INTRODUCTION TO ETHICS

CASE STUDY 1:
Accountant at Alpha-Male Sport Shoes
From Michel Boylan’s Ethical Reasoning. Modified by Tam Tran.

Thuy is a midlevel accountant at Alpha-Male Sport Shoes. The company she works for
competes with the big brands like Nike and Adidas but they offer cheaper prices and more
garish fashionable colours. The brand has been doing reasonably well. Their factories are in
Vietnam. Their sales are in the USA. The company also has a venture capital branch that seeks
[to invest corporate funds directly in external start-up companies] to diversify the company in
new global markets.

Thuy’s boss, Cora, calls in sick and asks her to handle any emergencies. Cora gives Thuy her
computer access code. After Thuy finishes her work for the day, she makes one last check on
Cora’s account. Then she gets curious, goes through her boss’s files and discovers that one of
the venture capital [investment] accounts, Elysium Fields, is a totally bogus (not genuine or
true) operation. She is very surprised and upset. She decides to stay late at work and
subsequently discovers that it is some sort of phony (fake, deceptive) operation. Lots of the
company’s money go into the venture capital branch and especially into Elysium Fields
through various foreign bank accounts that offer secrecy and do not report to the Internal
Revenue Service (IRS). She is convinced that something wrong is happening, but she is unsure
as whether the company’s actions are illegal. Before she left, in her last search, Thuy
discovered a suspicious e-mail that may tie Elysium Fields into the illegal drug trade from
Vietnam. She prints out the suspicious files and accounts transactions and go home with the
copies.

Thuy is a Vietnamese citizen of the USA. A single mother with a seven-year-old daughter and
a sick mother who are entirely dependant on Thuy’s work to pay school tuitions, rent, buy
groceries and medicine. She left Vietnam because her mother and she were abused by her
father. She knows the pain that illegal drug-trafficking has caused in the USA. Her own beloved
brother died of a drug overdose.

Thuy feels that Alpha-Male Sport Shoes is a front company for illegal drug traffic. She may
have enough evidence in her hands to go to the Federal Bureau of Investigation (FBI) and open
an investigation that will probably lead to a conviction. However, going to the FBI would
drastically change her life. Her family may be put into the witness protection program. People
living ‘undercover’ live under tremendous psychological stress. She has heard about abuses
committed to children in those programs. She does not want that to happen to her daughter
or risk her family.

If she does nothing, more people will die via this particular drug outlet. If she shuts the
company down, then her own family life is permanently disrupted.

Develop your moral assessment considering the following:

 1. What should Thuy do? (in one sentence)

2. Why? (in one sentence)

3. What are the facts that must be considered?

4. What are the theories of ethics applicable to your moral assessment?

(approach the problem from 3 different theories)

5. What could possibly be Thuy’s personal system of values? Minimum 3 levels

6. Should she have gone through her files? Elaborate your answer using a moral analysis
7. Should she have taken the evidence home? Elaborate your answer using a moral analysis
8. Does it make a difference that the factories are in Vietnam and she is a national of that country?
Elaborate your answer

CASE STUDY 2

Francisco is a Mexican citizen living irregularly (undocumented) in the U.S. He used to have a small
restaurant in Mexico, until drug-cartel-related people approached him asking for a ‘monthly fee’ to keep
his business running peacefully. He accepted at the beginning, but the drug-cartel fees and the pressure
were rapidly increasing. Fearing for his family’s safety, he decided to close the restaurant and fled to the
U.S. with his wife and three kids.
After 5 years of living and hard working in the U.S. Francisco had become the manager of ‘Happy Taco’
restaurant. Happy Taco started as a small business but rapidly became the most famous Mexican food
restaurant in the city and was bought by a well-related business man, Mr Rao. High profile customers were
usual; hence, Francisco had met very important politicians, company directors and even people from the
showbiz world. He loves his job as pays well and it might allow him to get the permanent residency for him
and his family in the U.S.
Last Saturday night, the restaurant closed late as Mr Rao visited to have dinner with some friends. When
everyone had left, Francisco was closing the premises and noticed Mr Rao was talking to someone in a black
car, he could not see a face, but Mr Rao was upset. Mr Rao gave a big bunch of notes (money) to the person
in the car. The black car sped off and Mr Rao took the hands to his face as if he was worried about
something. Francisco approached him to ask if he was ok and Mr Rao told him: “Everything is ok, go home”.
The following week Mr Rao announced that there would be some dismissals as Happy Taco was
experiencing a bad financial crisis. Francisco knew it was not true as he had been involved in the accounting
and nothing had changed in the last year, if so, the profits were growing. Regardless, many of Francisco’s
friends were fired that week. Mr Rao told Francisco he had nothing to worry about, he was ‘safe’. Mr Rao
promised Francisco to help him getting the permanent residency for him and his family under the condition
that he does not tell anyone about what he saw last Saturday night.
Francisco does not really know what is happening. It could be that Mr Rao is being extortioned like Francisco
was, or that he is actually doing dirty business with the person in the car. Francisco cannot go to the police
because he is an undocumented migrant. Although he is very upset about the firing of his friends (they all
really need their jobs), Mr Rao told him that he ‘is safe’ and might get the permanent residency for his
family soon.
What should Francisco do?
1. Write a logical analysis to explain what Francisco should do based on the facts
and acceptable moral principles.

2. Support your analysis and its counter-analysis on theories of ethics

3. Mention and explain Francisco’s possible personal system of values (3 levels)

CASE STUDY 3

Gina and Rob have a baby. They drive a sedan 2002. Gina suffers very bad back pain and has told Rob
that securing the baby in the car-seat is very painful as she needs to bend down. They have been
planning to buy a bigger and newer car, but they do not have enough money. Rob is concern about his
wife’s wellbeing and her safety and the safety of the baby in that old car, so he asks for a loan and buys
his wife a new SUV.

After a week of driving the SUV, Gina tells Rob that the direction of the car ‘is funny’. Rob checks the
car and, indeed, something is wrong. The wheel cannot keep steady and the car has a very minor
tendency to go to the right. Rob takes the car back to the dealer. An agent tells Rob that it will be fixed
in a week, but when Rob picks the SUV up a week after, he realises it is still driving towards the right.
It was not fixed. The dealer keeps the SUV again and commits to fix the problem. Days after, the
manager of the dealer calls Rob for a meeting. He explains to Rob that there was a failure in the original
manufacturing of those SUVs and they all have that minor failure worldwide. He assures Rob that it is
not life-threatening and that he and his family are safe. He offers Rob a lifetime of car-services in
exchange. Rob refuses the justification and menaces the manager to sue the company for jeopardising
the safety of his family. The manager apologises and asks Rob to come back the day after to further
discuss his case.

The following day, Rob goes to the car dealer and when he arrives there is a board meeting waiting for
him. There is the manager that talked to him before, a couple of engineers, the head of sales and the
director of that office. In that meeting the engineers explain to Rob that the failure of the car is very
minor and not even noticeable by most drivers. They assure Rob that this failure cannot cause any
defect of the car when driving. The head of sales explains to Rob that making a recall for the SUVs
worldwide may have a massive impact in the finances of the dealer. They also remind Rob that he
needs a big car for his family. So, the director offers Rob a brand new 7-seater VAN and a $50,000
compensation, under the condition that he does not mention to anyone about the ‘minor’ failure in
the SUVs.

What should Rob do?

1. Write a logical analysis to explain the justification for the dealer’s offer (use a
theory of ethics)

2. Write a logical analysis to explain why Rob should accept the deal

3. What is the corporate social responsibility of the dealer?

Using the due care theory, explain the extent of the dealer’s responsibility
regarding the safety of the cars

CASE STUDY 4

A fitting approach to shoe selling?

From Crane and Matten’s Business Ethics. Questions modified by Tam Tran.

You are the manager of an independent high street shoe store, specialising in fashionable shoes for
men and women. Your staff comprises a small team of eight salespeople who all take part in selling
shoes, checking and maintaining stock, and processing sales and orders. You run a pretty successful
operation, but there is intense competition from mayor shoes store chains, as well as one or two other
independent stores in the city where you are located. To motivate your staff, a couple of years ago you
introduced an incentive scheme that gives employees 5% commission on everything they sell. This has
worked pretty well—the store it has maintain profitability and the employees are all fairly well paid.

You have recently hired a new salesperson, Lola, who has made quite an impact on sales. She not only
seems to be enjoying a great deal of success selling shoes, but she has also proved to be popular with
everyone in the store, including the customers. Since she has arrived, though, Lola has also been giving
you some cause of concern. Although no one has complained about her, you have noticed that, at
times, some of her successful sales techniques do not always involve her being completely truthful.

For example, on one occasion last week you noticed that she was serving a customer who was plainly
unsure whether to purchase a particular pair of shoes. Lola obviously thought they shoes suited the
woman, but to create a little more urgency, she said that the model the woman was interested in was
the last pair in stock and that she did not think the store would be able to get anymore for another
month. However, you knew for certain that there were at least five or six pairs in the stockroom and
that reordering when they were sold out should only take a week. Still, the customer eventually
decided to buy the shoes, and once she had made the decision, she seemed delighted with them.

Then yesterday, Lola was serving a man who obviously wanted a particular pair of shoes that he had
seen in the window. She asked him his size—which was 43—but when she got to the storeroom she
discovered that there was only a 42 and 44 in stock. She asked you if you knew whether there was a
43 anywhere, but you have to tell her no—you had sold the last pair yourself only the day before.
Undeterred, Lola picked up both the 42 and 44 and took their shoes back out to the man. Giving him
the 42 first, she said to him that the company did not sell ‘odd’ sizes and that they only came in 42 and
44. The customer tried on the 42, but obviously found them too small. While he was doing this though,
Lola took out the 44 and carefully placed an additional insole in the bottom of the shoe. ‘Give this a
go’, she said handling the shoes to the man, ‘this should do the trick’. To his delight, they fitted fine
and he said he would take them. At this point, Lola mentioned that because the manufacturer did not
do ‘odd’ sizes, she had put insoles into the shoes, which would cost an additional three euros. Still
pleased with the shoes, the man said ‘fine’ and paid for both, the shoes and the insoles.

You were unsure what to do about the situation. Although the customers seemed pleased with their
purchases, Lola was clearly lying to them.
Develop your moral assessment considering the following:
1. What are the most important facts to be considered?
2. What are the arguments for and against Lola’s actions?
Use theories of ethics to explain each of them.
3. How do you think Lola’s customers would feel if they find out the truth?
4. What working moral values are being defeated by Lola’s actions?
5. What is the likeliness of other co-workers copying Lola’s persuasive techniques and what would be the
moral problem?
6. Is this affecting fair competition?
7. What could be the long-term repercussions of such practices?
8. Has the incentive scheme contributed to Lola’s actions? Explain
9. How would you approach the situation as Lola's manager?

CASE STUDY 5

Latino Spirit Coffee – 100% pure?

Susan works in the imports branch of a business chain, a café called ‘Latino Spirit’, with 5 cafes
around Melbourne. Latino Spirit is well known for their promise to sell ‘100% genuine
Colombian coffee’. Last year the chain gained some media terrain and published a TV and
social media advertisement that shows a person of Russian background who, after a week of
drinking a daily cup of Latino Spirit coffee, wins a salsa competition. The ad closes with the
slogan/catch phrase: ‘This is Latino Spirit, the coffee that makes you dance’. Susan does not
like the ad. She has heard about legal problems based on this kind of slogans, but the CEO of
the company likes it and goes with it despite of her advice.
Last week, Susan visited the warehouse of Latino Spirit. This is the area where the coffee
arrives from Colombia and is packed for distribution to all 5 chains. She visits the warehouse
once a month, usually in the mornings, but, as she has been busy, she visited late in the
afternoon. When she was leaving, she noticed something unusual. A truck had just arrived,
bringing big containers of what appeared to be used coffee grounds (ie, the waste left after
coffee has been brewed). Susan asked a bystander worker what that was for, and he replied
that the boss (Ray) collects the used coffee grounds from all the chains, apparently, to use it
as compost for his farm.
Ray is the CFO of Latino Spirit. He is also the husband of Susan’s cousin, and who got Susan
her job in the company. Susan is very grateful to Ray as she had not been able to find a job
after graduation and she has a university debt.
During the weekend at her cousin’s, Susan asked her about the ‘coffee compost’ and she told
her that they were not planting anything this season in the farm. Susan gets suspicious and
decides to sneak into Ray’s home-office to see if she could find any information. She finds onto
Ray’s desk, invoices from a company called Latino Soul for the selling of cofee [sic] in the last
six months.
On Monday, Susan asked Ray about the used coffee grounds delivered to the warehouse (she
does not tell him about the invoices she saw). He first tries to tell her the story about the
compost, but then he tells Susan that he is going to trust her with some confidential
information about a project. Ray explains that he googled and found that it was totally safe to
re-use the coffee grounds, once. So, he has worked with some people in the warehouse mixing
10% of used coffee grounds –collected from the 5 branches—with 90% of pure coffee. They
have already sold this blended formula in the in the 5 cafes during the last 6 months. No
complaints have been filed. This will increase the production and reduce the costs; hence,
they could lower the price of their coffee as an advantage before their closest competitor.
Ray goes on and tells her that the project has already been presented to the major shareholder
of Latino Spirit, and he was ok with it as long as it would save money to the company and help
them beat the competition. The company is already losing some money dealing with the legal
suing of the TV ad. Ray emphasises that they need her ‘on board’, as the head of imports, to
sign the bogus invoices from Latino Soul for the ‘purchase’ of the cofee [sic] and the re-
negotiation of the deal with their Colombian supplier. Susan cannot believe what she is
hearing. They all know that decreasing the sales of their Colombian supplier would affect a lot
of people back in Colombia. She asks Ray about this and about safety issues and whether that
would bring more legal problems due to the false promise of ‘100% genuine Colombian
coffee’, but he replies: ‘Colombia is not our problem, we must be faithful to our [emphasis
added] people. Now, the blended formula is perfectly safe and the used coffee grounds are still
from Colombia. It is not like we are lying… Come on Sue, remember that in the last board
meeting it was mentioned that if we managed to reduce the company’s yearly expenses to at
least 5%, the finances team, including you and me, will receive a big bonus. We both could use
that money. Besides, you owe me’.
Susan does not know what to do. She needs the job. The bonus would help her settle the
university debt; but she is worried that she could get into legal trouble and that the mixing of
old coffee grounds could eventually cause harm to customers. However, if she says no, she
will be fired, and they would carry on the project anyway. She knows she cannot disclose any
of the information given due to a confidentiality agreement in her contract and if she does, it
could severely harm her family relationships.
What should Susan do?