Thomas Donaldson - Faculty Research in Knowledge@Wharton

After Dodging Many Bullets, Hedge Funds Are Back in Regulators' Sights

Wed, 18 Mar 2009 16:34:51 EST

The hedge fund industry's long history of avoiding tougher regulation may be coming to an end, as the Obama administration and Congress look for ways to avoid another financial meltdown. Although it is not clear that hedge funds actually played much of a role in the current crisis, the industry's sagging performance, combined with investors' and regulators' heightened demand for transparency, will likely cause big changes in the way these secretive investment pools operate, according to several Wharton faculty members.

Hedging Their Bets: How Hedge Funds Can Curb Critics and Avoid Regulation

Wed, 12 Nov 2008 15:45:28 EST

Hedge fund managers oversee $1.9 trillion in assets, but no one knows what they invest in or even what those assets are actually worth. That's because hedge funds are not regulated and consequently aren't required to make the same detailed financial disclosures that are required of publicly traded companies. The combination of potentially huge financial rewards and lack of transparency may foster ethical lapses, Wharton professor Thomas Donaldson noted during a recent talk on hedge fund ethics. His solution? An approach he calls a "microsocial contract."

Eyes on the Wrong Prize: Leadership Lapses That Fueled Wall Street's Fall

Wed, 17 Sep 2008 20:25:57 EST

Executives at AIG, Bear Stearns, Lehman Brothers, Fannie Mae and Freddie Mac may have ignored or failed to see the level of risk their companies were taking on in a crusade to enhance results and their own compensation, according to Wharton faculty and industry analysts. In some cases, the management crisis was fueled by managers simply choosing not to lead.

Can't Run, Can't Hide: New Rules of Engagement for Crisis Management

Wed, 19 Sep 2007 15:42:32 EST

The corporate apologies are piling up. Mattel CEO Robert Eckert apologized on September 12 for lead paint found in millions of the company's toys. TD Ameritrade CEO Joe Moglia apologized on September 14 for a database breach. Apple CEO Steve Jobs apologized on September 6 for cutting the price of the high-end iPhone. Dell executives apologized in August for delayed deliveries of certain models. JetBlue apologized in February for canceling flights and leaving passengers stranded during an ice storm. While executives moved quickly to stem damage to their companies' reputations, it takes more than speed to manage a crisis. As Wharton experts and others point out, the rules governing crisis management have changed.

Trouble in Toyland: New Challenges for Mattel -- and 'Made in China'

Wed, 22 Aug 2007 13:17:32 EST

Mattel's recall of more than 10 million toys in the U.S. over the past three weeks has done more than focus attention on the company's wide array of products, which include such household names as Elmo, Ernie, Big Bird, Barbie and Batman. It has also further raised public awareness of quality control problems in China and the relentless push to cut costs along every step of the supply chain. Knowledge@Wharton looks at Mattel's response to the crisis, its potential liability and the consequences for China.

Current Controversies in Executive Compensation: 'Issues of Justice and Fairness'

Wed, 02 May 2007 09:59:26 EST

Although mammoth executive compensation packages at hedge funds -- hundreds of millions of dollars a year for some managers, with a select few topping $1 billion -- have recently been disclosed in the business press, public outrage over soaring CEO pay has been growing for years. Do executive compensation figures reflect an efficient market or a failed one? Are pay levels adequately disclosed? Should shareholders have more say? And if top executives are overpaid, what's to be done about it? Executive compensation was the subject of a panel at the 2007 Wharton Economic Summit.

Hit by an Earthquake: How Scandals Have Led to a Crisis in German Corporate Governance

Wed, 28 Mar 2007 13:10:27 EST

German corporations have long prided themselves on being above-board, but scandals at some of the country's multinational icons have seriously tarnished that reputation. The scandals allegedly involve hundreds of millions of dollars in bribes, the procurement of prostitutes and misbehavior by some of the country's most senior executives, including officials at Siemens, Volkswagen, Deutsche Bank and other firms. The situation is so grave that it may prompt German executives to adopt Anglo-American style corporate-governance principles, according to governance and business ethics experts at Wharton and in Germany.

Hedge Funds Escape Regulation: Should Investors Be Worried?

Wed, 07 Mar 2007 14:51:20 EST

When the Lilliputians came upon the sleeping Gulliver, they didn't know if he was friendly or hostile, but he was so big it seemed prudent to tie him down. Should the 9,000 hedge funds -- the secretive investment pools controlling $1.4 trillion in assets -- be treated the same way? The President's Working Group on Financial Markets doesn't think so. In a late-February report, the group urged vigilance but concluded that new regulations are not needed. Was this the right decision? Wharton faculty weigh in on the issue.

A Changing of the Guard at the SEC: Will Corporate America Get a More Sympathetic Ear?

Wed, 13 Jul 2005 15:36:49 EST

During his 28 months as chairman of the Securities and Exchange Commission, William Donaldson turned out to be something of a surprise. A Republican and longtime securities industry insider, Donaldson repeatedly sided with the two Democratic commissioners to push through a series of post-Enron market reforms that irritated Wall Street and corporate America, but were applauded by investors' groups. With Donaldson stepping down June 30, will the regulatory pendulum swing the other way under Christopher Cox, the conservative California Congressman Bush has nominated as the next SEC chairman? And just what kind of legacy is Donaldson leaving?

Corporate Fraud on Trial: What Have We Learned?

Wed, 30 Mar 2005 10:18:01 EST

The high-profile corporate scandals involving former WorldCom CEO Bernie Ebbers and former Tyco CEO Dennis Kozlowski are back in the news, refocusing attention on corporate fraud and inviting such questions as: What has changed since these allegations emerged a few years back? And will the criminal trials of these two men, under way this week, serve as a deterrent to other high-profile executives who might be tempted to forget the rules of fair play in corporate America?

Death of a Drug: The Aftermath of Merck's Recall

Wed, 20 Oct 2004 15:40:04 EST

Wharton management professor Michael Useem, director of the school's Center for Leadership and Change Management, notes that one of the key mantras in corporate crisis management is: "Hide nothing, tell all." Less than a week after Merck & Co.'s voluntary withdrawal of its blockbuster arthritis pain medication Vioxx, following an extended clinical trial that linked the drug to heart attacks and strokes, the jury is still out on whether the pharmaceutical giant followed this cardinal rule. Wharton professors debate Merck's response to the crisis and the impact of the recall.

Enron's Ken Lay: Captain of a Modern-day Titanic?

Wed, 28 Jul 2004 13:34:07 EST

On July 8, federal prosecutors in Houston made public an indictment against former Enron CEO Kenneth Lay, charging him and another Enron executive with conspiring to deceive shareholders, regulators and the public. Lay’s arrest surprised no one, but opinions differ as to why it took the government so long to make its case, what the odds are that Lay will get off, and whether it was smart for him to hold a news conference and appear on Larry King Live days after being led away in handcuffs.

How Parmalat Differs From U.S. Scandals

Wed, 28 Jan 2004 14:24:31 EST

When the Parmalat scandal broke in mid-December it was quickly dubbed “Europe’s Enron,” suggesting that multi-billion dollar frauds are not, after all, a predominantly American phenomenon. But is the case of Parmalat, an Italian dairy company based in Parma that employs 36,000 people in 29 countries, really analogous to the American corporate scandals of the past three years?

Why Smart People Do Unethical Things: What's Behind Another Year of Corporate Scandals

Wed, 14 Jan 2004 13:38:57 EST

You might think that with the passing of another year, the corporate scandals that have rocked American business would be showing signs of petering out. They are not. In the past few months, disclosures of allegedly unethical or illegal practices have rocked the mutual-fund industry and some of its blue-chip names, even as the head of the New York Stock Exchange was forced to resign over the size of his compensation package. Knowledge@Wharton spoke to ethics experts, a business historian and a Wall Street executive in an attempt to understand why the country has witnessed misbehavior of breathtaking scope in the first few years of a new century.

A Long (Range) Look at the Markets, Executive Stock Ownership and the Public Trust

Wed, 23 Oct 2002 00:00:00 EST

In addition to the reforms that have surfaced in response to recent corporate scandals, deeper changes in corporate governance � many of them focusing on a longer time horizon � are necessary to avoid the missteps of the recent past. This was the consensus of experts on regulation, executive compensation and ethics who participated in a panel titled �What Governance, Who Leads? Perspectives on Routines and Norms of Corporate Governance in the U.S.�

Are Government Bailouts Bad Business?

Wed, 10 Oct 2001 00:00:00 EST

Even the most cold-hearted free-marketer would concede the airlines got a tough break in the two-day grounding after the terrorist attacks. No manager could have been expected to anticipate events on the scale of Sept. 11, or to set aside enough money to cover the revenue shortfalls that followed. So a government bailout is a reasonable response, right? Not necessarily, say those who have studied past examples of government bailouts.

Foot-and-mouth Disease Poses Challenge for U.S. Beef industry

Wed, 11 Apr 2001 00:00:00 EST

First there was mad cow disease. Now there is foot-and-mouth disease. And through it all is the stampede of media reports on each new outbreak, written in lengthy and often graphic detail. How do members of the beef industry in the U.S., which has reported no cases of mad cow disease and no foot-and-mouth since 1929, deal with a potential public relations crisis that, so far, just hasn�t been a problem?

The Corporate Ethics Boom: Significant, or Just for Show?

Wed, 20 Dec 2000 17:41:01 EST

In an article on Nov. 13, 2000, in the Financial Times� Mastering Management series, Wharton legal studies professor Thomas Donaldson looks at the increase in corporate ethics programs throughout the world. Which are the most effective? Do they indeed make a company ethical? Do they improve return on investment and/or customer satisfaction? And what are the consequences of not having a program?

What the Love Bug Can Teach Us about Business Ethics: An Asian Perspective

Wed, 19 Jul 2000 14:03:19 EST

Manuel V. Pangilinan, executive chairman of First Pacific, a Hong Kong-based conglomerate, and president and CEO of the Philippine Long Distance Telephone Co., links the recent �I Love You� virus to a discussion of ethics in the context of the �Asian Century.� Pangilinan, who spoke this summer at Wharton�s seventh Asian Regional Alumni Meeting in Manila, suggests that Asia�s recovery from the economic crisis of the late 1990s will be closely related to how well individual organizations are able to identify and achieve ethical goals.

Things Go Bitter With Coca-Cola

Fri, 23 Jul 1999 16:28:09 EST

This has been a torrid summer for Atlanta-based Coca-Cola. In June hundreds of people-including school children in Belgium-complained of nausea and vomiting after drinking Coke products. Some consumers in France had similar symptoms. As a health scare spread across Europe, the governments Belgium, France, the Netherlands, Spain and Luxembourg banned Coke products or placed curbs on their import, though the bans were later lifted. Meanwhile, in response to this crisis, Coca-Cola was forced to pull millions of bottles off store shelves, the company's largest product recall in its 113-year history. How should companies respond to such crises? What can they do to prepare for them? Thomas Donaldson, professor of legal studies at Wharton and Director of the Wharton Ethics Program, speaks to Knowledge@Wharton about the lessons to be learned from Coke's crisis.

The Limits of Privacy

Mon, 24 May 1999 16:57:46 EST

Most people instinctively cherish the right to privacy. But should individuals' right to privacy be restricted for the public good? In a lecture organized by Wharton's SEI Center for Advanced Studies in Management, Amitai Etzioni, author of The Limits of Privacy, asks whom people should fear most: the Mafia, the FBI...or Microsoft?

Ethical Inspiration for Marketing Managers

Mon, 24 May 1999 16:56:22 EST

Marketing ethics has been much in the news with companies like Prudential Insurance being found guilty of deceptive sales practices. Wharton's Thomas Dunfee and his colleagues discuss a new social contracts based approach to business ethics which is called Integrative Social Contracts Theory (ISCT). They describe how it pertains to marketing and demonstrate how it can be applied to decision-making in marketing, particularly in cases involving bribery. They stress the implications of these findings for managers, researchers and public policymakers.