Number 1
· This week’s Discussion topic is an Ethics case. Please read the case below and respond to the questions that follow:
“Blake Romney became Chief Executive Officer of Peters Inc. two years ago. At the time, the company was reporting lagging profits, and Blake was
ought in to "stir things up." The company has three divisions, electronics, fiber optics, and plumbing supplies. Blake has no interest in plumbing supplies, and one of the first things he did was to put pressure on his accountants to reallocate some of the company’s fixed costs away from the other two divisions to the plumbing division. This had the effect of causing the plumbing division to report losses during the last two years; in the past it had always reported low, but acceptable, net income. Blake felt that this reallocation would shine a favorable light on him in front of the board of directors because it meant that the electronics and fiber optics divisions would look like they were improving. Given that these are "businesses of the future," he believed that the stock market would react favorably to these increases, while not penalizing the poor results of the plumbing division. Without this shift in the allocation of the fixed costs, the profits of the electronics and fiber optics divisions would not have improved. Now the board of directors has suggested that the plumbing division be closed because it is reporting losses. This would mean that nearly 500 employees, many of whom have worked for Peters their whole lives, would lose their jobs.
1. If a division is reporting losses, does that necessarily mean that it should be closed?
2. Was the reallocation of fixed costs across divisions unethical?
3. What should Blake do?”
Number 2
· Topic: Scenario – Te
y and Lori
The following is an excerpt from a conversation between the store manager of Brothers Grocery Stores, Lori Colburn, and Te
y Whipple, president of Yoder Brothers Grocery Stores.
Te
y: Lori, I'm concerned about this new scanning system.
Lori: What's the problem?
Te
y: Well, how do we know the clerks are ringing up all the merchandise?
Lori: That's one of the strong points about the system. The scanner automatically rings up each item, based on its bar code. We update the prices daily, so we're sure that the sale is rung up for the right price.
Te
y: That's not my concern. What keeps a clerk from pretending to scan items and then simply not charging his friends? If his friends were buying 10-15 items, it would be easy for the clerk to pass through several items with his finger over the bar code or just pass the merchandise through the scanner with the wrong side showing. It would look normal for anyone observing. In the old days, we at least could hear the cash register ringing up each sale.
Lori: I see your point.
Suggest ways that Yoder Brothers Grocery Stores could prevent or detect the theft of merchandise as described.