Company A's Executives Are Members of the Board of a Charity

question 12

Essay

Company A's executives are members of the board of a charity.  Company A may even itself be a major donor to the charity.  The charity may even benefit many of the company's customers.  The charity holds a golf tournament to raise money.  The executives participate in the tournament.  In some cases, Company A even pays the executives' participation fees (good for company image).  Company B is a supplier to Company A or a vendor that would like to be a supplier.  Enter the desire for face time.  In some tournaments, Company A executives turns to every Company B executive in the supply chain and asks for participation.  And participate they do.  They pay their entry fees because Company A executives ask.  But sometimes Company B folks want and get more.  Company B antes up the dough for primo participation in the tournament.  If a VP of Company A is playing a round with a celebrity, Company B pays enough to get its VP in the same foursome.  Discuss the ethical issues.

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Definitions:

Unit Contribution Margin

The difference between the selling price of a unit and its variable costs, indicating how much each unit contributes to covering fixed costs and generating profit.

Sales Volume

The total number of units sold within a specific period, often used as an indicator of business performance.

Variable Expense

Costs that change in proportion to the level of production or sales activity.

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs have been deducted, indicating how much contributes to fixed costs and profits.