The Ethics of Bankruptcy

Case Study Presentation

The Ethics of Bankruptcy

Central Issue

Is it ethical to declare bankruptcy in order to maximize your income?

The Ethics of Bankruptcy

SituationPersonal bankruptcies topped 1-million for first time in 1996

Chapter 7, not Chapter 13

Loopholes widely abused

Avoid contractual obligations

The Ethics of Bankruptcy

TLCSigned with LaFace Records

5 Year agreement

Typical royalties for an unknown group

Contract expired in 1996

The Ethics of Bankruptcy

TLCFirst 2 albums go Platinum

R&B Album of the YearRecord of the Year (Nominated)

Established

Declared bankruptcy in 1995

Accused of misusing bankruptcy

Settled and resigned in 1996

The Ethics of Bankruptcy

Billy JoelSigned 10 album agreement with Family Productions in 1970

Stripped Joel of tape and publish rights on future songs

Rocky start on First Album

Mastering error and poor sales

“She’s Got a Way”

The Ethics of Bankruptcy

Billy Joel“Piano Bar” clause

Did not produce second album

Allowed contract to expire

Signed with Columbia in 1972

Released “Piano Man”

Divergent Gambits

TLC

Focused on Revenue Active Adjudication Seize the Spotlight Earned Higher

Royalties

More Expedient

JOEL

Focused on Career Passive Adjudication Shun the Spotlight Earned Higher

Royalties

More Ethical

The Ethics of Bankruptcy

Case Study Presentation