I’m working on a business case study and need support to help me learn.
Week 4 Discussion Board Assignment
Ethical Dilemma –
When is A FREE Cruise not Free?
Veronica Singer was recently promoted to senior vice president and assistant to the CFO atColorado Alternative Products (CAP). In her new position, Veronica is responsible for managingCAP’s working capital, which requires her to make decisions about which working capitalinvestment and financing policies the firm should follow. In a meeting with department heads acouple of days ago, CAP’s CEO stated that he thought working capital management has beenhandled poorly in the past, and he thinks substantial changes should be made in Veronica’sdepartment to improve its efficiency. Although he blamed her predecessor, the comments wereclearly directed at Veronica and the members of her department. As a result, Veronica felt that sheshould evaluate the current working capital policy, and make any necessary changes.Because she is fairly new to her position, Veronica thought it would be a good idea to meet withothers who are more experienced to see how they developed and are now managing their workingcapital policies. One of the persons who offered Veronica some ideas is Archibald, a close friend ofhers who works at Fiduciary Responsibility Effectiveness Experts (FREE), which is a subsidiary ofthe commercial bank that provides cash management services to CAP. Archibald suggested thatCAP consider outsourcing its working capital management functions to FREE. He explained thatFREE had recently developed a new software platform that provides the services Veronica needs toimprove the efficiency of CAP’s working capital management. Archibald also explained thatalthough cash management and working capital management services are offered through otherbanks, the services that FREE offers are substantially superior to similar services from othercompanies. Other than telling her that the annual cost was substantial, Archibald provided Veronicawith few details about FREE’s services. In reality, Veronica knows nothing about working capitalservices banks offer, other than the information that Archibald provided her. But, because Archibaldis a friend and his description of FREE’s services was intriguing, she decided to investigate whetherit would be appropriate for CAP to outsource its working capital management.When she arrived at work this morning, Veronica was told that she must “clean up” CAP’sworking capital position immediately. Unfortunately, Veronica hasn’t had a chance to collect moreinformation about the working capital management services offered by banks. Even so, she has a“gut feeling” that it might be a good idea for CAP to outsource some of its working capitalmanagement functions. As a result, Veronica called Archibald and asked him how she could learnmore about FREE’s services in a short time period. Archibald told her that FREE presents aconference each year at which invited participants discuss various aspects of cash and workingcapital management. The topics that are covered at the conference range from the basics of cashmanagement to more complex topics involving holistic working capital management. Theconference, which is scheduled for next week, seems to be exactly what Veronica needs to becomemore informed about the advantages and disadvantages of outsourcing CAP’s working capitalmanagement functions. As a result, she asked Archibald to provide her with specific informationabout the conference, including the costs, specific session topics, and so forth.One hour ago, Archibald called with details about the FREE conference. The seven-dayconference will be held aboard a luxury cruise ship as it sails to exotic ports throughout theMediterranean Sea. The sessions are scheduled during the time the ship is traveling from one port toanother, which generally takes four or five hours. When the ship is in port, the conferenceCFIN5© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,in whole or in part.coordinator has arranged for conference participants to take tours, play golf and tennis, lounge at thebeach, and enjoy the local entertainment. The conference sounds great to Veronica because she canwork and relax at the same time. One thing bothers her, however—all of the costs, includingrecreation, relaxation, and entertainment activities will be paid by FREE.Veronica is convinced that she will get the information she needs at the FREE conference. Butshe is concerned that attending the conference might be considered a conflict of interest, becauseshe knows that FREE representatives will try to convince her to use its services. She also knowsthat Archibald will earn substantial commissions if CAP uses FREE’s service. And, she is awarethat Archibald needs the money, because his wife was recently laid off due to a downsizing at thefirm where she worked for 15 years. Further, Veronica is concerned that material/information shereceives at the conference will be one-sided (biased), favoring of the services offered by FREE .If she is going to attend the conference, Veronica must register today. As a result, she needs tomake a decision quickly.
Discuss the following and be sure to document appropriate sources to supportyour position:
What is the ethical dilemma?
Do you think that CAP should outsource some of its working capital services and why?
Should Veronica take the FREE cruise?
What would you do if you were Veronica? Why?
Christopher Cooper, “Giuliani Firms Had Potential Conflict of Interest,” The Wall StreetJournal, May 7, 2007, p. A6.
Rebecca Thurlow, “Australia Regulator Faults Citi Officers in Landmark Case,” The WallStreet Journal, April 11, 2007, p. C2.
Edward Siedle, “The Irrelevant SEC,” Forbes.com, November 27, 2006.Steve Rosenbush, “Investment Banks Jockey for Position,” BusinessWeek.com, June 30, 2006.