Read the bellow discussion topic. Your job is to respond to the discussion topic (3 SOLID PARAGRAPHS WITH REFERENCES) and respond to comments 1 & 2- different perspectives from other people (2 PARAGRAPHS FOR EACH COMMENT WITH REFERENCES, IF USED).
DISCUSSION TOPIC:
M.K. Gallant is the president of Kranbrack Corporation, a company whose stock is publically traded. In a meeting with stockholders at the first of the year, Gallant stated profits would rise by 20%. It is now November, Stan Richart, the vice president in charge of the technologies division sees making the target profit for his division will be difficult. He directed the following:
- Discretionary expenses be delayed until the beginning of the new year
- On December 30th, he discovered that a warehouse clerk had ordered $350,000 of parts in early December. Even though the parts were not needed until February of the next year. These parts are ordinarily expenses when received and Richart ordered them sent back. The parts have been received and the supplier will not accept returns.
- Gallant ordered the receiving dock to change the dates on all products received between December 25th and December 31st to the first week in January.
COMMENTS #1
- Are the actions ethical? Explain why or why not.
On the surface this small sample size of executive decision making seems totally unethical. But, consider the decision making process of M.K. Gallant. In my opinion Gallant is taking a calculated risk. 1) Gallant must prevent the exodus of stockholder monies. 2) Poor supply chain management (warehouse department) may do more damage discrediting the company to future investors. 3) Gallant must keep his company operational, profits at a desirable and realistic level to attract future investment, and his employees employed. His decision is warranted and justified in changing the dates on the documents in the receiving dock. The parts are still company property/inventory and any fines that may or may not be imposed by the SEC will not exceed future potential earnings or affect current company operations.
2. Does the general management philosophy and accounting policies at Kranbrack discourage ethical behavior by their managing by the numbers?
Negative, corporations operate to increase their bottom line. Regardless of what their public relations agenda is. We must understand corporations are functioning entities whose sole purpose is to make money for the company, investors, and continue sustainable growth. The situation in Kranbrack should lead to companywide improvements in supply chain operations. Safeguards should be implemented for supply orders exceeding certain dollar amounts and supply orders put in the last quarter of the financial year need approval from upper management. Decisions in corporations are based by the numbers regardless of what the situation is.
COMMENTS #2
- Are the actions ethical? Explain why or why not.
Mr. Richart is facing a dilemma. The actions may or may not be ethical from a business ethics perspective depending on the language of the policy. If the policy clearly states that parts are expenses when received, then Mr. Richart’s directives are in violation of the company’s policy. If the policy has language that says parts are ordinarily expenses when received and any exceptions must be approved by management, then Mr. Richart’s directives are within the policy and there is no violation because Mr. Richart has a management role.
Another aspect to consider is the gray area which involves the term “ordinarily.” Mr. Richart may rationalize his actions because he perceives the business situation he faces is “not ordinary”, and therefore, the ordinary policy does not apply. Using this rationale, he may contend that his actions are not in violation of company policy and he may assert that he is acting in the company’s best interest by helping the company reach its goal.
- Does the general management philosophy and accounting policies at Kranbrack discourage ethical behavior by their managing by the numbers?
Yes, the general management philosophy and accounting policies at Kranbrack discourage ethical behavior by their managing by the numbers. The president of the company, Mr. Gallant, is putting out a headline number “profits to rise by 20%” that financial analysts on Wall Street love to see and regurgitate in their headlines, articles, financial estimates, and financial reports in traditional and social media. Mr.Gallant may be seen as a “earnings hero” especially if he is making his profit statements during an economic recession. He may have a fame motive and yearn for the spotlight “to be noticed, to be wanted, to be loved, to walk into a place and have others care” (Carey, 2006). By publicizing the profit target, Mr. Gallant is putting the managers under tremendous pressure to “make the numbers” and has created artificial dilemmas that otherwise would not have been. He is putting the managers in an awful position. Putting managers in awful positions is a springboard for unethical behavior. Mr. Gallant should seek his fame in other ways.
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