Jon, Rick, and Beth had been friends for a long time and their relationship had been very

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Jon, Rick, and Beth had been friends for a long time and their relationship had been very profitable.
They met while each was working toward an MBA at the esteemed Jennings School of Business -Middle Tennessee State University. Together, the three developed a business plan for a company that would acquire businesses, and after graduation, they "gave it a go." Their company, Raider Inc., had purchased several distressed companies and had either developed them to become "cash cows" or had sold them for great profit. Beth's strength was marketing, Rick was a finance specialist, and Jon was the management guru who developed strategy and kept the group on task.

Another company, Pacific Life Books (PLB), appeared on their radar as a possible acquisition candidate.
Jon, Rick, and Beth visited the company and had gathered information. This was not their "first rodeo."
The trio worked methodically, not wasting time by stepping on the turf of another. It was now time to compare notes and determine if proceeding to acquire the company was a good move.
Jon called a meeting for the three to consider possibilities. As was their norm, the three met in Raider Inc.'s conference room to deliberate. These intense sessions took most of a day and sometimes spilled over into another. In front of them lay all the related information: financial statements, marketing reports, lease agreements, etc.

Pacific Life Books was a publishing company which specialized in novels related to life on the American West Coast under the theme "life near the ocean". Beth reported that the company's brand was solid and could form the basis of a strong marketing effort. Rick identified the cause of the company's distress. In an effort to lower unit costs, PLB typically procured large quantities of books from its supplier; the result was a large growing inventory that continually drained PLB's cash form its coffers.
Jon provided insight into the organizational chart and management culture at PLB; vast improvement opportunities were available on that front. However, if a sale of PLB wasn't consummated soon, PLB's existence was threatened.

After much deliberation, a potential strategy was developed. Raider Inc. would purchase equity in PLB, converting it to a privately-owned C-Corp, and the previous owners would continue as minority owners.
They would reduce inventory through the utilization of new "digital printing techniques" designed to produce smaller quantities of books at lower unit costs. Jon would intervene as a "consultant", working a couple of days per week to coach the remaining management team on how to organize, lead, and control the business. The prospects were good that with the Raider Inc. team's strategy that PLB would soon generate cash.

Then Rick asked, "What about Johnson Printing?" Johnson Printing had been a loyal and trusted PLB vendor, continuing to provide novels during lean and prosperous times as a true strategic partner.
Johnson Printing had inventoried books and allowed PLB extended payment terms. Without Johnson Printing's support, PLB might not have survived the last few years, much less enjoyed growth in the book segment of its business. PLB owed Johnson Printing $250,000.

Jon quickly replied, "Of course, we'll default on that unsecured debt." Jon's answer didn't surprise Rick.
Rick countered, "I am not sure I am completely comfortable with that. Johnson Printing is a small company, a blow that big could put them out of business." Surprised that Rick would question the strategy, Jon stated, "We'll allow them to do business with us in the future. As for the$250,000, if they choose to pursue it legally we'll just bankrupt PLB and open the business under another name. As for you, me, and Beth, we'll be protected by the C-Corp status of both PLB and Raider Inc."
(Owners of C-Corps are typically not held liable for legal actions against their company.)
Rick paused and said, "I know we've successfully executed this type of maneuver, walking away from a company's previous debt, several times in the past. I recognize that we've never suffered legal recourse from vendors we've defaulted on. But several loyal vendors have suffered much because of our actions;
we drove a few out of business. We've made a lot of money buying and selling companies...a lot of money. In the first few years, the only way we could do a deal like this was to default on the accounts payable. But now, is it necessary that we put another good vendor in distress to get this deal done?"
This case is solely for the use of MTSU's Principles of Management Classes and cannot be duplicated in any way.

Questions for Ethics Assignment:
1. What ethical decision do Raider Inc's owners face? What makes this an ethical issue? Effectively apply and explain related concepts from our text.

2. Name several stakeholder groups that are impacted by the ethical issue in the case? Discuss how the ethical issue impacts each stakeholder group.

3. Discuss at least three solutions for Rick might propose for Raider Inc. to solve the ethical issue. Discuss how those different solutions may impact the organizations.

4. Of the possible solutions you present for question three, which should Rick recommend to resolve the ethical issue. What steps are necessary to execute that solution? Discuss the benefits and risks of this course of action.

5. If the leaders of Raider Inc. do not want their employees to behave unethically, what are several (at least three) things they can do to improve the ethical climate? Identify keys to executing each approach.
(This is separate from the ethical issue presented above. How can they improve the general ethical climate of Raider Inc.?)