In Ethics Case BYP5-6, we are presented with a seemingly harmless accounting issue. Laura McAntee has just been hired as an assistant treasurer for a large retail store. Her new boss used to have her position but has since been promoted to treasurer. While explaining her new duties, he has asked her to date checks to pay invoices at a discounted rate, but hold on to the checks in order to gain interest on that money. He continues to explain away the practice by saying “everyone does it” and that the creditors need the business and will take it.
Ethical Considerations The ethical consideration in this case is that Danny Feeney, Laura McAntee’s new supervisor is asking her to commit fraud in order to make financial gains for the company. This is a practice that Mr. Feeney had previously established as he was the assistant Treasurer in charge of making sure the company’s high credit rating was maintained and taking advantage of cash discounts. The retailer has a centralized location for all its accounting, so there was no “check and balance” in place.
Because Mr. Feeney was able to keep the company’s credit rating high and was able to get the company’s creditors to accept late, discounted payments the practice has continued and he was ultimately rewarded for such activities. Stakeholders There multiple stakeholders in this situation who are both being harmed and benefitting from this practice. The stakeholders that are being harmed from this practice are the creditors, the creditors’ other customers, and potentially Laura.
The creditors are being harmed the most in this practice because they are losing out on revenue. By taking advantage of the discount, the creditors have to record their merchandise at a reduced cost. This takes away from potential profits for the company. This could trickle down and affect the other customers of the creditors. By having to record merchandise at a reduced cost, the creditor could pass that loss onto other customers. Laura could potentially be harmed by continuing the practice if the creditors were to complain or stop business with the retailer.
Since Laura would not be maintaining the company’s high credit rating, she could be in turn fired. It could also negatively impact the entire company if it were to come out that the company was committing fraud. The stakeholders that are benefitting from this practice are the retail company, their customers, and Laura and her boss. The retail company is benefitting by having the money in there account for longer therefore increasing the interest and the company’s overall profits.
They are also receiving products for a reduced rate, which increases profit. The retailer can then pass this savings onto the company’s customers making them beneficiaries of this practice. Laura and her boss also benefit by keeping costs down for the retail company. Mr. Feeney, who initiated the practice, was rewarded with a promotion. Laura could also get rewarded for continuing the practice through bonuses or promotions. Continue the Practice or Not
Since Laura’s primary responsibility is to maintain the company’s high credit rating by paying all bills when due and take advantage of all discounts, she should not follow Mr. Feeney’s example. Mr. Feeney is asking her to knowingly commit fraud and act in an unethical manner. By doing the right thing, she is still meeting her responsibilities to the company and can not get in trouble. If Mr. Feeney is unhappy with her, she can take the matter to his boss.