Ethical dilemma

Ethical Dilemma at Northlake

Our story opens with an irate Jim McIntosh confronting his manager of corporate reporting: “I

thought we had an understanding on this issue, Frank. Tina tells me that you are threatening to go

public with your stupid statements about the report. For Pete’s sake, Frank, wake up and smell the

coffee! You’re about to damage all the important things in your life: your career, your friendships, and

your company!”

Frank sat quietly in the overstuffed sofa in his V. P.’s expansive office. He thought that the pale

green report lying on the desk looked innocent enough but it certainly had provided the basis for some

serious turmoil. Jim stood by his desk trembling with rage. His face was bright red and mottled with

anger. Frank had often seen Jim upset, but never in a temper such as this. “I’m sorry, Jim,” Frank

replied softly, “I know how much this means to you, but I don’t think that I have a choice in this matter.

I can’t sit idle while you and that twit from financial analysis allow this report to go forward. You both

know that these numbers have no foundation in fact.”

The report, titled “Endangered Species: The Pulp and Paper Industry in the Upper Peninsula,”

laid out the industry’s response to the new government proposals to put effluent controls on the

discharge of wastewater from pulp and paper mills in environmentally sensitive regions of the province.

One section of the report detailed the financial consequences of the emission controls as determined by

each of the five pulp and paper companies operating in the region. Amalgamated Forest Products had

taken the industry lead in developing the report, and the company president, Jean Letourneau, was

scheduled to testify before a legislative subcommittee next week, giving the industry perspective on the

proposed legislation.

Amalgamated had three major mills located in some of the more remote locations in the

province. The firm had been facing difficult financial times due to the recession, and this had caused

substantial hardship in the three small communities where the mills were located. Corporate offices

were located in Northlake, a town of approximately 10,000 people.

The section of the report dealing with the dollar impact to Amalgamated Forest Products of

installing the emission control equipment had been prepared by Tina Pacquette. Tina, a long-term

employee of the firm, had risen through the accounting department to become the manager of financial

analysis. While Tina and Frank were peers, their working relationship had not been particularly cordial.

In Frank’s opinion, Tina’s work was barely adequate, but then, no one asked for his opinion.

“Well, Frank, your pigheadedness has really caused a problem for all of us! Wait Here! I’ll get

Jean Letourneau, and we’ll see what he thinks about your efforts!” Jim exited the office and slammed

the door.

As he waited in the silence of his boss’s beautifully decorated office, Frank looked back over his

10 years with amalgamated Forest Products. Just like his father before him, Frank started with the firm

after completing high school and his first job was as a yard man culling out damaged logs before

processing. That’s when Frank severely damaged his right leg on the job. He had been celebrating the

birth of his son the night before and he was unable to keep his footing with the dexterity required.

Surgery saved the leg and he was extremely grateful that the company had brought him inside to the

accounting office. An accounting clerk’s salary was low compared to a yard helper’s, but in a short time

his natural talent for analysis brought him to the attention of the vice president of finance. Within two

years, Jim McIntosh had arranged for him to go to a university, complete his Certified Management

Accountants (CMA) designation after graduation, and then return to Amalgamated. The financial

support provided by the firm had been adequate but not lavish by any means, and Frank had done well

in his studies. He was the gold medalist for his province on the CMA examinations, and he had returned

to Northlake in triumph. With three young children and a proud wife, Frank had been appointed to a

new position in corporate reporting. After a year of having Jim as his mentor, he rose to the position of

manager of corporate reporting.

The office door opened abruptly and Jim entered with the company president. Jean Letourneau

was a distinguished man of approximately 60 years of age. He had a long history with Amalgamated and

a solid reputation in the pulp and paper industry.

“What’s the problem, Frank?” Jean’s voice broke into the silence. “Jim tells me that you have a

few concerns about the report that we’re submitting to the legislative committee.”

“Well, Mr. Letourneau, I think we, the company, have some major problems here. The report

indicates that we’ll have severe financial problems if we’re forced into building a lagoon for wastewater

treatment. In fact, the report says we are likely to be pushed into bankruptcy if the legislation is passed.

But we all know these estimates of costs are highly inflated. There’s no way that our operating costs

would be raised by 30 percent. I could see our operating costs rising by only 8 to 10 percent. That’s

what the internal report Tina wrote a year ago predicts and there’s really been no significant change.

Moreover, you have to testify before the legislative committee as to the truthfulness of this report, and

there’s not a shred of truth in it. The other cost estimates are all high, and the prediction of our product

demand is based upon a further deepening of the recession. For our internal purposes, we have been

using an estimated increase of 10 percent in demand.”

“Slow down, son,” Letourneau’s calm voice broke in, “We have to use different figures for

different purposes. When we report to our shareholders, we give them numbers that are substantially

altered from the internal document, right? In this case, we have to make those dunderheads in the

government see what all this regulation is doing to us. Besides, they know we’re going to use the most

effective numbers to justify our position.

“But this isn’t simply a matter of different figures,” Frank sputtered. “These numbers have been

totally fabricated. And they don’t take into account the damage that we’re doing to the Wanawashee

River. The same stuff we’re dumping was cleaned up by our competition years ago. The aboriginal

community downstream is still drinking this garbage. We’re going to be subject to a huge lawsuit if they

ever trace it to us. Then, where will we be? I’ve got to worry about my professional obligations as well.

If this blows up, you could go to jail, and I could get my designation revoked.”

“We’ll cross that bridge when we come to it,” Jim McIntosh interjected. “You’ve got to

remember what’s at stake here. Northlake’s totally dependent on the mill for its economic survival. As

the mill goes, so goes the town. It’s your buddies you’d be threatening to put out of work, Frank. This

legislation may not bankrupt us, but it will certainly put a squeeze on profits. If profits are gone, no

more reinvestment by Chicago. Head office is putting lots of pressure on us to improve the bottom line

since the takeover last year. They’re talking about cutting all of that new production line equipment we

requested.”

“The bottom line is this, Frank,” Letourneau spoke softly. “You’re an important part of our

team, we’ve invested a lot in you. Jim was talking about working you into a new role: V.P. Controller.

We’d hate to let you go because of this small issue. However, we need to have everybody working on

the same goal. Besides, Jim tells me this isn’t even your responsibility. If you hadn’t picked up the copy

of the report on Tina’s desk, we wouldn’t have even involved you. Now take the rest of the day off, go

home to Cheryl and the kids, and take out that new speed boat of yours. Think the problem through,

and I’m sure you’ll see the long-term benefit of what we’re doing. This pollution issue is a ‘Northern

problem’ that we can resolve here, not in some fancy legislature in the south. Besides, we’ve had the

problem for as far back as I can remember. So a few extra years certainly won’t hurt.”