John is CFO at a venture-backed tech start-up with revenues of $20 million and approximately 80 employees. He has worked at the company for several years, and now reports to Ralph, the company's newly hired CEO. The company had been doing really well, but recently big customers have been placing fewer orders and Ralph is feeling pressure to show growth. This pressure is amplified because the company is venture-backed, and the investors expect results. While the company did well in the first round of funding, if they don't perform now, they may have trouble with gaining sufficient funding in the second round, which could mean the end of the company. All of this was on John's mind when Ralph came to him about recording a major order that was still under negotiation. The deal had not gone through, although both parties expected to complete the deal in the next week. With the current quarter ending in the next few days, including this order would give a significant boost to the company's financial reports. Nonetheless, under the generally accepted accounting principles (GAAP), it is clear that this order does not qualify as revenue. Even so, Ralph was adamant about John booking the order, which could make all the difference in the company's ability to stay afloat. John knew that doing so would constitute fraud; particularly because the Sarbanes Oxley Act requires the CEO and CFO to sign off on all quarterly reports. At the same time, John knew that this order could make all the difference. Q2: Examine and apply one ethical decision-making framework to this case using relevant company examples. What do you conclude that John should do? What is the rationale of your choice?
John is CFO at a venture-backed tech start-up with revenues of $20 million and
approximately 80 employees. He has worked at the company for several years, and
now reports to Ralph, the company's newly hired CEO.
The company had been doing really well, but recently big customers have been placing
fewer orders and Ralph is feeling pressure to show growth. This pressure is amplified
because the company is venture-backed, and the investors expect results. While the
company did well in the first round of funding, if they don't perform now, they may have
trouble with gaining sufficient funding in the second round, which could mean the end
of the company.
All of this was on John's mind when Ralph came to him about recording a major order
that was still under negotiation. The deal had not gone through, although both parties
expected to complete the deal in the next week. With the current quarter ending in the
next few days, including this order would give a significant boost to the company's
financial reports. Nonetheless, under the generally accepted accounting principles
(GAAP), it is clear that this order does not qualify as revenue.
Even so, Ralph was adamant about John booking the order, which could make all the
difference in the company's ability to stay afloat. John knew that doing so would
constitute fraud; particularly because the Sarbanes Oxley Act requires the CEO and
CFO to sign off on all quarterly reports. At the same time, John knew that this order
could make all the difference.
Q2: Examine and apply one ethical decision-making framework to this case using
relevant company examples. What do you conclude that John should do? What is the
rationale of your choice?
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