Case study on Business Ethics

1. SJCC, Bangalore
Business Ethics Valuation Marks: 20
ASSIGNMENT No. 2
Note:
1. This is an individual assignment
2. Please study the following cases “Magical 10000 dollars” and “Cement for Sale”; and
answer the questions given at the end of the case.
3. Report shall be hand written (legible) or typed. (Do not use plastic folder)
4. Last date for submission: 29th
August, before that start of the session that day. Submission
beyond this date and time will attract negative marks.
Case Study: The Magical $100,000
by Dennis Greer
On a weekday morning in 1975, there was an anonymous phone call to a cash teller at one of the
nation's largest national banks. The anonymous caller stated that an employee had just stolen
$100,000 from an electronics supply subsidiary of the bank. The Financial VP of the bank was
notified; he called in one of the internal auditors and assigned him to solve the case. The auditor,
working in conjunction with a retired FBI agent, employed a secretary and immediately set up
an office at the electronics supply plant. An analysis of the accounting records showed that the
theft involved inventory. The first step was to interview many of the 100 employees of the plant
including all plant officers. None of the employees knew anything about the inventory.
An analysis of the Accounts Receivable records showed that a major building construction firm
only owed $9.54, though its supply trucks were always picking up large amounts of electronic
inventory. He immediately became unavailable for questioning! Several days later the auditor
was contacted by an attorney representing the building construction firm for an appointment for
his client and himself. When the auditor arrived, the attorney stated, "I want you to know that
my client has done absolutely nothing wrong! But here is some information you might like to
know." The attorney then explained how the 30-year-old son of the president of the electronics
supply plant would sell inventory at one-half price if the construction firm made out the checks
to the son personally. They had, in effect, purchased $200,000 of inventory for only $100,000.
This information of the theft was immediately supplied to the Financial VP and the bank's
attorneys. Within 48 hours, the president of the electronics supply plant retired. His son had fled
the state and $100,000 in cash was returned to the bank.
Questions: (Justify your answers)
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2. 1) Did the employees know of the lost inventory?
A. As we read the case study, they say 'the first step was to interview many of the 100 employees of
the plant including all plant officers. None of the employees knew anything about the inventory'.
But, since there was an anonymous call stating $100,000 was stolen. We can say that at least one of the
employees would have had some knowledge of the lost inventory.
2) If they did, why didn't they tell more?
A. Fear. Since one of them knew about the missing inventory, they would have known that the
President’s 30 year old son was involved. The president would have a lot of power to put the whole
blame on the employees who had knowledge about the theft.
3) Were the president of the construction firm and his employees honest?
A. The client's attorney had given information to the editor stating that '30-year-old son of the
president of the electronics supply plant would sell inventory at one-half price if the construction
firm made out the checks to the son personally. They had, in effect, purchased $200,000 of
inventory for only $100,000.' Since they were personally making out checks to the son to purchase.
This shows that they were dishonest as well.
4) Had they done anything wrong?
A. Yes. Even after having knowledge that the son was selling at a lesser price for them. They still
continued having transactions with the song and he was being paid personally by check by the
construction firm.
5) Could they be sued?
A. They could have been sued as there were illegal transactions going on to the supplier and the
construction company though they had knowledge about it.
6) Why did the father retire?
A. The father would have retired after finding out that his son was involved in the theft or maybe the
company would have asked him to retire.
7) What was his responsibility?
A. As he was the President of the company, it was his responsibility to ensure that nothing would go
wrong with his company being involved in theft.
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3. 8) Should the bank's corporate officers go to the police and indict the son on grand theft?
A. An internal investigation has to be done finding out the reason of why the theft happened after the
internal investigation was done to why the theft occurred. The decision would be taken be taken by the
higher authorities of the bank whether to go to the police or not.
9) The bank received back $100,000 from the theft. Where from?
A. The bank could have received from the construction company as they had the fear of being sued for
the illegal transaction or the money could have been received from the son after he was caught of his
illegal transaction or the sons father would have paid the bank after trying to convince them not to file
a police case against his son.
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4. Case Study: Cement For Sale
by Robert Solomon and Kathleen Higgins
University of Texas, Austin
You own a cement company, and deal with most of the local contractors for cement, sand, etc.
You have a reputation of high quality products, and for good customer service with your
customers. Your foreman has just run the standard quality control tests you have performed
regularly on your products.
When the test results are ready, you discover that the new batch of product is 5% less durable
than your usual material. It is still well above all industry standards and meets all building codes
and requirements for the purposes for which it is intended, but it is, nevertheless, not up to your
usual company standards. Throwing it away would cost your company many thousands of rupee.
You decide to sell the cement anyway.
5. Should you tell your customers? Justify your stand.
A. According to my understanding, you need to be loyal to the customers. Hence, if you would be
loyal then you would have more customers as you would want to sell quality products.
6. Should you discount the price? Justify your recommendation.
A. Yes, I would keep the less durable products at a discounted price as people would tend to buy at
a lesser rate. Price and the quality of product are directly proportional to each other.
7. Should you tell your employees? Justify your answer.
A. Employees need to know the durability of the products and overall about the company as they
are essential to run the company and serve the needs of the customer.
8. Would you use this cement for the foundation of your own house? Justify your decision.
A. As this would create an impact on my company and the quality of my products, I would not
use this cement for the foundation of my house as people would comment more if they were to
see my house with low quality product being used which would reflect the reputation of my
company.
-Nikita S Lund
15SJCCPGD03
PGDFM
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