Neal Is Young, Likable, Optimistic and Generous Son of a Prominent

question 26

Essay

Neal is young, likable, optimistic and generous son of a prominent public official.He has a master's degree in business and is the business partner of Ken and Bill in an oil drilling and exploration business.Neal also serves as a director on the board of the Bonanza Savings and Loan Association.While serving on the Bonanza Board, Neal votes to approve major loans to Ken and Bill without disclosing to the other directors that he is a business partner of Ken and Bill.Neal also personally arranges for a $900,000 line of credit from Bonanza for an oil drilling venture in which he is a partner with Ken.The drilling venture is unsuccessful and Ken and Bill both default on their loans to Bonanza, which then causes the S & L to become insolvent.Federal banking officials seize Bonanza and liquidate its assets to pay creditors and depositors.Because Bonanza is federally insured, tax money is also used to pay off depositors whose deposits are insured under federal programs.Bonanza shareholders lose their investment money.Was Neal's conduct as a director of Bonanza ethical? Analyze his conduct in light of the following ethical theories:
a.Intuitionism and the "Television Test."
b.Milton Friedman's ideas on corporate governance.
c.Deontological theories.
d.Rule utilitarianism.
e.Ethical relativism.

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Definitions:

Adjusted Cost of Goods Sold

The cost of goods sold that has been adjusted for changes in inventory levels or valuation methods.

Overapplied Manufacturing Overhead

A situation where the allocated amount of manufacturing overhead costs exceeds the actual overhead costs incurred.

Unadjusted Cost of Goods Sold

The initial calculation of the cost of goods sold that has not been modified for returns, allowances, or discounts.

Overapplied Manufacturing Overhead

A scenario where the allocated manufacturing overhead costs exceed the actual overhead costs incurred, resulting in a credit balance.