Recommended Action Memorandum

Recommended Action Memorandum

To: Rita

From: Mattew

Date: October 30, 2023

Subject: Recommended Action

Recommended Decision

Rita should not inform the investor of the true state of affairs to protect the company’s credibility and interests.

Summary of Major Reasons for Recommended Decision

Rita has a responsibility to protect the company’s interests and credibility. Therefore, her decision should focus on benefiting the company. The company’s interests and credibility could be protected in the current case by withholding information that could paint a bad image. For instance, it would be best not to inform the investor about the performance of the debentures because other investors would lose trust in the company and view its financial products with suspicion, leading to loss of customers and reduced profitability. Therefore, it would be best to sacrifice one client to save the company’s future business. The company could defend itself if the investor found out the state of affairs by arguing that it had no control over the credibility of its bonds’ credit rating. Rita must also protect the company’s interests to honor her fiduciary duty of loyalty, which requires her to refrain from taking opportunities for personal gain and avoid having personal interests in transactions between a third party and the company.

Argument for the Recommended Decision

Employee behavior and decision-making are influenced by fiduciary obligations that create a foundation for the relationship between the employer and employees. Fiduciary obligations include the ethical and legal obligation to prioritize the company’s best interests and the interests of all stakeholders. According to Cavico et al. (2018), employees must respect their fiduciary relationship with their employers by honoring the duty of loyalty and confidentiality. Therefore, Rita should place the company’s interests first and sell ABC Company’s bonds without informing the investor about the company’s financial performance because disclosing the information would cause the company to lose out on the income it would generate from selling the bonds. Disclosing the information would also negatively impact the company’s reputation and increase the risk of losing customers and future business opportunities, thus limiting its sustainability.

Rita is also expected to honor the duty of loyalty by avoiding personal interest in transactions between the investor and ABC Company. According to Byars & Stanberry (2018), the duty of loyalty requires employees to act in good faith and advance the employer’s interests. Accordingly, disclosing information about ABC Company’s financial performance to the investor would be considered putting Rita’s personal interests over the company’s interests. For instance, the company would conclude that Rita informed the investor about the company’s financial status because they had often engaged in discussions about the relative merits of different debt instruments, and the discussions could have influenced the investor’s decision to buy ABC Company’s bonds. Therefore, Rita would be interested in maintaining a good relationship with the investor, leading to a conflict of interest, which could limit her ability to protect the company’s interests.

Rita is also responsible for using her knowledge and expertise to benefit the company and honor her duty of loyalty. ABC Company employees sign an agreement agreeing to work in the company’s best interests (Gentile, 2016). Therefore, Rita must ensure that her decisions do not violate this agreement by convincing the investor to purchase the company’s bonds and refraining from sharing any information that could make the investor change her decision. Rita must also ensure she does not jeopardize the company’s chances of getting more investors. Therefore, she should not inform the investor about the company’s financial performance but should allow the investor to make the decision independently by giving her enough time to do her due diligence so that the investor does not blame the company for misleading her when she finds out about the company’s poor financial performance.

Conclusion

The main weakness of the recommended action is that it creates a risk of backlash from the investor if she finds out that Rita knew about the company’s poor financial performance and failed to inform her to help the company earn income. However, this weakness is not fatal because Rita could justify her actions by informing the investor that she should have analyzed ABC Company’s balance sheet before purchasing its bonds because the balance sheets are available to all investors and can be used to assess a company’s financial performance.

References

Byars, S. (2018). Loyalty to the Company. In K. Stanberry (Ed.), Business Ethics.OpenStax.

Cavico, F. J., Mujtaba, B. G., & Muffler, S. (2028). The duty of loyalty in the employment relationship: Legal analysis and recommendations for employers and workers. Journal of Legal, Ethical and Regulatory Issues, 21(3). https://www.abacademies.org/articles/the-duty-of-loyalty-in-the-employment-relationship-legal-analysis-and-recommendations-for-employers-and-workers-1544-0044-21-3-136.pdf

Gentile, M. (2016). To Say or Not To Say. Giving Voice to Values.

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Persuasion through Argument: Decisions
How can you persuasively structure thinking about a decision?
Discussion of “To Say or Not to Say”

To Say or Not to Say Assignment
Answer the following question:
What should Rita decide? Why?
In a memo, recommend the decision you think Rita should make and write an argument to support it. Use relevant criteria and evidence to build the argument for your recommended option. (See below for the grading criteria.)
Word limit: 700 words.

Evaluation Criteria for “To Say or Not to Say” Assignment
Do you clearly state Rita’s decision options and the decision she should make?
Do you state relevant criteria clearly and use them to argue your recommended decision?
Do you provide persuasive evidence on each criterion that supports your decision?
Is the organization of the memo easy for a reader to follow?

Reading:
“To Say or Not to Say” case
Handout: Example of a Decision Argument
Handout: Decision Argument Template