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Teaching Resources Library

Ethics

Accounting

Harry Markham's Loyalty Dilemma (A)

By

John Minahan

Oct 1, 2012

Abstract

Harry Markham, a pension fund investment advisor, is torn about whether to tell the board of trustees of the pension fund he is advising that he believes the value of their projected liabilities are actually much larger than what the actuaries say they are. Confronted by the differing viewpoints held by economists and actuaries on how to value liabilities, Markham wonders, in light of the CFA Code of Ethics and Standards of Professional Conduct that he attests to on an annual basis, what are his duties and responsibilities as a professional and to whom—the trustees, his firm, the pensioners—he owes his loyalty.

“Some actuaries and plan sponsors act and speak as if accounting measures are unambiguous, unbiased measures of reality, or perhaps are reality itself. Economists and financial analysts have a term for this: accounting illusion.” – Harry Markham (pseudonym)

Learning Objectives

To introduce students to differing views between actuaries and economists on pension fund liability valuation, and how these views can create conflicts of interest; and get students to think about how they might practice values-based leadership in a business setting.

Appropriate for the Following Course(s)

leadership, ethics, accounting

Harry Markham's Loyalty Dilemma (A)

*An educator (non-watermarked) copy of this case is available only to individuals who hold teaching positions at academic institutions and want to use the case in a course.

THIS CASE HAS A TEACHING NOTE.

Supplemental Material

(for approved educators only)

Harry Markham's Loyalty Dilemma (B)