KingJewels: Ethical Leadership Practice Essay

1. Discuss how the leadership style may have contributed to unethical behavior. When the company was first founded by Andy Wong it was ran using a hands-on leadership style. He believed a good vision and direction were critical leadership qualities. He always said â€Å"you do not achieve commitment to, or an understanding of, a company’s vision and mission without actively pursuing and practicing it at every opportunity.† However, when he began spending most of his time travelling to the US and Canada and taking care of business development and marketing he put Clement Tam in charge of operations [ (KingJewels: Ethical Leadership Practice, 2010) ]. Tam’s primary responsibility was worldwide gem sourcing. Tam, however, looking at their bonuses began accepting lower-quality gemstones and continuing to sell them at the normal price. He was also using businesses owned by his uncle, Peter Tam, and was receiving attractive rebates for ordering from them. Johnathan Ho, the head of production and authentication used a dictatorial leadership style. He often made decisions without consulting his colleagues. He allowed the lower-quality gemstones to be used in manufacturing the jewelry. By Wong leaving Tam almost overseeing the whole company and not keeping better checks on him this allowed Tam to engage in unethical behavior. 2. Discuss how the proper segregation of duties could have prevented Tam from fraudulently sourcing the gems. Tam was Operations Director and in charge of Gem Sourcing. This would allow him to fraudulently source the gems because he had to sign off on them anyway. He should not have been allowed to hold both positions in the business, especially when one was over the other. Also his sister, Tam Wai Man, was in charge of Finance. 3. Discuss how the company’s compensation plan contributed to the deceptive behavior. The company’s annual bonuses are tied to the growth target. If the growth target is not met the employees do not receive their bonuses. Tam thought that by buying a lower-quality gemstone at a cheaper price and then selling it as a high-quality gemstone at the normal price that he could ensure that the company met their projected growth target, therefore receiving their bonuses. 4. Discuss how culture may have influenced the employee’s attitude towards exposing Tam. Even if the employees were not involved, most of them would be afraid to express their opinions or to question unethical and potentially illegal business practices. Furthermore, such practices were common and went unquestioned in China. Employees were handsomely rewarded for their job efforts and it was of no interest to them to report such incidents that could jeopardize the job stability [ (KingJewels: Ethical Leadership Practice, 2010) ]. 5. How would you recommend Wai Man proceed?  According to HKICPA a professional accountant should not be associated with reports, returns, communications, or other information where they believe that the information: a) contains a materially false or misleading statement, b) contains statements or information furnished recklessly, or c) omits or obscures information required to be included where such omission or obscurity would be misleading [ (Chan, 2004) ]. According to section 100.17: When initiating either a formal or informal conflict resolution process, a professional accountant should consider the following, either individually or together with others, as part of the resolution process: a) relevant facts, b) ethical issues involved, c) fundamental principles related to the matter in question, d) established internal procedures, and e) alternative courses of action. Having considered all these issues, a professional accountant should determine the appropriate course of action that is consistent with the fundamental principles identified. The professional accountant should also weight the consequences of each possible course of action [ (Chan, 2004) ]. According to section 120.1: The principle of objectivity imposes an obligation on all professional accountants not to compromise their professional or business judgment because of bias, conflict of interest or the undue influence of others. Section 120.2 states that a professional accountant may be exposed to situations that may impair objectivity. It is impracticable to define and prescribe all such situations. Relationships that bias or unduly influence the professional judgment of the professional accountant should be avoided [ (Chan, 2004) ]. According to section 140.2: A professional accountant should maintain confidentiality even in a social environment. The professional accountant should be alert to the possibility of inadvertent disclosure, particularly in circumstances involving long association with a business associate or a close or immediate family member [ (Chan, 2004) ]. According to section 150.1: The principle of professional behavior imposes an obligation on professional accountants to comply with relevant laws and regulations and avoid any action that may bring discredit to the profession. This includes actions which a reasonable and informed third party, having knowledge of all relevant information, would conclude negatively affects the good reputation of the profession [ (Chan, 2004) ]. According to section 310.1: A professional accountant in business should support the legitimate and ethical objectives established by the employer and the rules and procedures drawn up in support of those objectives [ (Chan, 2004) ]. After reviewing the HKICPA Codes of Ethic for Professional Accountants Wai Man should prepare a report containing all the information that she has found and go to Wong with it. She should be prepared for her brother to be properly punished for what he did while understanding that she could also be punished for not saying anything when it first came to her attention. She should suggest that Wong not leave Tam in charge of operations since that places him as her supervisor. She should also suggest that Wong employee an internal control group that would help prevent something like this from happening again. If Wong does not agree or is unwilling to do anything about the issue at hand Wai Man, as a professional accountant, should resign from her position with the company.