Jeremy, a successful entrepreneur in the automotive industry, is a certified car fanatic who is passionate about having the latest, hottest look for his street rod. A line of new wheel rims is all the rage, and after checking the prices ($1,500 each), he decides to contact the manufacturer directly and see if he can make a better deal. He is told that they are sold only through speed shops and custom shops, and that his area does not have a sales representative. If he would agree to become a representative and get $10,000 worth of wholesale orders, the manufacturer would sell him a set of the rims at cost, in addition to paying him his commission. Jeremy agrees. Now he knows how he will get his new rims. First Jeremy goes to the biggest and best speed shop nearby and asks for the rims by name. The owner says he has never heard of them. Jeremy, after telling the owner that they are really a popular product and that he is the sales rep, leaves some literature and says he will call again. Meanwhile he hires four male students from a local college to each go into the shop once in the next 2 weeks and to ask for the rims by name. They are to indicate that they would buy them if they were available. For this he pays each student $100. He then returns after 3 weeks, and the owner reports that the rims must be as hot as Jeremy says—kids have been asking for them. He orders $15,000 worth of rims to be delivered over 6 months. Jeremy is able to buy a set of rims from the manufacturer for $335 each and receives a $380 sales commission on the total sale. The speed shop owner sells $30,000 worth of the rims and reorders after 4 months. Jeremy remains the sales representative collecting commissions, but he does not actively promote the rims.
Questions
Were Jeremy's actions ethical? Why or why not? What should he have done? What are the implications and lessons from your discussion of the case? What role do ethical issues play in forming a team, selecting advisors and investors, and other entrepreneurial activities?