Question

DeVito Company operates in a state where corporate taxes and workmen's compensation insurance rates have recently doubled. DeVito's president has assigned you the task of preparing an economic analysis and making a recommendation about whether to move the company's entire operation to Missouri. The president is slightly in favor of such a move because Missouri is his boyhood home, and he also owns a fishing lodge there. You have just completed building your dream house, moved in, and sodded the lawn. Your children are all doing well in school and sports and, along with your spouse, want no part of a move to Missouri. If the company does move, so will you because your town is a one-industry community, and you and your spouse will have to move to have employment. Moving when everyone else does will cause you to take a big loss on the sale of your house. The same hardships will be suffered by your coworkers, and the town will be devastated. In compiling the costs of moving versus not moving, you have latitude in the assumptions you make, the estimates you compute, and the discount rates and time periods you project. You are in a position to influence the decision singlehandedly. Instructions (a) Who are the stakeholders in this situation? (b) What are the ethical issues in this situation? (c) What would you do in this situation?

Answer 1

Stakeholder for the situation:

• Management of the Firm
• Employees of the firm
• Shareholders of the firm
• Creditors of the firm

Ethical Issues of the firm:

• Personal Interest of President which will affect the decision to move to Missouri.
• The interest of the employees and the cost and settlement break they will experience with shifting to another city. Also, the decision to be based on a certain assumption which can be biased.
• The interest of the shareholders which is always aimed for shareholder's wealth maximization.

My Action: Will completely focus on the decision making based on the merits of the facts instead of making the biased decision whether it is the president's bias towards shifting or employee's bias towards not shifting.