with the banks policy and procedures? Please provide your opinion.


As a commercial loan officer-trainee at Farmwood National Bank, Adam’s future looked very bright. He had recently completed a series of credit analysis exams, earning the highest score in his training group and capturing the attention of the bank’s senior commercial loan officers. In the second phase of his training program, Adam was promoted to a financial analyst’s position and assigned to work for Mary Ryan, one of the bank’s most productive commercial loan officers. Like Adam, Mary had earned the highest score on the analysis exam among her training group five years ago, and she and Adam quickly became a team to be reckoned with inside the bank’s corporate banking division.

In the first few months of his new assignment, Adam quickly grew to admire his new boss. In most cases, when he evaluated the creditworthiness of a new customer for Mary, she readily agreed with his analysis and praised his attention to detail. However, one recent loan application left Adam totally confused. Evaluating a request from Mitchell Foods, Inc., for a $5 million short-term loan to finance inventory expansion, Adam noted that the firm was located in the greater metropolitan area served by Farmwood National, and the firm was financing its retail outlets with operating leases. Unlike financial leases, operating leases only appear in the notes accompanying the firm’s financial statements, and Mitchell Food’ current balance sheet gave the appearance of fat less leverage than the firm actually carried.

Adam promptly noted this fact in a memorandum of concern that he forwarded to Mary for inclusion in the Mitchell Foods credit file. Much to his surprise, Mary discounted the problem and told Adam to destroy the memo. After the bank’s senior credit committee approved the Mitchell Foods loan request, Mary defended her position by telling Adam that the issue of operating lease leverage never surfaced during the credit committee meeting.

In spite of Mary’s reassurance, Adam knew from his days in credit school that Mitchell Foods’ operating lease liability was handled improperly. While pondering this problem over coffee in the employee cafeteria, Adam overheard Mary talking excitedly among a group of young commercial lenders. It seems she had just received word that her personal mortgage loan application at Bay Street Savings and Loan had been approved, and the terms of this requirement have Mary 100 percent, fixed-rate financing of 25 years at 2 percent below the going rate of interest on fixed-rate mortgage loans.

Given his recent credit analysis, Adam recalled that the president of Mitchell Foods was also Chairman of the Board at Bay Street Savings. He began to wonder whether Mary’s actions as a loan officer had been compromised by her personal financial affairs, or whether he was simply thinking too much. After all, Mary was an outstanding loan officer and Adam’s mentor.

What should Adam do? Anything? Nothing? Please provide your opinion if you were Adam.


After graduation as a business major, Reyna was considering several positions. It was the height of a business and technology boom. Although starting salaries were attractive, her professors predicted that many firms would not survive.

Reyna applied for an entry-level position at Sunset Marketing Communications, a recently funded start-up. During the interview process, she began to doubt that the company would be successful. The services it provided lacked innovation and the corporate structure seemed disorganized. Reyna wondered if this boom-era company would eventually fail.

Sunset gave Reyna an attractive job offer and aggressively pursued her over a two-week period. The HR Director even sent her flowers and increased the original offer.

When Reyna received a more secure job offer from an established company, she contacted the HR Director at Sunset and told him about the competing offer. That same day Reyna received a call from the venture capital firm that funded Sunset. This top-tier VC firm explained that they were giving Sunset full funding for the year. This changed Reyna’s mind and she accepted Sunset’s offer. She felt that it would more likely survive and prosper with the venture capital funding.

After a week at her new job, Reyna realized the other employees were incompetent. Further, despite the assurances from the VC firm, Sunset only received a small portion of the promised investment. The company was now close to bankruptcy. Two weeks later, the CEO moved to New York and the firm closed. Reyna felt betrayed. She was abruptly fired after only two months.

Reyna had to learn a hard lesson. She was back on the job market.

Was Reyna treated fairly in the situation? Was the venture capitalist firm ethically wrong by lying about the funding? Is it Reyna’s fault for not looking into the company or is it the company’s fault for misleading Reyna?