DIALING FOR DOLLARS INTRODUCTION The situation in this particular ethical dilemma is that the sales person is drastically under the quota, although in par with the rest of the sales department. The salesperson is trying to manipulate schemes to reach quota in an unfavorable market. The VP of sales has called for 20% discount on all new orders; with the stipulation that customers take delivery before the end of the quarter so the accounting department can log the sales into the current quarter. The salesperson’s boss told him to “Start Dialing for Dollars, get what you can. Be creative.” This statement led the way for numerous ethical concerns within the organization in the sales department. In this example, there are three different customers where a broad range of ethical violations occurred: Salesperson agreed to take back inventory next quarter if not sold Granting a 20% credit for next quarter Setting up a fictitious company that is owned by your brother-in-law

Question 1 Is it ethical for you to write the agreeing to take the product back? If that comes to light later, what do you think your boss will say? It is not ethical to write the agreeing to take the product back if it was not one of the policies set forth in your company’s return policy. The salesperson manipulated the agreement with the customer in order to reach quota, which will further damage the sales revenue for the following quarter. The is a definite violation in the company’s procedures because the salesperson is doing so only to gain the sale; if it was a stipulation of the company policy than sales would allow it to be defined on the purchase order. If the comes to light later on, I believe his boss will let him go because reprimanding the individual by just transferring him into another department would jeopardize the quality of the organization. The additional burden that the salesperson put on the organization because of the ethical violations cost the corporation a lot of money and his boss must set an example.

Is it ethical for you to offer the “advertising” discount? What effect does that discount have on your company’s balance sheet? Question Two Is it ethical for you to offer the “advertising” discount? What effect does that discount have on your company’s balance sheet? Using “advertising” in an illegal way such as pushing inventory off to another accounting period doesn’t adhere to GAAP (Generally Accepted Accounting Principles). Since they didn’t want the accountant to know what they were doing, they did not mention on the invoice why these sales were so close to the end of the accounting period. Also, the effect on the balance sheet would show higher revenues and lower inventories to show a higher net income. That is what the company is trying to accomplish. It is totally illegal for a company to utilize this form of accounting. They would be subject to criminal prosecution which could lead to trial and large fines to the company and employees that knew about this activity.

Is it ethical for you to ship to the fictitious company? Is it legal? Question Three Is it ethical for you to ship to the fictitious company? Is it legal? The Sarbanes Oxley Act of 2002 states that you may not ship fake inventory to a fictitious company. It’s like this company is going to wind up being another Enron or World Com waiting to happen. It is not ethical at all to ship fake inventory to a fake company since you know you will never get paid. It seems inconceivable to believe that anyone could possibly believe that there isn’t something illegal about shipping fake inventory to a fake company. It gives the appearance that they want to push inventory off the balance sheet and increase their income statement by doing this.

Describe the impact of your activities on next quarters inventory. The impact these actions would have on your inventory would be terrible. The end result would be an over saturation of inventory which would also take up a large amount of space. The company would begin losing large amounts of money very quickly and it would be extremely hard to correct this. Second the chances of making the quota next quarter would be nearly impossible, because you would first have to sell the remaining inventory plus the inventory for the second quarter. Having an overstock is never a good thing and your supply would be much larger then the demand. The impact these actions would have on your inventory would be terrible. The end result would be an over saturation of inventory which would also take up a large amount of space. The company would begin losing large amounts of money very quickly and it would be extremely hard to correct this. Second the chances of making the quota next quarter would be nearly impossible, because you would first have to sell the remaining inventory plus the inventory for the second quarter. Having an overstock is never a good thing and your supply would be much larger then the demand.

If you were the COO of this company, would you instruct manufacturing to ignore the sales increase? If I was COO I would definitely not ignore the sales increase because if the sales do end up occurring their needs to be enough product to sell. The only problem that I could see arising is in the next quarter. Since inventory will be returned, manufacturing will need to be slowed down and this could cause issues amongst the employees. I personally agree the best bet would be to continue looking for customers who will be satisfied with the 20% discount on new orders. If enough time and effort are put into it I believe the quota will be reached and their will be no future problems. If I was COO I would definitely not ignore the sales increase because if the sales do end up occurring their needs to be enough product to sell. The only problem that I could see arising is in the next quarter. Since inventory will be returned, manufacturing will need to be slowed down and this could cause issues amongst the employees. I personally agree the best bet would be to continue looking for customers who will be satisfied with the 20% discount on new orders. If enough time and effort are put into it I believe the quota will be reached and their will be no future problems.

Question 6. What would you do if you were the salesperson in this situation? If I was the salesperson in this situation I would definitely not have created a fake company to generate more quarterly sales. Instead of giving people discounts, or telling them you will take it back after the end of the quarter I would just try and keep selling the normal way. Giving all these stipulations will only lead to more confusion and harder goals in the end.

Question 7. What, in your opinion, should this company do? This company should just not the hit the goal for that quarter. Even though that probably means less or no bonus for employees it will make things easier in the long run. Perhaps, if they see that sales are down, management will lower sales goals for the future quarters. If they do hit the sales goals with the way they have talked about than the second quarter they will have more product coming back than from quarters before it, and it may lead to not hitting their sales goals for a second consecutive quarter.