Tech Firms Tangled in Web of Ethics

Strauss Zelnick, the new chairman of Take-Two Interactive Software, hosted his first conference call with Wall Street analysts Tuesday -- and the questions were tough.

The company behind the popular Grand Theft Auto line of video games is embroiled in a messy accounting scandal. Its CFO resigned Monday. Founder and former CEO Ryan Brant was fined more than $10 million by state and federal agencies for accounting issues. Take-Two recently restated eight years of financial results.

Now, Zelnick, who was hired as part of a shareholder revolt, must repair the company's business -- and its reputation. "We promise that we'll operate with the utmost integrity," he says.

Take-Two is an extreme example of a tech firm putting money ahead of ethics, says Kirk Hanson, a leading business ethics professor at Silicon Valley's Santa Clara University. But it's hardly the only one.

More than 75 tech companies have revealed ethical violations and investigations, or been criticized over the handling of ethical issues, in recent months. It's a public relations nightmare, especially for an industry that portrays itself as innovators making the world a better place. (One of Google's corporate mantras is "Don't Be Evil.")

But investors don't seem bothered by the ethical flaps. Shares of Take-Two have doubled since the company revealed a Securities and Exchange Commission investigation into its finances in July. Dozens of tech companies have revealed similar accounting problems, many without major stock hits.

Shares of Apple are up 35% since the electronics maker said in August that an internal investigation had uncovered "irregularities" in its accounting. Shares of BEA Systems have changed little since it made a similar announcement in August. McAfee, the maker of Norton AntiVirus and other software, has seen its share price jump 26% since it announced the departure of its general counsel because of accounting problems in May.

Investors should...