Corporate Governance And Ethics

Story: What Would You Do?
The two managers stood on the carpet of the Chief Operating Officer’s office feeling very uncomfortable. Arnold (the management accountant) and Amanda (the HR manager) had come to deliver some very bad news. In front of them sat Mr Goodrich, the Chief Operating Officer (COO), behind his impressively big mahogany desk, with its impressively big iMac Pro computer, all of which resided in the impossibly big office. Mr Goodrich did, after all, like to give visitors the distinct impression that he was big and important, especially since, if he stood up, he measured an unimpressive 168cm.

But of course Mr Goodrich was important; it was the COO who ran the company while the CFO and CEO managed the stakeholders. He was a good manager who always delivered on results and never, ever missed out on his annual performance bonus. The company’s investors loved him, and because of that he was considered untouchable—even if he had a reputation for being a “whatever it takes guy” who wasn’t afraid to cut corners and push the law to its limits if it meant meeting profit forecasts. Additionally, Mr Goodrich quite liked his reputation as a tough results achiever.

Not surprisingly, Mr Goodrich didn’t like surprises very much, and so Arnold and Amanda knew that they were in for a rough time. They weren’t to be disappointed. Mr Goodrich’s face turned quite red as he thundered away and banged on his desk. His executive assistant, sitting just outside the open office door, knew what this meant, so she hurried over and quietly shut the large office door. Arnold and Amanda felt quite trapped, as they were.

“How much did you say is involved?” Mr Goodrich thundered, as if he wasn’t believing his own ears.

“About $6 million” Arnold stammered, “give or take a few”.

“What? How?”

Arnold tried to explain the situation as calmly as he could. “For the past two years, we have been paying our factory staff from the wrong staff award. We have been short paying them on wages, leave and superannuation. Amanda has just found out about it, and I have started running the numbers on the extent of the problem”.

Mr Goodrich suddenly became quiet and stopped banging things. He just looked silently at the two managers standing in front of him. Then he seemed to make a decision.

“You!” He said firmly, looking at Amanda. “You’re finished. Sign the non-disclosure agreement on the way out and we’ll look after you”. Then he turned his intense stare to Arnold. “You…you will develop a full financial plan with options and be here to present it at 8am tomorrow. Now get out, both of you”.

Damn, they heard Mr Goodrich mutter as they turned to walk out. “Damn kids with degrees, think they can run the world”. Arnold and Amanda left him and walked through the office door to join the rest of the world.

“That was harsh” said Arnold to Amanda as they walked away from the executive office suite. “It was his damn nephew who stuffed up, long before you were appointed”.

Amanda swung around to face Arnold, her face showed signs of a struggle, of trying to keep control. “Listen Arnie, this isn’t so bad for me. A non-disclosure agreement means they don’t tell tell the world I was sacked, and I will probably get a nice payout to buy my silence. You’re the one who has to be careful now. What are you going to do?

Arnold thought for a little while and said “Show Goodrich the full problem and hopefully he will make the right decision”.

“Good luck with that” said Amanda with a knowing smile, and then she walked away to collect her things from her desk.

“We have limited options, and none of them are easy”, Arnold told Mr Goodrich the next morning. Mr Goodrich sat behind his enormous desk, as he always did, and read the professional report that Arnold had spent (literally) all night preparing. “…and those options are: that we do nothing and hope no-one notices, or that we declare our error to the Fair Work Commission (The industrial relations regulator) as an innocent error and ask for time to fix the problem. If we declare the error now, perhaps we can come to arrangements with our workers and banks so that we don’t have to pay back the money now and risk insolvency…”

Mr Goodrich interrupted, shouting: “Insolvency? Are you insane?”

“Uum, no Mr Goodrich. If we had to pay over $7 million in backpay within a month, well, we just don’t have that cash available. However, I am sure that the banks and the workers will support us. It doesn’t do anyone any good to force us into insolvency”.

“To hell with them”, Mr Goodrich shouted back. “I won’t have the damn union telling me how to run the company”. Now Mr Goodrich was positively enraged, but just as quickly he calmed down again. Spreading his hands across his huge desk and looking squarely across that desk at Arnold, he spoke calmly and with authority.

“Give me all the print copies of your report…NOW!” The last exclamation was shouted at Arnold, who took a step backwards, but then came forward and put his entire file on Mr Goodrich’s desk.

Now Mr Goodrich returned to his calm authority: “Now, this is what we will do. We will tell no-one. No-one, do you understand? This will ruin the company. We have no chance of making any arrangements with the banks or anyone else. If news of this leaks out, I will see to it that you are held responsible for this debacle and you will never work for any corporation ever again. You might as well learn how to serve kids at Maccas, because that is all the career left for you. Do you understand? Good, I see that you do. Now get out and made sure that you delete every file related to this from your computer—a company computer, mind you.”

With that, Arnold stumbled back a couple of steps, before turning and fleeing out of Mr Goodrich’s massive office. Now he had his own decisions to make.

Part A Question 1: If Mr Goodrich wanted to disclose the problem only after he knows all the facts, what theory of ethics best explains Mr Goodrich’s motivation for wanting to do this. Explain why you chose this theory.

Part A Question 2: What is nepotism, and why is it considered unethical in Australia? Is there any evidence in the story that Mr Goodrich might have engaged in nepotism in the past ?

Part A Question 3: What are Kaptein’s dimensions of an ethical culture? Based on what you know of the business in the accompanying story, use Kaptein’s work to evaluate its ethical culture.

Part A Question 4: Use one or more justice theories to explain why Mr Goodrich’s sacking of Amanda was unethical. Use the principles of Just Cause and Due Process to support your answer.

Part B Question: Provide a plan to institutionalise an ethical culture in Mr Goodrich’s company. Explain what parts of your plan are missing in the business, based on what you have learned from reading the story.

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