Krispy Kreme Doughnut, Inc. sells donuts through its network of stores owned and operated by independent franchisees. Franchisees criticized Krispy Kreme’s former CEO, Scott Livengood, for forcing companies with which Krispy Kreme did business to contribute $500,000 to sponsor a “storytelling festival” in the hometown of Mr. Livengood’s wife. According to an independent investigation, this expenditure benefited Mr. Livengood and his wife, but did not provide Krispy Kreme with any marketing or promotional benefits.
a. Was Mr. Livengood’s insistence that these companies fund the storytelling festival ethical?
b. Did Mr. Livengood likely have an improper tax motivation for structuring the funding of the storytelling festival in this manner?
a) Mr. Livengood’s insistence that these companies fund the storytelling festival was not ethical. According to an independent investigation, this expenditure benefited Mr. Livengood and his wife, but did not provide Krispy Kreme with any marketing or promotional benefits. In this case if both the parties, the independent franchisees as well as Krispy Kreme were to benefit from this event, or if neither parties benefited from this but rather just did it for pure charitable purposes, then this decision would be deemed ethical. But since this only benefited Mr Livengood and his wife while the companies that donated their money did not gain anything in return, it made this an unethical decision.
b) It does seem likely that Mr Livengood was funding the storytelling in this manner for improper tax motivation. If he and his wife were the people in charge of this festival, and were donated all this money, then only they will have the option to not pay taxes on this money since their funds were donated by the companies. This could have been a way that Mr Livengood and his wife structured the funding of the storytelling festival for improper tax motivation and benefited from the same. This donation could have reduced their tax burden or eliminated the need to pay any taxes.
Krispy Kreme Doughnut, Inc. sells donuts through its network of stores owned and operated by independent...
Krispy Kreme Doughnut, Inc. sells donuts through its network of stores owned and operated by independent franchisees. Franchisees criticized Krispy Kreme’s former CEO Scott Livengood for forcing companies with which Krispy Kreme did business to contribute $500,000 to sponsor a “storytelling festival” in the hometown of Mr. Livengood's wife. According to an independent investigation, this expenditure benefited Mr. Livengood and his wife, but did not benefit provide Krispy Kreme with any marketing or promotional benefits. 1. Was Mr. Livengood’s insistence...