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 Please answer all 7 questions at the end of this case


 Please answer all 7 questions at the end of this case.  Your total submission should be at least 5 pages and all 7 question should be answered.  You should use a minimum of at least 7 scholarly sources (peer-reviewed sources, authoritative bodies like the IMA or AICPA, or organizations/associations devoted to the profession) to support your answers.  Please do NOT re-type the questions in the case.  You can simply section each off in your paper by a heading (Question 1, 2, etc.).   


The Semiconductor and the Two-Way Radio divisions

are two major divisions in Big Electronics Company

International (BECI). These two divisions each have

multibillion-dollar sales. Manufacturing, direct distribution,

and sales occur primarily in the United States, Western

Europe, Canada, and Australia with feeder and assembly

plants located throughout Southeast Asia and Latin

America.1 Service for the developing world happens through

distributors and commission agents, while export support

activity takes places at BECI’s headquarters in Dallas, TX.

The Semiconductor division has six established production

facilities in Southeast Asia and Mexico, but the Two-Way

Radio division is opening its first production facility in the

developing world in Penang, Malaysia. The two divisions are

managed and operated separately.

In March 2013, the Two-Way Radio division opened

its first overseas production facility in a free trade zone in

Penang, Malaysia. Figure 1 shows reporting relationships

for the Penang production facility. Figure 2 shows a partial

BECI organizational chart reflecting how the Penang facility

fits into the overall company. Figure 3 presents the timeline

for events relative to this case. Because the facility plans to

make semiconductor components exclusively for two-way

radio products, the operation is part of the Two-Way Radio

division and not part of the Semiconductor division.

Two years prior to the opening of the Penang facility,

BECI hired 26-year-old Sam as a supervisor of financial

analysts for a domestic group in another large division. Based

on Sam’s well-regarded job performance in that position,

BECI promoted him to financial controller of the startup

Penang operation. Sam has a wife and two young children.

To start up the operation, Sam moved to Penang along with

two others: Dave the general manager and ceramic engineer,

and Glenn the engineering manager and mechanical

engineer. Sam, Dave, and Glenn are all in their late 20s.

The operation is expected to eventually be a considerable

contributor to BECI’s profitability because of the low labor

cost and favorable tax treatment. Management at the Penang

Production Facility plans to hire as many as 3,000 employees

in the next five years and, if all goes well, 10,000 within the

next 10 years. The Penang operation reports to Max, a vice

president and operations manager at the headquarters of the

Two-Way Radio division in Miami, FL. He in turn reports to

the chief executive officer (CEO) at corporate headquarters

in Dallas. Max is viewed as a man of integrity and a superstar

of the present and future. He is well respected for his

business expertise and highly regarded by all.

The Penang plant started shipping semiconductor

components and products to the Two-Way Radio division in

Miami in May 2013. By September, the operation had hired

400 employees and was already considered very successful.

Sam has 10 employees in the Accounting department, which

will likely increase in the future as the division has plans


ISSN 1940-204X

A Reporting Dilemma: Hiring Freeze Headcount

Bruce Bettinghaus Associate Professor of Accounting Grand Valley State University

Stephen R Goldberg Professor of Accounting Grand Valley State University

Lara Kessler Associate Professor of Accounting Grand Valley State University

©2019 IMA

1 Big Electronics Company International has approximately 70,000 employees and is listed on the New York Stock Exchange.



to increase the total operation’s employment to as many as

3,000 within the next two years.

Sam and his staff have designed and implemented

accounting policies and procedures consistent with BECI

policies. As controller, Sam is responsible for all reporting to

the United States, including all monthly financial reports and

monthly headcount reports. All reporting is made directly to

division headquarters in Miami, which consolidates division

reporting and eventually sends it to Dallas to be included

in consolidated BECI reporting. Costs (including fringe

benefits) per head for clerks and factory workers in Penang

are approximately 10% of U.S. personnel costs. Total cost of

the operation in relation to productivity is low. It is regarded

as a successful and efficient operation. The three young

expatriate managers are viewed favorably within BECI.


The global economy was in recession early in 2013.

Consolidated BECI sales and profits were rapidly

plummeting. In September 2013, the chairman of the board

and the CEO initiated a global hiring freeze and were

putting pressure on all operations to maintain or reduce

headcount. U.S. operations were laying off employees,

while the Penang operation was hiring. Dave (Sam’s boss

in Malaysia) and Max (Dave’s boss in Miami) were under

pressure not to hire. Max went to the chairman of the board

and CEO and laid out his case:

“Hiring additional personnel and increasing production

in Penang, Malaysia, would reduce net company costs and,

thus, would increase the Miami Two-Way Radio division’s

and overall BECI’s profitability. Hiring additional personnel

would result in further BECI cost savings.”

The argument fell on deaf ears, though. The chairman of

the board and CEO tell Max: “We have bigger problems. Go

solve your own problems. We do not want to hear any more

about hiring in Penang.”

The hiring freeze for BECI remained in place through

2014, and reports were reviewed at a consolidated level for

any changes in headcount. BECI is a nonunionized company

that prides itself on treating employees well. Though, from

a cost-benefit point of view, laying off employees worldwide

and hiring in Penang would be economically beneficial; from

political and employee relations points of view, it would

create difficulties.


Max has a dilemma. If the Penang operation does not continue

to hire, the Miami division as well as BECI will not reap

potential benefits of the Malaysian facility. Yet, additional hiring

in Penang would violate the worldwide BECI hiring freeze.

One possible, but not explicit interpretation of the words from

the chairman of the board and CEO is that Max should do

what he thinks best but not tell them. Max’s resolution of the

dilemma is to tell Sam to divide total Malaysian payroll plus

benefits by the average cost of an employee in the United

States, not Malaysia, which is much lower, and use that number

to report Malaysian headcount, which is then consolidated into

the division’s headcount. Thus, instead of reporting 400 new

employees, 40 employees would be reported, and the Penang

operation would continue hiring. Dave (Sam’s immediate

boss) also encourages following Max’s request. The Finance

department employees in Miami, to whom Sam sends all

Penang operation reports, also encourage reporting as Max

requests. These employees also ultimately report to Max. The

Two-Way Radio division employs approximately 30,000 people.

Without additional headcount, it would be difficult for

the Malaysian operation to continue being so successful.

Sam realizes that hiring additional employees will allow him

to continue to perform well in the eyes of his superiors and

will result in a more positive contribution to profitability to

BECI in total. All financial reports would be accurate; only

the headcount would be understated. That number gets

aggregated with other operations and is ultimately rounded

to the nearest thousand at the division and corporate levels.

Because of this rounding, the public reports to the U.S.

Securities & Exchange Commission (SEC) will most likely

not be misstated at all, or if they are, it will not be a material

amount. Sam, Max, and all other parties know that financial

reporting must be accurate. Sam is only asked to show

“creativity” on the headcount report.

Sam views BECI as having an overall high integrity

environment. This is the only request that he has ever

received to not report accurately. Internal auditors will visit

the location in its second year but focuses on internal controls

primarily as incorporated in BECIs financial and operating

policies and procedures. Sam and the Penang Accounting

department carefully follow these policies and procedures.

Thus, there is minimal expectation that the headcount

reporting would be an issue.


2 IMA® Statement of Ethical Professional Practice, Institute of Management Accountants, Montvale, N.J., July 2017. 3 AICPA Code of Professional Conduct, American Institute of Certified Public Accountants, December 2014,





Help Sam determine the appropriate course of action.

There are many approaches to ethical decision-making.

The IMA® (Institute of Management Accountants) Statement

of Ethical Professional Practice recommends following your

organization’s established policies for resolving ethical issues.2

If the organization does not have established policies, the

IMA Statement first recommends discussing an ethical issue

with your immediate supervisor. If the supervisor appears

to be involved, present the issue to the next higher level

of management who does not appear to be involved. The

highest level would be the Audit Committee of the Board

of Directors. If this does not bring resolution, the next

consideration could be IMA’s anonymous hotline. Another

possible step would be consulting your attorney.

The AICPA (American Institute of Certified Public

Accountants) Code of Professional Conduct3 similarly

recommends that if you find yourself in an ethical conflict,

first consider relevant facts and circumstances, including

applicable rules, laws, or regulations; second identify the

ethical issues involved; and third consider established

internal procedures.

Questions 1 through 6 ask what course of action Sam

would take if he were guided by utilitarianism, deontology

(Kant’s categorical imperative), virtue ethics, giving voice to

values, behavioral ethics, or professional ethical principles.

Question 7 asks for your recommendation to Sam.

1. The utilitarian approach to ethical decision-making

entails identifying potential alternative courses of

action and selecting the alternative that maximizes net

utility. Utility is defined as whatever produces pleasure

or happiness and whatever prevents pain or suffering.

This principle can be used by individuals as well as

by legislators in drafting laws. There are two major

objections to Utilitarianism. The first objection is that it

fails to respect individual rights. By caring only about the

sum, it does not consider the treatment of individuals.

Ultimately, utilitarianism could sanction ways of treating

persons that violate fundamental norms of decency.

Minorities could be discriminated against to benefit

the majority. The second objection is that utilitarianism

counts everyone’s preferences equally. Under this

approach, it is necessary to measure, aggregate, and

calculate happiness on a single scale. Some people

question whether it is possible to translate all moral goods

into a single currency of value without losing something

in the translation. Cost benefit analyses can be used

as a tool in applying utilitarianism. Any cost-benefit

analysis should consider costs and benefits internal

to the company as well as external costs and benefits.

Even considering its flaws, utilitarianism is an influential

approach to making moral decisions. All stakeholders

should be considered, including but not necessarily

limited to BECI shareholders, current U.S. and Malaysian

BECI employees, future BECI employees, citizens of the

United States and of Malaysia. Which course of action

would a utilitarian select?

2. Deontology is an ethical theory that focuses on rules

that embody our moral duties. Kant advocates treating

all humans with dignity and respect. To act ethically

is to perform one’s duty by following the categorical

imperative. One formulation of the categorical imperative

is to act in such a way that you always treat humanity,

whether in your own person or in the person of any

other, never simply as a means but also as an end.

Another formulation of the categorical imperative is

to act only on principles that we could universalize

without contradiction. In any alternative course of action

considered by Sam, is anyone or any group being used

solely as an end to benefit the ends of others? What

course of action would be consistent with the categorical


3. A virtue ethics approach to ethical decision-making

requires identifying the civic and business virtues

expected of executives and then selecting the alternative

course of action that best reflects those desired virtues.

Aristotle believed that when determining which virtues

should be rewarded, one should consider the purpose of

the social or, in this case, business practice in question.

Aristotle’s view of the moral life was living a life of virtue,

which is the “good life.” Virtues are character traits that

go deep down inside of people. Desirable virtues are

determined by deliberation within the community. What

is the purpose of the controller, and what virtues should

be honored? After deliberation and agreement within the

professional communities, desirable virtues have been

recommended in the IMA Statement and the AICPA Code

of Professional Conduct. IMA recognizes competence,

confidentiality, integrity, and credibility as values to

which accounting professionals are responsible to adhere.

The Principles section of the AICPA Code of Professional

Conduct expresses tenets of ethical and professional

conduct. These responsibilities include cooperation

within the profession, acting in the public interest,

maintaining integrity, discharging services objectively




free of conflicts of interest, maintaining independence for

attest clients, striving to continually improve competence

and quality of service, and discharging responsibility

to the best of your ability. Additional sources of virtues

might be one’s social and spiritual communities. What are

desirable virtues to guide Sam’s decision? What course of

action is consistent with these virtues?

4. Question 3 discussed identifying appropriate values

to guide decisions. Yet many of us, including Sam,

may encounter conflicting values, such as loyalty vs.

integrity or self-interest vs. professional responsibility.

Sometimes the way we want to live and the things we

want to accomplish seem in conflict with expectations

of our bosses, our clients, our peers, or our organization.

This case demonstrates that it can be challenging to

effectively stand up for your values when pressured by

your boss (or in other cases colleagues, customers, or

shareholders) to do the opposite. Despite internal and

external pressure, some people effectively voice and act

on their values. Consider your personal values. Are these

values consistent with and perhaps influenced by IMA

and AICPA as discussed previously? Are your values

aligned with Max’s and Dave’s? Do your values align

with following BECI’s policy of maintaining a worldwide

hiring freeze? How might you voice your values in this

situation? If your values are not consistent with your

boss’s values, how can you effectively communicate your

concerns? Would confrontation, reasoned discussion, or

some other approach be more effective?

5. Behavioral ethics is a descriptive, as opposed to a

normative, approach to ethical decision-making. This

approach addresses how people actually make ethical

decisions as opposed to how philosophers say they should

make decisions. Desires and self-interest powerfully

influence the way one interprets information. When

motivated to reach a particular position, a person

usually does. Psychologists conclude that overcoming

unconscious biases is challenging, resulting in faulty

moral reasoning that further social agendas, to justify

actions. What action might innate biases lead Sam to

select? How might Sam overcome these biases and make

an ethical decision?

6. As discussed previously, the IMA Statement indicates that

ethical principles include honesty, fairness, objectivity,

and responsibility. As a CMA® (Certified Management

Accountant), what are Sam’s professional responsibilities

related to the headcount reporting dilemma? Likewise,

the AICPA principles include exercise of sound moral

judgment, acting in the public interest, integrity,

objectivity, and due care. What are possible courses

of action that Sam could take? Considering the IMA

Statement and the AICPA Code of Professional Conduct,

which action should Sam take?

7. What action would you take if you were in Sam’s




IMA®, the association of accountants and financial professionals in business, is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant) program, continuing education, networking and advocacy of the highest ethical business practices. IMA has a global network of more than 100,000 members in 140 countries and 300 professional and student chapters. Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe, and Middle East/India. For more information about IMA, please visit




Figure 1. Big Electronics Company International Penang Management Team

CEO and Chairman of the Board, BECI Corporate Headquarters, Dallas, TX

Max – Vice President and Operations Manager, Two-Way Radio division in Miami, FL; reports to the CEO in Dallas, TX

Dave – General Manager, Two-Way Radio Production Facility in Penang, Malaysia; reports to Max in Miami, FL

Sam – Controller, Two-Way Radio Production Facility in Penang, Malaysia; reports to Dave in Penang, Malaysia

Glenn – Engineering Manager, Two-Way Radio Production Facility in Penang, Malaysia; reports to Dave in Penang, Malaysia

Figure 2. BECI Partial Organization Chart

Semiconductor division, Phoenix, AZ

Automotive division Detroit, MI

Consumer Products division

Chicago, IL

BECI HQ CEO & Chairman of the Board

Dallas, TX

Two-Way Radio division Vice President and

Operations Manager Miami, FL


Production Operation Penang, Malaysia General Manager


Production Operation Penang, Malaysia

Controller Sam

Figure 3. Timeline

January 2011 Sam is hired by BECI to be a supervisor of financial analysis within the Two-Way Radio division.

October 2012 Dave is appointed general manager and Glenn is appointed mechanical engineer for the future Penang Production Operation.

January 2013 Sam is appointed controller of Penang Production Operation.

March 2013 Sam, Dave, Glenn, and families move and start up Penang Operation.

May 2013 Penang Operation begins shipping small quantities of hybrid circuits (components) to Miami, FL.

September 2013 BECI announces a global hiring freeze as thousands of employees are laid off.

October 2013 Max requests Sam to report headcount based on Malaysian payroll divided by U.S. average salary, not actual headcount.



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