The initial concern was raised already in August before Philip Clarke, the former CEO of the giant UK grocery retailer, left the company.

The whistleblower, an accountant inside the company, warned his superiors about the inconsistencies in the accounting reports, but “failed to get traction”. Later, on September 1^st, after Mr. Clarke’s departure, the employee delivered the information to the Tesco’s general counsel, and the new CEO Dave Lewis was alerted to the problem on September 19^th. In a few days the company revealed that it had overestimated its first half trading profit by £250m. In this case, what caused this overstatement and why the former CEO ignored the employee’s concerns? “We have an investigation under way and we will await the findings before drawing any conclusions,” a Tesco’s representative stated.

According to The Economist (2014), the source of inaccuracies is expected to be the premature recognition of revenue, which, in its turn, originates from either “timing differences” or fake sales. In case Tesco’s financial statements are deliberately modified by its managers, “it would be the biggest fraud of its type in retailing since the scandal at US Foodservice in 2000-03.”

Yet whatever circumstances caused this incident, Tesco is facing grievous consequences. Its shares dropped around 16% for the last week, the fact that impairs company’s situation even more, considering a substantial share decrease in the last year. Apart from that, the accounting scandal resulted in the retirement of four chief executives, including the finance director Carl Rogberg. Moreover, Tesco hired outside auditors and legal counsel to scrutinize the origins of misleading financial statements and examine the company’s culture.

Thomas, N. (2014, September 28). Tesco’s £250m accounting black hole first flagged during Phil Clarke’s reign. The Telegraph.

Not so funny. (2014, September 27). The Economist.

Nearly 5 million Gmail passwords dumped online

According to CBC News, a list of 4.93 million Gmail addresses and passwords was posted on a Russian website Bitcoin Security on Tuesday night, Sep 10, 2014. On the same day, Danish eCrime specialist Peter Kruse tweeted that the disclosure of passwords “likely originates from various sources” and that the majority of the hacked passwords are more than 3 years old, though many of them may still be valid. Beside, some of the security codes belong to Russian-based email services, Yandex and Mail.ru. As for the hacked  Gmail accounts, Google team assured that they are protected now, and the users were strongly advised to renovate their passwords.

In my opinion, those people, whose accounts have been affected, should blame themselves for being lax on email security. First, if these passwords are truly 3 years old, it is likely to be more than 3 years ago when these users changed their passwords for the last time, while Microsoft recommends changing security codes every 1-2 months. Second, Gmail offers 2-step authentication that makes account hacking close to being impossible. Third, as the Google team noted, “If you reuse the same username and password across Websites, and one of those Websites gets hacked, your credentials could be used to log into the others”. Having that said, I believe there’s no truly solid evidence that Gmail systems are vulnerable to attacks.

Thus, to prevent further information leaks, Gmail users are strongly advised to reset their password, not to reuse them on other websites and to launch 2-step authentication.

References

Kruse, P. (2014, September 10). Gmail Leak. Twitter. https://twitter.com/peterkruse/status/509647881184509952

Gmail addresses, website passwords leaked online (2014, September 10). CBC News. http://www.cbc.ca/news/technology/gmail-addresses-website-passwords-leaked-online-1.2762316

On August 26^th, 2014 Tim Horton’s and Burger King agreed to merge their companies (CTVNews, 2014). Before and after the deal, the latter was attacked by the US government, politicians and general public for the decision to move its headquarters to Ontario, Canada. Critics see this merger as a tax inversion maneuver by Burger King both to avoid paying additional US taxes and to pay lesser tax to the Canadian government. President Obama called US companies, which renounce their citizenship to escape tax payments, “corporate deserters” (Forbes, 2014).

So what is unethical in Burger King’s merge with Tim Horton’s? Well, first of all, according to BK’s announcement, their “headquarters will remain in Miami where we were founded more than 60 years ago” (Facebook, Burger King, Aug 26, 2014). At the moment, there is no official document or proof that BK moved to Canada. Second, the tax inversion should not be considered as a main reason of merging. Because this deal both makes international expansion possible and brings variety into BK’s menu, Burger King has a good chance to take on McDonald’s, its main competitor. Such perspective might be more appealing to the company than cutting its taxes. Third, in case the tax inversion is truly the main reason of the merger, one should take into account the decision of Federal Judge Learned Hand that “anyone may arrange his affairs so that his taxes shall be as low as possible; there is not even a patriotic duty to increase one’s taxes”.

Thus, while customers are warning that they will stop eating at Burger King if the company’s citizenship is renounced, the fast-food chain seems to be following all ethical standards of business.

References:

Done deal: Tim Hortons agrees to takeover by Burger King. CTVNews. Aug 26, 2014. http://www.ctvnews.ca/business/done-deal-tim-hortons-agrees-to-takeover-by-burger-king-1.1976444

Schaefer, S. Corporate America’s Hunt For Lower Taxes Won’t End With Burger King And Tim Horton’s. Forbes. Sep 5, 2014. http://www.forbes.com/sites/steveschaefer/2014/09/05/corporate-americas-hunt-for-lower-taxes-wont-end-with-burger-king-and-tim-hortons/

Burger King Ethics: What’s Unethical About Burger King’s “Tax Inversion” (And It’s Not Burger King). Ethics Alarms. Aug 27, 2014 http://ethicsalarms.com/2014/08/27/burger-king-ethics-whats-unethical-about-burger-kings-tax-inversion-and-its-not-burger-king/