Ethics in Business

Jeff Fox is the controller of a cooperation whose stock is not listed on a national stock exchange. The company has just received a patent on a product that is expected to yield substantial profits in a year or two. However, the company is presently experiencing financial difficulties; it is on the verge of defaulting on a note held by its bank because of inadequate working capital.

At the end of the fiscal year, the president of the company instructed Fox to not record several invoices as accounts payable. Initially Fox objected since the invoice represented bona fide liabilities. However, the president insisted that the invoices not be recorded until after the end of the year, at that time it was expected that additional financing could be obtained. After several strong objections that were expressed to both the president and other members of senior management, Fox finally complied with the president's instructions.

1. Did Fox act in an ethical manner? Explain.

2. If the new product fails to yield substantial profits and the company becomes insolvent, can Fox's actions be justified by the fact that he was following orders from a superior? Explain.