R.M. Lilly Security, Inc. offers security services to professional athletes and entertainers.  Each type of service offered is considered to be a separate department.  Anita Lilly, the vice president of operations and daughter of the owner, is compensated partially on the basis of departmental performance.  Performance is measured by whether the departments are able to operate within their respective budgets.  She often revises operations in order to allow the departments to stay within budget.  Says Anita, "I will not go over budget even if it means slightly compromising the level and quality of service we provide.  These are minor compromises that don't significantly affect the safety of my clients, at least not in the short term."1. Is there an ethical concern in this case?  If so, explain the concern.2. What parties are affected by these "minor compromises"?3. Can Anita Lilly take action to eliminate any ethical concerns?  Explain.4. What is R.M. Lilly Securities, Inc.'s ethical responsibility in offering professional security services?

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Asked Mar 31, 2019
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R.M. Lilly Security, Inc. offers security services to professional athletes and entertainers.  Each type of service offered is considered to be a separate department.  Anita Lilly, the vice president of operations and daughter of the owner, is compensated partially on the basis of departmental performance.  Performance is measured by whether the departments are able to operate within their respective budgets.  She often revises operations in order to allow the departments to stay within budget.  Says Anita, "I will not go over budget even if it means slightly compromising the level and quality of service we provide.  These are minor compromises that don't significantly affect the safety of my clients, at least not in the short term."

1. Is there an ethical concern in this case?  If so, explain the concern.

2. What parties are affected by these "minor compromises"?

3. Can Anita Lilly take action to eliminate any ethical concerns?  Explain.

4. What is R.M. Lilly Securities, Inc.'s ethical responsibility in offering professional security services?

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Expert Answer

Step 1

a) 

Yes there is an ethical concern in this case. Person AL is being compensated based on department’s ability to perform within the budgeted costs. This is an obscure parameter. The costs incurred may vary and deviate the budgets based upon the various business scenarios.

 

However, Person AL unwilling to deviate the cost, considering those changes to be trivial may impact the performance in the long run. The Person AL must take at times decisions with the requirements of the business and not the budget alone.

 

Budget is a tool, that acts as a reference while spending and taking certain decisions, however it is not the only criteria to be addressed and Person AL needs to understand this. Quality and level of service is what gives every business its edge and a compromise on it even at the slightest level may have a great impact on the business.

Step 2
  1. b) The minor compromises have a great impact and affect the following parties:
  • The present and potential investors of the firm.
  • The present and future creditors to the firm.
  • The clients of the firm.
  • The management of the firm.
  • The employees of the firm.
  • The reputation and image of the firm.
Step 3
  1. c) Yes, Person AL can take the following actions to eliminate ethical concerns:

 

  • Create business guidelines.
  • Identify means to r...

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