Read the attached file. Respond to the following questions [all eight]. Write three to four sentences in response to each question, and be sure to include references to your text and course materials.
- What is the ethical issue in the case? What makes this an ethical issue?
- Who are all of the stakeholders that are impacted by the ethical issue in the case? Discuss how the ethical issue impacts each stakeholder.
- If you were making a decision about what is the right thing for Raider Inc. to do using the deontological approach, what would your decision be and why? Explain how your decision represents the deontological point of view, and your specific decision making process.
- If you were making a decision about what is the right thing for Raider Inc. to do using the utilitarian approach, what would your decision be and why? Explain how your decision represents the utilitarian point of view, and your specific decision making process.
- Discuss at least three solutions for Raider Inc. to solve the ethical issue. Be sure to discuss the impact of those different solutions for the organization and stakeholders, and what decision making biases and constraints (e.g., bounded rationality) might enter into the process.
- Recommend a course of action for Rick to resolve the ethical issue. What steps should he take? Be sure to discuss the benefits and risks of this course of action.
- Assuming that the leaders of Raider Inc. do not want their employees to behave unethically, what are several (at least three) things that can be done to improve the ethical climate (from both an ethical and decision making standpoint)? What steps can the managers at Raider Inc. take to guide employees to make more ethical decisions?
- Discuss Preventative measures that you would enact to prevent the situation from recurring (e.g., training, policy, disciplinary measures) citing respective company examples.
Ethics Assessment Case
Jon, Rick, and Beth had been friends for a long time and
their relationship had been very profitable. They met while each was working
toward an MBA at the esteemed Jones College of Business – Middle Tennessee
State University. Together, the three developed a business plan for a company
that would acquire businesses and after graduation they “gave it a go.” Their
company, Raider Inc., had purchased several distressed companies and had either
developed them to become “cash cows” or had sold them for great profit. Beth’s
strength was marketing, Rick was a finance specialist, and Jon was the
management guru who developed strategy and kept the group on task.
Another company, Pacific Life Books (PLB), appeared on the
radar as a possible acquisition candidate. Jon, Rick, and Beth visited the
company and had gathered information related to their particular business
discipline. This was not their “first rodeo.” The trio worked methodically, not
wasting time by stepping on the turf of each other. It was now time to compare
notes and determine if proceeding to acquire the PLB was a good move.
Jon called a meeting to consider the possibilities. As was
their norm, the three met in Raider Inc.’s conference room. These intense
sessions took most of a day and sometimes spilled over into a second day. In
front of them lay all the related information: financial statements, marketing
reports, lease agreements, etc.
PLB was a publishing company which specialized in novels
related to life on the American West Coast under the theme “life near the
ocean”. Beth reported that the company’s brand was solid and could be the basis
of a strong marketing effort going forward. Rick identified the cause of the
company’s distress. In an effort to lower unit costs, PLB typically purchased
large quantities of books from its supplier; the result was a large and growing
inventory that continually drained PLB’s cash. Jon provided insight into the
organizational chart and management culture at PLB; vast improvement
opportunities were available on that front. However, if a sale of PLB wasn’t
soon consummated, PLB’s existence was threatened.
After much deliberation, a potential strategy was developed.
Raider Inc. would purchase equity in PLB, converting it to a privately owned
C-corp, and the previous owners would continue as minority owners. The newly
formed company would reduce inventory through the utilization of new “digital
printing techniques” designed to produce smaller quantities at lower unit
costs. Jon would intervene as a “consultant”, working a couple of days per
week, coaching PLB’s management team on how to organize, lead, and control the
business. The prospects were good – with the strategy developed by Raider
Inc.’s three leaders, PLB would soon be generating cash.
Then Rick asked, “What about Johnson Printing?” Johnson
Printing had been a loyal and trusted PLB vendor, continuing to provide novels
during both lean and prosperous times as a true strategic partner. Johnson
Printing had inventoried books and allowed extended terms on its accounts
receivables with PLB. Without Johnson Printing’s support, PLB might not have
survived the last few years, much less enjoyed growth in the book segment of
its business. PLB owed Johnson Printing $250,000. This by far represented PLB’s
largest accounts payable.
“Of course, we’ll default on that unsecured debt,” Jon
quickly replied. Jon’s answer didn’t surprise Rick. Rick countered, “I am not
sure I am completely comfortable with that. Johnson Printing is a small
company, a blow that big could put them out of business.” Surprised that Rick
would question the strategy, Jon stated, “We’ll give them the opportunity to do
business with us in the future. As for the $250,000, if they choose to pursue
legal action we’ll just bankrupt PLB and continue to execute our strategy. As
for you, me, and Beth, we’ll be protected by the C-corp status of both PLB and
Raider Inc.”
Rick paused and said, “I know we’ve successfully executed
this strategy in the past – walking away from a company’s previous debt. I
recognize that we’ve never suffered legal recourse from vendors we’ve defaulted
on. But several loyal vendors have suffered because of our actions; we drove
more than a few companies out of business. We’ve made a lot of money buying and
selling companies… a lot of money. In the first few years, the only way we
could do a deal like this was to default on the accounts payable. But now, is
it necessary that we put another good vendor like Johnson Printing in distress
to get this deal done?”
