Introduction
Corporate fraud is a serious matter (Fusaro & Miller, 2002). In the past, consumers only need to worry about thieves in the night and armed robbers (Salinger, 2005). But in modern times, criminals can be found in corporate offices (Kotler & Lee, 2005). The way accountants and executives committed fraud at Enron and WorldCom is a good example of corporate fraud (Post, Preston, & Sachs, 2002). Business ethics is an important issue as seen in the following case studies.
Relevant Facts of Mini Case #1
Chris had to impress his superiors in order to get a promotion. He wants to become a branch manager, but two years after his first training assignment, the bank still relies on him as a management trainee. In one occasion he came across an ethical dilemma. A new teller named Carole Baker made a mistake. A customer came in to use the drive-thru service of a particular bank and asks the teller to process a $100 check. But she records it as $1000 dollar check. Thus, the ledger promptly shows a deficit of $900. If the management discovers the problem, then Carole Baker will lose her job.
Chris decides to call the customer to explain the error. But the customer said that he received only a hundred dollars. Chris knew that he can do two things. He can report the error and expects Carole to be fired from her job. The second thing that he can do is to take the $900 from the customer’s account. In the meantime he can also place the amount in a temporary suspense account to balance the ledger, so that Carole can keep her job.
Ethical Issues
The first ethical issue is related to the dishonesty of the customer. The client decides to keep the money that is the result of an error. He should have returned the money in order to help Carole Baker keep her job. But the client refuses to do so. As a result Chris and Carole Baker are in an ethical predicament. Chris can decide to make a formal report or decide to help Carole. If Chris decides to do what was expected, then he can continue with his job. But if he decides to help Carole, then he can jeopardize his career. He will not be promoted and there is a possibility of administrative charges can be filed against him. If Chris decides to move the funds from the customer to finance the deficit in the ledger, then it is also an example of a white-collar crime.
If Chris decides to help Carole, then one option is to remove the funds from the customer’s account. This seems to be a wise choice considering that the customer stole the money from the teller. It is a white-collar crime because he is a willing participant and he made it possible to steal the said funds. He must carefully consider his actions based on its impact to the primary stakeholders. The primary stakeholders are the client who took the money, Carole Baker, Chris, the bank managers and the other clients of the bank.
Possible Alternatives
Chris cannot afford to move funds around. The customer will soon discover that $900 is missing from his account. He can sue the bank and the bank will take serious disciplinary actions against Chris. One possible alternative is to ask Carole if she can borrow money from other people and that money to cover the deficit in the ledger. Chris can also give her the money as a type of loan. On the other hand Carole can resign.
Relevant Facts of Mini Case #2
Kathy Ryan is the Trade Credit Officer working for the Diversified Consolidated Corporation or DCC. Scott Bradley is the Treasurer working for a firm called North Manufacturing. Mike Walnnan is a friend of Kathy Ryan working with a competitor called the Basic Products. Now, Kathy has a long-standing business relationship with North Manufacturing. Kathy handles the account of the said firm and DCC provides credit to keep the business afloat and provides good credit rating to its suppliers.
Kathy has the right to be anxious because DCC released $1 million in loans to North Manufacturing. If the firm defaults on their loan, then it would be bad business for DCC. Kathy will never be able to receive a bonus that covers 25 percent of her annual compensation. There is a possibility that she will not be promoted and there is also a possibility that DCC can fire her. She has to confront North Manufacturing’s treasurer with regards to rumors of financial trouble.
Scott Bradley immediately made a confession to Kathy regarding their financial position. He tells Kathy that North Manufacturing may file for bankruptcy. Scott Bradley proceeds by asking her to give a good word for them to other credit suppliers. They needed the money to keep their business. If they can secure a loan, then they can go through this whole ordeal without filing for bankruptcy.
What Will You Do?
Kathy should encourage Mike to provide credit to North Manufacturing. Kathy can see the issue from a different perspective. She can view herself and credit suppliers as having an obligation to help businessmen (Prout, 2006). DCC made money through the loans made to North Manufacturing. In a time of difficulty, Kathy cannot simply abandon them. There is nothing wrong with providing funds to North Manufacturing because their business continues to be productive. The only thing that they need in order to survive this period of difficulty is to be able to secure a line of credit from credit suppliers.
Mike must do his homework. Although it is a strategic move to ask his friends working in the credit industry, the ultimate responsibility remains with the credit officer. He must be able to determine though due diligence if the risk outweighs the benefits of extending credit to North Manufacturing. Mike must talk to other credit officers. He must utilize his network to find out more about North Manufacturing.
Possible Alternatives
Kathy can decide to tell Mike that North Manufacturing can go bankrupt any moment. But she must provide the context and explain to Mike that although North Manufacturing is experiencing financial troubles it does not mean that the collapse of the company is imminent. She must also stress out that if Basic Products decides to provide funds to North Manufacturing, then they have a new business partner that knows how to pay their debts. Mike can disagree and conduct his own research regarding the said firm. It is best that Mike visits North Manufacturing in order to determine their financial position.
References
Fusaro, P., & Miller, R. (2002) What went wrong at Enron. New Jersey: John Wiley & Sons, Inc.
Kotler, P., & Lee N. (2005). Corporate social responsibility: Doing the most good for your company and your cause. New Jersey: John Wiley & Sons, Inc.
Post, J., Preston, L., & Sachs, S. (2002) Managing the extended enterprise: The new stakeholder view. California Management Review, 45(1), 6-28.
Prout, J. (2006) Corporate responsibility in the global economy: A business case. Society and Business Review, 1(2), 184-191.
Salinger, L. (2005). Encyclpedia of white-collar & corporate crime. CA: Sage Publications, Inc.