Unethical Behavior Memo

: Ethical Situation #2: Unethical Behavior Memo

You have been hired as the new controller of a large manufacturing company. The 30-year-old company produces a selection of profitable products, but has also experienced some ethical lapses. A few months into your new role, the CEO has asked you to prepare a memo that will provide guidance to management for handling some of these ethical lapses. As you investigate, you discover a negative atmosphere in the company. Your investigation reveals the following information:

CEO: We need to create a way to make sure our company goals are defined and align with the highest ethical standards. We have experienced issues in almost every department, and I am trying to focus on what we can do. I know you have spoken with others, and I suspect there is some unethical behavior occurring. I have heard that the accounting department has experienced some issues in the past. Specifically, issues with fake suppliers being created and paid. While this did result in the termination of one employee, I'm not sure it has stopped.

Accounts Receivable Supervisor: Things are pretty bad around here. There doesn't seem to be any leadership or direction for the company. Upper management rarely conducts meetings to discuss anything, positive or negative. There are no clear goals and we only receive feedback once a year at our annual review. I have difficulty keeping the staff motivated because the meager raises. We all receive the same raise, even in a booming year when sales are high.

Accounts Payable Supervisor: I used to be energetic when I started working here. I suppose this place just wears you down after a while. There doesn't seem to be any correlation between pay and performance. You can be a high performer and receive a 2% raise or be a low performer and receive a 1% raise. Most of the staff have given up, and view their position as a job rather than a career.

Upon further inspection, you discover that the vendor files are in disarray, and there is no proper backup to support the invoice and expense reports that have been paid.

Sales Team Manager: I am having difficulty getting the sales team to visit their accounts and provide acceptable customer service. Part of the problem is that the company has set the commission schedule to prior standards, when sales were easy to acquire. Each salesperson receives only 1% commission on the sales in his or her territory. I am beginning to wonder if they are visiting the existing accounts anymore. Sales are still healthy--no one seems to ask questions when the sales are healthy--but we are not seeing many new sales.?

Explain some of the underlying motives contributing to the unethical behavior.
Recommend a few changes that might alleviate some of the unethical behavior and improve employee morale.
Address the common fraud schemes in the outflow of company funds, including check tampering, payroll schemes, and expense reimbursement schemes.
Suggest several controls for the company to implement in order to prevent these schemes.

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