Christopher Manufacturing is a privately owned business located in the southwestern United States. The company was founded in 1978 as a manufacturer of precision scientific equipment. The company has a strong customer base that is comprised almost entirely of research laboratories and universities. Christopher's sales have been solid and the company has experienced significant growth in the last decade. Gordon Jankowski, the company's founder, serves as the company's president and chief scientist. Like others in the industry, Gordon is primarily a scientist. His business experience is solely limited to operating Christopher. Given the company's recent success, Gordon would like to take his company public, but he knows that the company will need to undergo some corporate changes before that can happen.
For example, the company's accounting system has recently undergone a number of changes and is now functioning as a fully operational enterprise resource planning (ERP) system. Most employees interface with the system via a secure local network, but some employees do have access to the system through the Internet. Another significant issue relates to the absence of an ethics program. Gordon has never thought it necessary to implement such a program and has not even written a code of ethics for employees.
A. Explain the relevance of internal control to Christopher’s plan to go public. Is internal control more important to a public company than to a private company?
B. Given the recent change to an ERP system, what additional issues must the company consider in developing internal controls?
C. Based on the very brief description above, what is your impression of Christopher’s likely approach to corporate governance? Explain your impression to the extent possible.
D. Why should the company establish a formal ethics program? What elements do you think would be most beneficial to a company such as Christopher?