When You’re Faced with an Unethical Situation

By Daniel R. Arcuri, CPA, L'Oreal USA – March 21, 2016
When You’re Faced with an Unethical Situation

You hope it never happens to you; but, for some, it may be a question of “when” and not “if.” If you are confronted with an unethical workplace situation, it is invaluable to know just how to react. 

First, analyze the issue. What exactly is taking place? What do you think makes it unethical? What are the potential consequences to all concerned? What is the fallout from not doing the right thing? 

You can gain some perspective by asking yourself how you would feel if this became public information—splattered across the newspapers and TV news. Is this something you would be proud of or ashamed of telling your mother or your kids of your involvement? 

While an ethical standard may be somewhat subjective, generally, if it smells bad it is bad. Just because something is technically legal, or you may not get caught, does not mean it is ethical. And what if the actions are illegal? You then have much more to lose than your personal and professional reputation. 

There are many examples where employees are accused of misstating expenses. You may first think about understating expenses on the income statement in order to overstate income, but this is not always the case. However, these are usually the ones you will see in the news, because the amounts are often material. Misstating expenses is also an issue when it comes to expense reimbursements for travel and entertainment (T&E). Employees may try to submit personal expenses for reimbursement or try to receive reimbursement for a higher amount than what they actually spent. This is also considered fraud. There is opportunity, intent and motive to misstate the amounts actually spent. This is more common in cases where receipts are not required for T&E reimbursement if the amount spent is below a certain threshold. Although the amount may be considered immaterial, this is still considered unethical. 

So, if you have determined that a situation is unethical, report it immediately to your supervisor. If you believe that your supervisor is also involved, then go to the next level above him or her. Perhaps your manager is already aware of the issue and has already gone through the proper channels. The issue may be larger than you think. But if you see no resolution or action being taken, one option is to report the issue to an internal ethics hotline, which many companies have. Generally, callers remain anonymous and the appropriate internal committee must take action to resolve the issue. Smaller companies may not have an ethics hotline; however, you should still report the issue to your supervisor or management team. 

While you may feel there’s a sense of urgency, the appropriate person, team or committee needs to gather the facts and investigate the issue. Regardless of the reporting method, you need to let the process play out properly. Change does not take place immediately, and coming to a premature or incorrect determination is not a solution. 

It’s not uncommon for someone to feel uneasy about reporting what is happening. But better to speak up than do nothing. It often takes a certain amount of courage to do the right thing. Regardless if others are or are not aware of the issue, someone should take the initiative to start the resolution process. This is the mark of a leader. If you feel that the management team is involved in the situation, you may decide resignation is the least-worse course of action. Thankfully, this “nuclear” option is the exception and not the norm. 

It can be quite easy for an unresolved unethical situation to spiral out of control. Employees and/or customers may be compromised, and the ensuing media coverage could put the company out of business. The result could be significant job loss. Enron resulted in 4,500 lost jobs, while WorldCom led to 17,000 lost jobs. Therein lies the cost of doing nothing.

Daniel R. Arcuri

Daniel R. Arcuri

Daniel Arcuri, CPA, MBA, is an accounting manager at L’Oreal USA. He is a member of the New Jersey Society of CPAs and serves on the Content Advisory Board.

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This article appeared in the March/April 2016 issue of New Jersey CPA magazine. Read the full issue.