You have been the Chief Financial Officer (CFO) for a large manufacturing compan

Question

You have been the Chief Financial Officer (CFO) for a large manufacturing company for 15 years. The Company’s year end is March 31 and you are finishing the year end accounts. You have recently been advised by the Chief Operating Officer (COO) of a significant level of slow moving stock. The stock in question is now more than nine months old and would normally have been written down some months previously. The shareholders are trying to sell the Company and the Chief Executive Officer (CEO), who is also the majority shareholder, has told you that it is not necessary to write down the stock in the year end accounts. You are sure that the CEO wants the financial statements to carry an inflated stock valuation because he has found a prospective buyer for the Company. The CEO has mentioned to you that if the proposed deal is successful, all employees will keep their jobs and you will receive a substantial pay increase. What are the ethical implications of this scenario and how would you resolve them? Are there any ethical theories that might support your answer?

Explanation / Answer

Ansss
Answer: This scenario is a good example of ethical dilemmas faced in business situations. Falsifying the financial information is a major issue which has affected the business environments after the case of Enron scandal. If the CFO shows the inflated stock valuation then it will amount to fraud. Providing wrong information in the financial statement will not only make the investors take wrong decisions but can also bring legal actions against the person doing it. The logic of saving the job provided by CEO does not hold true as the employees will still lose their jobs once the new owner will realise that a fraud has taken place. In this scenario the CFO should present the right financial records and ignore the suggestion made by CEO as it is the only ethical solution of this situation. The Kant’s theory of duty is applicable in this case as it is legal, ethical and professional duty of a CFO to provide the right financial information in the financial statements.

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