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Financial accounting to assess stewardship: the case requires students to evaluate Thompson’s stewardship of McDonald’s, in part based on the company’s financial accounting information. Financial reporting performs an important societal role by helping control agency problems that arise from the separation of ownership and management. Since external stakeholders cannot “observe directly the extent and quality of managerial effort on their behalf […] the manager may be tempted to shirk […] blaming any deterioration of firm performance on factors beyond his/her control” (Scott, 2014, p. 23). However, although financial reporting helps hold managers accountable to shareholders, accounting information is not fully informative about managerial effort. For example, while net income provides useful information regarding the CEO’s stewardship, it is also “noisy,” due to recognition lags and other factors (Scott, 2014, p. 364). Efforts undertaken by Thompson in a particular period, such as marketing expenditures, might reduce current earnings, yet boost future profitability. Additionally, Thompson’s predecessor’s past efforts might have positive or negative effects on current earnings. Evaluating stewardship effectively involves considerable judgment, in addition to knowledge of financial accounting. The implication of poor firm performance is that the CEO is ineffective at formulating and implementing strategies and policies to enhance firm value (Dikolli et al., 2014). Specifically, it appears that missing earnings benchmarks matter more for relatively inexperienced CEOs. Don Thompson’s tenure of 33 months at McDonalds is 42 percent lower than median CEO tenure documented in academic research, where the median tenure of chief executives documented in large sample empirical studies is about 57 months (Dikolli et al., 2014). The evidence suggests that the longer a CEO serves, the less likely he is to be dismissed for performance-related reasons. This appears to be the result of the resolution of uncertainty about CEO’s ability and leads to subsequent declines in the level of monitoring by the Board of Directors. Performance evaluation and bias: a significant body of research explores the extent to which female managers are assessed differently than their male counterparts (Powell and Butterfield, 2002). For example, female CEOs face more threats from activist investors than male CEOs. Therefore, even after women achieve the highest managerial rank, they experience more professional challenges than their male counterparts (Gupta et al., 2018). However, the question of whether black CEOs are assessed differently is more challenging to answer empirically as a result of a smaller sample size (only one percent of S&P 500 companies are run by black CEOs). Our case attempts to develop the inference that if female CEOs are subject to bias, analogous forces are likely at work when black CEOs are assessed. Recent evidence further suggests that business students sometimes demonstrate bias in making assessments (Mengel et al., 2018). The authors discuss these findings – as well as strategies for including them in the case discussion – in the “Teaching Strategy” section herein below.

The case was written from the public record surrounding the appointment of Don Thompson and McDonald’s company filings. The record includes articles from The New York Times and The Wall Street Journal, as well as local and industry publications.

The case examines the role of financial accounting in evaluating CEO performance in the context of the appointment of McDonald’s first African-American chief executive and his subsequent two-and-a-half years on the job. The case deepens students’ understanding of the link between financial reporting and stewardship, while highlighting the subjectivity inherent in assessing managerial performance, particularly over relatively short time periods. As students analyze the case, they must consider the extent to which a firm’s results are attributable to luck vs skill. We use “skill” to refer to CEO effort and other controllable factors, while “luck” refers to exogenous factors, such as macroeconomic conditions. Assessing stewardship is of practical significance. It allows pay to be better aligned with performance and empowers stakeholders to identify when a change of leadership may be warranted. The case may also be used to spur reflection, in an applied context, on the importance of being alert to unconscious bias, even when evaluating seemingly objective financial reporting data. Recent research, discussed herein, suggests that business students sometimes exhibit bias when making assessments.

The case should be included in discussions of corporate governance, executive compensation and the role of accounting information in efficient contracting. It is appropriate in intermediate financial accounting courses for undergraduates, introductory graduate accounting courses, or other courses with an element of financial statement analysis. Standard introductory accounting textbooks offer helpful supplementary reading for students. Horngren et al.’s (2014) book, Introduction to Financial Accounting (12th ed.), Pearson, London, provides an overview of the income statement and its role in assessing performance (see Chapter 2) as well as a useful discussion on evaluating the components and trends of a business (see Chapter 12). More advanced students may benefit from the in-depth discussion of earnings quality, operating income and non-operating income found in Chapter 4 of Intermediate Accounting (9th ed.), McGraw Hill Education, New York by Spiceland et al. (2018).

In this case, lessons from the Chicago Benchmarking Collaborative illustrate key principles of collaborative action and the importance of using data to achieve SMART goals.

In 2015, the Chicago Benchmarking Collaborative (CBC) was a network of seven agencies in Chicago, Illinois, serving 12,000 low-income residents. Each of the agencies had early childhood, school-age children, and adult education programs. At the prompting of the Chicago Community Trust, they came together to (1) benchmark their education programs outputs and outcomes; (2) learn and share best practices through developing a common set of metrics and measurements and implementing these measurements into a case management software system; and (3) share the costs of the case management software system to be used for program evaluation and continuous quality improvement.

Three aspects of CBC are particularly noteworthy. First, there are no joint program activities or clients among these agencies. Their exchange is limited to sharing data and other information. This makes CBC distinct from collaborations formed to begin a program or to advocate for a policy. Second, the group requires each agency to enter data on a timely basis and to set SMART goals based on the data reports. The agencies are held mutually accountable for their work to achieve their own SMART goals during the year and report on progress. Third, CBC used monetary incentives to ensure that data entry and SMART goal action remained a priority for each agency.

This case presents some of the entrepreneurial challenges faced by a female leader in the technology sector who conceived a new product based on her passion to help others especially those most disadvantaged.

Upon completion of this case study, students should be able to prepare supply chain and distribution analysis that considers ethics and sustainability, integrate philanthropic efforts as part of an organizational strategy and recognize strategies to promote equity within and beyond an organization.

Connie Stacey (she/her) is an entrepreneur and president of Growing Greener Innovations, an award-winning battery energy storage company based in Alberta, Canada, with a mission to end energy poverty globally. With the emergence of COVID-19 as a global pandemic in 2020, Stacey turned her attention to an innovation called Project Rescue, a ventilator that uses non-identifying patient vitals to track data. It serves as a pandemic early warning system, addressing two key challenges: pandemic data are prone to error, and real-time information is non-existent after the pandemic has spread. This new product was conceived based on her passion to help others, especially those most disadvantaged. This multi-faceted case focuses on the many challenges that Stacey and her team needed to address. The dilemma in this case centres on establishing supply chains amid a pandemic, as well as prioritizing the corporate social responsibility elements of philanthropy and equity within her organization (and beyond).

This case is appropriate for third- or fourth-year undergraduate or graduate-level students.

In addition to “call out boxes” throughout the case and teaching note, additional readings/links/videos are outlined below. (These supplementary materials, “Teaching Tips”, are included in the teaching notes as well.)

CCS 11: Strategy.

The case examines the development and launch of an exchange-traded fund (ETF) based on JUST Capital's socially responsible corporate ranking methodologies. The case provides a market overview of Environment, Social, and Corporate Governance (ESG) and socially responsible investing (SRI), what has driven growth in those areas worldwide, and several best-practice investment approaches. Following the overview, the case describes the founding and development of JUST Capital, explores JUST Capital's ranking methodologies, and presents the decision point faced by the CEO: requisite selection of one of three strategies in order for JUST Capital to generate “self-sustaining” revenue.

Republic Electric is faced with the need to engage in a systematic process of evaluating vendors for its just-in-time manufacturing. The case gives students the opportunity to think through the process for vendor selection in the context of real-world constraints for a specific organization, to become acquainted with the Delphi technique for developing consensus, to gain hands-on experience with linear averaging, to engage in calculations of value indexes, and to recognize the marketing implications of effectively evaluating vendors. A key takeaway for students is the fact that vendor selection decisions are multifaceted and will vary among organizations depending on each organization’s particular strategic needs, operational constraints, and human judgment.

The case is based upon a consulting assignment with the company that is represented by Republic Electric. The experience was gained first-hand by one of the authors.

This case is targeted at undergraduate students in marketing, materials management, supply chain management, and purchasing, but can work well in a variety of business courses in which supply chains or the development of evaluation tools is studied, to include graduate classes.

The concept of vendor assessment is well developed in the literature and represents a pragmatic, but often neglected, step in the practice of choosing suppliers.

Uber had pioneered the growth and delivery of modern ridesharing services by leveraging the explosive growth of technology, GPS navigation, and smartphones. Ridesharing services had expanded across the world, growing rapidly in the United States, China, India, Europe, and Southeast Asia. Even as these services expanded and gained popularity, however, the pickup experience for drivers and riders did not always meet the expectations of either party. Pickups were complicated by traffic congestion, faulty GPS signals, and crowded pickup venues. Flawed pickups resulted in rider dissatisfaction and in lost revenues for drivers. Uber had identified the pickup experience as a top strategic priority, and a team at Uber, led by group product manager Birju Shah, was tasked with designing an automated solution to improve the pickup experience. This involved three steps. First, the team needed to analyze the pickup experience for various rider personas to identify problems at different stages in the pickup process. Next, it needed to create a model for predicting the best rider location for a pickup. The team also needed to develop a quantitative metric that would determine the quality of the pickup experience. These models and metrics would be used as inputs for a machine learning.

The case is a continuation of the series of articles, written in the form of a case, that focus upon various issues relating to case research, writing and teaching with cases. In this article Professor Moore and the other fictitious characters, confront the difficulties that he had experienced grading student case analyses. In discussing the situation with his department chair Gloria Gorham he learns much about the origins of grading and the various methods of evaluating student work. At a later date other colleagues, Chris Anderson and Dave Berger, are brought into the discussion expressing their views and providing rubrics for use in grading student case analyses.

The case describes the first four years of Dhruva, a tax advisory firm set up by Dinesh Kanabar, ex-Deputy CEO of KPMG. Dinesh and other founding partners had worked with the Big-4 firms and were familiar with some of the tensions in the overall ecosystem of Professional Services Firms. Dinesh wanted to build a distinctive professional service firm driven by values of cooperation, high quality work, transparency and stewardship. Very early in its journey, Dhruva's founding team decided that they would use organizational culture as the North Star for guiding decisions related to growth, internal organization design and even admission of new members including Partners. The first four years turned out to be highly successful for the firm. Since inception, it was ranked as Tier-1 firm in the tax advisory space. It was apparent that the firm had succeeded in building a model of alternate organizational paradigm for professional service firms. The next challenge was to test the scalability of this model as the firm embarked on an ambitious growth journey.

In early 2013, Mr. Deepak Kumar, Chairman and Group CEO of MakeMyTrip1 (MMT), summoned a meeting to discuss about redesigning the MMT Homepage2. It was a three-hour meeting at the Hindustan Conference Room at the company's head office in Gurgaon, India. Theis meeting was attended by key members of the homepage website redesign team comprising the CBO, Analytics head, User Experience (UX) head, Product head and the Tech head (CTO). As a pre-read for the meeting, Ajay Singh, Product Head, shared his findings3 that could help in defining the issues faced by visitors to the homepage of MMT.

The learning outcomes are as follows: Students/participants can understand the type of financial fraud pertaining to the case; Students/participants can analyse the case using the fraud triangle perspective; students/participants can describe detection/anticipation strategies to prevent such acts from taking place in the future; students/participants can evaluate the case using the ethical decision-making framework; and students/participants can comprehend the importance of financial literacy when investing, especially in this digital era.

This case discusses the investment funds mismanagement accusations addressed to PT Jouska Finansial Indonesia (Jouska). Jouska is a financial planner business that was immensely popular among Indonesian young investors. It actively posted interesting content on its social media accounts, gaining attention from the millennial and Gen Z generations. However, in 2020, many of its clients reported and filed complaints that their portfolio values decreased significantly because of Jouska’s decision to invest their funds in low-quality stocks. Jouska was also alleged to violate its role as a financial planner by being able to perform several activities that fell under the authority of investment managers. This case attracted the attention of authorities so that the Investment Alert Task Force (SWI) stopped Jouska’s operational activities and initiated an investigation into the case. SWI also blocked Jouska’s websites, applications and social media accounts, in cooperation with the Ministry of Communication and Information. Despite settlement agreements that Jouska claimed had been offered to several clients, at the end of 2020 some of its clients and former clients filed a formal lawsuit. As of January 2021, several alleged criminal actions attributed to Jouska were still under investigation, comprised of money laundering, clients’ funds embezzlement, fraud, and insider trading. In October 2021, Aakar’s status was a suspect in the allegations. This case is another example of investment misconduct or fraud; to put it another way, it is the effect. It is expected that the participants can deliberate other perspectives during the discussion that could be the cause of such a case, hence viewing it holistically.

Undergraduate level.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance.