Fred Is Suggesting Is Not Ethical. He

¶ … Fred is suggesting is not ethical. He is proposing a deceitful practice in the interest of gaining overhead. He is planning to conceal from his customers the true practices of overhead calculation. This kind of concealment is unethical, because customers are being deceived in terms of costing procedures. The only reason why this will not be questioned is because it is being concealed in a private set of books.

Furthermore Fred does have a choice. His solution is blatantly unethical in the face of Sarah's solution, which is both ethical and financially sound. She had answers for every one of Fred's objections. Fred should have paid more attention to her for this reason. In a business it is better and less risky to follow the ethical path rather than the deceitful one. Fred could choose to make the compromise between money and ethics, and follow Sarah's suggestion instead.

Fred's proposal furthermore entails considerable risk. If the business is found to have conducted unethical and deceitful business procedures, not only Fred and Sarah, but the entire company is at risk. Legal action could for example be brought against the company, and a substantial loss of business is possible, especially from the customers most directly affected by the deceit. The company's reputation would also be compromised, resulting in a general loss of confidence from existing customers, and also a loss of future business from new customers. Personally, both Fred and Sarah are at risk of losing their employment with the company, with a reputation for deceitfulness that would make it hard to find other similar employment.

From the viewpoint of sound business practice, then, it would be unwise to follow Fred's proposal. The fact that he is Sarah's boss of course adds and element of difficulty to Sarah's decision. She does however seem sufficiently confident to raise her viewpoint. I believe that this is what she should do in this case.

Sarah's first step should be to ask Fred to give her time to think over his proposal. She should then carefully consider all the implications of the deceit that Fred asked her to commit. Sarah herself is in charge of the bookkeeping, so she would be the first to be incriminated in any charges of deceit and unethical behavior.

She should then put her concerns in writing, along with a reiteration of her proposal, together with projections of the profits and losses involved in each. She should then give these to Fred, along with a detailed oral explanation why she cannot accept his proposal. She should also keep for herself a copy of her written proposal. If Fred disagrees, Sarah should suggest that they take the proposals to General Management for their decision. Both Fred and Sarah should then take their written proposals and calculations to General Management.

If the decision is in Sarah's favor, she can continue with her own proposal instead of Fred's. This would be the ideal outcome for her. There is however a possibility that Management would see matters from Fred's viewpoint, and place profit over ethics and risk. The primary risk would be Sarah's, since it is she who would be in charge of concealing the books that are secretly kept.