Editor’s note: The dilemma discussed in the following article was originally described in the summer 2013 issue of Outlook magazine, published by CGA-BC. We asked Michael McDonald, long-time author of Outlook’s ethics column, to discuss some of the responses he subsequently received.
Nell Fong, CPA, CGA,* is the assistant to the chief operating officer (COO) at Diameter Forest Products,* a privately held company that is the main employer in northern BC. Diameter has been having financial difficulties. The COO has just handed Nell a confidential list of employees who are going to be let go at the end of the summer after the current production run is completed. Nell is to prepare severance packages for these employees.
Much to her dismay, Nell sees that her sister-in-law Ginny is going to be let go, along with 100 other employees. Ginny has developmental disabilities and is a single mother with two children. Nell thinks that if Ginny were given a “quiet heads-up,” she would likely be able to find a new job in their town right away. Nell knows that if Ginny does not find out about her job loss until the fall, she will have to compete for a new job with all of the other recently laid-off workers.
What would you advise Nell to do?
Lynda Wallace, CPA, CGA, wrote: “This truly is an ethical dilemma. On the one hand Nell has a clear obligation to her employer, and on the other hand it is obvious Nell has strong family ties and wants to protect her sister-in-law.”
It is also an emotionally wrenching situation with loyalty to an employer pulling in one way and familial concern for a vulnerable family member pulling in the other. For a resolution of these conflicting demands, Wallace turns to the preamble to CGA-BC’s Code of Ethical Principles and Rules of Conduct (CEPROC), which stresses the need to act with integrity, trustworthiness, and objectivity. These, in turn, require the avoidance or, if necessary, the disclosure, of conflicts of interest. Wallace suggests: “Nell should speak to her COO and explain her conflict; however Nell has a clear obligation to keep the information confidential as well as not undertake any actions that would imply favoritism towards her sister-in-law.”
The approach taken by Wallace is, in my estimation, fundamentally sound. It respects the trust placed in Nell by her employer by keeping important information confidential and not using it to advance the interests of family members. However, is it fair to ask if Nell may, within the moral boundaries set by CEPROC, do more to deal with the situation of employees who, like her sister-in-law, are particularly vulnerable in the layoff process?
Such a suggestion was provided by another respondent,** who said: “I think Nell should make a request to the COO that her sister-in-law, as well as any other challenged individuals, be laid off ahead of the others so they may find employment more easily.”
What I appreciate about this response is that it offers Nell a suggestion for helping especially vulnerable employees while still respecting the trust placed in her by the employer. However, I have my doubts about the course of action recommended. Laying off individuals who are deemed especially vulnerable first, regardless of seniority or other provisions affecting partial layoffs, could well be seen as acting in a discriminatory manner—especially if the employer keeps secret the plan to lay off other workers later. If, on the other hand, the employer announces the plan to lay off other workers at this point, it might trigger a general exodus of workers that still would leave vulnerable workers in the lurch.
In thinking through this situation, this is a good point to take stock. First, we have decided that Nell should not take matters into her own hands and tell her sister-in-law about the forthcoming layoffs. She has a duty of loyalty to her employer and must avoid conflict of interest even though the conflict in this case is not directly self-serving.
Second, there is a legitimate moral space left here for Nell, as a professional accountant and trusted advisor, to talk to the COO about the likely effects of the layoffs on the workers. In doing so, she should be open about the fact that her sister-in-law is one of those who is likely to be hit especially hard. At the same time, she should point out others who are especially vulnerable due to disability, age, and other possible barriers to future employment.
I would then suggest that Nell talk to the COO about taking a stakeholder perspective on the forthcoming layoffs. This would involve taking into account the impacts of layoffs on all the company’s stakeholders—including employees and the community, as well as shareholders. Perhaps the company could work with provincial and municipal officials as well as community groups to mitigate the effects of layoffs—for example, through retraining and counselling programs with special provision for those who will likely have the hardest time finding re-employment.
In addition, the company should take a serious look at the severance packages being offered, with a view to making provision for workers who face special challenges securing future employment. With good will on the part of the company and some creativity, there may at least be a better ending in this case, even though an ideal “happy” ending is not a realistic prospect.
A final word
For the past several years, I have had the privilege of writing the “Ethics in Focus” column in Outlook magazine. I have appreciated the responses to dilemmas offered by members, and the staff at CGA-BC have been very supportive—notably Edward Downing, Patrick Schryburt, Kate Talmage, Edward Tanaka, and others whose good advice over the years has helped improve the content of the column.
I would also like to thank the readers of Outlook and wish all of BC’s professional accountants well as they work towards building the new CPABC. Ethics—particularly trustworthiness, objectivity, honesty, and a fundamental commitment to the public good—will remain, as ever, foundational to the practice of accounting.
All the best in the years ahead.
Michael McDonald is professor emeritus of applied ethics at the W. Maurice Young Centre for Applied Ethics at the University of British Columbia. In 2006, McDonald received an Honorary CGA for his extensive work in accounting ethics education.
*Names are fictitious.
**Name withheld by request.
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