Question

I would like to ask this question about ethics in business. Thank you.

Maurice Stokes was one of the best classmates of Roy Russell while he studied his MBA in the USA. Maurice grew up in Addis Ababa, the capital of Ethiopia. Ethiopia’s GDP per capita ranked 187 out of 191 countries due to adverse geopolitics and civil wars in the past. Maurice is talented and hard working. He went through his bachelor degree in Ethiopia and luckily won a scholarship to study an MBA in the USA. Right after he got his MBA degree, Maurice joined AB&T, the world’s biggest mobile phone service provider, as a management trainee. After 5 years’ working in the USA, Maurice was assigned to work as the Vice President in Addis Ababa, where AB&T’s African headquarter is located, to oversee all African operations.

After his MBA graduation, Roy Russell joined his father’s family business– a medium size mobile phone service provider in Hong Kong. Three years later, AB&T acquired Roy’s family business and retained all existing staff. Roy then became an employee of AB&T and he was happy to work for a multinational company with good reputation. After 3 years’ working as financial controller in AB&T’s Singapore office, Roy was offered an opportunity for promotion to work as chief financial officer (CFO) in its African headquarter in Addis Ababa. Eager to get more international exposure, Roy said yes to this offer. This is how Roy came to a reunion with Maurice.

AB&T provides its senior employees in Addis Ababa with a monthly housing allowance of up to $2,500. Compared with the US standard, most of the housing in Addis Ababa is of low quality, and in many regions the law and order are bad. By giving a generous allowance, AB&T aims to ensure that its senior employees live in areas that are safe, convenient and comfortable to ensure that senior executives can have good rest, that they live in a district that is appropriate to the company’s reputation. For housing allowance claim, senior executives need to hand in their monthly receipts for reimbursement. Every month Maurice submits a bill of $2,500 from his landlord to the finance office for re-imbursement. Roy suggested paying a visit Maurice’s house for a few times. However, every time Maurice rejected this suggestion, claiming that he had never entertained any coworkers at home so that his family members would not be distributed. Roy considered this understandable and so did not insist.

After working for six months in Addis Ababa, Roy had a business dinner with a supplier. The supplier mentioned that Maurice was a neighbor in a district called Winter Town. Winter Town is a district quite far from AT&T’s African office and is well-known for its high crime rate in Addis Ababa. Roy was surprised to hear that, as Maurice told him that he lived in Spring Town, a district that many foreign ambassadors lived and a lot more expensive than Winter Town. Through some connection, Roy verified that what the supplier said was true.

Roy decided to confront Maurice about the housing allowance issue. Maurice at first denied but later admitted that his apartment was in Winter Town and the rent was less than $2,500. He defended his action by saying that “Every AB&T senior executive gets $2,500 a month. If I live in an economically way, why should I be penalized? I just receive the same as others”. As a reply, Roy stressed that “It is AB&T objective to let senior employees to live in a safe place and have good rest for the challenging duties during office hours. Besides, the districts that the company’s senior executives live in represent the image of the company. Moreover, the company’s housing allowance policy is reimbursement on an actual basis, i.e. the amount of monthly claim should be the same as the rental value of the apartment and not to allow staff to make a profit. As the regional CFO, I have to maintain my professional standing”. When Roy challenged Maurice for using falsified rental receipts for disbursement claims, Maurice admitted but replied that this is a common and well-accepted practice in Ethiopia.

Later in the discussion, Maurice tried to convince Roy regarding his housing allowance claim practice. Maurice explained his situation that “You may not understand my situation. I have to save every dollar to pay school fees for my ten nephews and nieces. I got my family members’ great support to finish my education. I owe it to my brothers and sisters to give their children the same chance to study as I did. My parents can never understand why I live in a big apartment instead of helping their grandchildren. I am just doing what I should do. The company has no extra expense to reimburse me $2,500 housing allowance per the monthly receipt I submit. As my old classmate and my best friend, please pretend you know nothing and pay me $2,500 housing allowance as before. As a person grown up in Ethiopia, I know all business practice here and have good connection in this country. I know many senior executives in the government tax department and that will be helpful to your work here. I will fully support you to do an excellent job to save some tax for the benefit of our company. You will be compliment by your boss for paying a lower tax than other companies here”.

Roy does not want to lose his friendship with Maurice and he believes it will make his working life easier if he can make use of Maurice’s connection in Africa. Roy is not sure what should be his next step.

Required

1. Identify the ethical issue, if any, involved in this case?                                     

2. Who are the stakeholders in this situation? How are they affected?

  

3. What are Roy’s alternatives?   

4. What course of action will you suggest Roy Russell to take and justify your suggestion?

Answer 1

Answer:

1. Identify the ethical issue, if any, involved in this case?

Answer 1:

The company is paying $2500 to the senior employees so as to ensure that they live in the areas that are safe, convenient and comfortable so that the company’s senior employees could have good rest and that they live in a district that is appropriate to the company’s reputation.

However, Maurice, being the senior employee, is living in the low cost apartment located in the danger zone which was Winter Town, a district quite far from AT&T’s African office and well-known for its high crime rate in Addis Ababa. The apartment in which Maurice was staying was one having a low cost whose charges were less than $2500 but Maurice was submitting the bill of $2500 to the company.

This action of Maurice was an ethical behaviour.

2. Who are the stakeholders in this situation? How are they affected?

Answer 2:

There are three stakeholders in this situation; Maurice Stokes, Roy Russell and the company AT & T of Addis Ababa.

Maurice Stokes is affected in a way that, according to him, he is required to save the money to carry out the education of his nephew and niece and hence he submits the full bill of accommodation amounting to $2500 for the reimbursement even when in reality, his bill of accommodation does not amount for the full reimbursement.

Roy Russell, being the chief financial officer, is in dilemma that whether he should allow the conduct of Maurice Stokes by taking into consideration the Maurice’s connection in Africa or shouldn’t allow the conduct of Maurice Stokes by taking into consideration the ethical issues.

The conduct of Maurice Stokes of living in the Winter Town, a district quite far from AT&T’s African office and well-known for its high crime rate in Addis Ababa will result into the deterioration of the reputation of AT & T’s brand image.

3. What are Roy’s alternatives?

Answer 3:

Roy Russell is left with the two alternatives.

1. Either allows the conduct of Maurice Stokes by taking into consideration the Maurice’s connection in Africa and retains the friendship with him. This will make the work life of Roy Russell easier as Maurice Stokes has been grown up in Ethiopia and he knows all business practice there and have good connection in his country. He knows many senior executives in the government tax department and that will be helpful to Roy.

2. Or should not allow the conduct of Maurice Stokes by taking into consideration the ethical issues.

4. What course of action will you suggest Roy Russell to take and justify your suggestion?

Answer 4:

Roy Russell should not allow Maurice Stokes for his conduct by taking into consideration the ethical issues and should either ask Maurice to stop his unethical conduct and submit the actual bills of accommodation or report the complete situation to management of AT&T Company of Addis Ababa.

The conduct of Maurice Stokes is hampering the reputation of the company and even if Roy supports the conduct of Maurice, the company will come to know the conduct of Maurice in the future course of time and if the company comes to know that Roy has supported Maurice than the company could sue Maurice and Roy because of which the reputation of Maurice and Roy will be completely devastated and they may be required to resign from the job. In order to prevent this situation, Roy should ask Maurice to stop his conduct or should report the situation to the company.