case study

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Issues Identified:
1) The first issue of the case is whether Harry Hepburn, the president of Southern California Division of Robinson Brothers Homes should make the projection on the specific project more optimistic or not. By making the revenue forecasts more optimistic, the most likely outcome is that the project will be undertaken and his team of employees will keep their position. Otherwise, at the current estimated return projections, the project is expected to be declined, and Harry’s team will be partially laid off in accordance with the Robinson Brothers Homes plan on cutting costs as the company faces the slowing down market and decreased profitability.
2) The second issue of the case is to evaluate what can be done to either
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They are also crucial for the division’s success (637 homes in 2006 and $235 in revenue).
Harry should oversee their work in order to ensure that no risk manipulation and unjustified assumptions/forecasts take place.
Ethical issue
[There are really no alternatives for this issue – there is only a question: “Should Harry stretch the forecast a bit or should not?”]
* Harry’s action of making the forecast a bit too optimistic will not be left unnoticed by VPs. As a result, they may begin making dishonest acts on their own in the future acting on the example set by the president. (The cultural control may get broken.)
* The management owns the fiduciary duty to its shareholders, as it is trusted with assets to manage. Shareholders interests should be put ahead of their own. According to the stockholder ethical model, the maximization of shareholders’ profit/wealth is of utmost importance.
* Southern California Division of RBH represents a large portion of company’s business: in 2006 it is projected to sell 637 homes, while 2000 were built by RBH in total. Thus, the failure in this division may cause the financial difficulties on the company-wide level affecting other employees as well. According to the stakeholder ethical model, the acceptance of the project of higher risk would also be unethical.
* If they accept, then in case of the unfavourable scenario, the company is
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