analytical report

Acme Title Pawn*

Joe reflected on his situation at Acme Title Pawn while mowing his lawn. He had been working there for

about a year, but was having ever-greater reservations about his job. During all of those years of

struggling to care for his family while planning for, attending, and ultimately graduating from college, he

never envisioned a career at a firm like Acme Title Pawn. He wrestled with the question of whether to

quit. His doubts about the business began by the end of his very first day at work and they had only

increased since then. As he went back into his house for a breath of cool air, he once again reviewed his

situation.

Joe Collata was 36 years old with a wife and three children. His first full-time job was as an accounts

payable clerk at a medical center. He worked there for four years. He quit that position to accept a

similar position at a printing plant in the town where his soon-to-be wife was employed. He remained

employed with that firm, Ace Printing, for a total of nine years until he lost his job due to downsizing.

By that time, he realized that he needed a college education if he hoped to have a meaningful career with

some degree of job security. While attending college part-time at night, he held a succession of jobs,

none of which lasted more than a year. He was a clerk in a hospital, an appliance salesman, and an

accounts payable clerk for a small manufacturing firm. Approximately one year ago he accepted the

position of accounting staff member at Acme Title Pawn.

At the time he accepted the position he knew virtually nothing about the title pawn industry. He believed

this firm might offer him the possibility of increased responsibility, an advantage not offered by many of

his previous positions. Also, the pay was good compared to his previous positions. Six months after

beginning his employment with Acme, he graduated with a degree in accounting. It had been a struggle,

but Joe hoped that soon there would be a payoff. Now he found himself wondering: “is this it?”

He had become disenchanted with the title pawn industry in general and Acme in particular because of

activities that he believed to be unethical. It was apparent to him that the industry preyed on the poor and

uneducated. Joe had learned a bit about usurious interest rates in his business law class, but he had

imagined that they were of concern only to the loan shark on the street corner. The rate on his only credit

card was 30 percent annual interest on the unpaid balance, and he was not aware that interest rates could

legally go much higher than that. He was truly shocked when he found out how Acme conducted

business and that it was legal—for the most part.

When a customer needed a loan, Acme would lend money, holding the title of the individual’s

automobile as collateral. The maximum amount Acme would lend was usually 50 percent of the car’s

book value. The customer was allowed to keep driving the car as long as the specified payments were

made. The standard loan was for one month with an interest rate of 25 percent compounded monthly.

Therefore, if a customer borrowed $1,000 on the car, $1,250 would be due at the end of the month or the

car would be seized and sold at auction to satisfy the debt. Occasionally, Acme would extend the credit

for several more months as long as the interest was paid every month. A customer borrowing $1,000 for

a four-month period would have paid $1,000 in interest and still owe the $1,000 principal at the end of

* This case was prepared by Roland B. Cousins, LaGrange College, and edited by Jen nifer Jackson for

classroom use. All names and locations have been disguised to assure anonymity. Certain other facts about

the company are disguised, although this case represents an actual situation as perceived by an employee.

the fourth month. At that time, or at the end of any month when the principal remained unpaid, the

vehicle could be seized.

The business of repossession can get ugly, so subcontractors were employed to perform that service in

each city in which Acme maintained an office. State laws generally required that the debtor be paid the

difference between the amount owed and the proceeds from the sale of the vehicle, minus any expenses

incurred. Acme paid the repossessor an average of $100, a locksmith was typically paid $25, and the

clean-up and sale of the vehicle at auction usually cost Acme about $75 to $100. Sometimes a

transportation charge was assessed depending on the distance from the seizure location to the auctioneer.

Joe soon learned that the company occasionally did not return this excess to the debtor. If the debtor

called and asked about it, a check would be sent. If the debtor did not ask, the company often did not

send the check. It seemed to Joe that the decision whether or not to send the check was based on the

likelihood of a complaint being made by the debtor.

The individuals who pawned their car titles generally were people who had no alternatives. Often they

had bad credit or no credit, but Acme did not investigate credit if a clear title was presented. Acme

seemed to be the lender of last resort for most of its clients, although Joe suspected some would find

other alternatives if they understood the cost of doing business with Acme. But most clearly did not

understand.

The company targeted minority groups, locating offices in poorer neighborhoods in most cities in which

they did business. In Florida, Acme’s business was highly visible in Hispanic neighborhoods. The

company directed its marketing efforts toward gamblers in areas likely to have down-on-their-luck

gamblers, such as Nevada and the Mississippi Gulf Coast. The company presently operated in twelve

states. If a state in which Acme was operating lowered the legal interest rate that could be charged to less

than 25 percent per month, Acme stopped doing business in that state. Acme suspended operations in

North Carolina and Kentucky for this reason.

Acme had many difficulties in the field, as one would expect, considering the nature of the business.

There had been a number of armed robberies at Acme locations even though very little cash was kept on

the premises. Advertising that stressed “cash for your title” might have misled would-be armed robbers,

the company had toyed with the idea of emphasizing payment by check instead of cash in their ads—

especially billboards—to discourage robbers. Acme had also been plagued with very high employee

turnover in most branches. Occasionally, an incident of embezzlement was uncovered at a branch. No

one at the home office seemed especially surprised when such activity was uncovered.

It appeared to Joe that the company did not attract very high-class personnel for any positions. Joe

thought the employees at the home office where he worked did not seem to be of a much higher caliber

than those employed at the branches. Once he had commented to his supervisor on what he perceived to

be a lack of professionalism on the part of his coworkers. The Accounting Manager’s response was, “Of

course, if there were not something wrong with each one of us, why would we work here?” Joe thought

of that statement often. The founder and CEO of Acme was rumored to have mafia connections. Joe had

seen no evidence of this, but it remained a widely held perception. The CEO lived in another state and

was rarely seen in the office.

As Joe thought more about his situation, he concluded that he could sum up most of his reservations

about working at Acme with a single sentence. It seemed that he was working for a sleazy company in a

sleazy business surrounded by sleazy individuals.

Joe still believed that he would acquire responsibilities sooner at Acme than at most other firms because

of the high turnover in his department. He thought it possible that he could be promoted to the

controller’s position within five or six years if he continued to work as he had. Management seemed very

pleased with his performance. Joe wondered, though, if his association with this firm and industry might

lessen other job prospects if he stayed on. He was also concerned that his resume might portray a “job

hopper.” For years he had rarely stayed longer than one year with any employer. He was concerned that

leaving Acme at this time would give future prospective employers additional reason to question his

stability. Several more years at Acme would strengthen his resume both in terms of the higher-level

responsibilities he could claim and the added stability that would be implied by a longer term of

employment.

Joe also thought he had to consider the well being of his family in any decision he made. He would not

find it easy to secure another good position his town, as it was small and isolated. Joe and his family

were now living about 1,000 miles from their relatives. He had accepted a transfer to his present

location, Grovetown, when he was working for Ace Printing. The layoff caused by downsizing had left

Joe and his family stranded in Grovetown. The proximity of a university offering a night program in

accounting coupled with his wife’s position as a clerk in the business office of a local physician’s group

had led to the decision to stay. Now his two older children were very active in their schools and with

extracurricular activities. They had many friends, and Joe believed the children would suffer a difficult

adjustment period if they were to leave Grovetown at this time. His wife, too, seemed content with life as

it was. She had found satisfaction in her job, as well as with the community.

Although Joe had not worked in one of the branch offices dealing directly with customers, he had heard

plenty of stories around the office about what it was like on the front line. Based on what he had heard,

he was glad to be working with people behind the scenes, even though the environment in the office was

far from ideal.

Even Acme’s home office seemed to be fraught with problems, most of which Joe thought were caused

by the caliber of Acme’s personnel. In the year that Joe had been there, he had seen a number of

employees go over their supervisors’ heads taking problems to higher levels than necessary and

undermining the authority of their supervisors. This seemed to be an accepted way of solving problems

and making decisions. There also seemed to be a degree of backstabbing with which Joe was unfamiliar

in other positions. Additionally, there had been recurring incidents of executives charging personal items

on company credit cards. The company continued to pay for such charges in spite of Joe’s calling those

incidents to the attention of the accounting manager. Sums of money were also borrowed from company

accounts with no apparent attempt to secure repayment. Joe had also seen several seemingly

inappropriate personal relationships develop on the job. The entire office was gossiping about the

relationship that had developed between the CFO and one of his direct reports, the office manager. The

subordinate, a female, was subsequently transferred to one of the branch offices.

QUESTIONS FOR DISCUSSION 1. What decisions need to be made when an individual discovers that he/she is working in a company

and industry with many ethical issues?

2. If the organizational culture at Acme Title Pawn cannot be changed, can Joe continue to work there

and avoid involvement in activities that are ethically questionable or possibly illegal?

3. How could Acme create an ethical organizational culture and still be in the title pawn business?