Reece Manufacturing rewards its plant managers for their ability to meet budgeted quality cost reductions. The bonus is increased if the productivity goal is met or exceeded. The productivity goal is computed by multiplying the units produced by the prevailing market price and dividing this measure of output by the total cost of the inputs used. Additionally, if the plant as a whole meets the budgeted targets, the production supervisors and workers receive salary and wage increases. Matt Rasmussen, the manager of a plant in Nebraska, feels obligated to do everything he can to pro- vide this increase to his employees. Accordingly, he has decided to take the follow- ing actions during the last quarter of the year to meet the plant's budgeted targets and increase the productivity ratio:

a. Decrease inspections of the process and final product by 50 percent and transfer inspectors temporarily to quality training programs. Matt believes this move will increase the inspectors' awareness of the importance of quality; also, decreasing inspection will produce significantly less downtime and less rework. By increas- ing the output and decreasing the costs of internal failure, the plant can meet the budgeted reductions for internal failure costs and, simultaneously, increase its productivity measure. Also, by showing an increase in the costs of quality train- ing, the budgeted level for prevention costs can be met.

b. Delay replacing and repairing defective products until the beginning of the following year. While this may increase customer dissatisfaction somewhat, Matt believes that most customers expect some inconvenience. Besides, the policy of promptly dealing with dissatisfied customers could be reinstated in three months. In the meantime, the action would significantly reduce the costs of external failure, allowing the plant to meet its budgeted target.

Required

1. Evaluate Matt's ethical behavior, taking into account his concern for his employees. Is he justified in pursuing the actions described in the problem? If not, what should he do instead?

2. Assume that the company views Matt's behavior as undesirable. What can it do to discourage it?

3. Assume that Matt is a CMA and a member of the IMA (Institute of Management). Are any of these ethical standards violated?