From left to right:
Pic 01: Disneyland, the happiest place on earth
Pic 02: Most memorable ladies
Pic 03: Your reward for graduating, be there!
Dear Intensive Practice Sessions P1 candidates,
As promised, the answer to the case study involving Disney Limited.
Remember, work very hard.
Marcus
ANSWER TO CASE STUDY: Ethics model AAA (AMERICAN ACCOUNTING ASSC.)
1. WHAT ARE THE FACTS?
The plant is in financial distress, closure is inevitable. Disney wants the contract completed or HS will face lawsuits as per contract.
2. WHAT ETHICAL ISSUES INVOLVED?
Whether the employees have the right to know about their future, albeit bleak since it involves their employment security. Naturally, if they have been told, key staff will find employment elsewhere, resulting in joepardising the Disney contract.
If employees are told, shareholders risked losing more with the contract unfulfilled. The ethical issue here is to what degree is the Board responsible to ‘both’ shareholders and employees.
3. WHAT RULES/POLICIES IN FORCE?
There is no rules requiring management to inform ‘high-level’ decisions and sensitive information to employees. Thus Board is not ‘obligated’ to communicate with staff. After staff completed the project, there is no further use of them, thus if made redundant Board merely have to comply with the redundancy laws of the land which likely involve paying compensation.
4. WHAT OPTIONS AVAILABLE?
(i) Outsource contract and inform staff. This way HS can still complete the contract and safeguard the employees interests in that they can look for other alternatives.
(ii) Keep information confidential by giving vague answers or even outright denial of rumour that plant is shutting down.
(iii) Re-negotiate with Disney to rescind the contract with amicable settlement.
5. DECISION THAT SUITS CURRENT POLICIES
Board will be compelled to protect shareholders interests by completing the contract and collect the contracted sum. This enhances both shareholders’ wellbeing by minimising losses and also Board’s performance is enhanced.
Thus, unlikely to adopt option to outsource or negotiate to rescind the contract as this works against shareholders' interests and Board as not performing their fiduciary duty to stockholders.
6. WHAT POSSIBLE CONSEQUENCES?
Consequences are minimal in view that firm is shutting down. Reputation dies with the firm.
Consequences are negative impact on employees in view that they are caught unprepared, with the sudden termination after the contract completion.
7. WHAT IS DECISION? (APPLYING KOHLBERG’S CONVENTIONAL STANDARDS)
From Deontological perspective: unfair and unjust to employees as they are seen being exploited by management only to be dismissed thereafter.
From a Teleological perspective: utilitarian perspective is at least, all employees ‘still’ have job until the plant closes. Egoist perspective shows that Board and shareholders protect their own economic interests.
Decision: by keeping information confidential, the weakest and poorest stakeholders, namely the employees, still have their jobs. Otherwise informing them pre-maturely will result in jeopardising the employment earlier when key staff leaves.
Ethical to keep information confidential, even if management is pressed for an answer.
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