ETHICAL DILEMMA
The management of the Auto Parts Division of the SantanaCorporation receives a bonus if the division's income achieves aspecific target. For 2013 the target will be achieved by a widemargin. Mary Beth Williams, the controller of the division, hasbeen asked by Philip Stanton, the head of the division's managementteam, to try to reduce this year's income and "bank" some of theprofits for future years. Mary Beth suggests that the division'sbad debt expense as a percentage of net credit sales for 2013 beincreased from 3% to 5%. She believes that 3% is the more accurateestimate but knows that both the corporation's internal auditors aswell as the external auditors allow some flexibility when estimatesare involved.
Presented below is a sequence of steps that provide a frameworkfor analyzing ethical issues. These steps can help you apply yourown sense of right and wrong to ethical dilemmas.
Step 1: Determine the facts of the situation. This involvesdetermining the who, what, where, when, and how.
Step 2: Identify the ethical issue and the stakeholders.Stakeholders may include shareholders, creditors, management,employees, and the community.
Step 3: Identify the values related to the situation. Forexample, in some situations confidentiality may be an importantvalue that may conflict with the right to know.
Step 4: Specify the alternative courses of action.
Step 5: Evaluate the courses of action specified in step 4 interms of their consistency with the values identified in step 3.This step may or may not lead to a suggested course of action.
Step 6: Identify the consequences of each possible course ofaction. If step 5 does not provide a course of action, assess theconsequences of each possible course of action for all of thestakeholders involved.
Step 7: Make your decision and take any indicated action.
ETHICAL DILEMMA
The management of the Auto Parts Division of the SantanaCorporation receives a bonus if the division's income achieves aspecific target. For 2013 the target will be achieved by a widemargin. Mary Beth Williams, the controller of the division, hasbeen asked by Philip Stanton, the head of the division's managementteam, to try to reduce this year's income and "bank" some of theprofits for future years. Mary Beth suggests that the division'sbad debt expense as a percentage of net credit sales for 2013 beincreased from 3% to 5%. She believes that 3% is the more accurateestimate but knows that both the corporation's internal auditors aswell as the external auditors allow some flexibility when estimatesare involved.
Presented below is a sequence of steps that provide a frameworkfor analyzing ethical issues. These steps can help you apply yourown sense of right and wrong to ethical dilemmas.
Step 1: Determine the facts of the situation. This involvesdetermining the who, what, where, when, and how.
Step 2: Identify the ethical issue and the stakeholders.Stakeholders may include shareholders, creditors, management,employees, and the community.
Step 3: Identify the values related to the situation. Forexample, in some situations confidentiality may be an importantvalue that may conflict with the right to know.
Step 4: Specify the alternative courses of action.
Step 5: Evaluate the courses of action specified in step 4 interms of their consistency with the values identified in step 3.This step may or may not lead to a suggested course of action.
Step 6: Identify the consequences of each possible course ofaction. If step 5 does not provide a course of action, assess theconsequences of each possible course of action for all of thestakeholders involved.
Step 7: Make your decision and take any indicated action.
