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Higher Degrees of an Ethical Dilemma

Matador Materials, a public company became an industry leader in the United States supplying construction and heavy building materials and through numerous acquisitions. Matador followed a decentralized operating philosophy allowing facilities to operate as autonomous profit centers. Facility managers reported directly to the vice president of operations at the main corporate office and were given broad decision-making authority over facility expenditures with minimal if any oversight. If the facility was generating a profit, little attention was paid to the facility manager’s decisions. Matador followed a «don’t ask don’t tell» philosophy which allowed facility managers to do whatever necessary to achieve the company’s financial objectives. Corporate executives realized their philosophy encouraged questionable business practices bordering on unethical—-or worse illegal, but rationalized their actions as being consistent with industry practices. Consistent with the company’s code of ethics, a confidential ethics hotline was established for employees to report suspected unethical or illegal behavior.

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After completing her accounting degree, and passing the Certified Management Accountant exam, Teresa was excited about her first accounting job as the accounting manager at Matador Material’s, the largest employer in her rural hometown of Hope. Since graduating from high school, Teresa stayed in Hope to raise her now ten-year-old daughter. Teresa was the third-generation from her family to work for Matador Materials, but the first to work in the office. Her grandfather, father and brother worked loading and unloading building materials. On her first day, she mused, «This is best accounting job in Hope. I am so blessed to work here and raise my daughter near family and friends.»

In the past, the Hope facility consistently outperformed other facilities with corporate executives hailing it as well as its facility manager Sam as a model for others to emulate. All that changed a year ago, when a competitor opened a new facility in Hope. This resulted in dramatic decreases in sales and increases in costs with the Hope facility reporting a loss for the first time ever. Executives who once praised the Hope facility now requested a complete review of the facility’s financial results. They charged Pat, the former Hope accounting manager who was recently promoted to divisional controller, with the task. As expected, Pat discovered a significant decrease in sales driven by lower selling prices and increased operational costs driven by inefficient operations. Pat was puzzled by the extraordinary increase in the facility’s administration expenses. Pat knew Sam approved those expenditures with the source documents retained locally at Hope, so he asked Teresa to investigate.

The Investigation Teresa realized this investigation could jumpstart her career. While Teresa reported directly to Pat at the corporate office, she felt a deep sense of obligation to Sam at Hope. She reasoned, «If I do a good job at the Hope facility, when Pat retires in the next five years, I could become the next divisional controller».

Analyzing the details of the administration expenses, Teresa uncovered significant increases in overtime and tuition reimbursement costs in the general administration and human resources departments. Confident she had the necessary skills to uncover the root cause of the increase; her first stop was the payroll department.

«Good morning, Mary,» Teresa said to her payroll clerk. «I need your help. Would you please pull last year’s timecards for Sam’s administrative assistant, Tia, and the switchboard operator, Tamara, and all of the human resource clerks?»

«No problem, Teresa. It might take me a little bit. Can I get them to you after lunch?»

«Sure.

«Funny you should ask. These are the only departments in the entire facility that submit their timecards in Excel. All the other departments use the company’s time system,» Mary commented.

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Discussion with the Divisional Controller

«Pat, sorry for calling so late. I just completed my analysis of the administration expenses. If you have a moment, I would like to discuss my findings,» Teresa spoke hesitantly.

«What did you find?» Pat prompted.

Pat asked a little puzzled «Did you review the source documents?»

«Absolutely, Sam approved all of the expenses. What I found a bit curious was that, Tia, Tamara, and Marty used Excel to submit their time which averaged 70 hours per week for over a year. Coincidently, besides Angel, they were the only employees to request tuition reimbursement».

«Great. Thanks for your thorough analysis,» Pat appraised.

«It seems the overtime and tuition reimbursement costs are related. When you were at Hope, did you or Sam make any special accommodations for employees taking classes? I am curious if you approved overtime pay for employees taking classes on-line so long as they did their course work at the office,» Teresa suggested hopefully.

«Teresa, I did not make any such arrangement and am certain neither did Sam. I am confident Sam is in complete control of all of the expenditures at Hope. I hope you are not suggesting Sam gave preferential treatment to the facility administration and human resource departments, or worse committed some type of fraud. During my 10 years at the Hope facility, Sam would not tolerate anyone bending much less breaking the rules,» Pat commented, clearly agitated. «Your line of inquiry is unfounded. If you persist in pressing the issue, your tenure with our company may be short».

Discussion with the Facility Manager Teresa remained unsettled by Pat’s warning. Even though she reported directly to Pat, her loyalties were to her profession and to Sam the management team at the Hope facility. She felt compelled to resolve the issue. Even though Sam and Pat shared a close working relationship and friendship for several years, Teresa could not help but wonder if Pat was protecting his former colleague or someone else at Hope. She had to know. Ignoring her boss’ warning, Teresa arranged a meeting with Sam.

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Higher Degrees of an Ethical Dilemma
Artscolumbia
Artscolumbia
Matador Materials, a public company became an industry leader in the United States supplying construction and heavy building materials and through numerous acquisitions. Matador followed a decentralized operating philosophy allowing facilities to operate as autonomous profit centers. Facility managers reported directly to the vice president of operations at the main corporate office and were given broad decision-making authority over facility expenditures with minimal if any oversight. If the fa
2021-08-19 09:18:17
Higher Degrees of an Ethical Dilemma
$ 13.900 2018-12-31
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