Acme Title Pawn Group: KPSN Consultants Overview ?Summary of case ?Ethical issues present in the case ?Discuss dilemma faced by decision makers in the case ?
Acme Title Pawn was in the business of providing loans to a target market consisting of mostly high risk customers, example, gamblers, persons with little or no credit history and those with poor credit history, predominantly from the minority groups such as African American (mostly migrants) and Hispanic communities (low income earners).
High staff turnover despite attractive compensation packages. ?In sync with the title loan industry, Acme presents itself as a ‘headache-free’ business simply because they catered to persons having challenges obtaining financial help with the likes of banks and other reputable lending institutions. ?To obtain a loan, customers were asked to simply present a motor vehicle title that would be used as security.
Due to the risks involved, loans were capped at a maximum of fifty percent (50%) of the blue book value of the vehicle.
Acme Pawn operations were essentially in States which had legislation allowing at least 22% interest rate to be charged as the company charged twenty five (25%) interest rate to its customers. The company would pull out of states if the legislators changed this policy to lower interest rates. ?The Company believed in adequately compensating its staff hence high salaries were paid, yet there was a grave concern regarding the high staff turn-over experienced. ?The Company had its share of challenges in how it conducted its business affairs.
How it viewed its obligations to customers and its role as an “ethical corporate company”. Joe Scruples, a father and husband, is a current employee of Acme Title Pawn and has had his fair share of employment challenges throughout his working life. ?He viewed joining Acme as the ultimate move for his career as he held the Company in high esteem. He soon realized that not all that glitters is gold. ?Joe is at a cross roads.
Senior managers ignoring the misappropriation of company’s funds; executives at Acme Title Pawn would regularly charge personal expenses such as phone bills, courier service fees and even movie rentals to the company’s credit card.
Joe upon realizing this reported it to the Accounts Manager, however there was no action taken. Chain of command was ignored within the organization; whenever there were any staff issues or conflicts, they were not reported to the immediate supervisor; they were instead reported to higher levels than were necessary. This undermined the authority of the immediate supervisor and fostered back stabbing. Staff members regularly borrowed from the company’s accounts without any loan agreement or payment scheduled being put in place. No approval was given by the CEO. Withholding customers’ funds from vehicle sales; it was the policy of Acme Title Pawn to issue loans to a maximum of fifty percent of the vehicles’ book value. If there was any default in payments Acme Title Pawn would seize and sell the vehicle. The excess proceeds, if any, should rightfully be returned to the owner; however this was only done if the debtor called to query the outstanding amount or if State law specifically demanded its return. Deception- Anything that substantially interferes with the ability of people to make a rational decision (Boatright, 2009).
Acme Pawn’s actions leaned towards deception in their non disclosure of their high interest rates and also the non disclosure of the lack of return of the excess from vehicle sales Acme and Joe’s Dilemma Acme ?How can they create a morally sound company? ?How can they improve the service to their clients? Joe ?Will his personal moral standards conflict with lack thereof within Acme? ?Should he quit his job or try to be an agent of change? Ethical Theories Applied Teleological Theory Teleology is derived from the Greek word “telos” which means an end.
The teleological theory therefore holds that the rightness of an action is determined solely by its consequences. The most common example of the teleological theory is Utilitarianism. Utilitarianism (John Stuart Mills) – the end justifies the means (Boatright, 2009) Boatright explains that an action is right if, and only if it produces the greatest balance of pleasure over pain for everyone. One Utilitarian thesis, the Maximalist, states that a right action is one that has not merely some good consequences but the greatest amount of good consequences. Simply put, the end justifies the means.
Based on these definitions, we are convinced that Acme Title Pawn operated in a highly utilitarian manner. What justifies this decision?
Therefore, despite the extremely high interest rates, the extreme 30 day pay-back period, the vehicle seizure and sale, the non return of the excess from vehicle sale or the lack of full information, the greater good was being served. All in all, despite its many issues internally and externally, Acme Title Pawn served its purpose as a Utilitarian. Deontological Theory Deontology is derived from the word “deon,” the Greek word for duty.
The Deontology theory holds that consequences are relevant to determining what we out to do hence the means justifies the end. (Boatright, 2009) The most common example Deontology is Universalism. Universalism (Immanuel Kant)-treating persons as mean in and of themselves rather than means to an end. This theory states that individuals have a duty to perform certain acts not because of some benefits to themselves or others, but because of the nature of these actions or the rules from which they follow (Boatright, 2009).
The staff members of Acme Title Pawn had a responsibility to act in an ethical manner when conducting business with their clients. As stated by Kant in his theory of universalism, any act you perform should be above board and be able to withstand scrutiny. Even though Acme operated by using a legal interest rate on loans to their clients, there were many other questionable acts within their operations. In executing their duties, the staff members of Acme Title Pawn did not think about their clients’ welfare.
In most instances the following was not done at Acme during the processing of a loan: ? Full information was not given about the value of the loan in many instances, that is, customers were not provided with interest rates, penalty fees and other special conditions that applied should they default on the loan agreement. ?Proceeds from sale of repossessed vehicles were kept in full even when it exceeded outstanding loan amounts. ?They targeted the under-educated (African Americans and Hispanic communities) immigrants within the states they operated.
Persons who were known to have appalling credit ratings and gamblers. ?They did not perform any due diligence on loan prospects, Motor Vehicle Titles and their staff members. Acme’s main objective was to maximize profits regardless of the consequences to achieve that objective. Hence, their clients were treated as means to an end and not as ends as the deontological theory advocated. Ethical Relativism Ethical Relativism states that no universal standard or rules can be used to guide or evaluate the morality of an act – simply put one is guided by their own moral principles. Boatright, 2009) ? The industry in general and Acme Title Pawn in particular, felt justified in charging high interest rate (25%) as this was legal in the states which they operated. In order to get a loan, clients were only asked to submit their car title, however they were still allowed to keep and use the car during the duration of the loan.
Acme stands to lose the most if the clients default on their payments, therefore an interest rate of 25% was justified given the risk and uncertainty to collect that existed. Acme management ensured they had no legislative issues that would limit them hence they only operated in States that were conducive to their business’ operations. In North Carolina and Kentucky where the interest rate was 22% (lower than the rate they felt justified in charging), Acme Title Pawn ceased operation in those states. ?Never felt they exploited anyone – Acme Title Pawn felt that the service they provided was needed. The persons who came to them had poor credit rating or no credit history.
These persons could not have gone to a traditional financial institution and access a loan. Therefore, Acme strongly believed that they offered a service that was needed and beneficial to both themselves and their clients. Recommendations Joe ?Stay in his job, in order to provide for his family who was quite settled in the community and his children were performing well in school. He too felt there was scope for personal growth within the company. ?Report misappropriation of funds to higher personnel than his immediate superior.
If needs be report this directly to the CEO as surely he would find this information quite interesting. ?However, if the operations within the company continue to conflict with his moral beliefs and change seems despondent; he needs to consider seeking employment elsewhere. Acme Title Pawn ?Senior managers should encourage lower level staff to use the chain of command in reporting grievances/concerns. ?Implement an Internal Accounting policy that governs the issue and repayment of staff loans. ?Hire an Internal Auditor to ensure that correct procedures are being adhered to. Employ a Human Resource manager to create, implement and monitor policies and procedures that will govern work ethics. ?Ensure that adequate info is given to “the least “of the potential clients, so as to equip them in making a rational choice/decision.
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