RESOLVING ETHICAL BUSINESS CHALLENGES (Ferrell, Fraedrich, dan Ferrell, Business Ethics Cases) Even though Todd had just

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RESOLVING ETHICAL BUSINESS CHALLENGES (Ferrell, Fraedrich, dan Ferrell, Business Ethics Cases) Even though Todd had just

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RESOLVING ETHICAL BUSINESS CHALLENGES
(Ferrell, Fraedrich, dan Ferrell, Business Ethics Cases)
Even though Todd had just graduated from Indiana University, he
interned with Jennings Department Store for two summers. This
experience helped him get promoted to Section Manager once he
graduated. Although Todd was young and most of the people he
managed were older, they respected him because of his expertise and
ability to form good relationships with his coworkers and
customers. Several weeks ago, Todd began to hear rumors about one
of the unit managers, Zara. He checked Zara’s past financial
reports and verified she was one of his better managers. Her unit
posted the highest sales volume and growth, received positive
customer feedback, and showed excellent cost control. The unit’s
people also did consistently well on inspections. In fact, Zara
consistently rated higher than all the other managers for the last
two years. Todd wondered why she hadn’t been promoted. He knew
upper management went over the financials with a magnifying glass.
Todd decided to investigate further. Over the next few weeks Todd
began talking informally to those that knew Zara. He heard the same
story over and over again. Zara was kind, firm, great with the
customers, and looked out for her employees. Zara even had a
dedicated following of customers that came in to ask question about
fashion and accessories. She had a client list that followed her
tweets and made her department the cash cow of the store. Even
though Zara had not graduated from college, she took night classes
and was about a year away from her management degree. Next, Todd
spoke to some of Zara’s retail clients. The comments made him
realize just how much he needed to learn about retailing. They
spoke of Zara’s advice on shoes, dresses, and jewelry. Some told
him they routinely came in to give Zara Christmas gifts. He
discovered the store was doing so well in large part because this
one employee cared about her clients and workers. Yet as he
questioned more clients, Todd found something rather odd. Some of
the customers told him that for small items they handed Zara cash
and told her to keep the change. Todd soon discovered these sales
were not rung up. Next, he checked the store shrinkage measures or
items that may have been stolen or damaged. The records indicated
some shrinkage but nothing significantly “excessive.” After a few
weeks of investigation Todd discovered Zara used the money or cash
as unrecorded payments to her retail staff. She gave the money in
the form of performance bonuses, overtime incentives, and off-hours
works. He knew this was in violation of company procedures, yet he
couldn’t definitely prove Zara was actually taking the shrinkage
money and using it to achieve the high performance that had become
her trademark. It wasn’t as if the employees were being over paid,
compared to top management’s 700:1 income disparity ratio. Most
employees just scrapped by, as was evident by the company’s high
employee turnover rates. But Zara’s turnover rate had always been
low. 2 Todd could not definitely say whether Zara was stealing. He
did know there were some cash purchases that were not recorded
properly. However, Zara was officially getting the money, whether
through theft or simply by “keeping the change” the customers gave
her for purchases, he knew that because the funds were not listed
as income, the extra “wages” to Zara’s employees meant no payroll
taxes were being withheld. This means Jennings was at risk for a
tax liability action by the IRS. Todd thought about what to do. He
looked through the company’s ethics code but found the guidelines
vague. The code itself only spanned two pages and did not provide
any contact information for him to ask questions. Todd murmured
under his breath, “Why did I start this mess? I should have left
things alone.” He knew nothing at a company is secret for long and
his questions would soon alert others to start asking questions. On
the other hand, he knew this had gone on for quite some time. Why
had nobody noticed before?
Questions/Exercises:
1. Describe some of the weaknesses in Jennings’s ethics program.
(30)
2. Discuss the alternatives for Todd. (40)
3. How was Zara been given the opportunity to engage in
misconduct? (30)
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