Choose an ethical perspective and use the moral reasoning model to resolve Joes dilemma.

Ethics Case 1: Joe Schmo & Round Trip Transactions

Joe Schmo, 25, got his MBA in May and started a job at Behemoth in July. Behemoth is a Fortune 500 company making luxury items. It is located in Buffalo, NY, and Joe has been hired as a treasury analyst making $150,000 a year. Joe has enjoyed his job to date, especially the comradery with his co-workers.

Joe and his wife Susan recently bought a 3-bedroom house in Eggertsville, an upscale, expensive Buffalo suburb. The public schools in the area are excellent, which is of interest because Susan is six months pregnant. She left her old job when they moved to Buffalo, so they have become a one income family.

Most of the people in Joes division are at least ten years older than Joe. His boss, Don Doe, is the treasurer. He is around 50 and has been with the company for twenty-five years. He has been in his current position for five years, and is on track to become the CFO. Joe thinks Don is a great boss, and he and Susan enjoy going on Dons sailboat with he and his wife on Lake Ontario on the weekends.

Use the Moral Reasoning Model to resolve Joes problem. Type your answers in the boxes below.

Ethical perspective chosen and why
Relevant facts
Ethical issues
Alternatives for resolution
Primary stakeholders
Ethics of each alternative
Practical constraints
Action that should be taken

Since Joe was hired, Behemoths sales have slowed due to the state of the economy. Unfortunately, the market for luxury goods of any kind is dwindling. Don is currently drilling down into ways to increase sales and cut expenses. Hes tasked Joe with finding creative ways to increase sales.

Joe is eager to take on the assignment. The first thing he does is to review the inventory management sections of the Short-term Financial Management course he took as part of his MBA coursework. He recalls from one of his classes that there is something called bill and hold or buy and hold. Bill and hold or buy and hold is when a company buys inventory but doesnt take possession of it. This does not violate SEC regulations. However, if there is a side agreement between the buyer and seller to reverse the sale in the following quarter, it does violate SEC regulations. Its called a round trip transaction, and its purpose is to artificially pump up the sellers revenues before the end of the quarter. To encourage the buyer to participate in a round trip transaction, the seller provides an incentive for the customer, generally lower prices on inventory that is purchased regularly.

Joe left work at the same time as Don today. As they walked out together, Joe mentioned round trip transactions and their impact on sales. Joe believes that the company can engage in buy and and hold transactions without side agreements to repurchase the goods. He thinks that if companies do not need the inventory, they will cancel the purchase without a secret agreement to do so. Absent that agreement, SEC regulations are not violated.

Don likes the idea but said such sales must have secret agreements to buy back the goods. Joe is not comfortable with this. Joe asked Don if he wanted to meet the next day to discuss the subject further. Don said no that Joe should go ahead and begin setting up round trip transactions, and only discuss it verbally with Don when necessary.

Joe doesnt want to violate SEC regulations, and since Don asked Joe for only verbal interaction on the subject, Joe thinks he may be the fall guy in case the transactions come to light. Joe tosses and turns all night, and goes to see Don the next morning. Once again, he states his concerns about SEC regulations. Don says, Joe, Ive been here a long time. We have certain ways of doing business. Youve done a great job so far. In fact, your performance is outstanding. But to make your career here, it is important that you recognize that you must absorb companys culture, and play by the companys rules.