A1 Business and Technical College Midland Dairy Products Case Study Paper Review the Midland Dairy Case. Required: Evaluate your actions using BOTH the decision making model and Utility Theory AND the AICPA Code of Professional Conduct. I need to see citations to specific rules and interpretations. You should focus on Part 2, Members in Business.Note: Skip step # 6 in the decision making model ISSN 1940-204X
Midland Dairy Products: An Ethics Case
Herbert W. Snyder
North Dakota State University
Nancy Emerson
North Dakota State University
INTRODUCTION
DP: Thanks for meeting with me. Can you explain how you
are reimbursed under the state food program?
Midland Dairy Products is a privately held wholesaler of
dairy products to commercial and institutional consumers. Its
customers include manufacturers, educational institutions,
state and municipal agencies, and nonprofit organizations.
MS: Well, we do not really get reimbursed, which is one of
the nice things about the program. The centers are certified
by the state, and then we sign on with local food distributors.
We send them our weekly requests for whatever food the
centers need, and the centers invoice the state directly for
payment.
PROBLEM DEFINITION: AN ETHICAL DILEMMA
SERVING ON A NONPROFIT BOARD
DP: That is certainly easy for the centers, but does anyone
ever check what you actually use?
Diana Pierce is a CMA (Certified Management Accountant)
and a CPA (Certified Public Accountant). She works as a
staff accountant at Midland Dairy Products. She has been
employed by the company for eight years, and her current job
duties include overseeing the accounting for the manufacture
of a variety of product lines distributed by Midland, including
the company’s standard and premium yogurt products.
As is common for many accounting professionals, Diana
was asked to become a member of a state nonprofit board.
The organization, Parent Helper, administers a statewide
network of places for children of working parents to be
taken care of before and after school. In addition to standard
childcare, Parent Helper also provides food supplements for
needy students under a program sponsored by a state agency.
Part of Diana’s job duties as a board member requires
her to review Parent Helper’s documentation for the state
nutrition program. To do so, she scheduled a meeting with
Maria Stapleton, Parent Helper’s office manager, to discuss
the program:
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MS: The state does not, but some of the distributors we work
with do. Our contracts specify we have to let them review the
records for the products we consume. Actually, we do business
with Midland, although the company never sends anyone to
check our consumption of the product. Midland has the best
yogurt. The kids really love the mixed fruit.
When Diana returned to work the next morning she was
curious about the contractual arrangements between Parent
Helper and Midland. How the state decided to fund its
programs was not her problem, but she was curious whether the
state relied only on the word of suppliers to issue payments.
Diana’s area was manufacturing, but sales of the yogurt
her group produced were under the control of her supervisor,
Tom Harrold, Midland’s CFO. But the invoices Midland sent
to the state were available to any Midland accountant, and
Diana was able to pull up the most recent one.
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Much to her surprise, the invoice listed that 80 cases
of Midland’s premium Greek yogurt had been shipped to
Parent Helper rather than the standard yogurt she had seen
in the files. “This must be an error,” she thought and pulled
up invoices for the last six months.
It was not an error, however. All of the invoices for the
prior six months were for the more expensive yogurt. Diana
downloaded the entire file for the program and returned to
Parent Helper that evening to compare the two sets of invoices.
It had appeared that except for the first few months
of the contract, the state had been billed for the more
expensive product, although Parent Helper continued to
receive the cheaper, standard yogurt. The difference was
significant. Premium yogurt was priced at almost double the
cost of regular yogurt. Parent Helper was a large consumer;
over the course of the contract the difference amounted to
more than $40,000.
Dismayed by what she had uncovered, Diana organized
her materials and made an appointment to speak with her
supervisor, Tom Harrold:
and what they are doing. Now leave the Parent Helper
account to me and have a copy of your board resignation
letter on my desk by the end of the day. Anything else?
DP: I guess not. I will get right on it.
TH: Good. Let’s get this taken care of, and we will not
need to deal with the matter further. You are an excellent
employee, and I would hate to see something like this
sidetrack your career.
After the meeting, Diana went back to her office. She
placed a call to Midland’s human resource office to see
whether the company had any specific guidance concerning
the issues she was dealing with. She was informed that
Midland did have a conflict of interest policy (Appendix 1),
but otherwise had no comprehensive ethics policy.
She began writing her letter of resignation from Parent
Helper, but couldn’t concentrate. The situation did not seem
to be resolved, but she was at a loss as to what to do.
QUESTIONS
TH: I looked over the materials you sent me, and frankly I
would agree that we have a serious problem here.
1.
What is a conflict of interest in the workplace? What is
the purpose of conflict of interest policies? What basic
responsibilities does Midland’s policy contain, and to
whom do they apply?
DP: I am so relieved you agree; this has been bothering me
for days. What do you think we should do?
TH: We? I do not think we have problem, but you do. I am
2. Appendix 1 is Midland’s policy concerning conflicts of
seriously concerned about your membership on the board
of an agency we do business with. Have you ever bothered
to look over the conflict of interest policy we have? Frankly,
you may be putting your career in jeopardy.
interest. Do you agree with Tom Harrold that Diana
violated the policy? Why or why not? What steps should
Diana have taken to avoid a potential conflict?
3. Examine the IMA Statement of Ethical Professional
DP: Sorry? I do not understand.
Practice. As a CMA, has Diana acted appropriately from
an ethical and professional standpoint so far? Be specific
in your response, and be prepared to justify it based on
the statement.
TH: Apparently I am not making myself clear. We do
business with Parent Helper. Therefore, you cannot be a
member of its board. It is the first time we have ever had this
come up with you, so if you tender your resignation from
Parent Helper’s board immediately, I will let it pass.
4. Diana holds both CMA and CPA certifications. Compare
the IMA Statement of Ethical Professional Practice with
that the AICPA (American Institute of Certified Public
Accountants) Code of Professional Conduct. How are
the codes of conduct different? Would these differences
affect on how Diana would handle her current situation?
DP: Wait, of course I do not want to violate any company
policies, but what about the yogurt?
TH: What about it?
DP: The invoices do not match. We seem to be charging the
5. Imagine that you are in Diana’s situation. What options
state for something we are not supplying to Parent Helper.
are open to you? Which of the options should you follow
and why? What are the likely outcomes for you personally
if you pursue the option you selected? What is likely to
happen if you decide not to follow that option?
TH: Nonsense. I handle the account myself, and I assure
you that you are wrong. Nothing gets paid for that we are
not delivering. This is why we have the conflict of interest
policy. People like you get confused about where they work
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APPENDIX 1. MIDLAND DAIRY PRODUCTS’
CONFLICT OF INTEREST POLICY
4. Using Midland’s time, personnel, equipment, supplies,
or goodwill for other than Midland-approved activities,
programs, and purposes.
5. Receiving personal gifts or loans from third parties
SECTION 1. PURPOSE
dealing or competing with Midland. Receipt of any gift is
disapproved except gifts of a value less than $50, which
could not be refused without discourtesy. No personal
gift of money should ever be accepted.
There exists between Midland’s board, officers,
management, employees, and the public a duty to administer
the affairs of Midland honestly and prudently, and of
exercising their best care, skill, and judgment for the sole
benefit of Midland.
As a Midland employee, you are expected to act at
all times in the Company’s best interests and to exercise
sound judgment unclouded by personal interests or divided
loyalties. Both in performing your duties at Midland and in
your outside activities, you should avoid the appearance as
well as the reality of a conflict of interest
6. Family and romantic relationships.
7. Spouses, domestic partners, immediate family members or
relatives as suppliers, vendors, and other business partners.
8. Kickbacks and rebates by suppliers or vendors.
9. Honoraria.
SECTION 5. INTERPRETATION OF THIS STATEMENT OF POLICY
SECTION 2. PERSONS CONCERNED
The nature of conflicting interest described in Section 3, and
the relations in those areas which may give rise to conflict, as
listed in Section 4, are not exhaustive. Conflicts might arise
in other areas or through other relations. It is assumed that
the directors, officers, and management, and employees will
recognize such areas and relation by analogy.
The fact that one of the interests described in Section 4
exists does not necessarily mean that a conflict exists, or that
the conflict, if it exists, is material enough to be of practical
importance, or if material, that upon full disclosure of all
relevant facts and circumstances it is necessarily adverse to
the interests of Midland.
However, it is the policy of the board that the existence
of any of the interests described in Section 4 shall be
disclosed before any transaction is consummated. It shall
be the continuing responsibility of the board, officers,
management, and employees to scrutinize their transactions
and outside business interests and relationships for potential
conflicts and to immediately make such disclosures
This statement is directed to all board members, officers,
management, and employees who can influence the actions
of Midland. For example, this would include all who make
purchasing decisions, all persons who might be described as
“management personnel,” and anyone who has proprietary
information concerning Midland.
SECTION 3: CONFLICT OF INTEREST DEFINED
A conflict of interest exists if your circumstances would lead
a reasonable person to question whether you had a personal
or private interest sufficient to appear to influence whether
or not your decisions were made in the best interests of
Midland. Note that this requires avoiding both actual
conflicts of interests and actions which give the appearance
of conflicts of interest. Such conflicts may exist even in the
case where no monetary interest or gain is involved.
SECTION 4. NATURE OF CONFLICTING INTEREST
A conflicting interest may be defined as an interest, direct or
indirect, with any persons or firms that creates the situations
described in Section 3. Such an interest might arise through:
SECTION 6. DISCLOSURE POLICY AND PROCEDURE
Transactions with parties with whom a conflicting interest exists
may be undertaken only if all of the following are observed:
1. Owning stock or holding debt or other proprietary
interests in any third party dealing with Midland.
1. The conflicting interest is fully disclosed;
2. Holding office in, serving on the board of, participating in
2. The person with the conflict of interest is excluded from
management for, or being otherwise employed (or formerly
employed) with any third party dealing with Midland,
including but not limited to nonprofit organizations.
the discussion and approval of such transaction;
3. A competitive bid or comparable valuation exists; and
4. The management of Midland Dairy Products has
3. Receiving remuneration for services with respect to
determined that the transaction is in the best interest of
the organization.
individual transactions involving Midland.
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Disclosure in the organization should be made to the
employee’s supervisor, who will, in turn pass the information
to Midland’s Conflict Review Committee. In cases where
the supervisor is a party to the conflict, the matter will be
brought directly to the Committee.
The Committee shall determine whether a conflict
exists and in the case of an existing conflict, whether the
contemplated transaction may be authorized as just, fair,
and reasonable to Midland. The decision of the Committee
on these matters will rest in their sole discretion, and
their concern must be the welfare of Midland and the
advancement of its purpose.
Based on templates available from the Minnesota Council
on Foundations. (www.mcf.org). Used with permission of MCF.
IM A ED U C ATIO NA L C A S E JOURNAL
ABOUT IMA® (INSTITUTE OF MANAGEMENT ACCOUNTANTS)
IMA®, the association of accountants and financial professionals
in business, is one of the largest and most respected associations
focused exclusively on advancing the management accounting
profession. Globally, IMA supports the profession through
research, the CMA® (Certified Management Accountant)
program, continuing education, networking and advocacy of the
highest ethical business practices. IMA has a global network of
more than 85,000 members in 140 countries and 300 professional
and student chapters. Headquartered in Montvale, N.J., USA,
IMA provides localized services through its four global regions:
The Americas, Asia/Pacific, Europe, and Middle East/India.
For more information about IMA, please visit www.imanet.org.
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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 member 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
IMA members have a responsibility to comply with and uphold the standards of Competence, Confidentiality, Integrity, and Credibility. Failure to comply
may result in disciplinary action.
I. COMPETENCE
1. Maintain an appropriate level of professional leadership and expertise by enhancing 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. Recognize and help manage risk.
II. CONFIDENTIALITY
1. Keep information confidential except when disclosure is authorized or legally required.
2. Inform all relevant parties regarding appropriate use of confidential information. Monitor to ensure compliance.
3. Refrain from using confidential information for unethical or illegal advantage.
III. INTEGRITY
1. Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid apparent conflicts of interest. Advise all parties of any
potential conflicts of interest.
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.
4. Contribute to a positive ethical culture and place integrity of the profession above personal interests.
IV. CREDIBILITY
1. Communicate information fairly and objectively.
2. Provide all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses, or
recommendations.
3. Report any delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy
and/or applicable law.
4. Communicate professional limitations or other constraints that would preclude responsible judgment or successful performance of an activity.
RESOLVING ETHICAL ISSUES
In applying the Standards of Ethical Professional Practice, the member may encounter unethical issues or behavior. In these situations, the member
should not ignore them, but rather should actively seek resolution of the issue. In determining which steps to follow, the member should consider all
risks involved and whether protections exist against retaliation.
When faced with unethical issues, the member should follow the established policies of his or her organization, including use of an anonymous
reporting system if available.
If the organization does not have established policies, the member should consider the following courses of action:
• T he resolution process could include a discussion with the member’s immediate supervisor. If the supervisor appears to be involved, the issue could
be presented to the next level of management.
• IMA offers an anonymous helpline that the member may call to request how key elements of the IMA Statement of Ethical Professional Practice
could be applied to the ethical issue.
• T he member should consider consulting his or her own attorney to learn of any legal obligations, rights, and risks concerning the issue.
If resolution efforts are not successful, the member may wish to consider disassociating from the organization.
IMA Ethics Helpline Number for callers in the U.S. and Canada: (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number
from www.att.com/esupport/traveler.jsp?tab=3, then the above number.
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COLLEGE OF BUSINESS
Asu
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ARKANSAS STATE
ETHICAL DECISION MAKING FRAMEWORK
UNIVERSITY
(Hartman & Desjardins, 2008)
Apply any ethical theory to the following framework
Step 1
Determine the facts in an unbiased manner
Step 2 Identify the ethical issue at hand
Step 3
Identify stakeholders impacted by our decision
Step 4 Consider all available alternatives (use moral imagination)
Step 5 Consider how the decision will affect the stakeholders
Step 6 — Discuss the pending decision with relevant others
Step 7
Make the decision
CS
Step 8 ned Monitor and assess the quality of the decision
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