Bill Robbie works for a human resource management firm, People 4 U (P4U), that searches for middle and senior managers for large businesses. The firm receives a fee equivalent to 80% of the salary package of the people the firm successfully finds for clients. Each job is allocated direct expenses, such as the time spent by staff looking for potential employees and interviewing them, stationery, advertising costs, phone calls and secretarial time.

As well as the direct costs, each job is allocated overhead costs determined by the accountant, Crea Tive, who estimates what proportion of total work done by the firm each year applies to each job. This estimate is very subjective. Bill regularly takes Crea out to lunch or for drinks after work at the local hotel. Crea believes Bill is interested in a relationship with her, but Bill has a steady partner and does not reciprocate Crea’s feelings.

Each employee of P4U earns a base salary and a bonus equal to 10% of the profit on each job. The profit on each job is calculated by deducting the direct costs and allocated overhead costs from the fee charged to the client. Bill has borrowed a large amount to finance a new house, and is having difficulties meeting his repayments. At lunch one day, Bill intimated that it might be in Crea’s interests if she allocated less of overhead costs to Bill’s jobs and that some of the direct costs could easily be charged to other jobs that Bill was not involved with. Eager to please Bill, Crea agrees and charges some of the phone calls, stationery and secretarial costs for Bill’s jobs to Nadia’s, as she doesn’t like Nadia anyway. Crea also reduces the amount of overhead costs allocated to Bill’s jobs. In return, Bill takes Crea to lunch more often just to keep her on side, as he has no intention of developing a personal relationship with her.

Required

A. Who are the stakeholders?

B. What are the ethical issues, if any, involved?

C. How are the actions of Crea likely to affect the performance evaluation of Nadia?