Summary Accounting Ethics
This document contains two parts. First, the Individual Assignment. Be careful and think of it as an inspiration!
Secondly a summary of 80 pages based on the lecture slides and my own notes.
Individual Assignment
Case 7.2 PPP Loans: Free Money at a Cost (a GVV case)
Question 1: Meredith, was aware of her leadership obligations and the opportunity to positively
influence the accounting function starting with the controller through the entry-level accounting
staff. What would she do to be a transformational leader in that regard.
Transformational leadership: A leadership approach that causes change in individuals and social systems. It creates valuable and positive
change in followers with the end goal of developing followers into leaders.
GVV focuses on enabling individuals to voice and act on their values in the workplace, an approach that is particularly relevant in
situations like TBT’s, where ethical dilemmas may arise concerning financial decisions such as PPP loan forgiveness.
Approach:
Articulate Ethical Standards: Develop and articulate a set of clear ethical guidelines regarding financial reporting and decision-
making. Some of the key areas that these may touch on are handling of government aids and financial transparency. Meredith can
start by articulating a clear vision of ethical practice that aligns with TBT's core values. This could involve regular communications
emphasizing the importance of integrity and transparency in financial reporting. (define mission) (establish goals)
Engaged Leadership and Role Modeling: As a transformational leader, Meredith can lead by example. By openly sharing her thought
processes and the ethical rationale in the decision-making process, she will serve as a role model. This includes being candid about
the ethical implications of seeking PPP loan forgiveness when perhaps not strictly needed. (train & develop)
Creating a Safe Environment for Ethical Discussions: Implement a program where employees feel safe to discuss ethical dilemmas
they face without the fear of repercussions. This can be done through regular workshops or meetings where team members can
practice scenarios on how to voice their values and receive feedback. (train & develop)
Encourage Ethical Advocacy: Encourage employees at all levels to voice their concerns and opinions on the matter of ethical
practices within the company. Meredith could establish a mentorship program that helps staff in navigating ethical dilemmas and
advocating for their values. (sensemaking) (compose team)
Recognition and Reinforcement: Reward decisions and actions that are consistent with the company’s values and ethics. Recognizing
these behaviors publicly reinforces the importance of ethics in the company’s culture and encourages others to do the same.
(provide feedback) (sensemaking)
,Question 2: Assuming Meredith decides to ask for a meeting with the CEO to discuss the matter of
applying for loan forgiveness. Before doing so, she sits down and reflects on the values that
should guide her actions. Discuss how Meredith might go about influencing the actions of TBT.
Before the meeting, Meredith should identify and clarify the core values that guide TBT and her personal ethical standards. She should
think of how these values align with the decision about the PPP loan forgiveness. This reflection is not about merely being compliant with
regulatory requirement but also about moral responsibility towards all stakeholders, including employees, shareholders, and the wider
community affected by the company’s actions. With the GVV approach, Meredith thinks through the consequences of applying or not
applying for loan forgiveness from multiple stakeholder perspectives. This includes considering the potential impact on the company's
reputation, the trust of its employees, and its financial stability. Meredith plans how she will express these values and her ethical
reasoning to the CEO. This includes preparing statements that reinforce her position, such as, "While legally we might be able to justify
applying for forgiveness, ethically, it compromises our integrity and the trust that our stakeholders have in us."
Integrity
Description: Maintaining honesty and transparency in all activities and decisions. Ensuring that financial decisions are arrived at
in an open and accountable manner.
Application: For the PPP loan, integrity would be to decide whether going for forgiveness meets the honest reporting
requirement of the need or no need for the company.
Stewardship/Trust
Description: Responsible management of the company's resources, including consideration of the interests of all stakeholders,
public and governmental bodies included.
Application: Meredith must decide whether loan forgiveness is prudent and good stewardship of the public funds.
Accountability
Description: Being answerable/responsible for decisions and activities to stakeholders, including employees, shareholders, and
regulatory bodies.
Application: Ensuring that any decision made regarding the PPP loan forgiveness is defensible under ethical and legal scrutiny.
Transparency
Description: Operating so that actions and decisions are clear and understandable to all stakeholders, encouraging open
communication.
Application: Communicating the rationale for accepting the PPP loan with stakeholders in an open manner, to build and
maintain trust.
Fairness
Description: Acting justly and equitably, ensuring that actions do not unfairly disadvantage or benefit any one group over others.
Application: Considering how applying for loan forgiveness affects other businesses that may be in greater need and how it
reflects on TBT’s competitive fairness.
Respect for the Law
Description: Adhering to the spirit (!) and letter of legal requirements, beyond mere compliance.
Application: Evaluating the PPP loan forgiveness criteria and ensuring that TBT’s actions are in full compliance with both the
rules and the intended purpose (!) of the law.
Commitment to Ethical Practices
Description: Fostering a culture that prioritizes ethical considerations in all business dealings.
Application: Influencing corporate culture by exemplifying ethical decision-making in her role, setting a precedent for future
actions.
,Question 3: Describe the reasons and rationalizations Meredith is likely to hear from the CEO to
apply for loan forgiveness and how Meredith might respond to them.
Financial benefit:
CEO's Point: "The loan forgiveness would significantly improve our financial position and help us with any future unforeseen
challenges."
Meredith's Response: Meredith could acknowledge the financial gains but argue that the long-term reputation risks and the
potential trust loss from stakeholders might outweigh the immediate financial benefits. She might say, "While the short-term
financial relief is undeniable, our long-term success is built on trust and integrity, which could be compromised if we're seen as
exploiting a program meant for struggling businesses."
Industry Practice:
CEO's Point: "Many other companies within our industry are applying for forgiveness, regardless of their financial situations. We
would be at a competitive disadvantage if we didn’t."
Meredith's Response: Meredith can challenge this normative rationale by pushing leadership in ethical practices. "When we lead
with integrity, we are setting a standard in the industry and differentiate ourselves positively. Being competitive isn't solely
about capitalizing on every financial opportunity but also about how we conduct our business. Our ethical stance could be a
strong competitive advantage, attracting customers and partners who value integrity.
Legal Justification:
CEO's Point: "We are technically eligible for forgiveness under the terms set by the program, so it’s perfectly legal to apply."
Meredith's Response: Meredith should answer that legal compliance doesn't necessarily equate to ethical justification. "Just
because something is legal does not mean it aligns with our company values or public expectations. Our commitment to ethical
leadership should guide our decision beyond just adherence to the law."
Economic Uncertainty:
CEO's Point: "The economic future is uncertain, and the pandemic's long-term effects remain largely unknown. We have to
secure our financial base." Or something like: “I don’t see this as an ethical decision but as an economical one.”
Meredith's Response: While recognizing the validity of planning for uncertainty, Meredith could argue for a balanced approach
that considers ethical implications. "It’s prudent to prepare for uncertainty, but using resources designated for those in dire
need might not only harm our reputation but also our conscience in the long term."
Pressure to Meet Expectations:
CEO's Point: "Our stakeholders expect us to manage resources wisely, which includes taking advantage of available government
support."
Meredith's Response: Meredith can reframe this expectation by highlighting ethical stewardship. "Our stakeholders indeed
count on us for prudent financial management, but it is more important that we count on us to do the right things by adhering
to principles of integrity and fair-dealing. Let's rise to the occasion. “
Resilience Argument:
CEO's Point: "Securing financial stability through loan forgiveness ensures that we can maintain all our employees and jobs
without needing to make hard cuts in the future."
Meredith's Response: "I understand and share your concern for our employees' welfare, which is indeed paramount. However,
we should also consider whether our financial stability is genuinely in danger to the extent that it justifies using government aid
meant for businesses in distress. Let's review our financial forecasts and consider other ways to ensure job security that align
with our ethical commitments."
Minimal Harm Justification:
CEO's Point: "It would be a drop in the bucket compared to the total funds available in the program, so it won't really hurt
anyone if we take it."
Meredith's Response: "While the impact on the overall program might be minimal, it’s about the principle of the matter. Our
actions reflect our company’s personality. Taking advantage of funds we don’t need could undermine our ethical standing and
the trust our stakeholders place in us."
, Question 4: What levers can Meredith use to counteract the opposing viewpoint of the CEO?
Meredith has several strategies or levers at her disposal to effectively counteract the opposing views of the CEO regarding the PPP loan
forgiveness:
Data/Risk Analysis:
Lever: Discuss in detail the financial and risk analysis demonstrating the potential long-term risks associated with public
perception and trust if the company is perceived to be taking advantage of the PPP program unnecessarily. This should
include case studies of other companies that faced backlash for similar actions.
Example: "Here is the analysis of some recent cases where firms suffered significant brand damage due to perceived
unethical financial decisions. We need to weigh these risks against the short-term financial benefits."
Ethical Guidelines and Compliance Standards:
Lever: Highlight the company’s own ethical guidelines and compliance standards that might be violated. This includes going
over any clauses about integrity and proper use of resources.
Example: "Our company ethics policy clearly states our commitment to integrity and prudent use of financial resources. We
should apply these standards to decide on the PPP loan forgiveness."
Stakeholder Considerations:
Lever: Discuss the expectations and the potential reactions of various stakeholders, including employees (see also below),
customers, investors, and regulators. Emphasize the value of maintaining ai strong, ethical relationships with these groups.
Example: "Our stakeholders trust us to act in a responsible way. Applying for loan forgiveness when it’s not absolutely
necessary could erode that trust and affect our relationships long-term."
Board Involvement:
(There was no mention of the board of directors in the case, however this is an important lever, in my opinion.)
Lever: Suggest involving the board of directors in the decision-making process, especially if there is a dissonance between
the ethical stance and financial considerations. The board’s perspective might balance the CEO's viewpoint with broader
governance concerns.
Example: "I believe this decision warrants board involvement to ensure all governance aspects are considered, ensuring
alignment with our corporate values and external expectations."
Employee Morale and Culture:
Lever: Discuss how the company's actions can affect internal culture and employee morale. Employees tend to feel more
engaged and positive about their work when they believe they are working for an ethical organization. Also, social learning
and leading by example.
Example: "Our team prides itself on working for an ethical company. We should consider how this decision reflects
internally and its impact on our culture.”
Reputation and Brand Value:
Lever: Use examples from the market showing how strong ethical reputations lead to higher brand value and customer
loyalty. This can be particularly effective if the company prides itself on its public image and customer trust.
Example: "Maintaining our reputation for ethical conduct has historically given us a competitive edge. Let’s consider how
this decision might enhance or detract from our brand value."
