Dixon Corporation Evaluates Its Managers Based on Return on Investment

question 68

Essay

Dixon Corporation evaluates its managers based on return on investment (ROI). Kathryn Bricker and Lindsey Allan managers of the electronics and housewares departments respectively have recently suffered from declining profits in their departments. Over lunch they discuss the problem and how they could improve performance. Most of the discussion centers around ways to increase sales. Near the end of the lunch period however Lindsey remarks that there are two components to consider and that they have considered only one. She wonders whether there is some way to reduce investment and by decreasing the denominator of the ROI fraction to improve the final result.
Back at work Kathryn continues to mull over Lindsey's remarks. She decides to pursue the matter further and before the end of the quarter she has sold quite a bit of older equipment and replaced it with equipment obtained with a short-term lease. Her performance measured by ROI is markedly improved although sales continue to be disappointing.
Required:
1. Who are the stakeholders in this situation?
2. Is Kathryn's action ethical? Briefly explain.

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Definitions:

Social Responsibility

The ethical framework that suggests an entity, be it an organization or individual, has an obligation to act for the benefit of society at large.

Economic Responsibility

The obligation of an organization to make decisions that benefit the economic well-being of society and its stakeholders.

Legal Responsibilities

Encompasses the obligations that organizations and individuals have to abide by laws and regulations in their professional conduct.

Corporate Social Responsibility

A strategy for business that promotes sustainable development through ensuring economic, social, and environmental advantages for every stakeholder involved.