1-4 Selected Ethics Cases

After his first two years at Bronson Beverages (BB), a publicly held wholesaler of beers and wines, Jim Best has advanced to a senior cost analyst position with a very good salary.

Required: For each of the following situations Jim will face in the coming year, indicate how you see his responsibility, and how he should respond.

1. Jim learns that a significant portion of the firm's beer inventory has passed its shelf life and by local ordinance and company policy, should be destroyed. Because of concern about the effect on profits and his bonus, the chief operating officer decides that the beer should be sold anyway.

2. As part of his regular duties, Jim reviews BB's financial statements for inconsistencies and errors. While reviewing the recent report, Jim notices that non-trade accounts receivable (note: non-trade receivables arise from non-operating events, such as a loan to an employee, customer, etc; trade receivables arise from sales on credit) have increased sharply over the prior year. Upon inquiry, Jim finds out that the firm is lending money to one of its customers so that it can make purchases from BB. Jim knows that in his state, beer and wine purchases must be paid for in cash, by state law. Jim wonders if the treatment of the loan as a non-trade receivable is OK, or if it should be classified as a trade receivable?

3. Jim learns that BB has just been granted the franchise to sell a popular new line of custom-brewed beers. The franchise will improve BB's sales and profits substantially, and should mean a significant boost to BB's share price. Jim knows that, until the news of the franchise is made public, he is restricted by the SEC from using this insider information to trade in BB's shares and make unfair profits as a result. That evening, Jim and his wife have dinner with some friends, and one of them says she has heard there are some good things going on at BB, and asks Jim to comment. What should Jim say?

4. Jim is analyzing the sales and cost of sales in specialty wines when he discovers that one of the firm's customers has greatly increased purchases in this, the last month of the firm's fiscal year. Jim goes to talk to the salesperson for this customer to offer his congratulations. The salesperson says that he has simply shipped in advance the customer's order for the following month, so that it would appear on the current year's financial report. This tactic would help the salesperson meet his sales target and would also improve BB's sales and profits for the current year. The salesperson says there is a small chance that the customer will reject the shipment and send it back, but then says, "We will worry about that if it happens."

5. Working late one night, Jim notices that one of the top marketing executives has come into the office and is removing a box full of office supplies. He says in a joking manner to Jim as he leaves, "BB won't miss this stuff, and I really need it for my other business."