read this and answer questions

1. Do you think Granger Stokes is using budgets appropriately?
2. What sort of behavioral consequences may occur as a result of the way budgets are used at Prime Drive?
3. What would you do if you were in Keri Kalani's position?

ETHICS CHALLENGE LO8-10 Granger Stokes, managing partner of the venture capital firm of Halston and Stokes, was dissatisfied with the top management of PrimeDrive, a manufacturer of computer disk drives. Halston and Stokes had invested $20 million in PrimeDrive, and the return on their investment had been below expectations for several years. In a tense meeting of the board of directors of PrimeDrive, Stokes exercised his firm's rights as the major equity investor in PrimeDrive and fired PrimeDrive's chief executive officer (CEO). He then quickly moved to have the board of directors of PrimeDrive appoint himself as the new CEO. Stokes prided himself on his hard-driving management style. At the first management meeting, he asked two of the managers to stand and fired them on the spot, just to show everyone who was in control of the company. At the budget review meeting that followed, he ripped up the departmental budgets that had been submitted for his review and yelled at the managers for their wimpy, do nothing targets. He then ordered everyone to submit new budgets calling for at least a 40% increase in sales volume and announced that he would not accept excuses for results that fell below budget. Keri Kalani, an accountant working for the production manager at PrimeDrive, discovered toward the end of the year that her boss had Page 389 not been scrapping defective disk drives that had been returned by customers. Instead, he had been shipping them in new cartons to other customers to avoid booking losses. Quality control had deteriorated during the year as a result of the push for increased volume, and returns of defective disk drives were running as high as 15% of the new drives shipped. When she confronted her boss with her discovery, he told her to mind her own business. And then, to justify his actions, he said, All of us managers are finding ways to hit Stokes's targets