Ethics ACCT202 Mini Case Flint Hills Company\'s most recent financial statements

Question

Ethics ACCT202 Mini Case Flint Hills Company's most recent financial statements showed dismal performance. There was a net loss of $10,000 and the statement of cash flows showed a net cash decrease in all categories. The company president called all the managers together and asked them to do all they could to make sure the next quarter's performance was better. Ed Gray, manager of the manufacturing division, sold off old manufacturing equipment. He also reclassified several workers to part time (30 hours per week) and hired additional temporary workers to take up the slack. This saved the company money, since part-time workers do not have the same insurance and other benefits as full-time workers Mike Cane, financial manager, immediately suspended payments on all accounts except those on which interest would accrue. He also instituted aggressive collection procedures Required: 1. Were Ed Gray's actions ethical? Explain. 2. Were Mike Cane's actions ethical? Explain. 3. Were the company president's actions ethical? Explain

Explanation / Answer

1. In case of Ed Gray, the argument can be from both sides. Selling off manufacturing equipment and reclassifying workers may be well within his right. He also has provided employment to more workers than before. However, at the same time he has deprived the company's old and trusted workers of benefits which they rightfully deserve. This must have seriously depleted the morale of the workers. It can be said that though none of Ed Gray's actions were seriously unethical, he did take actions under pressure which a good employer might not have taken.

2. All actions of Mike Cane are in tune with his responsibilities towards the company. He has suspended payments but not on the accounts on which interest shall accrue. Thus, he has ensured that there shall be no addditional cost that has to be borne by the company. Aggressive collection procedures shall also work towards improving the liquidity position of the company. Thus, all his actions are ethical.

3. The president has taken into view the company's depleting financial position and asked his employees to make sure that they move towards profitability. This may have created a natural pressure on the employees but the has in no way done anything unethical.

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