If you were a Pepsi executive, what would you do if contacted by a Coca-Cola employee who was willing to give you Coke’s secret ingredients? Would you say thanks, inform your Pepsi boss, or inform Coke’s legal office?

Leaders can give long lectures about ethics. But the real test occurs in quiet moments when employees decide whether to do what’s right.

How can a CEO influence such decisions? By emphasizing the importance of ethics, especially when it’s easy to give in to temptation.

For over a century, Coca-Cola and Pepsi-Cola have competed for market share. Both beverages contain a syrup recipe that’s a heavily guarded trade secret.

Steve Reinemund, Pepsi’s former CEO, recalls an incident in which his counterpart at Coca-Cola called out of the blue. Coke’s CEO thanked Reinemund for his actions, but Reinemund had no idea what that meant.

Digging for information, Reinemund discovered that a rogue employee at Coke sought to sabotage his employer by stealing a product ingredient list and mailing it to Pepsi. When an administrative aide at Pepsi opened the letter, she recognized its intent and immediately resealed it and sent it to Coke’s general counsel.

She did not discuss it with anyone at Pepsi or show it to any colleagues. Notifying Coke’s legal team struck her as the right thing to do.

“It was a great day for PepsiCo,” Reinemund says.

The employee’s wise move validated Reinemund’s belief that a leader sets an ethical tone and takes every opportunity to reinforce it. Such messaging cascades down the ranks and enables individuals to make sound judgments.

Like many CEOs, Reinemund established boundaries for how much risk he and his team should take when weighing strategic moves. But he frequently declared that when facing an ethical issue, no risk is acceptable.

“That is especially true today as it is so hard for a company to recover when there has been some ethical miscalculation,” he says.

— Adapted from “Corporate CEOs talk ethics, leadership at Soderquist anniversary event,” Kim Souza, www.thecitywire.com.

If you were a college administrator at an elite school that receives many applications from high school students with extremely high grades and test scores, would you set aside a few of the coveted seats to low-income applicants with promising scores and give them full scholarships to diversify the student body and give them a chance? If so, how what % of the available seats and how would you explain this to applicants with higher scholastic scores who are rejected?

As the shaded quadrangles of the nation’s elite campuses stir to life for the start of the academic year, they remain bastions of privilege. Amid promises to admit more poor students, top colleges educate roughly the same percentage of them as they did a generation ago. This is despite the fact that there are many high school seniors from low-income homes with top grades and scores: twice the percentage in the general population as at elite colleges. 

A series of federal surveys of selective colleges found virtually no change from the 1990s to 2012 in enrollment of students who are less well off — less than 15 percent by some measures — even though there was a huge increase over that time in the number of such students going to college. Similar studies looking at a narrower range of top wealthy universities back those findings. With race-based affirmative action losing both judicial and public support, many have urged selective colleges to shift more focus to economic diversity.

This is partly because students are more likely to graduate and become leaders in their fields if they attend competitive colleges. Getting low-income students onto elite campuses is seen as a vital engine of social mobility.

Yet as Anthony P. Carnevale, director of Georgetown University’s Center on Education and the Workforce, put it, “Higher education has become a powerful force for reinforcing advantage and passing it on through generations.”

It is true that low-income enrollment at some top colleges has been slowly climbing. And some studies suggest that colleges are well intentioned but simply ineffectual in addressing economic diversity. College leaders also point to studies showing that most low-income students with high grades and test scores do not apply to highly selective colleges.

But critics contend that on the whole, elite colleges are too worried about harming their finances and rankings to match their rhetoric about wanting economic diversity with action.

“It’s not clear to me that universities are hungry for that,” said Richard D. Kahlenberg, a senior fellow at the Century Foundation who studies college diversity. “What happens if low-income students start calling the bluff of selective universities, and do start applying in much larger numbers? Will the doors be open?”

There are elite colleges, both private and public, with three times as many recipients of Pell Grants — the main federal aid for low-income students — as some of their peers, which critics say shows that the others could be doing more. Prestigious schools like Vassar, Amherst, Harvard and the University of California system have managed to increase low-income enrollment.

“A lot of it is just about money, because each additional low-income student you enroll costs you a lot in financial aid,” said Michael N. Bastedo, director of the Center for the Study of Higher and Postsecondary Education at the University of Michigan. “No one is going to talk openly and say, ‘Oh, we’re not making low-income students a priority.’ But enrollment management is so sophisticated that they know pretty clearly how much each student would cost.”

Colleges generally spend 4 percent to 5 percent of their endowments per year on financial aid, prompting some administrators to cite this rough math: Sustaining one poor student who needs $45,000 a year in aid requires $1 million in endowment devoted to that purpose; 100 of them require $100 million. Only the wealthiest schools can do that, and build new laboratories, renovate dining halls, provide small classes and bid for top professors.

The rankings published by U.S. News and World Report, and others, also play a major role. The rankings reward spending on facilities and faculty, but most pay little or no attention to financial aid and diversity.

“College presidents are under constant pressure to meet budgets, improve graduation rates and move up in the rankings,” Dr. Carnevale said. “The easiest way to do it is to climb upstream economically — get students whose parents can pay more.”

A big part of that climb has been the rise of “merit aid,” price breaks offered to desirable students regardless of their parents’ wealth. A few dozen top schools give no merit aid, but they are the exception. Historically, American colleges gave far more need-based aid, but it is outweighed today by merit aid.

Since the late 1990s, top schools have made several high-profile moves to become more accessible to low- and middle-income families. The policy changes drew heavy coverage, but had limited effect, studies found, largely because poorer consumers were unaware of them.

Harvard, Princeton, the University of Virginia and the University of North Carolina at Chapel Hill eliminated early admission programs that were seen as favoring affluent students. Some colleges stopped including loans in financial aid packages, so that all aid came in the form of grants. Others lowered prices for all but affluent families, not requiring any contribution from parents below a certain income threshold, like $65,000.

But the colleges that ended early admissions reinstated them within a few years, after other elite schools declined to follow their lead, putting them at a disadvantage in drawing top students. Many of the benefits of the no-loan and no-parental-contribution policies went to middle-income families, and in any case, not all of the wealthiest schools, like Harvard, Princeton, Yale and Stanford, fully adopted both.

In 2006, at the 82 schools rated “most competitive” by Barron’s Profiles of American Colleges, 14 percent of American undergraduates came from the poorer half of the nation’s families, according to researchers at the University of Michigan and Georgetown University who analyzed data from federal surveys. That was unchanged from 1982.

And at a narrower, more elite group of 28 private colleges and universities, including all eight Ivy League members, researchers at Vassar and Williams Colleges found that from 2001 to 2009, a period of major increases in financial aid at those schools, enrollment of students from the bottom 40 percent of family incomes increased from just 10 percent to 11 percent.

If you were a federal administrator, would you revise the Medicare nursing home ratings system, which is based on self-reported staff levels and quality statistics, in addition to annual health inspection results, to include more objective independently confirmed measures, such as fines and enforcement actions?

The lobby of Rosewood Post-Acute Rehab, a nursing home in this Sacramento suburb, bears all the touches of a luxury hotel, including high ceilings, leather club chairs and paintings of bucolic landscapes.

What really sets Rosewood apart, however, is its five-star rating from Medicare, which has been assigning hotel-style ratings to nearly every nursing home in the country for the last five years. Rosewood’s five-star status — the best possible — places it in rarefied company: Only one-fifth of more than 15,000 nursing homes nationwide hold such a distinction.

But an examination of the rating system by The New York Times has found that Rosewood and many other top-ranked nursing homes have been given a seal of approval that is based on incomplete information and that can seriously mislead consumers, investors and others about conditions at the homes.

The Medicare ratings, which have become the gold standard across the industry, are based in large part on self-reported data by the nursing homes that the government does not verify. Only one of the three criteria used to determine the star ratings — the results of annual health inspections — relies on assessments from independent reviewers. The other measures — staff levels and quality statistics — are reported by the nursing homes and accepted by Medicare, with limited exceptions, at face value.

The ratings also do not take into account entire sets of potentially negative information, including fines and other enforcement actions by state, rather than federal, authorities, as well as complaints filed by consumers with state agencies. Last year, the State of California, for example, fined Rosewood $100,000 — the highest penalty possible — for causing the 2006 death of a woman who was given an overdose of a powerful blood thinner.

From 2009 to 2013, California fielded 102 consumer complaints and reports of problems at Rosewood, according to a state website. California Advocates for Nursing Home Reform, which also tracks complaints, put the number even higher, at 164, which it says is twice the state average. Nursing home officials are appealing the state fine and point out that only a small fraction of the complaints at Rosewood, which has about 110 beds, have ever been substantiated. While that may be true, the sheer number could be a sign of trouble, industry experts say.

In interviews conducted during a recent visit, a half dozen current and former residents, including some who had lived in other homes, said they did not believe that the home merited a five-star rating. “If I fell down, they’d pick me up, but that’s about it,” said Michael McFadden, 76, who has lived at Rosewood for several years.

John L. Sorensen, the chief executive of North American Health Care, the chain that operates Rosewood, said the quality of the home was excellent. “I would put my parent there,” he said.

Rosewood struggles with many of the same challenges faced by other nursing homes around the country, offering a window into the rating system’s flaws, The Times found. Many residents live three to a room, and there is often a scarcity of basic supplies like washcloths, as well as a shortage of quality staff, according to interviews with current and former patients, their families and statements from former employees.

Lawsuits From Families

Rosewood has also been the subject of about a dozen lawsuits in recent years from patients and their families claiming substandard care.

“It looks nice when you walk in,” said Bonnie Nathan, who said she placed her mother in Rosewood in 2010 mainly because of its five-star rating. She is now suing the home because she claims that workers there failed to treat her mother, Janet Zagon, for a respiratory condition that led to her death. “But I really didn’t have a sense of where patients were going to be cared for,” Ms. Nathan said.

Mr. Sorensen said that his nursing home was not at fault and that even excellent homes occasionally make mistakes.

“While we have had a few problems, they’re pretty minor compared to the overall accomplishments and tremendous customer satisfaction that’s being provided,” he said. The many lawsuits against Rosewood could be attributed to a “very litigious marketplace” in the Sacramento area, he said, and not to poor quality at the nursing home.

Receiving a high star rating has never been more important to nursing homes. When nurses and doctors discharge patients from hospitals, they often use the ratings in referral decisions, and insurers consider them when setting up preferred networks. The ratings are also often a first stop for investors and lenders, who consult them to decide whether a nursing home company is a safe bet.

“This whole program has walked into parts of our industry that we never expected,” said Steven Littlehale, executive vice president and chief clinical officer at PointRight, one of a handful of consulting firms that advise nursing homes on how to improve their ratings.

Widespread acceptance of the ratings is leading to their use beyond the elder-care industry. Beginning this year, Medicare plans to introduce similar five-star ratings for hospitals, dialysis centers and home-health-care agencies.

Federal officials say that while the rating system can be improved — and that they are working to make it better — it gives nursing homes incentives to get better.

“We have seen improvements,” said Dr. Patrick Conway, the chief medical officer at the Centers for Medicare and Medicaid Services. As evidence, he pointed to a decrease in the use of physical restraints by nursing homes and in the number of homes reporting bedsores among patients at a high risk of developing them.

But some nursing homes are not truly improving. Instead, they have learned how to game the rating system, according to interviews with current and former nursing home employees, lawyers and patient advocacy groups.

Nationally, the proportion of homes with above-average ratings has risen steadily. In 2009, when the program began, 37 percent of them received four- or five-star ratings. By 2013, nearly half did.

The Times analysis shows that even nursing homes with a history of poor care rate highly in the areas that rely on self-reported data. Of more than 50 nursing homes on a federal watch list for quality, nearly two-thirds hold four- or five-star ratings for their staff levels and quality statistics. The same homes do not fare as well on the sole criterion that is based on an independent review. More than 95 percent of the homes on the watch list received one or two stars for the health inspection, which is conducted by state workers.

“These are among the very worst facilities, and yet they are self-reporting data that gives them very high staffing and very high quality measures,” said Toby S. Edelman, a senior policy lawyer with the Center for Medicare Advocacy, a nonprofit organization that helps patients. “It seems implausible.”


Should the federal government require cellular providers to lease their networks to competitors at cost, as is done in Great Britain to reduce the $41.50-a-month difference in price for the same service in both nations?

If your monthly cellphone bill seems high, that may be because American cellphone service is among the most costly in the world. A comparison of two similar plans, one in the United States and one in Britain, reveals a marked difference.

Both plans include a new iPhone 5S with 16 gigabytes of memory. Both require a two-year commitment and allow unlimited voice minutes and unlimited texting. The plan offered by the British provider, Three UK, offers unlimited data and requires no upfront payment. With Britain’s 20 percent tax included, the plan costs 41 pounds a month, or $67.97 at current exchange rates.

The plan provided by the American carrier, Verizon Wireless, has an upfront cost of $99.99 and then $90 a month, not including taxes. Spreading the upfront cost over 24 months and adding 17 percent tax — typical for the United States — comes to $109.47 a month. But while the British plan includes unlimited data, the American plan does not. It includes two gigabytes a month, with an additional gigabyte free during an introductory period.

To put that in perspective, two gigabytes of data allows streaming about 15 minutes of music a day and watching about 10 minutes of video a day, according to the Verizon Wireless Data Calculator. If you run over, you’ll see it on your bill.

So why the $41.50-a-month difference in price? Several factors are involved, but an important one is regulatory policy. Britain has forced companies to lease their networks to competitors at cost. The United States has not, allowing a formidable barrier against competitors.

“The United States lacks meaningful competition in its cellular market sector, which leads to higher cell plan prices than a growing list of other countries,” said Sascha Meinrath, founder of the Open Technology Institute at the New America Foundation.

In a 2010 study, the institute found that the minimum cost of a complete cellphone package, which features voice, data and text, was $59.99 a month in the United States, compared with $32.40 in Britain.

“Over the next decade,” Mr. Meinrath said, “U.S. consumers may overpay by over a quarter of a trillion dollars for worse levels of service than customers in other countries receive.”