Pinturas Windsor A Failed Attempt to Save a Company John Ledgerwood, MSA, CPA, CMA, CFM, CGMA Tamilla Curtis, DBA Embry-Riddle Aeronautical University Daytona Beach, Florida

Agenda Background Problems The Decision An Ethical Dilemma Conclusion Questions 1

BACKGROUND 2

Pinturas Windsor Company established in Ecuador on March 24, 1995 A subsidiary of Windsor Group, based in Miami, Florida Owned several manufacturing and chemical companies Presence in Chile, Peru, and Colombia Specialized in aerosol paints, shampoo, cologne, and talcum products /thirteenfifty / can-of-spray-paint.jpg BackgroundProblemsThe DecisionEthical DilemmaConclusion

Francisco Cevallos First General Manager 10 years of management experience in manufacturing Hired to set up the business 4 images/275788/Article/images/ / large.jpg BackgroundProblemsThe DecisionEthical DilemmaConclusion

Initial Investment 1.Old factory in Quito 2.Hired 30 employees 3.Purchased new machinery and equipment (about $4.0 million) 4.Set-up costs that included a $5 million insurance policy Total: approx. $6.0 million BackgroundProblemsThe DecisionEthical DilemmaConclusion

PROBLEMS 6

Successful Years Great success from 1995 to the end of By end of 1997, had 5 stores in Quito, and were suppliers to customers in other big cities throughout Ecuador Cevallos received congratulatory remarks from Board of Directors BackgroundProblemsThe DecisionEthical DilemmaConclusion

Successful Years (2) Ecuador’s government expecting to invest heavily in construction Cevallos decided that in 1998, production should be doubled from 5 million units/year to 10 million units/year 8 BackgroundProblemsThe DecisionEthical DilemmaConclusion

Competition Moves In Cevallos did not consider effect that competition would have…… Two weeks after accelerating production, Pinturas Condor (a major competitor) announced the start of operations in Quito Cevallos realized they were in trouble BackgroundProblemsThe DecisionEthical DilemmaConclusion

Pressure from the U.S. Windsor Group decided to send Mary Petravsky, a senior level accountant to try and remedy the situation CMA - Certified Management Accountant Member of IMA (Institute of Management Accountants) 10 BackgroundProblemsThe DecisionEthical DilemmaConclusion

THE DECISION 11

In Trouble Pinturas Condor (the competition) signed contract with government to be the sole provider in construction projects Cevallos remembered he had purchased an insurance policy… 12 By December 1998, Pinturas Windsor sales were down and inventory was huge…… BackgroundProblemsThe DecisionEthical DilemmaConclusion

The Accident On March 25, 1999 (3 months after Mary arrived), Mary picked up the newspaper to find that a fire at 3:00 a.m. had burned down half of the factory She was worried about how to communicate news to Windsor Group Cevallos claimed it was an electrical malfunction, however firefighters did not jump to a conclusion aerosol-factory-fire_1_large.jpg BackgroundProblemsThe DecisionEthical DilemmaConclusion

The Accident (2) A few months later, investigation concluded that fire was caused by an electrical malfunction Cevallos and Mary met to discuss what to do with the $5 million, which the insurance company agreed to pay Cevallos revealed to Mary that he had been the one who caused the fire 14 BackgroundProblemsThe DecisionEthical DilemmaConclusion

AN ETHICAL DILEMMA 15

What Should Mary Do? Cevallos had behaved unethically and illegally…. Mary knew she could lose her job if she didn’t save Pinturas Windsor The $5 million was enough to save the company from bankruptcy 16 BackgroundProblemsThe DecisionEthical DilemmaConclusion

Reference The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practice Principals, Standards and Guidelines Four Standards Competence Confidentiality Integrity Credibility IMA Statement of Ethical Professional Practice 17

IMA Guidelines for Resolution of an Ethical Conflict Follow employer’s established policies. If this does not work, consider the following: Discuss the conflict with immediate supervisor or next highest uninvolved managerial level. If immediate supervisor is the CEO, consider the board of directors or the audit committee. Contact with levels above the immediate supervisor should only be initiated with the supervisor’s knowledge, assuming the supervisor is not involved. Follow employer’s established policies. If this does not work, consider the following: Discuss the conflict with immediate supervisor or next highest uninvolved managerial level. If immediate supervisor is the CEO, consider the board of directors or the audit committee. Contact with levels above the immediate supervisor should only be initiated with the supervisor’s knowledge, assuming the supervisor is not involved.

IMA Guidelines for Resolution of an Ethical Conflict Except where legally prescribed, maintain confidentiality. Clarify issues in a confidential discussion with an objective advisor. Consult an attorney as to legal obligations. Except where legally prescribed, maintain confidentiality. Clarify issues in a confidential discussion with an objective advisor. Consult an attorney as to legal obligations.

What Mary Did Followed the IMA standards Revealed truth to Board of Directors of Windsor Group, as well as authorities in Ecuador 20 BackgroundProblemsThe DecisionEthical DilemmaConclusion

CONCLUSION 21

Conclusion Ethical situations occur in business. Follow your professions code of ethical conduct. Mary chose professional ethical conduct over keeping her job Things turned out better than she thought they would…. Returning to the US and later being promoted… BackgroundProblemsThe DecisionEthical DilemmaConclusion

QUESTIONS 23