Question

In: Operations Management

Did your coworker do anything unethical in this transaction?

 

  • Did your coworker do anything unethical in this transaction?

  • Assuming you feel this was an unethical situation, how do you handle this? Remember, this is your friend and co-worker.

Material: You have a co-worker at work that you are also friends with. One day, a borrower comes in and meets with him. You overhear the borrower tell your co-worker that he has a loan with his mom and dad for about $10,000 that he pays $300 a month. Your co-worker proceeds as if he didn’t hear your borrower at all. Once he has taken the application, he tells the borrower that he qualifies for maximum financing for a $250,000 home. However, that does NOT take into consideration the $300 a month the borrower pays his parents for the loan.

Solutions

Expert Solution

Did your coworker do anything unethical in this transaction?

Yes. The colleague acted unethically in the transaction by not realizing that the borrower pays $300 a month to provide his parents with the $10,000 loan. This figure should be modelled by the co-worker while establishing the borrower 's maximum funding limit. The $250,000 is based on the borrower's incorrectly inflated loan capacity and this is unethical, as the risk exposure in this transaction is improperly increased.

Assuming you feel this was an unethical situation, how do you handle this? Remember, this is your friend and co-worker.

By talking to my colleague, I will handle this situation immediately. I am going to discuss with him that his acts are immoral and that he should minimize from the estimated $250,000 the borrower 's overall funding sum. It'll be the right step and the ethical step for me to reason with him. In the event that my boss disagrees, I would have no choice but to tell my company's manager about the matter.


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