Would you lie to save your Company?

"I'm at my board meeting," begins the CEO of a $20 million toy manufacturer, "and I get this fax from our largest customer saying that our Rupert the Robot, our biggest seller, was self-destructing. The customer said that it was considering removing all Ruperts from the shelf and returning them to us.

"Within a couple of hours," he continues, "I get another call saying that another major customer stated the same problem. Then an hour later, another call. And then another. In all, our biggest selling product would be returned by our major customers. If we have to refund money to our customers for returns, we would be facing a $40 million loss. Put delicately, the company would be ruined."

For us as a business, returns of this magnitude would have been the end. The CEO could imagine only what might happen once word of this reached all of his lenders. "I had short-term loans with about eight banks for an amount of money equal to my equity in the business," he says. "They could have pulled these loans."

But - so far anyway - The CEO informed the customers that the problem could be minor and easily repairable. And, they agreed to wait. As a result, the CEO decided that there was no compelling reason to do anything but remain in a holding pattern until more details emerged. As a strategy, at least for the short time, it sounded workable. If not, that is, for an unfortunate accident of timing.

The company, it so happened, was in the midst of its annual audit. As part of the process, the CEO must sign a letter assuring the auditors that they have been informed about any outstanding circumstances that more than likely could have a negative financial impact. "The document was sitting on my desk waiting for my signature," says the CEO. "I was going to have to decide whether or not to sign it or tell the auditors about the extent of our problems. The auditors were pushing for an answer.

Question:The CEO should sign the letter to the auditors.

True

False