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Andrea Rosenberg MGMT 3610 Professor Moake 12/25/23 Chapter 5 Assignment 1. What is the ethical issue in the case? What makes this an ethical issue? The ethical issue in this case is needing to default on a liability in order to make the purchased business profitable again would cause their most loyal vendor to fall into financial distress. PLB owes a lot to their vendor Johnson Printing because the vendor essentially helped them stay afloat for years. Raider Inc would be knowingly damaging their business by defaulting on loans that Johnson provided to help out PLB when they were struggling. It’s not illegal to do so but is an ethical dilemma affecting Raiders Inc. 2. Who are all of the stakeholders that are impacted by the ethical issue in the case? Discuss how the ethical issue impacts each stakeholder. The main stakeholders are PLB and Johnson Printing as the main companies involved with the debt, as well as Raiders Inc if they choose to acquire PLB. Other stakeholders would be the employees of all companies involved, other suppliers and vendors, other lendors, customers, and the communities they are in. The main stakeholders would clearly be affected most obviously where Raiders Inc could gain a lot of profit from acquiring PLB and going ahead with their plan of defaulting on the loan with Johnson but could also risk bad publicity for knowingly taking unethical actions. PLB stands to either lose or gain depending on whether their company stays afloat, further affecting their employees in this uncertainty. Johnson is directly affected negatively if the decision to default is made and stands to possibly be put out of business if they cannot survive such a huge loss on that loan. Their employees stand to also lose their jobs if Johnson cannot stay afloat. Other lenders, suppliers, and vendors could be risking their investments as well in
both PLB and Johnson based on the outcomes. Lastly, customers and the community at large can be affected by the loss of job sources and backlash of unethical maneuvering. 3. Discuss at least three solutions for Raider Inc. to solve the ethical issue. Be sure to discuss the impact of those different solutions for the organization and stakeholders. (1) Proceed with the acquisition and defaulting on the Johnson debt as planned. This could make Raiders Inc a lot of money as usual, allow PLB to stay in business, and allow PLB employees to maintain job stability. However, it would likely cause Johnson to be driven out of business and their employees to lose their jobs. The questionable morality may bring bad publicity on both Raiders and PLB. (2) Don’t acquire PLB. This could result in PLB going out of business and as a result defaulting on all their liabilities. Johnson would be detrimentally affected by that default and likely end up going out of business too. Employees of both companies would lose their jobs. (3) Acquire PLB but don’t default on the loan. This would be ideal but would likely affect the team at Raiders most directly because they’d need to prioritize paying back the loans, which would heavily impact any immediate cash inflows they generate. However, they’d maintain the good business relationships that could lead to more opportunities in the future. 4. Recommend a course of action for Rick to resolve the ethical issue. What steps should he take? Be sure to discuss the benefits and risks of this course of action. I think Rick should push for a more ethical solution to maintain stability for all stakeholders by committing to acquire PLB but not default on debt. They would lose out on fast short-term profits by putting any initial profits towards paying out on debts but in the long run would be the best option for everyone involved without burning any bridges with Johnson. The risks would be Raiders either contributing more capital or just not making profits for the initial periods it would take for debt repayment. 5. Assuming that the leaders of Raider Inc. do not want their employees to behave unethically, what are several (at least three) things that can be done to improve the ethical climate? What steps can the managers at Raider Inc. take to guide employees to make more ethical decisions? (1) Instituting a code of conduct to outline expected ethical guidelines.
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