Question

Accounting Ethics:

Krispy Kreme Doughnut, Inc. sells donuts through its network of stores owned and operated by independent franchisees. Franchisees criticized Krispy Kreme's former CEO, Scott Livengood, for forcing companies with which Krispy Kreme did business to contribute $500,000 to sponsor a “storytelling festival” in the hometown of Mr. Livengood's wife. According to an independent investigation, this expenditure benefited Mr. Livengood and his wife, but did not provide Krispy Kreme with any marketing or promotional benefits.

1. Was Mr. Livengood's insistence that these companies fund the storytelling festival ethical?
2. Did Mr. Livengood likely have an improper tax motivation for structuring the funding of the storytelling festival in this manner?

Answer 1

Answer:

a)

Mr. Livengood's insistence that these organizations subsidize the storytelling festival was not moral. As per an autonomous or independent investigation, this expenditure profited Mr. Livengood and his spouse, yet didn't give Krispy Kreme any advertising or promotional benefits. For this situation if both the parties, the autonomous franchisees just as Krispy Kreme were to profit by this occasion, or if neither parties profited/benefited by this but instead simply did it for pure charitable purposes, at that point this decision would be regarded moral. However, since this just profited Mr Livengood and his spouse/wife while the organizations that gave their cash didn't gain anything consequently, it settled on this a deceptive decision.

b)

It appears to be likely that Mr Livengood was funding the narrating/storytelling thusly for inappropriate tax motivation. On the off chance that he and his wife were the individuals responsible for this festival, and were donating this cash, at that point just they will have the alternative to not pay taxes on this cash since their assets were donated by the organizations. This could have been a way that Mr Livengood and his better half organized the financing of the storytelling festival for ill-advised tax motivation and profited by the equivalent. This donation could have diminished their taxation rate or dispensed with the need to make good on any taxes.