Response 1:

I think the choice to commit income smoothing is a rationalization. Because if one allowed oneself to ask, “Does this present an accurate picture of our financial position to investors?” They would have no choice but to answer negatively. So, when a CEO or CFO decides to smooth his company’s income, he does not ask this but instead tries to figure how to circumvent existing rules and regulations so that he can boost earnings. It all comes down to the love of money that is so addictive and yet never satisfies. When money is one’s ultimate goal, he must find continual and increasing ways to get it. This love of money brings people and businesses to ruin, or significant financial loss, time and time again.

I think the same question still applies to the activities of waiting to sell an asset or performing a service ahead of schedule. One should ask, “Is it going to mislead investors?” The options above would be even easier to rationalize, but if the answer is yes, then it is also unethical. I think the thing to consider here is the unusualness of the event (doing it differently than you do the rest of the year). If one’s intent is to make his finances look different than they actually do (by doing either of the things listed above), or even if it this result is achieved unintentionally, then yes, I think it is unethical.

I say this because of the underlying goal of such a decision; I do not see that it can be anything other than greed. God has instructed us to make money to provide for ourselves and our families (1 Timothy 5:8, New American Standard), but He does not want us to amass money for money’s sake. Such a pursuit is a distraction (Matthew 6:21) from the only thing that will bring real joy (Proverbs 10:28) in this life, and in the life to come – a relationship with Him (John 17:3, 8:31-32).

Response 2:

Although the reasoning behind the fraud produced by Xerox’s managers appeared as though they intended to better the company itself, the fact that they purposely misled the shareholders contradicts the entire claim. I think that the company and its investors go hand in hand. Without the company, you have no stock, and without the investor, you have no stockholder. Therefore, making decisions to change one without including the other is manipulative and deceptive. For these reasons, I will eliminate virtue ethics, justice, deontology, utilitarianism, relativism, and postmodernism ethical methods.

I believe that the spiritual act that Xerox managers and KPMG (auditing firm) committed during this period was merely greed. This company was not performing poorly and was profitable. However, they wanted more fame and success prematurely.

I think the appropriate ethical system used by Xerox’s managers was enlightened egoism, based off of their claim to boost Xerox’s reputation. However, I believe that this claim was less important than a potential hidden agenda. I think that the managers were looking after their self-interest. For instance, one of the practices the managers used included the cookie jar reserves tactic. This method presents investors with the impression that the company is performing consistently every period and hitting target goals. Thus this illusion is not real. With this method, managers create reserves when the company is doing good and use those reserves to when there exist volatile financial periods. Thus, management was more concerned with their performance appearance than displaying the actual performance of the company.

Solution preview for the order on rationalization



234 words