Twenty-eight-year-old Elaine Hunt, who is married and has one child, has been with United Banc Corporation (UBC) for several years. During that time, she has seen the company grow from a relatively small-size to a medium-size business with domestic and international customers. Elaines husband, Dennis, has been involved in the importexport business. The situation that precipitated their current problem began six months ago. Elaine had just been promoted to senior financial manager, which put her in charge of 10 branch-office loan managers, each of whom had five loan officers who reported to him or her. For the most part, the branch loan officers would go through the numbers of their loan people, as well as sign off on loans under $250,000. However, recently this limit had been increased to $500,000. For loans over this amount and up to $40 million, Elaine had to sign off. For larger loans, a vice president would have to be involved. Recently, Graphco Inc. requested a $10 million loan, which Elaine had been hesitant to approve. Graphco was a subsidiary of a tobacco firm embroiled in litigation concerning the promotion of its products to children. When reviewing the numbers, Elaine could not find any glaring problems, yet she had decided against the loan even when Graphco had offered to pay an additional interest point. Some at UBC applauded her moral stance while others did not, arguing that it was not a good financial business decision. The next prospective loan was for a Canadian company that was exporting cigars from Cuba. Elaine cited the U.S. policy against Cuba as the reason for not approving that loan. The HelmsBurton Amendment gives us clear guidance as to what we shouldnt be doing with Cuba, she said to others in the company, even though the loan was to a Canadian firm. The third loan application she was unwilling to approve had come from Electrode International, which sought $50 million. The numbers had been marginal, but the sticking point for Elaine was Electrodes unusually high profits during the last two years. During dinner with Dennis, she had learned about a meeting in Zurich during which Electrode and others had allegedly fixed the prices on their products. Because only a handful of companies manufactured these particular products, the price increases were very successful. When Elaine suggested denying the loan on the basis of this information, she was overruled. At the same time, a company in Brazil was asking for an agricultural loan to harvest parts of the rain forest. The Brazilian company was willing to pay almost 2 points over the going rate for a $40 million loan. Because of her stand on environmental issues, Elaine rejected this application as well. The company obtained the loan from one of UBCs competitors. Recently, Elaines husbands decision making had fallen short of his superiors expectations. First, there was the problem of an American firm wanting to export nicotine and caffeine patches to Southeast Asia. With new research showing both these drugs to be more problematic than previously thought, the manufacturing firm had decided to attempt a rapid-penetration marketing strategythat is, to price the products very low or at cost in order to gain market share and then over time slightly increase the margin. With 2 billion potential customers, a one-cent markup could result in millions of dollars in profits. Dennis had rejected the deal, and the firm had gone to another company. One person in Denniss division had said, Do you realize that you had the perfect productone that was low cost and both physically and psychologically addictive? You could have serviced that one account for years and would have had enough for early retirement. Are you nuts for turning it down?! Soon afterward, an area financial bank manager wanted Elaine to sign off on a revolving loan for ABCO. ABCOs debt/equity ratio had increased significantly and did not conform to company regulations. However, Elaine was the one who had written the standards for UBC. Some in the company felt that Elaine was not quite up with the times. For example, several very good bank staff members had left in the past year because they found her regulations too provincial for the emerging global marketplace. As Elaine reviewed ABCOs credit report, she found many danger signals; however, the loan was relatively large, $30 million, and the company had been in a credit sales slump. As she questioned ABCO, Elaine learned that the loan was to develop a new business venture within the Peoples Republic of China, which rumor had it was also working with the Democratic Peoples Republic of Korea. The biotech venture was for fetal tissue research and harvesting. Recently, attention had focused on the economic benefits of such tissue in helping a host of ailments. Anticipated global market sales for such products were being estimated at $10 billion for the next decade. ABCO was also willing to go almost 2 points above the standard interest equation for such a revolving loan. Elaine realized that if she signed off on this sale, it would signal an end to her standards. However, if she did not and ABCO went to another company for the loan and paid off the debt, she would have made a gross error, and everyone in the company would know it. As Elaine was wrestling with this problem, Denniss commissions began to slip, putting a crimp in their cash-flow projections. If things did not turn around quickly for him, they would lose their new home, fall behind in other payments, and reduce the number of educational options for their child. Elaine had also had a frank discussion with senior management about her loan standards as well as her stand on tobacco, which had lost UBC precious income. The response was, Elaine, we applaud your moral outrage about such products, but your morals are negatively impacting the bottom line. We cant have that all the time.

4. Discuss the implications of each decision that Elaine could make.