Question

Tiffany Lyons was just hired as the assistant treasurer of Key West Stores. The company is a specialty chain store with nine retail stores concentrated in one metropolitan area. Among other things, the payment of all invoices is centralized in one of the departments Tiffany will manage. Her primary responsibility is to maintain the company's high credit rating by paying all bills when due and to take advantage of all cash discounts.

Jay Barnes, the former assistant treasurer who has been promoted to treasurer, is training Tiffany in her new duties. He instructs Tiffany that she is to continue the practice of preparing all checks “net of discount” and dating the checks the last day of the discount period. “But,” Jay continues, “we always hold the checks at least 4 days beyond the discount period before mailing them. That way, we get another 4 days of interest on our money. Most of our creditors need our business and don't complain. And, if they scream about our missing the discount period, we blame it on the mailroom or the post office. We've only lost one discount out of every hundred we take that way. I think everybody does it. By the way, welcome to our team!”

Instructions

(a)  

What are the ethical considerations in this case?

(b)  

Who are the stakeholders that are harmed or benefitted in this situation?

(c)  

Should Tiffany continue the practice started by Jay? Does she have any choice?

Answer 1

a) Let us start with term Ethical: ( Business Ethics) : ethics is the study of appropriate business policies and practices in any situation  including corporate governance, management and business competition. Here in this case, Ethical consideration is to pay the required amount on time in order to avail discount instead of deceive or manipulating  the documentation.

(b) Stakeholders: Stakeholders include all including shareholders of the organisation eg: Debtors, Customers, creditors, government etc,

Here in this situation Stakeholders which are harmed are:

1. Monetary Loss: Creditors as they are giving discount by forgoing their interest for four days ( As per Treasurer) following practice of providing check after 4 days of lapse of availing discount period.

2. Non Monetary loss:  Government services,( post office) , their timely delivery and reliable services are loosing Creditors as customer, as they will shift their post office service to private courier services.

Stakeholders which are benefitted:

1. Debtors and Owners: As due to 4 days they are availing discount as well as interest over the deposit fro four days in their bank account, if it has facility of interest credit.

2. Bank: As bank is getting funds for 4 extra days to carry on their operations.

(c) As ethical practice she should not follow that practice, as not only the profitability which keeps the business high but better creditors relations also keep the market at same pace, once loss the creditability of the creditors it may lead to loss of whole business in turn.

As a general practice, same practice as implemented by her treasurer manager can be followed till it come into the eyes of their creditors. As per proverb Boss is always right"