Problem

Mary Elizabeth Mills is a textile manufacturing firm located in the southern United States. The company carefully prepares all financial statements in accordance with GAAP, and gives a copy of all financial statements to each department. In addition, the company keeps records on quality control, safety, and environmental pollution by the company. It then prepares "scorecards" for each department indicating their performance. Recently, the financial impact of the second set of information was added, and the information has been used in the evaluation of employees for merit pay and promotions.

At the most recent employee meeting, Carl Victor, marketing manager, expressed his discomfort with the system. He said there was no guarantee that the second set of information was fair, since there were no generally accepted principles for this kind of information. He also said that it was kind of like keeping two sets of books-one following all legal requirements, and the other one actually used by the company.

Required:

1. Is it ethical to evaluate managers in the way described? DISCUSS and Explain (a limited yes or no is not sufficient).

2. Discuss one or more safeguards the company could build into its system to ensure the ethical treatment of employees.