FDP HOMESECURITY

FDP Company produces a variety of home security products. Gary Price, the company’s president, is concerned with the fourth quarter market demand for the company’s products. Unless something is done in the last two months of the year, the company is likely to miss its earnings expectation of Wall Street analysts. Price still remembers when FDP’s earnings were below analysts’ expectation by two cents a share three years ago and the company’s share price fell 19% the day earnings were announced. In a recent meeting, Price told his top management that something must be done quickly. One proposal by the marketing vice president was to give a deep discount to the company’s major customers to increase the company’s sales in the fourth quarter. The company controller pointed out that while the discount could increase sales, it may not help the bottom line; to the contrary, it could lower income. The controller said, “Since we have enough storage capacity, we might simply increase our production in the fourth quarter to increase our reported profit.”

      

You will be using Chapter 6 Ethics Challenge p 236 AND the IMA Code of Ethical Practice (found in doc sharing Week 2) as the basis for this written project.  You will be required to review the case in the text and provide solutions to the situation along with any ethical concerns based on the IMA Code. This will be done in the form of a memo to Gary Price explaining your answer and why this is or is not ethical based on the IMA Code.  

 

Grading Rubric: 

  

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Category

Grade

Comments

Student Name:

Scale of 5-0 where 5=Requirements met 0=Requirements not met

Format / Citations -20%

o Format: Proper Memo format used

o Memo uses, 1” margins,  12 pt font in Times New Roman style  and pages are numbered

*Remember if sources are not noted it is considered plagiarism

o Citations:  Sources used in the paper are cited in APA format (author name, date, page number if needed for direct quotes).

o Sources are listed on a separate references page in APA format (alphabetical order by author, if there is one, with all needed information).

Content / Quality -80%

o Content: There is a clear concise opening segment including  the purpose of the memo, the context  and the specific task

o There is a clear context section  this is the event, circumstance, or background of the problem you are solving

o There is a clear task statement where you should describe what you are doing to explain the problem

o There is a clear summary statement that provides a brief statement of the key recommendations you have reached.

o There is a clear discussion segment that includes all the details and research that support your ideas

o There is a clear closing segment summarizing your key points for the reader.

o There is a smooth transition between paragraphs.

o The information presented including exhibits is accurate and terms are used correctly.

o Concepts covered in class are incorporated into the paper.

o No more than 20% of the paper was taken from outside sources.

Paper is not less than 1 1/2 and not more than 2 pages of text (not including exhibits and reference page).

o Quality: used the IMA Code and textbook to explain the problem and  to tie in any ethical concerns in this case

o Used proper grammar, spelling, and punctuation; did not use slang or other forms of casual language.

o Submitted paper on or before the date due.

o Extra credit if the report from the OWL is submitted and corrections are made.

Total

   

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IMA STATEMENT OF ETHICAL PROFESSIONAL PRACTICE

Members of IMA shall behave ethically. A commitment to ethical professional practice includes
overarching principles that express our values, and standards that guide our conduct.

PRINCIPLES
IMA’s overarching ethical principles include: Honesty, Fairness, Objectivity, and Responsibility. Members
shall act in accordance with these principles and shall encourage others within their organizations to
adhere to them.

STANDARDS
A member’s failure to comply with the following standards may result in disciplinary action.

I. COMPETENCE
Each member has a responsibility to:

1. Maintain an appropriate level of professional expertise by continually developing knowledge and
skills.

2. Perform professional duties in accordance with relevant laws, regulations, and technical
standards.

3. Provide decision support information and recommendations that are accurate, clear, concise, and
timely.

4. Recognize and communicate professional limitations or other constraints that would preclude
responsible judgment or successful performance of an activity.

II. CONFIDENTIALITY
Each member has a responsibility to:

1. Keep information confidential except when disclosure is authorized or legally required.
2. Inform all relevant parties regarding appropriate use of confidential information. Monitor

subordinates’ activities to ensure compliance.
3. Refrain from using confidential information for unethical or illegal advantage.

III. INTEGRITY
Each member has a responsibility to:

1. Mitigate actual conflicts of interest, regularly communicate with business associates to avoid
apparent conflicts of interest. Advise all parties of any potential conflicts.

2. Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
3. Abstain from engaging in or supporting any activity that might discredit the profession.

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FAX: 201-474-1600 • www.imanet.org

-2-

IV. CREDIBILITY
Each member has a responsibility to:

1. Communicate information fairly and objectively.
2. Disclose all relevant information that could reasonably be expected to influence an intended

user’s understanding of the reports, analyses, or recommendations.
3. Disclose delays or deficiencies in information, timeliness, processing, or internal controls in

conformance with organization policy and/or applicable law.

RESOLUTION OF ETHICAL CONFLICT
In applying the Standards of Ethical Professional Practice, you may encounter problems identifying
unethical behavior or resolving an ethical conflict. When faced with ethical issues, you should follow your
organization’s established policies on the resolution of such conflict. If these policies do not resolve the
ethical conflict, you should consider the following courses of action:

1. Discuss the issue with your immediate supervisor except when it appears that the supervisor is
involved. In that case, present the issue to the next level. If you cannot achieve a satisfactory
resolution, submit the issue to the next management level. If your immediate superior is the chief
executive officer or equivalent, the acceptable reviewing authority may be a group such as the
audit committee, executive committee, board of directors, board of trustees, or owners. Contact
with levels above the immediate superior should be initiated only with your superior’s knowledge,
assuming he or she is not involved. Communication of such problems to authorities or individuals
not employed or engaged by the organization is not considered appropriate, unless you believe
there is a clear violation of the law.

2. Clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethics Counselor
or other impartial advisor to obtain a better understanding of possible courses of action.

3. Consult your own attorney as to legal obligations and rights concerning the ethical conflict.

ETHICS CHALLENGE 

P2

  (K)

BTN 6-3

FDP Company produces a variety of home security products. Gary Price, the company’s president, is concerned with the fourth quarter market demand for the company’s products. Unless something is done in the last two months of the year, the company is likely to miss its earnings expectation of Wall Street analysts. Price still remembers when FDP’s earnings were below analysts’ expectation by two cents a share three years ago and the company’s share price fell 19% the day earnings were announced. In a recent meeting, Price told his top management that something must be done quickly. One proposal by the marketing vice president was to give a deep discount to the company’s major customers to increase the company’s sales in the fourth quarter. The company controller pointed out that while the discount could increase sales, it may not help the bottom line; to the contrary, it could lower income. The controller said, “Since we have enough storage capacity, we might simply increase our production in the fourth quarter to increase our reported profit.”

Required

1. Gary Price is not sure how the increase in production without a corresponding increase in sales could help boost the company’s income. Explain to Price how reported income varies with respect to production level.

2. Is there an ethical concern in this situation? If so, which parties are affected? Explain.