Marian Buggs
6/9/2017
Pro. Mclester
Case Study 3
Ethics Factual Scenario
Consumer Lending Corporations uses local offices to lends the money to consumers. These loans are
secured promissory notes underlined to large institutional investors. The cost to obtain this money is
determined by the delinquency rate. This rate must be low for the corporation to make a profit. The
consumer must make a payment within 90 days or the loans will delinquent. Depending on the total
combined loans, at the end of the year, managers can earn up to 20% bonuses. Thus, loan officers are
required to pressure customers to borrow more than they need.
After 60 days past due more aggressive techniques are used to persuade customers make at least a
partial payment. Before the 90-day mark or if will be on the delinquency list. Some of the tactics are illegal
and does cost the company money, but managers don’t care as long as the account stay off the list. The
savings in cost of borrowing money in the commercial paper market is too high.
Issue:
Are the current practices ethical and would the benefits of reforming the practices benefit the
shareholder?
Rule:
Under the theory of social responsibility, a corporation owes a duty to take actions that maximize profits
