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An Ethical Dilemma

Joseph Freberg had been with Alcon for 18 months. He had begun his career right out of college with a firm in the Southeast called Cala Industrial, which specialized in air compressors. Because of his work with Cala, he had been lured away to Alcon, in Omaha, as a sales manager. Joseph's first six months had been hard. Working with salespeople older than he, trying to get a handle on his people's sales territories, and settling into the corporate culture of a new firm took 16-hour days, six days a week. During those six months, he also bought a house, and his fiance', Ellen, furnished it. Ellen had stepped right in and decided almost everything, from the color of the rugs to the style of the curtains.

Ellen had taken a brokerage job with Trout Brothers and seemed to be working even more hours than Joseph. But the long days were paying off. Ellen was now starting to handle some large accounts and was being noticed by the "right" crowd in the wealthier Omaha areas.

Costs for the new home had exceeded their anticipated spending limit, and the plans for their wedding seemed to be getting larger and larger. In addition, Ellen was commuting from her apartment to the new home and then to her job, and the commute killed her car. As a result, she decided to lease something that exuded success.

"Ellen, don't you think a Mercedes is a little out of our price range? What are the payments?" inquired Joseph.

"Don't worry, Darling. When my clients see me in this--as well as when we start entertaining at the new house once we're married--the payments on the car will seem small compared with the money I'll be making," Ellen mused as she ran her fingers through Joseph's hair and gave him a peck on the cheek.

By the time of the wedding and honeymoon, Joseph and Ellen's bank statement looked like a bullfighter's cape--red. "Don't worry, Joseph, everything will turn out okay. You've got a good job. I've got a good job. We're young and have drive. Things will straighten out after a while," said Ellen as she eyed a Rolex in a store window.

After the wedding, things did settle down--to a hectic pace, given their two careers and their two sets of parents 2,000 miles in either direction. Joseph had realized that Alcon was a paternal type of organization, with good benefits and tremendous growth potential. He had identified whom to be friends with and whom to stay away from in the company. His salespeople seemed to tolerate him, sometimes calling him "Little Joe" or "Joey" because of his age, and his salespeople were producing--slowly climbing up the sales ladder to the number one spot in the company.

While doing some regular checkup work on sales personnel, Joseph found out that Carl had been giving kickbacks to some of his buyers. Carl's sales volume accounted for a substantial amount of the company's existing clientele sales, and he had been a trainer for the company for several years. Carl also happened to be the vice president's son-in-law. Joseph started to check on the other reps more closely and discovered that, although Carl seemed to be the biggest offender, three of his ten people were doing the same thing. The next day, Joseph looked up Alcon's policy handbook and found this statement: "Our company stands for doing the right thing at all times and giving our customers the best product for the best prices." There was no specific mention of kickbacks, but everyone knew that kickbacks ultimately reduce fair competition, which eventually leads to reduced quality and increased prices for customers.

By talking to a few of the old-timers at Alcon, Joseph learned that there had been sporadic enforcement of the "no kickback" policy. It seemed that when times were good it became unacceptable and when times were bad it slipped into the acceptable range. And then there was his boss, Kathryn, the vice president. Joseph knew that Kathryn had a tendency to shoot the bearer of bad news. He remembered a story that he had heard about a sales manager coming in to see Kathryn to explain an error in a bid that one of his salespeople had made. Kathryn called in the entire sales staff and fired the salesman on the spot. Then, smiling, she told the sales manager, "This was your second mistake, so I hope that you can get a good recommendation from personnel. You have two weeks to find employment elsewhere." From then on, the office staff had a nickname for Kathryn--Jaws.

Trying to solve the problem that he was facing, Joseph broached the subject of kickbacks at his monthly meeting with Carl. Carl responded, "You've been in this business long enough to know that this happens all the time. I see nothing wrong with this practice if it increases sales. Besides, I take the money out of my commission. You know that right now I'm trying to pay off some big medical bills. I've also gotten tacit clearance from above, but I wouldn't mention that if I were you." Joseph knew that the chain-of-command structure in the company made it very dangerous to go directly to a vice president with this type of information. 

As Joseph was pondering whether to do nothing, bring the matter into the open and state that it was wrong and that such practices were against policy, or talk to Kathryn about the situation, his cell phone rang. It was Ellen. "Honey, guess what just happened. Kathryn, your boss, has decided to use me as her new broker. Isn't that fantastic!"

• What are Joseph's ethical problems?
• Assume that you are Joseph and discuss your options.
• What other information do you feel you need before making your decision?
• Discuss in which business areas the ethical problems lie.