Question

Chapter 10: Ethical Issue Tonya Latino is a staff accountant for Cannally and Kennedy, a local CPA firm. For the past 10 years, the firm has given employees a year end bonus equal to two weeks' salary. On November 15, the firm's management team announced that there would be no annual bonus this year. Because of the firm's long history of giving a year end bonus, Tonya and her co-workers had come to expect the bonus and felt that Cannally and Kennedy had breached an implicit agreement by discontinuing the bonus. As a result, Tonya decided that she would make up for the lost bonus by working an extra six hours of overtime per week for the rest of the year. Cannally and Kennedy's policy is to pay overtime at 150% of straight time. Tonya's supervisor was surprised to see overtime being reported, because there is generally very little additional or unusual client service demands at the end of the calendar year. However, the overtime was not questioned, because employees are on the "honor system in reporting their work hours. Instructions Answer each question below in a way where you use at least 200 words to answer both questions ( NOT 200 words per question). After doing this, please respond to one of your peer's responses by using at least 100 words in your response. 1. Is Cannally and Kennedy acting in an ethical manner by eliminating the bonus? Explain your answer. 2. Is Tonya behaving ethically by making up the bonus with unnecessary overtime? Why?

Answer 1

1.         Cannally and Kennedy is not obligated to pay a bonus to its employees under any circumstances. The decision to pay a bonus is entirely discretionary. Companies frequently decide to discontinue or suspend annual bonuses for a variety of reasons, including deteriorating economic conditions, poor company or divisional performance, and alternative cash needs within the business. Even though the firm paid a two-week bonus for 10 straight years, it is not obligated to pay a bonus in Year 11. Thus, the firm is not behaving unethically for reducing the bonus.

2.         Tonya Latirno, on the other hand, is behaving unethically. Feeling that she is being cheated, Tonya is attempting to replace the bonus by working overtime that is not required. This behavior is fraudulent if the overtime is unnecessary, even though Tonya is actually present on the job during the overtime hours. Tonya is incorrect in thinking that her behavior is justified because she did not receive the full two- week bonus. In fact, this behavior would not be justified even if she had a legitimate claim against the company. If she had a claim or grievance against the firm, then it should be handled through proper human resource or legal means.