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Stakeholder Management - The Shareholder

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Cost Justified?

Topic: Strategic Planning, Policy and Control

Characters: Joe, District Manager of Computer Operations
Mary, Division Manager - Information Systems
John, President and CEO of a large company

Joe was recently promoted to the position of District Manager of Computer Operations for a large company. Mary, Joe's supervisor, calls him to her office. She has just been informed that the CEO has received an anonymous letter from an employee. This letter states that a recently installed (and very expensive) system does not perform as expected and has not achieved the expected results.

Joe has been aware that the system's actual performance is really as described in the anonymous letter. Joe had reported this performance problem to Mary before. Although Mary had listened to Joe, she had been the original supporter of the system and continually provides only positive feedback to the CEO on its performance.

Mary tells Joe that the CEO expects a reply to the letter. She tells Joe to draft the reply. It should say that the system is performing as projected and that all savings portrayed in the original justification documents are being achieved. She says the documentation provided with his reply should support those statements. `

Joe is upset by this directive. He feels that upper management is being misinformed in the interest of protecting a questionable decision. He approaches Mary with his concern. She says that if he does not provide the reply as requested, she will have serious doubts about his ability to perform the functions of a District Manager for the company. Joe has worked hard to achieve this position and is very worried about her statement.

Author: Originally developed by David Brickhaus, graduate student at Washington
University, as a class project in "Ethical Derision Making." Edited and submitted
by Dr. Raymond L. Hilgert, Professor of Management and Industrial Relations,
Washington University

Prepare a 3-page analysis in outline form. Your analysis should include the following:

? Who are the stakeholders in this case?
? What are the interests of the stakeholders?

Legal Analysis
? Do any of the laws from the eGuide apply to this case?
? If they do apply, analyze the legality of the corporation's actions in this case.
? If the laws do not apply to the actions in this case, explain why they do not apply.

Ethical Analysis
? If the decision maker applied the categorical imperative theory in this case, what would the result be, and why?
? If the decision maker applied the utilitarian theory in this case, what would the result be, and why?
? If the decision maker applied the rights theory in this case, what would the result be, and why?
? If the decision maker applied the justice theory in this case, what would the result be, and why?

Conclusion and Recommendation
Based on the above, as well as what you have learned about ethical theories and foundations of moral development, what is your final recommendation to the corporation regarding this case? Your recommendation should be at least two paragraphs and include at least three reasons, with specific references to course material, stating how you arrived at that conclusion.


Solution Preview

I. Introduction
II. Legal Analysis
III. Ethical Analysis
IV. Conclusion and Recommendation

Now let's look at each section.


The stakeholders mentioned in the scenario are Mary (Division Manager - Information Systems), Joe (District Manager of Computer Operations), John (CEO of company); the company, the employee, but perhaps there are also shareholders who are being deceived about the quality of the information system and the high cost. The company and the shareholders are also stakeholders.

The interests of the stakeholders include:

Mary: interested in protecting her image by continuing to report that she had made the right decision to support the installation of the computers.

Joe: Interested in keeping his job, performing his job properly and interested in doing the right ethical behavior e.g. report the poorer than expected performance of computer information system. He has reported the poor performance to Mary before, so he is aware of the problem, but appears to now be in an ethical dilemma of going to the top management or doing as Mary has requested.

Employee who made the complaint is interested in the company performance.

John is interested in the company and performance of the company. Therefore, he acted ethically and took the employees complaint seriously and reported it to Mary. He is Interested in having a computer system that is reliable and high performing as expected. Mary, however, has kept the "low" performance a secret, so the company executives do not appear to be guilty of any ethical or legal violations.

Shareholders are interested in their investment and in the company managing its finances responsibly. "It should say that the system is performing as projected and that all savings portrayed in the original justification documents are being achieved."


Because this information system was expensive and the cost justified on the document, if the computers are not working properly, then the information reported to shareholders lacks accuracy and reliability. Does the Sarbanes-Oxley Act apply? It applies to the financial reporting that is accurate and reliable. "Effective managers should never put profit ahead of principle.
The Sarbanes-Oxley Act speaks directly to the principle of corporate responsibility. The act requires both the principal executive officer and the principal financial officer of a company to certify in each annual or quarterly report that certain procedures have occurred" (see p. 5 of e-guide).

The other two laws discussed in the eGuide do not seem to apply to this case but it depends on how the ...

Solution Summary

Based on the case and the questions and referring the eGuide, this solution assists in the analysis regarding stakeholders, laws and ethics. References are provided.