Breakout Diary

Case Study No. 10 Trading Scandal at Société Générale In January 2008, Société Générale (SocGen), France’s second largest banking establishment, was a victim of internal fraud carried out by an employee, Jérôme Kerviel. SocGen bank lost €4.9 billion (euros) as an immediate result of the fraud. (At the time of the incident, the euro was worth approximately $1.45.) In 2007, SocGen was rated the best equity derivatives operation in the world by Risk magazine. Its internal control system of checks and balances was world renowned. For example, its trading room had five levels of hierarchy, each of which had a clear set of trading limits and controls, checked daily by a small army of compliance officers.2 In addition, “the bank also [had] a shock team of internal auditors who descend on a corner of the bank without warning and pull apart its operations to ensure they conform to bank rules.”3 During the summer of 2000, Kerviel began his employment at the bank—ironically, in its Comp...

Case Study No. 9 Manufacturers Compete on Green Computing Dell, Apple, and HP have long competed on the basis of price and performance. Recently, the three companies have begun to focus on green computing as a way to differentiate themselves to consumers who have come to see green computing as an excellent opportunity to save money through reduced power consumption and to lessen their negative impact on the environment.92 In 2007, Dell announced that it had set a goal for itself of becoming the “greenest technology company on Earth,” and the company frequently touts its strong recycling program. Apple claims to have the “greenest family of notebooks” and emphasizes the progress it is making in removing toxic materials from all of its computers. HP highlights its efforts to develop more environmentally friendly packaging as well as its long tradition of environmentalism.93 “Power to Change” is HP’s latest green initiative campaign, which urges PC users around the world to shut d...

Case Study No. 8 Kaboodle—A Successful Social Shopping Web Site Kaboodle is a social shopping Web site created in 2005. The idea for the Web site grew out of the frustration that Manish Chandra and his wife, Asha, experienced when remodeling their home. The process of finding products that matched their taste, identifying the retailers of those products, and searching for bargain prices was tedious and time consuming. As a result, Chandra created Kaboodle, an online social shopping community where members can discover and recommend new products. Kaboodle members can create shopping lists, read product reviews, and get help making purchasing decisions.62 Kaboodle members can install a Kaboodle browser toolbar, which includes an “Add to Kaboodle” button. As they are browsing the Web, members can click the “Add to Kaboodle” button on their toolbar when they see a product that interests them. (Retailers can also easily add an “Add to Kaboodle” button to their individual product Web...

Case Study No. 7 IT Enables a Smarter Power Grid           The U.S. electrical power infrastructure, also called the grid, delivers electricity from points of generation to consumers around the country. The electric delivery network functions via two primary systems: the transmission system and the distribution system. The transmission system delivers electricity from power plants to distribution substations, while the distribution system delivers electricity from distribution substations to consumers.52             The Department of Energy has been charged with leading the wholesale modernization of the U.S. electrical power grid. This transition is likely to take decades and cost hundreds of billions of dollars. The first phase of the transition involves the implementation of a smart grid, which will convert the power grid from a centralized generation and distribution model to one that is more distributed and diverse. Pe...

CASE STUDY NO. 6 Dubious Methods Used to Investigate Leaks by Hewlett-Packard Board Members           On September 5, 2006, Newsweek published a story revealing that Hewlett-Packard (HP) chairman Patricia Dunn authorized an internal investigation of HP board members beginning sometime in 2005. Dunn suspected one or more board members of leaking information about HP’s long-term strategy to the news media. One such article appeared on the technology Web site CNET in January 2006.2 Making such confidential information public could have a significant impact on the competitiveness of the company and impact its share price.             Three private detectives involved in the investigation allegedly engaged in pretexting —the use of false pretenses—to gain access to the telephone records of HP directors, certain employees, and nine journalists. The detectives allegedly obtained and used the targeted individuals’ Social Security n...

CASE STUDY NO. 5 Sexting Over the years, the courts have made many decisions regarding what kinds of communication are obscene and whether or not they are protected by our First Amendment rights to freedom of expression. The line between what is legal and what is not has been in constant flux. Now comes a new test for our society: sexting. Sexting —sending sexual messages, nude or seminude photos, or sexually explicit videos over a cell phone—is a fast-growing trend among teens and young adults. According to a survey by the National Campaign to Prevent Teen and Unplanned Pregnancy, one in five teenagers have engaged in sexting, including 22 percent of teen girls, 18 percent of teen boys, and 11 percent of young teen girls aged 13 to 16. 1 Increasingly, teens are suffering the consequences of this new fad.             Jessie Logan was a good kid—lively, artistic, and fun. But in her last year at Sycamore High School , she...

CASE STUDY NO. 4 Computer Problems at WellPoint Have Serious Impact WellPoint, Inc., is the second largest health insurance company in the United States, with 2008 annual revenue of $61 billion. 32 The company was formed in December 2004 when Indianapolis-based Anthem, Inc., and California-based WellPoint Health Networks, Inc., merged. In 2005, WellPoint acquired New York–based WellChoice, Inc. WellPoint has more than 42,000 employees, and one out of every nine Americans is a member of a WellPoint-affiliated health plan. 33             In an attempt to standardize and simplify processes, WellPoint decided to consolidate the claims processing computer systems for the three merged companies into a single system. Unfortunately, the consolidation turned out to be much more difficult than anticipated, and many problems arose—causing significant delays in claims processing. 34         ...

CASE STUDY NO. 3 Antibribery Laws Force U.S. Companies to Raise the Bar on Business Ethics In the mid-1970s, investigations by the U.S. Securities and Exchange Commission (SEC) revealed that more than 400 companies in the United States had made illegal or questionable payments to foreign sources. To clean up the United States’ image overseas, Congress enacted the Foreign Corrupt Practices Act (FCPA), which allows the U.S. Department of Justice (DOJ) and the SEC to prosecute businesses and company personnel who bribe governments, politicians, or political parties abroad. Companies can be fined up to $2 million and be barred from doing business with the U.S. government, receiving an export license, and engaging in the securities business. People can be imprisoned for up to five years and fined twice the amount they hoped to receive as a result of the bribery. So, executives of a large IT company today wouldn’t dare bribe foreign officials, say, to obtain a large government contra...