Ethical Implications of takeovers: A Financial Manager’s Story


Discuss the issues facing Lisa when challenging existing policies and procedures of the
acquired company from both ethical and professional perspectives.
Hint: The discussion should take the form of an essay including introduction and
conclusion with maximum 1000-1500 words; you MUST cover the following points in the
essay: (1 Mark for the introduction and conclusion)
• Identify any ethical issue(s) involved (if any). (1 Mark)
• Identify the stakeholders involved in any ethical issue (if any). (1 Mark)
• Identify the alternative courses of actions that Lisa could take. (1 Mark)
• Identify the best course of action would you advise Lisa to take. (1 Mark


Ethical Implications of takeovers: A Financial Manager’s Story

Ethics can be defined as the various conceptions of right or wrong that individuals hold in relation to conduct. Ethical values are of great importance especially within the organizational context. Various ethical issues in organizations create complex situations for managers making it difficult to make correct decisions. Ethical issues mostly impact the internal stakeholders of the organization such as managers and the employees. This paper will analyze the ethical issues involved during acquisitions through the review of a case study.

Identify ethical issues involved

One of the major ethical issues facing Lisa Micheals was that the Prestige Fragrance Company did not conform to the generally accepted accounting principles and standards. During her analysis of the company’s financial records, there appeared to be gross misstatements in the acquired company’s records. For instance, she noticed a high proportion of “Other Assets” in the company’s financial statements. Upon a closer look at the company’s financial statements, Lisa Michaels noted that some of the marketing expenses were recorded as assets rather than as expenses. The ethical issue in this case was whether the acquired company’s financial statements represented a fair and an accurate view of the company’s financial position. In addition, some employees of the acquired company such as Mr. Anderson were not happy of the acquisition since he would now be forced to work in a smaller division of the larger company.

Other ethical dilemmas surround Lisa Michaels revelations concerning the financial statements of Prestige Fragrance Company. Lisa Michaels was in a dilemma on whether to issue the company with an unqualified audit report. If she issued the report, she would have to pursue the matter further through in-depth audit analysis. Since this was a new acquisition, there were bound to be tension between the employees of the two companies.  Conducting audits on the acquired company would probably raise issues in the relationship between the two companies and especially the employees. The acquired company’s team may probably develop mistrust and increase tension between the two factions. Furthermore, Lisa Micheals was not sure if she would find any substantial details if she pressed further on the issue. Lisa also felt there was misuse of funds in the acquired company especially through exorbitant print and television advertisements.

Stakeholders involved in any ethical issue

Various stakeholder groups may be affected by ethical issues in businesses. There are two types of stakeholders; internal stakeholders and the external stakeholders. Internal stakeholders are those who have a direct connection or interest with the organization. Employees, management and shareholders are good examples of internal stakeholders. Outside stakeholders are people who have limited interest in the company. Outside stakeholders include local communities, the government, special interest groups, trade unions, and the public in general. Internal stakeholders are highly involved in ethical issues. For instance, the employees and those in upper management have a critical role to play when it comes to ethical issues. Employees contribute skills and expertise to the organization, while the shareholders contribute money and capital.

In the case study, internal stakeholders are deeply involved in the ethical issues. Lisa and Jeffery Anderson are directly involved in the ethical issues affecting the two organizations. Lisa is the Finance Manager of the global conglomerate acquiring while Jeffrey Anderson is the Controller at Prestige Fragrance Company. Lisa was also worried that she could not be able to prove her case before the Chief Financial Officer in the acquired company. The Chief Finance Officer is part of the management team. Outside stakeholders are not involved in ethical issues in this case, although in certain circumstances the impacts of ethical issues may also be felt by the outside stakeholders.

Identify the alternative courses of actions that Lisa could take

There are a number of alternative actions that Lisa could take. Ethical decision making simply involves choosing among a set of alternatives the best one which is in consistence with the outlined ethical principles (Zerbe, Härtel, & Ashkanasy, 2008). In ethical decision making, individuals should carefully analyze all the issue at hand and opt for the best ethical approach, even though the cost of such an action may be high. Ethical decision making is guided by consciousness, commitment and competency. Consciousness refers to the general awareness regarding the decisions to make. Individuals should be able to employ their moral convictions to daily behavior. Commitment is the will to follow the right course regardless of the cost. Competency involves the ability to evaluate the evidence or information presented concerning the ethical issue at hand. Competency also involves the ability to come up with alternative solutions and to assess the consequence of each action to be taken (Ferrel & Ferrell, 2014).

Any alternative actions that Lisa should take should be both effective and ethical. They should be effective in the sense that they should achieve the intended goals and objectives. The actions she opts to take should accomplish her major goals. In line with this, Lisa’s alternative course of action could be to involve the relevant stakeholders in a meeting in order to discuss the issues identified in the financial statements of the acquired company. This could provide her with a clear direction to take without causing distrust and resentment especially from the acquired team. Another possible course of action is to personally talk with relevant individual employees of the acquired company in order to get an understanding of how things were run in the company. For instance, she could talk to the CFO as well as other employees prior to making the final decision. Lastly, she could also hold training sessions where she could explain to both the company’s employees about the potential benefits of the acquisition and the need to strengthen the internal controls.

Identify the best course of action you would advise Lisa to take

The best course of action for Lisa to take is to hold meeting with relevant stakeholders from both companies where she would have the opportunity to highlight the issues observed. The meeting would give her the opportunity to present her findings about both of the company’s financial controls and outline the required standards. The meeting would also give all employees from both companies the opportunity to come up with suggestions on handling the issues raised in the report. It is worth noting that meetings provide the best chances for developing supportive relationships between various individuals. A meeting will provide Lisa with the much needed opportunity to convince the team from Prestige Fragrance Company of the need to develop proper controls in the face of an acquisition. A meeting will also provide each individual with the opportunity to air their views. She will also be able to obtain vital feedback from all the members. Due to these and other benefits, engaging the entire team through a meeting would the best course of action for Lisa to take.

In conclusion, ethical issues often present ethical dilemmas that make the decision making process difficult for managers. Internal stakeholders play a big role in ethical issues affecting organizations. When ethical issues emerge, the stakeholders involved must make appropriate decisions. Ethical decision making involves choosing among a set of alternatives the best alternative which is in consistence with the outlined ethical principles.


Ferrel, O. C., & Ferrell, J. F. (2014). Business Ethics: Ethical Decision Making & Cases. Boston:             Cengage Learning.

Zerbe, W. J., Härtel, C. E. J., & Ashkanasy, N. M. (2008). Emotions, ethics and decision-making.             London: Emerald/JAI.


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