DuMelon Publishing Inc. is a nationwide company headquartered in Boston, Massachusetts. The firm’s benefits are a significant element of employee compensation. All professional employees at DuMelon receive company-paid benefits including medical insurance, term life insurance, and paid vacations and holidays. They also receive a set reimbursement amount of $250 per day maximum for travel expenses when they conduct business for DuMelon. DuMelon offers a 25 percent match for money the professionals deposit in the company-sponsored 401(k) plan. These benefits vary, depending on the employee’s salary and level in the company. For example, the amount of vacation days increases as a professional is promoted to higher levels. The maximum amount that can be contributed to the 401(k) plan also increases as the employee’s salary increases, subject to an overall limitation provided by tax laws.
When a DuMelon employee attains the position of vice president of a function, such as operations or sales, that person qualifies for a special class of additional benefits: a company car, a larger office with decoration allowances, and access to the executive suite at the Boston office. (The executive suite features a dining room and lounge for the executives’ use.) The perks also include total reimbursement for all business travel expenses.

Required
1. Explain the implications for employee behavior and performance of DuMelon’s two levels of benefits for professional employees, including ethical issues.
2. Suppose that the policy for benefits is not applied strictly at DuMelon. As a result, the following instances have occurred:
a. The company has occasionally paid the travel expenses of VPs’ spouses. Company policy is unclear as to whether this is allowed.
b. Some VPs have special-ordered their company-provided vehicles, which on average costs the company an additional $23,000 for each car.
c. Passes to the executive suite have been lent to other DuMelon professionals.
d. Some of the vice presidents have offices that are much larger than those of other vice presidents. No apparent factors determine who gets the larger offices.
How might this situation affect the behavior of vice presidents and other professionals at DuMelon? What are the underlying implications for cost control of benefits? Use specific examples when applicable.