Reference no: EM132252133

ETHICAL DILEMMA

At the Dun and Ready (D&R) Company, Sid was responsible for monitoring the Japanese stock market to determine patterns and identify stocks that could become active. One of 10 company representatives in Japan, Sid, who was of Japanese descent and fluent in the language, had been assigned to Tokyo. Being relatively new to the firm, he was told to gather information for his boss, Glenna. Glenna had been with D&R for 10 years, but because of the cultural barriers, she was not enthusiastic about her Tokyo assignment. Glenna encouraged Sid to get to know the Japanese brokers, traders, and other key people in the business, and thanks to his background, he found that he blended easily into the culture.

In Japan, ceremony and giving favors is a way of life. Sid leaned that, by observing Japanese customs and perfecting his Japanese, he not only became an information resource on the Japanese stock market and its players for his company but also a resource for the Japanese who wanted to invest in the U.S market. He found that the local would talk to him about important investments rather than coming into the office to see Glenna.

Sid’s duties included taking key customers to bars, restaurants, and vacation spots for entertainment. One day a government official in the group that Sid was entertaining hinted that he and the others would like to play golf on some famous U.S. courses. Sid understood what the government official wanted and relayed the request to Glenna, who told him that granting a favor of this kind would normally be against policy, but because such favors seemed to be the custom in Japan, they could do some “creative bookkeeping”. “When in Rome, right, Sid?” was Glenna’s response to the whole situation. By pulling some strings, Glenna managed to have these officials play at 10 of the most exclusive U.S. golf courses. Later, several official passed the world to people in Japan’s elite financial circle about Sid’s helpfulness.

Six months later, Glenna was transferred back to the States. Rumor had it that expenses were too high and revenue too low. Her replacement, Ron, didn’t like being sent to Japan either. In his first week on the job, he told the staff that he would shorten his tour in Tokyo by slashing expenses and increasing productivity. Ron was “by the book” person. Unfortunately, company rules had not caught up with the realities of cultural differences. After two months with Ron, 7 or the original 10 company representatives had quit or been fired.

Sid was barely surviving. Then one of his contacts in the government repaid a favor by recommending several stocks to buy and sell. The information paid off, and Sid gained some breathing room from Ron. Around the same time, some of Sid’s Japanese clients lost a considerable amount of money in the U.S. markets and wanted a “discount” – the term used for the practice in some large Japanese brokerage houses of informally paying off part of their best clients’ losses. When Glenna was still in Tokyo, she had dipped into the company’s assets several times to fund such discount. Because everything required Ron’s approval, Sid and his colleagues believed that this practice would not be tolerated. However, late one afternoon Sid and a few others provided the proper forms, and Ron signed them without realizing what he had done.

Several months passed and the three survivors had resorted to lowering their expenses by using their own funds. This in turn led to Sid churning some of his accounts; that is, he bought and sold stocks for the express purpose of increasing his own revenues. Churning was tolerated in Japan, along with other practices that would be deemed questionable in the United States. Ron was oblivious to what Sid was doing because his focus was on reducing expenses. In the previous month, a group of important D&R clients had thrown a party for a few of their favorite brokers at one of their local haunts. After she customary toasts and small talk, it was suggested to Sid that a Japanese cartel might be interested in D&R. Sid was cautious and nothing else was mentioned. Several weeks later at another party, Sid and the two remaining D&R people were told that a takeover was imminent. But to make the takeover painless, the cartel needed certain sensitive information. Sid’s reward for providing it would be a high position in the new, reorganized company and a “wink/nod” agreement that he could go anywhere in the world for his assignment.

That week Ron announced that headquarters was pleased with the productivity of the Tokyo group. “It’s only a matter of time before I get transferred, and I want out of Tokyo,” he told them. The office knew that if Ron were successful, his next position would be that of vice president. He also informed the group that corporate representatives would be coming to Tokyo the following week.

“It seems that they’ve heard rumors of a possible hostile takeover attempt on D&R from someone in Japan, and they want us to check it out,” Ron said, adding with a tight smile. “there will be some changes next week.”

Sid suspected that this meant there would be even fewer people working even harder. It might also, mean, however, that someone knew that Sid and the two representatives had been talking to the wrong people. Or maybe one of the three had sold out the other two. If Sid was to gather the information sought by the cartel, he would have to act quickly.

Questions:

1. What are ethical issues here?

2. What moral philosophies were Sid, Glenna, and Ron using?

3. What are some control options that D&R could have introduce to create a more ethical culture?

4. Discuss the advantages and disadvantages of each decision that Sid could make.

5. Identify the pressures that have caused the ethical issues to develop.

6. Discuss Sid’s power structure and leadership position at D&R and it might be at the new D&R.