The Alert Company is a closely held investment-services group that has been very successful over the past five years, consistently providing most members of the top management group with 50% bonuses. In addition, both the chief financial officer and the chief executive officer have received 100% bonuses. Alert expects this trend to continue.
Recently the top management group of Alert, which holds 35% of the outstanding common stock, learned that a major corporation is interested in acquiring Alert. Alert's management is concerned that this corporation may make an attractive offer to the other stockholders and that management will be unable to prevent the takeover. If the acquisition occurs, this executive group is uncertain about continued employment in the new corporate structure. As a consequence, the management group is considering changes to several accounting policies and practices which, while not in accordance with generally accepted accounting principles, would make the company a less attractive acquisition. The chief financial officer has told Roger Deerling, Alert's controller, to implement some of these changes. Deerling has also been informed by the chief financial officer that Alert's management does not intend to disclose these changes immediately to anyone outside the top management group.
Required:
(1) Which of the 15 responsibilities in Standards of Ethical Conduct apply to the chief financial officer's behavior?
(2) Which of the 15 responsibilities in Standards of Ethical Conduct apply to Deerling's situation?
(3) Identify the steps Deerling should take to resolve this situation.
(4) What social and ethical responsibilities should Alert's management consider before mounting the takeover defense described above?