P
rofessor Kenneth A. Merchant wrote this teaching note as an aid to instructors using
t
he Education Food Services at Centra
l
M
aine State University case.
Marshall School of Business
University of Southern California
Education Food Services
at Central Maine State University
Teaching Note
Purpose of Case
This case was written to motivate a discussion of the ethics of creating slack in a budget. A
strength of the case is that the setting is one with which most students will have some
familiaritya university food service. Another strength is that the case is real; only the names
have been disguised.
Suggested Assignment Question
Are Pams actions ethical or unethical? Explain.
Case Analysis
I suggest analyzing the case using the four-step framework described in Chapter 15 of the
textbook.
Determine the facts:
These facts should describe who, what, where, when, and how. Among the facts that should be
brought out are:
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
It is important for Pam to achieve her budget. If she does, she will get a good performance
review and a 20% bonus. If she does not, she may lose her job.
Budget slack enables Pam to give her staff more autonomy.
Budget slack sometimes enables Pam to buy things that allow her to provide better service
to the university.
Define the ethical issues:
Stakeholders: University
Pam
Major ethical principles
2. Fairness
4. Virtues (e.g., integrity, honesty)
Ethical issues
An ethical issue can usefully be discussed if someone is hurt or put at risk. Is anyone hurt or put
at risk here? The answer is clearly yes. Still, compensating rights or principles may mean
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1. Pams well being (e.g., job security, bonus) vs. universitys right to accurate projections
3. Pams well being vs. other managers (who do not pad their budget) bonus claims
4. Pams well being vs. stockholders right for maximum returns (less sloppy work, less
expenditures on unapproved equipment)
This list can be extended, but at least these issues should be identified.
Another way to portray the trade-offs is to list the stakeholders in a column. Then add two
columns to the right, one titled Who benefits? and the other titled Who is harmed? For each
Decision alternatives and their probable consequences
Identify the alternatives and their short- and long-term, positive and negative consequences.
1. Pam keeps slack and keeps silent
Pam retains position and earns bonus.
2. Pam discloses slack to her superiors
Supervisors tell her to keep slack.
Pam loses right to have slack?
Pam gets sanctioned for duplicity?
3. Pam discloses slack to university
Pam at risk of losing job and bonus.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
419
Compare the alternatives with the ethical principles and choose the best
alternative
Students should balance the consequences against their primary principles or values and select
the alternative that best fits. Take a vote. Insist that everyone make a choice. Examine the
rationale for different positions.
Pedagogical Suggestions
The case discussion can be done with the entire class or with small groups. If the entire class
discusses the case, elicit the four-step method responses shown above. At the last step, have the
class vote regarding the appropriate conclusion. Then elicit reasons as to why individual
students voted the way they did. Differences in students conclusions may be due to differences
Another Issue
Some instructors find it useful to discuss another ethical issue described in the case. That is,
should the researcher disclose what he knows about Pams actions to the university even though