VII.+Homework,+Discussion+Questions,+and+Learning+Objective+Solutions

VII. Module 1000 Homework, Discussion Questions, and Learning Objective Solutions


 * __My answer to Exercise 1-5: __**

There is absolutely an ethical dilemma posed by the course of action considered by the manager. While no ethics violation has occurred because the manager has yet to turn his thoughts into action, he would definitely breach his ethical duties if he embarked on this course of action. In addition to the ethically questionable aspects of his plan, the entire plan constitutes dubious business decisions. I would strongly discourage this manager from carrying out his ideas and mandate that he take a refresher course in business ethics. The clearest ethical violation contemplated is the 50 percent reduction in salary increases for employees who earned promotions. This is effectively stealing from subordinates and has no place in a modern business. Moreover, the 25 percent quarterly reduction in the preventative maintenance budgets is also unethical because he is making decisions regarding company assets from a purely personal standpoint with no regard to business necessity. In addition, the manager’s plan to reduce depreciation of existing equipment may not be unethical on the surface, but does employ questionable accounting practices that could negatively affect the company over the long-term. All three ideas are poor business decisions that could simultaneously hurt employee morale by denying meritorious employees the raises they have earned, reduce the effectiveness of company assets by failing to properly maintain them, and hurt the company’s finances by using improper accounting methods. The manager should scrap his entire plan to focus on what he can do to improve the company in an ethical and financially responsible manner. In order to avoid similar situations, the company should adopt a formal code of ethics without delay and require all employees, especially managers, to familiarize themselves with the policy. Furthermore, a compliance program needs to be established to ensure that employees are acting in accordance with their ethical duties. If any employee, such as this manager, are found to be in violation of the ethics code then they should be fired immediately. By adopting a code of ethics and instilling those values in the corporate culture, the company will be able to attract and retain talented employees who share this vision and a commitment to promoting an ethical workplace.

The manager is clearly considering unethical behaviors, especially the decisions associated with reducing maintenance and promotional salaries. Extending asset life for depreciation has less clear ethical implications. Reducing maintenance may not hurt much in the short run but will have long-run negative financial consequences. Furthermore, the decision for promotions has been made with a given set of financial expectations, and reducing the salary increases by 50 percent for deserving employees is obviously unfair to them. Although the manager is not a cost or management accountant, he is violating the ethical standard under Integrity that requires him to “refrain from engaging in any conduct that would prejudice carrying out duties ethically.” (III-3).The reduction in promotional salary increases is particularly egregious in that he is reducing the salaries of others so that he may benefit. In effect, he is stealing from his subordinates. The reduction in maintenance budget is also a form of stealing—robbing future service potential to produce a current personal benefit.An ethical dilemma does exist if the manager carries through with his plans. The dilemma exists because the manager wants to manipulate income to achieve personal financial gain. A company code of ethics and compliance monitoring is one recommendation. An internal audit could be used to detect and deter such questionable behavior. Furthermore, a company policy requiring managers to justify any expenditure reductions in writing to both the employees and higher management could discourage behavior like the manager’s. The best control, however, is hiring managers with the integrity to do the right thing even when faced with the opportunity to cheat or steal.
 * __ Dr. Ferry's answer to 1-5: __**