This case study examines the failure of top management at Putnam to exercise ethical behavior in the face of their clear knowledge of corruption in the company. Market timing by employees was expressly forbidden by Putnam. Six employees, including two portfolio managers, repeatedly engaged in market timing activities from 1998 to 2003, garnering over a million dollars in personal profit. The CEO and key senior executives had factual knowledge of the abuses. Management failed to stop the abuses or to discipline (...) those involved until faced with charges from government regulators. By failing to do so, top management breached ethical duties to its shareholders and inflicted serious damage on the organization. The end results of top management's failure to address ethical violations were significant outflow of assets from Putnam's funds, payment of penalties, and loss of trust among investors. This case raises awareness about ethical issues surrounding mutual fund trading practices and the impact that top management can have on the ethical behavior of employees. (shrink)