Question:
Bailey Manufacturing has just initiated a formula bonus plan whereby plant managers are rewarded for various achievements. One of the current criteria for bonuses is the improvement of asset turnover. The plant manager of the Carson City Plant told Horace Appleby, his young assistant, to meet him Saturday when the plant is closed. Without explanation, the plant manager specified that certain raw materials were to be loaded on one of the plant's dump trucks. When the truck was loaded, the plant manager and Horace drove to a secluded mountain road where, to Horace's astonishment, the plant manager flipped a switch and the truck dumped the raw materials down a steep ravine. The plant manager grinned and said that these were obsolete raw materials and the company would run more smoothly without them. For the next several weekends, Horace observed the plant manager do the same thing. The following month, the plant manager was officially congratulated for improving asset turnover.
a. How did the dumping improve asset turnover?
b. What are the ethical problems in this case?
c. What are Horace's options? Which should he choose and why?