Question

Tonya Latirno is a staff accountant for Cannally and Kennedy, a local CPA firm. For the past 10 years, the firm has given employees a year-end bonus equal to two weeks’ salary. On No- vember 15, the firm’s management team announced that there would be no annual bonus this year. Because of the firm’s long history of giving a year-end bonus, Tonya and her co-workers had come to expect the bonus and felt that Cannally and Kennedy had breached an implicit agreement by discontinuing the bonus. As a result, Tonya decided that she would make up for the lost bonus by working an extra six hours of overtime per week for the rest of the year. Cannally and Kennedy’s policy is to pay overtime at 150% of straight time. Tonya’s supervisor was surprised to see overtime being reported, because there is gener- ally very little additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, because employees are on the “honor system” in reporting their work hours. Instructions: Answer each question below in a way where you use at least 200 words to answer both questions ( NOT 200 words per question). After doing this, please respond to one of your peer's responses by using at least 100 words in your response. 1. Is Cannally and Kennedy acting in an ethical manner by eliminating the bonus? Explain your answer. 2. Is Tonya behaving ethically by making up the bonus with unnecessary overtime? Why?

Answer 1

(1): No, Cannally and Kennedy is not acting in an ethical manner by eliminating the bonus. This is because the payment of year-end bonus, equivalent to two week’s salary, was a sort of an implicit agreement between the organization and its employees. The practice of paying year-end bonus was a regular practice for the company and as such employees started treating this as a norm and as their right.

Cannally and Kennedy should properly explain the reason and causes to the employees for not paying bonus in that year. Employees of the company work hard throughout the year and expect a variable pay in the form of bonus as it had become a norm for the company. Suddenly not paying bonus to employees in a year and that too without any reason does not seem ethical at all.

(2): No, Tonya is not behaving ethically by making up the bonus with unnecessary overtime. This is because Tonya is abusing the company’s ‘honor system’ and is falsely logging extra hours when there was no need for the same. It was year-end time for the company and during this time work load was reasonable as additional client service demands was not present at this time. Thus Tonya was putting in extra hours not because she had extra work to do but merely because she wanted to earn the equivalent amount of bonus through overtime. This is equivalent of abusing the company’s honor system and hence cheating the company for personal benefit and self-interest.