Ethics Case: Juniper Packaging Solutions (14 MARKS)

Juniper Packaging Solutions provides custom packaging products to companies all over the United States.

With five production facilities, the company produces cardboard boxes, plastic and steel drums,

aluminum bottles, and absorbent pouches and bags. Companies using their products ship

everything from chemicals in 55-gallon containers to biological specimens in tamper-evident pouches.

Spencer Williams is the vice president in charge of the Maryland production facility, and in the last year

hes become concerned about plant performance. The plant needs a long lead time for orders, and defect rates

have increasedboth of which hurt customer satisfaction. In Spencers opinion, the problems are the result

of outmoded production equipment. Recently Spencers team of production managers identified three

pieces of state-of-the-art equipment that they believe will turn the plant around and make it the most efficient

of the companys five plants. Unfortunately, the price tag of the equipment is $2,000,000 and the company

has a freeze on capital expenditures greater than $500,000. The freeze was mandated by

the company chief executive officer (CEO) after third-quarter earnings dropped by 10 percent

due to a weakening of the Asian economy and reduced shipments to Japan and Korea by several of Junipers

major customers.

Spencer and the controller of the Maryland plant both believe that the new equipment is absolutely necessary

for the company to maintain customer satisfaction and market share. Together theyve devised a plan to

circumvent the capital expenditure freeze. Each piece of equipment is actually a system with multiple

components (e.g., conveyor belt, box molding unit, box taping unit, etc.). Spencer will ask the equipment

manufacturers to break each system into components and submit multiple bills (e.g., a separate bill for the

conveyor, a separate bill for the box molding unit, etc.) each less than $500,000. The plant controller will then

approve the expenditures as being consistent with the guidelines that only prohibit expenditures on equipment

costing more than $500,000.

Required

1. What is the situation facing Spencer and the controller? (5 MARKS)