Sact Creek Company's most recent financial statements showed dismal performance. There was a net loss of...

Sact Creek Company's most recent financial statements showed dismal performance. There was a net loss of $10,000 and the statement of cash flows showed a net cash decrease in all categories. The company president called all the managers together and asked them to do all they could to make sure the next quarter's performance was better.

Ted Flay, manager of the manufacturing division, sold off old manufacturing equipment. He also reclassified several workers to part time (30 hours per week) and hired additional temporary workers to take up the slack. This saved the company money, since part-time workers do not have the same insurance and other benefits as full-time workers.

Will Smith, financial manager, immediately suspended payments on all accounts except those on which interest would accrue. He also instituted aggressive collection procedures.

Required:
1.    Were Ted Flay's actions ethical? Explain.
2.    Were Will Smith's actions ethical? Explain.
3.    Were the company president's actions ethical? Explain.

Solutions

Expert Solution

1. In case of Ted Flay , his actions were not unethical in particular. However, he did reclassify workers from full time to part time depriving them of the benefits they deserved. At the same time, it can also be argued that he provided employment to more people by hiring a new part time workforce. Selling off old manufacturing equipment is well within his rights.

2. All of Will Smith's actions are ethical. As a finance manager, he suspended payments on all accounts except those bearing interest. He has done this to improve the liquidity position of the company, He has also ensured that no cost has to be borne by the company due to his actions, Further, deploying aggressive collection procedures is a common business practice.

3. It is the responsibility of the company's president to drive the company towards better financial health. He has driven his employees to achieve this but in no way has he asked them to do anything unethical. This might have created a certain pressure on the employees. However, it is a part of the job. Thus, the company president's actions were ethical.

ekkarill92 answered 1 year ago

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