Note: Reference to the terms Code and Standards in this section refers to the CFA Institute Code ofEthicsand/ ortheCFAInstituteStandards ofProfessional Conduct.

Q1. As the Chief Financial Officer (CFO) of a major multi-national automotive manufacturer, you arerequiredto makesignificantdecisionsthatwillimpactonthefuture viabilityofthecompanyandits shareholders.The company's best-selling and most well-known product is a Sports UtilityVehicle(SUV)thatoperatesonpetrol.

In the last few months there have been a few accidents reported from drivers whereby the fueltank has exploded, causing significant damage to the vehicle and horrific injuries to passengers.Atthisstagehowever,no-onehasdiedandthegeneralpublicisnotwidelyawareofthisissue.

Forthefirmtorepositionthe vehiclesfueltankwouldbeacostlyexercise,requiringproductionto cease for at least 6 months and also changing the distinctive look of the vehicle which is oneofits currentselling points.

It is noted that the costs of meeting the insurance payouts to injury victims for this design fault iscurrentlyless than20%ofthecurrentprofits generatedonSUVsales.

Required:

• Assuming that you are seeking to apply appropriate principles of stakeholder theory inyour position as CFO, outline what processes you would consider in your decision-makingprocess regarding this issue.
• As CFO, how would your response be different, if at all, if you applied appropriateprinciples ofshareholdertheorytothis decision-makingprocess?

Q2

The application of Stakeholder Theory requires the assessment of various issues in the ethicaldecision-makingprocess.

Required:

Provideapracticalexampleofthecommentregardingstakeholderimpactsconsistentwith

thesnifftestbeing;'Ifit smells, then...'.

Hint:This issue is referring to a situation where the information presented to stakeholdersis likely to have been manipulated in order to meet a particular outcome - such ascomplying with an ethical requirement - but upon closer examination, it is evident tostakeholdersthatitstill has anumberofshortcomings.

Q2.

As the recently appointed ethical compliance officer for your firm, a national fast-foodconvenience franchise, you note that the stakeholder success pyramid model requires thereconciliation of the firms strategic objectives with that of stakeholder support.Providetwopractical exampleofthis reconciliationprocessappliedforyourfirm.

Hint:What are examples of strategic decisions having an ethical perspective, that could bemade by the firm that would likely provide a positive benefit / perception to itsstakeholders, andlikely alsotocontributetothebusinesssuccess ofthefirm?