Question

Ethical Issue

Becky Knauer recently resigned from her position as controller for Shamalay Automotive, a small, struggling foreign car dealer in Upper Saddle River, New Jersey. Becky has just started a new job as controller for Mueller Imports, a much larger dealer for the same car manufacturer.
Demand for this particular make of car is exploding, and the manufacturer cannot produce enough to satisfy demand. The manufacturer’s regional sales managers are each given a certain number of cars. Each sales manager then decides how to divide the cars among the independently owned dealerships in the region. Because of high demand for these cars, dealerships all want to receive as many cars as they can from the regional sales manager.
Becky’s former employer, Shamalay Automotive, receives only about 25 cars a month. Consequently, Shamalay was not very profitable.
Becky is surprised to learn that her new employer, Mueller Imports, receives over 200 cars a month. Becky soon gets another surprise. Every couple of months, a local jeweler bills the dealer $5,000 for “miscellaneous services.” Franz Mueller, the owner of the dealership, personally approves payment of these invoices, noting that each invoice is a “selling expense.” From casual conversations with a salesperson, Becky learns that Mueller frequently gives Rolex watches to the manufacturer’s regional sales manager and other sales executives. Before talking to anyone about this, Becky decides to work through her ethical dilemma . put yourself in becky's place :

1)tell the highlights of the ethical issues, analyze the situation

put yourself in becky's place :

2. What is the ethical issue?
3. What are your options?
4. What are the possible consequences?
5. What should you do?

Answer 1

Answers:

1.) The issue here is that it appears that Mueller is bribing the manufacturer’s regional sales managers and executives. Mueller is approving these invoices as a “selling expense.” Mueller is not practicing an ethical professional practice which is outlined by the IMA and states principles of honesty, fairness, objectivity, and responsibility. By what Mueller is doing he is completely taken honesty and objectivity and thrown it out the window. There is no way the manufacturer’s regional manager is being objective if they are receiving gifts and accepting Rolex watches and rewarding Mueller with 200 cars each month.

2.) According to the IMA, Becky has a few options to be done in a order if she believes there is an ethical dilemma. They include: discussing the situation with an immediate supervisor, the higher mangement, an objective adviser, and if necessary, an attorney. if the issue is not solved after all these steps leave the job.

3.) The classification of “selling expense” is inaccurate because we know selling expenses include things like sales salaries, sales commissions, advertising, depreciation on store buildings and equipment, store rent, utilities on store buildings, property taxes on store buildings, and delivery expense. The consequences of the company getting caught would be a loss in credibility and most likely business. If the manufacturer is caught accepting bribes they will likely have to answer to the Securities and Exchange Commission and or the Department of Justice. They could face paying huge penalties and losing a lot of investors.

4.) If I were Becky, I would discuss my findings with my immediate supervisor, or if I didn’t trust that that would bode well for me in fear of losing my job, I would seek an objective party to discuss with. Perhaps some sort of anonymity would be helpful.