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Public Finance

Masters level graduate studies for public and private sector managers.

The protagonist in this case is Mrs Maribeth Ocampo a manager of a reputable non-governmental organization (NGO) that plans to devise a position on the Philippines' Priority Development Assistance Fund (PDAF) (or more pejoratively called “pork barrel”). This NGO manager intends to tap the assistance of their local legislator to fund some of their projects. Her NGO has been working with farmers in provinces in the Bicol region and one of the recent projects of the group involves skills training for the female farmers, which aims to provide the latter with a greater variety of income source which they can tap during the lean season. Expenses associated with the project include costs of the training sessions (e.g. cost of session kits and honorarium of resource people) and assistance that will be provided to the female farmers to start their venture.

However, recent reports have surfaced which cast doubts on the accountability and transparency associated with the PDAF of the legislators. Some reports indicate the presence of commissions that NGOs must allegedly pay to the legislators in exchange for their access to the said funds, while a recent scam involves the creation of bogus NGOs that allegedly serve as conduits through which legislators can take advantage of their allocation. The NGO manager needs to decide on whether and to what extent to engage with legislators on tapping the pork barrel funds. She also needs to address the question: “What is the position of my NGO (and possibly all reputable NGOs more broadly) on pork barrel funds moving forward?”

This case aims to familiarize the manager with key public finance concepts such as discretion and accountability; and to develop her/his appreciation of the politics surrounding the public sector budget and, in particular, discretionary funds. The case is focused on Philippine legislators' discretionary funds, the PDAF. However, it can be used to discuss issues surrounding public finance concepts of transparency, accountability and citizens' engagement in the budget process in a much broader context within developing democracies.

The case revolves around the scandal surrounding the pork barrel funds of some legislators that were exposed for apparent abuse in early 2013. The scandal and its repercussions are still ongoing at the time of writing this case, so the authors expect to update this case moving forward. It aims to highlight an example of the role of public institutions and its respective challenges when it comes to critical decisions of keeping public financial a credible undertaking. It is also expected that this case will help develop an understanding of the pros and cons in the use of discretionary funds and help the student identify potential risks for abuse in public finance management with respect to these funds.

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In October 2016, Timothy Sloan, the newly appointed CEO of American banking giant Wells Fargo, faced a massive public-relations crisis. A few weeks earlier, a United States government agency had announced the results of its regulatory review of the bank and exposed a shocking practice common in the retail division, in which aggressive community bankers had created more than a million fraudulent accounts and credit card applications on behalf of unaware customers for the past several years. Over the next few weeks, the bank—and Sloan's predecessor, John Stumpf, in particular—suffered from harsh criticism from politicians, journalists, and former employees alike, ultimately forcing Stumpf's resignation. As Sloan sought to minimize the public-image backlash and restore general trust in Wells Fargo, he struggled to construct the best communication strategy for the bank's next chapter.

The contribution of the present case lies in the critical view that every business actor should exercise – be it general manager, middle management, supervisor or executive – when building a strong organizational culture in corrupt political environments.

The purpose of this case study is to explore the dilemma in which Marcelo Odebrecht, once CEO of Odebrecht, found/determined whether to continue with the business model established by the founders of Odebrecht or take a new path for the organization. After exploring the corrupt acts of Odebrecht and the scope of Operation Lava Jato, the reader can reflect on the importance of organizational culture (according to the three levels proposed by Schein) in the face of the emergence of corruption. By generating discussions about organizational culture, business ethics, political culture and corruption, the organizational culture of Odebrecht is problematized in relation to its real behavior.

Students of administration, business and international business undergraduates and graduates, as well as members of senior management in companies in the infrastructure sector. Also, given the plurality of possible readings, it is recommended that the case also be used in courses or specializations in organizational psychology, organizational sociology or organizational anthropology.

Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 5: International Business.

The theoretical concepts and frameworks from the following literature are brought in to discuss the case situation. Freeman’s stakeholder framework, Yukl’s Influence Tactics, Johnson and Scholes’ Power-Interest Matrix Please see: Freeman, R. E. (2010). Strategic Management: A Stakeholder Approach. Pitman Publishing Inc. Yukl, G. (2002). Leadership in Organizations. Prentice-Hall. Johnson, G. and Scholes, K. (1999). Exploring Corporate Strategy: Text and Cases. Prentice-Hall.

Information required for the case was primarily collected from Lal Bahadur Shastri National Academy of Administration, Mussorie, India, where the newly recruited civil service officers (probationary trainees) of India are trained. The main protagonist, a senior officer in the Indian Administrative Services was interviewed by one of the authors. Secondary data from contemporary newspaper reports and government orders were also made use of.

Palakkad District Magistrate Gayathri Nair was tasked with acquiring 130 hectares of land for a government-sponsored public-private partnership project to set up a railway coach factory in Palakkad. After taking the landowners into confidence and fast-tracking the administrative process through the line departments, she successfully acquired 93 hectares of land for Phase I of the project. However, the intervention from local politicians and activists halted the next phase. Gayathri was pressured by her bosses to solve the standstill in four weeks. Unable to make the owners realize the benefits of the project, she witnessed a showdown between the agitating masses and the district administration. The entire episode is worsened by the partisan media coverage. The only options open to Gayathri, as the head of the district administration, are either to go ahead with forceful land acquisition and thereby, risk the wrath of the public or abandon the project and bury the months-long back-breaking teamwork. How could Gayathri handle the situation better? What steps could she take at various stages to ensure a balanced outcome for all the stakeholders in the project?

This case is applicable for the courses/sessions in training programmes for executives, and undergraduate courses related to project management, strategic management, leadership and public policy. It is also useful for courses and training programmes on stakeholder mapping and conflict management.

On completion of the case study, students will understand the following learning objectives: the characteristics of quantitative easing (QE) and when it may be appropriate to implement QE; how QE differs from a conventional bond purchasing programme; the impact of direct financing of the fiscus by the central bank on its independence; how the macro-economic and political environments affect and influence national economic policy; the difference between traditional and unconventional monetary policies and potential implications for an economy like South Africa. The learnings from this case study can be used in other global economic environments, particularly in emerging markets. This case study provides valuable insights into decision-making, institutional independence, policy coordination, deficit financing, causes and consequences of price inflation, risks relating to monetary instability and the correct application of monetary policy.

After the announcement of the COVID-19-related lockdown in March 2020 and the subsequent slow-down of economic activity in South Africa, the South African Reserve Bank (SARB) had to consider appropriate macro-economic tools to ensure both price and financial stability in South Africa. The macro-economic policy tools had to be considered in light of the South African economic context, which included acknowledgement of South Africa’s debt crisis and slow economic growth. The central bank responded by introducing the following measures: reducing interest rates to a record low of 3.5% to give consumers financial relief and to promote spending in the economy; purchasing government bonds in the secondary markets to stabilise financial markets; facilitating the loan guarantee scheme that was aimed at providing financial relief to small- and medium-sized enterprises; relaxing the capital and liquidity adequacy requirements that commercial banks are required to meet; and ensuring availability of liquidity to banks through facilities such as the weekly repo auctions. However, despite introducing these interventions, the SARB faced calls from politicians, analysts and academics to do more. Various commentators argued that the SARB could introduce QE and directly finance government spending by purchasing government bonds. Some commentators argued that the reluctance of the SARB to pursue these suggestions was a result of the close alignment and relationship between the SARB and National Treasury. The dilemma faced by Governor Lesetja Kganyago of the SARB was threefold, namely, whether it was appropriate for the central bank to pursue the initiatives and, if so, whether the bank could pursue them without compromising its independence, and if the introduction of those initiatives would not adversely affect the ability of the central bank to fulfil its mandate of price stability and financial stability. In this regard, the governor and his executive team were required to consider the long-term implications of introducing the initiatives on consumer price inflation, independence of the SARB and the appropriate use of monetary policy tools to fulfil the central bank’s mandate. But the question was: What policies should the governor favour?

This case study is based on various macro-economic theories. Therefore, it would be useful to teach this case study in macro-economic courses in the following programmes: master’s in business administration, bachelor of commerce, bachelor of economic sciences and business science studies, as well as on executive education programmes, which consider macro-economic policy. In general, students who undertake economics, business and general management, finance, legal, commerce and banking studies could learn from this case study.

Teaching notes are available for educators only.

CSS 3: Entrepreneurship.

In 2007, BP sought and received regulatory approval to expand operations at its Whiting Refinery in northwest Indiana. Had the project gone forward as planned, the refinery would have discharged significantly higher levels of pollutants into Lake Michigan, but would have also contributed to economic development in the region. The result of BP seeking and being granted regulatory approval triggered a firestorm of controversy from multiple segments of society. This case study draws from secondary sources to examine the positions of a variety of stakeholders who influenced BP's decision as to whether or not it should expand its Whiting Refinery. Relevant stakeholders included for analysis are citizen and environmental organizations, political groups, trade associations, BP's employees, and stockholders. The intended target audience for this case is upper-level undergraduate business students studying issues related to business and society, such as corporate social responsibility and sustainable development.

After working through the case and assignment questions, students will be able to do the following: • Analyse the aspects of strategic leadership and evaluate effectiveness of the leadership in the case study. • Identify stakeholders in a large-scale project and differentiate between their needs and sources of power. • Establish what behavioural mechanisms can be used by leaders to gain support from stakeholders with seemingly divergent pro-poor and pro-growth development orientations for expansion in an emerging market context. • Generate recommendations to communicate the benefits of expansion plans.

On November 8, 2019, Jack van der Merwe, the chief executive officer of the public rapid rail organisation, Gautrain Management Agency (GMA), was considering how to influence stakeholders to support the pace of the expansion planning phase, without alienating the surrounding communities and balancing the various and sometimes opposing stakeholder interests. The case highlights the background to this dilemma in offering the financial background of the Gauteng province and the evolution of the Gautrain project in the context of an emerging market country characterised by institutions at different development levels and how the unique characteristics of the protagonist could influence stakeholder orientations. The case illustrates how the Gautrain is at the centre of a complex transport conflagration in the South African transport ecosystem. Specific stakeholders and their needs are exposed in the case to enable students to analyse their several levels of influence on the project and proposed expansion. The differences between pro-poor and pro-growth development orientations are also highlighted in this case as input to describe the dilemma Van der Merwe faced in his influencing role in this particular South African context. Students will gain insight into how to manage the tensions between pro-poor and pro-growth orientations.

The case is suitable for a graduate-level course on strategy; organisational behaviour; or leadership. The case is also suitable for a post-graduate-level course on an MBA or MPhil program on strategy and leadership.

Teaching notes are available for educators only.

CSS 7: Management Science.

The theoretical basis for the case is information asymmetry and signaling theory, with buybacks providing a mechanism for reducing information asymmetry between management and investors. The controversy surrounding buybacks has led to political and regulatory scrutiny, which, consistent with evidence from academic research, may affect corporate behavior.

The compact case is based on secondary, public information about stock buybacks. All sources used are cited in-text, with full citations included in the references section at the end of the teaching note.

Stock buybacks, a means of providing returns to shareholders, have recently received increased scrutiny by politicians, media and shareholder activists. Proponents have argued that buybacks result in efficient allocation of capital by returning funds to shareholders, whereas opponents have criticized buybacks for enriching executives, providing tax advantages to shareholders and contributing to income inequality. Corporations did not curtail their use of buybacks after the Inflation Reduction Act of 2022 imposed an excise tax. The case frames the buyback debate in current events and focuses on the buyback activity of Apple. The case provides students the opportunity to analyze alternative ways that companies can provide returns to shareholders, evaluate impacts of buybacks on corporate stakeholders and appraise the reasons for, and implications of, current controversy regarding buybacks.

This compact case is appropriate for upper-level undergraduate or graduate courses in financial accounting, tax and finance. This case provides an opportunity to analyze and evaluate stock buyback decisions in the context of the current controversy related to buybacks.

The learning outcomes of this study are as follows:▪ to analyze service attributes that influence customers’ decisions to purchase services;▪ to identify the factors that influence customers’ perceptions of service quality;▪ to identify the “moments of truth” that the service provider (IndiGo) would need to monitor and manage through the service encounter; and▪ to use the Servuction model to analyze the various elements of the service process.

In May 2022, the chief executive officer of IndiGo Airlines - India’s largest passenger airline by market share, Ronojoy Dutta, faced flak over the airline staff's handling of a specially abled child travelling with his parents on IndiGo Airlines. The staff member, reacting to the tantrums of the disturbed child, had refused to allow the boy and his parents to board the flight. He had cited the “risk to other passengers” from the boy as the reason for such a refusal (Biswas, 2022). In spite of the boy’s parents being supported by their fellow passengers, the IndiGo staff member refused to relent, and the flight took off without the trio (Firstpost, 2022). The incident goes viral when a fellow flyer shares a Facebook post describing it first-hand and provokes widespread condemnation of the nation's “preferred airline” (IndiGo, 2023) by citizens and politicians on various social media platforms besides Facebook (Gupta, 2022). Dutta initially supports his employee even as he issues a statement expressing his regret at the “unfortunate incident” (Business Standard, 2022a). The regulatory body for aviation in India, the Directorate General of Civil Aviation, imposes a fine of INR 5 lakh on IndiGo for denying boarding to a specially abled child (Indian Express, 2022). How could an incident like this impact the perception of IndiGo’s service quality? How could Dutta better ensure that IndiGo managed the various touch points with the customer over the entire service encounter – the “moments of truth”? How could he prevent such a fiasco in the future, ensuring that IndiGo remains India’s “preferred airline”?

This case is intended to be taught in an undergraduate or MBA marketing course in a module on service marketing. The case can also form a 90-min module in a service marketing course within an advanced management or executive education program.

Teaching Notes are available for educators only.

CCS 8: Marketing.

On October 6, 2011, President Barack Obama publicly scolded Bank of America for developing a new revenue stream: a $5 monthly fee for all Bank of America debit card holders, which the bank had announced a month earlier. It was a strategy for replacing lost “swipe fee” revenue following the passage of the Dodd-Frank Act and accompanying Durbin Amendment, which capped swipe fees at 21 cents per transaction. This was the culmination of three tumultuous years for the world's largest financial services firm, but would not be the end of its public affairs challenges.

The president's public critique of Bank of America came in response to and helped exacerbate consumer anger about the bank's monthly fee, changes across the banking sector, and general discontent with Wall Street. Bank of America's situation was complicated further by ongoing legal action following acquisitions of Merrill Lynch and Countrywide, which hurt the firm's shareholders and led to large-scale employee layoffs.

In this case study, students will be challenged to analyze how Bank of America could have better managed the competing interests of different stakeholders, including shareholders, employees, regulators, customers, and the public.