Last week, we had to dismiss our finance manager, James Morris, for embezzling company funds. I insisted that the Internal Audit department, which discovered the fraud, investigate the matter further, and preliminary findings indicate that the practice is widespread and, in fact, known to occur in the Finance Department. I am therefore proposing that we revise our company policy to ensure stricter enforcement of our company ethics and create a culture that not only prevents people from engaging in fraud but also ensures people feel confident to report suspicious behavior that may indicate the presence of fraud. This new approach will ensure that we avert fraud and therefore reduce the losses we are incurring from fraudulent activities.
The fraud in our finance department has been happening thanks to an organized collusion between James and Mary Parker, our former Procurement Manager, who left two months ago and is still being sought by federal agents. James had been creating fictitious purchase orders which Mary would then approve and forward back to James together with a request for payment. Since our CEO has been busy, she did not have time to review the purchases before approving them. She also trusted James a lot. This situation of lack of oversight created a loophole that was promptly exploited by James and Mary. The two were also the chiefs of their department, which meant that they could easily intimidate any junior staff member who discovered the fraud. The low samples taken by our Internal Auditors also made it possible for such fraud to go undetected.
How to Deter Fraud
In order to prevent such high level collusion, we must ensure that we create a culture of self-restraint against such behavior. I propose that we improve oversight on purchases by ensuring that purchases are authorized by two independent parties such as the Chief Operations Officer and CEO. If the purchase is urgent and the CEO is not available, the Internal Auditor can take her place. The Internal Audit department should also increase the purchases sample they test to match that used by other companies in our industry. The two should also be sued for the recovery of all the money they embezzled.
This will help to stress the position that fraud will be punished. We should also ensure that junior employees know that their jobs are protected and that they should not be intimidated, even by their seniors, if they come forward to report a case of fraud.
I understand that these actions require policy changes. You, as the Human Resource Manager, are best placed to understand how these policy changes will impact on the job description of our employees. I am therefore requesting you to prepare a policy draft so that we can discuss it in our next management meeting.
Question 1: If I were in a corporate culture in which I witnessed cheating, I would come forward and report the incident to the relevant authority. I would also advise anyone who witnessed an incident of cheating to report it. This is because corporate fraud not only causes losses to the company, but also puts the jobs of all other employees at risk.
Question 2: A business can create an ethical culture by ensuring that non-ethical behavior is detected and punished. This creates a psychological deterrence against such behavior.
Question 3: Ethics and morality begin at home. This is proven by the fact that an early exposure to unethical behavior is likely to cause an inclination to that behavior later in life.
In my memo, I have used the Fogg Behavior Model to explain ethics, where I have analyzed behavior in terms of motivation, ability and trigger. I have also used three of Cialdini’s Six Principles of Influence. I have not only proposed action to the Human Resource Manager, but I have also committed to helping to solve the problem at hand by ensuring I provide oversight on purchases. I have also committed to attendance of the next management meeting to discuss the draft policy. I have used social proof by indicating that other companies in our industry use better oversight.
I have also used Bowman’s principles as outlined in the ‘letters that sell ideas’ section of his article ‘writing persuasive messages’. I have presented the problem of fraud which the Human Resource Manager is interested in. I have made reference to the company policy to increase chances of catching the HR manager’s attention. I have presented logical facts to support my idea. I have ended the memo by telling the HR manager what I expect him to do.
My memo is ethical because it proposes action that is ethical as away of preventing unethical behavior. This ensures that the actions I propose do not contradict the indicated purpose. I have also avoided factual and grammatical errors to avoid presenting an impediment to the communication of the message.
Beason, L. (2001, September). Ethos and Errors: How Business People React to Errors. Retrieved June 23, 2013, from http://faculty.winthrop.edu/kosterj/WRIT465/samples/Beason.pdf
Bowman, J. P. (2002, August 21). Writing Persuasive Messages. Retrieved June 23, 2013, from http://homepages.wmich.edu/~bowman/c4eframe.html
Mazur, T. C. (1993). Lying. Issues in Ethics, Santa Clara University. Retrieved June 24, 2013, from http://scu.edu/ethics/publications/iie/v6n1/lying.html
Mindtools.com. (2013). Cialdini's Six Principles of Influence. Retrieved June 24, 2013, from http://www.mindtools.com/pages/article/six-principles-influence.htm
Perkins, C., & Brizee, A. (2010, April 21). Format. Purdue OWL. Retrieved June 23, 2013, from http://owl.english.purdue.edu/owl/resource/590/03/
Stanford Persuasive Tech Lab. (n.d.). Behavior Wizard. Retrieved June 24, 2013, from http://captology.stanford.edu/projects/behavior-wizard-2.html