COURSE

EPPA4713 INTEGRATED CASE STUDY

SEMESTER 2 2022/2023

SET 3

TOPIC

DILEMMA AT GROUND ZERO: STRATEGIC PERFORMANCE MEASUREMENT,

INTERNAL CONTROLS, AND PROFESSIONAL ETHICS

LECTURER

PROF. DR. MOHAMAT SABRI BIN HASSAN

GROUP MEMBERS - GROUP NUMMA

NAME MATRIX NUMBER

1. NUR FASHAHAH SHAZNIN BINTI MAT OTHMAN A173528

2. UMY ASIAH BINTI YAHYA A173785

3. MUHAMMAD IRFAN BIN SAIFULAZMI A174136

4. MUHAMMAD FURQAN ANWAR BIN MOHD RAFIDI A174178

5. AUSATH WAFI RAIS AL A198049

 TABLE OF CONTENTS

INTRODUCTION...................................................................................................................... 2-3
ISSUE STATEMENT......................................................................................................................
A) Personal Interest....................................................................................................................4
B) Investment Challenges.......................................................................................................5-6
C) Un Standardizing Company Policy.......................................................................................7
D) Unsystematic Incentive Structure......................................................................................8-9
E) Violation Professional Ethics.............................................................................................. 10
F) Lack of Internal System.......................................................................................................11
DISCUSSION............................................................................................................................... 12
CONCLUSION............................................................................................................................ 22

1
INTRODUCTION

This report examines the complex situation faced by Isabella McGill at Ground Zero
Coffee, Inc., a rapidly growing coffee company with a solid commitment to fair trade and
philanthropy. Isabella, recently hired as an accountant at the Knoxville district, discovers several
ethical and financial challenges within the organization that require careful consideration and
resolution.
Ground Zero Coffee is renowned for its outsourced coffee service, providing businesses
with high-quality coffee, equipment, and maintenance. The company has seen significant growth
in this business line and is now exploring expansion into mail-order coffee delivery. The success
of Ground Zero can be attributed to its visionary leader, Will D. Brewster, whose passion for
coffee and dedication to supporting coffee-growing communities has driven the company's
philanthropic mission.
Isabella's professional journey begins with a strong connection to Brewster, whom she
met during a service trip to Guatemala. Impressed by Ground Zero's commitment to fair trade
and philanthropy, Isabella eagerly accepts a full-time position in the Knoxville district, hoping to
contribute her accounting skills and make a difference in the lives of coffee growers.
However, upon delving into the district's financial data, Isabella uncovers several
concerning developments. The Knoxville district has barely met its return on investment (ROI)
targets in the last two quarters, and significant changes in staffing, vendor contracts, and service
providers have occurred. Isabella's investigation leads her to discover that Brewster, facing
personal financial difficulties due to a family tragedy, has been performing vehicle maintenance
and facility cleaning outside of working hours along with his children.
Brewster reveals that his actions were driven by desperation to save his family's home,
compounded by the challenges faced by the new mail-order business initiative. He explains that
he has been working on developing a snack bar with Guatemalan farmers, using Ground Zero's
facilities and resources. This venture, though promising, relies heavily on Brewster's personal
connections and expertise, and termination could jeopardize both the Knoxville district and the
philanthropic endeavours in Central America.

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 Isabella is torn between her loyalty to Brewster and the ethical responsibility to report the
irregularities to her superiors. The potential consequences of her actions weigh heavily on her as
she contemplates the impact on the company, its customers, and the coffee-growing communities
that rely on Ground Zero's support.
This report will analyze the ethical dilemmas and financial challenges presented in the
Ground Zero Coffee case, examining the potential courses of action and their implications. It is
crucial to navigate this complex situation with integrity, considering the interests of all
stakeholders involved and striving to uphold the values that Ground Zero stands for.

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ISSUE STATEMENT

A) Personal Interest
The issue at hand revolves around Personal interest as an inherent risk in the incentive
structure in the Knoxville Ground Zero Coffee district. This issue arises due to the nature of
the incentive system, which primarily focuses on financial performance metrics, such as
return on investment (ROI), without adequate checks and balances to prevent the potential
misuse of incentives for personal gain.
Personal interest risk arises when individuals are driven to maximize their incentives
without considering the broader impact on stakeholders, including the company, employees,
suppliers and local communities. When personal gain becomes the primary motivator, ethical
decision-making and the pursuit of sustainable practices can suffer. This can damage the
company's reputation, sustainability efforts, and overall success.
Addressing the issue of Personal interest in incentive structures requires a thorough
evaluation of the existing system, identification of potential loopholes or biases that allow
personal gain to override organizational values and implementation of appropriate
safeguards. It is critical to design a revised incentive structure that not only incentivizes
financial performance but also aligns with company values, encourages long-term
sustainability, fosters collaboration, and promotes ethical decision-making.
By recognizing and addressing issues of Personal-interest in incentive structures,
Ground Zero Coffee can improve corporate culture, reduce potential risks, and create a
framework that aligns district managers' motivations with the company's long-term success
and broader social impact.

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B) Investment Challenges

The investment challenges in the article are related to the way that Ground Zero
Coffee Inc. Measured the performance of its divisions. The company used the ROI index as a
primary indicator for success, but this metric was not appropriate for the Knoxville division,
which was focused on developing new services and coffees. The ROI index is calculated by
dividing operating profit by investment. This means that a division with a high ROI is one
that is generating a lot of profit relative to its investment. However, the Knoxville division
was not focused on generating profit in the short term. Instead, it was focused on developing
new products and services that would have a long-term impact on the company. As a result,
the ROI index was not a good measure of the Knoxville division's performance. The division
was actually making progress, but it was not showing up in the ROI index. This led to
Brewster making some questionable decisions that harmed the company in the long run. For
example, Brewster decided to invest in a new coffee roasting machine that was very
expensive. The machine was supposed to help the division improve its efficiency, but it
actually ended up costing the company money. This was because the machine was not
compatible with the other equipment in the division, and it required a lot of maintenance.

Brewster also made some decisions that were not in the best interests of the company.
For example, he decided to sell a large amount of coffee beans at a loss in order to meet his
quarterly ROI targets. This decision damaged the company's reputation and made it more
difficult to sell coffee beans in the future. The investment challenges in the article highlight
the importance of choosing the right performance measurement metrics. Companies need to
make sure that their metrics are aligned with their strategic goals. If they are not, they may
make decisions that harm the company in the long run. In addition, companies need to have
strong internal controls in place to prevent unauthorized decisions from being made. This is
especially important for companies that have decentralized organizations with a high degree
of autonomy. By having strong internal controls, companies can help to protect themselves
from the kind of investment challenges that were experienced by Ground Zero Coffee Inc.

The solution to the investment challenges in the article is to use performance

measurement metrics that are aligned with the company's strategic goals. For the Knoxville
division, this would mean using metrics that take into account the costs of developing new

5
products or services. This would allow the division to make decisions that are in the best
interests of the company in the long term, even if these decisions do not boost the ROI index
in the short term. In addition to using appropriate performance measurement metrics,
companies also need to implement strong internal controls. Internal controls are designed to
prevent unauthorized decisions from being made. If a company has weak internal controls, it
is more likely that employees will make decisions that are not in the best interests of the
company.

Here are some specific solutions that Ground Zero could implement to address the
investment challenges in the article is change the performance measurement metric for the
Knoxville division to one that takes into account the costs of developing new products or
services. Next, it implements stronger internal controls to prevent unauthorized decisions
from being made and provide more training to district managers on strategic performance
measurement and internal controls. By implementing these solutions, Ground Zero could
improve its investment decision-making process and reduce the risk of making decisions that
are not in the best interests of the company.

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C) Un Standardizing Company Policy
For the zero-ground dilemma, corporate policy non-standardization can have many
negative effects. Including the absence of standardized company policies can lead to various
negative consequences, including an elevated risk of fraudulent and unethical behavior by
employees. In the absence of clear guidelines, employees may take advantage of the situation
and engage in deceitful activities, such as submitting fraudulent expense reports.
Additionally, lack of standardization can lead to employee confusion and frustration,
ultimately harming productivity. Moreover, companies without standardized policies may be
more susceptible to legal liability, as they may be held accountable for the actions of their
employees in the absence of clear guidelines.
To minimize these risks, companies need to establish and communicate clear and
consistent company policies. This will help prevent fraud and unethical conduct, enhance
employee comprehension and efficiency, and reduce legal exposure. The absence of a
standardized bonus system in Dilemma at Zero Ground allowed William to commit fraud by
fabricating invoices and vendors. If the company had implemented a standardized bonus
structure, it would have been harder for William to carry out such actions. It is recommended
that the company establishes a code of ethics to clearly define its expectations for ethical
conduct. This code should be effectively communicated to all employees and enforced
consistently in order to promote a culture that discourages unethical behavior.

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D) Unsystematic Incentive Structure
A lack of clarity and structure in an incentive system's approach to rewarding
employee performance creates ambiguity, unfairness, and a narrow concentration on specific
indicators. Employees may feel unclear about expectations and think they are being treated
favourably, but significant qualitative performance factors may go unnoticed. Long-term
goals could be overshadowed by short-term benefits, and flexibility and autonomy might be
constrained. These problems are addressed by a well-designed incentive structure, which
offers transparency, equity, thorough evaluation, and the flexibility required for development
and innovation.
Based on this case study, the unsystematic incentive system at Ground Zero is that
they lack structure and consistency. Although it is claimed that a percentage of district
managers' pay is "at risk" if development and profitability goals are not met, there is no
established, standardised incentive programme. This lack of consistency can make it unclear,
unjust, and difficult for managers to understand how their work will be recognised.
Other than that, Ground Zero is also one of the companies that overemphasis on ROI
targets. The return on investment (ROI) for a district manager's unit serves as their key
evaluation criterion. Managers may experience substantial pressure to put short-term
profitability ahead of other crucial factors with a focus on reaching an annual ROI of 24%.
This exclusive emphasis on financial measurements could stifle innovation, long-term
growth, and other crucial aspects like employee engagement and customer happiness.
Furthermore, the incentive system is unsystematically occurring at Ground Zero when
it shows in the case that they have limited kind of performance metrics. There is no
information in the case about supplementary performance indicators or key performance
indicators (KPIs) taken into account when rating district administrators. By focusing just on
ROI goals, the review process may ignore other vital performance facets that are essential to
the company's overall success. A more complete picture of the contributions of managers can
be obtained by using a wider range of performance measurements.
Additionally, Ground Zero's customary incentive scheme seems to be heavily weighted
towards quantitative financial indicators. There is no mention of including qualitative
elements like employee or customer input or innovative ideas in the appraisal process. By
ignoring these qualitative factors, the incentive system may be unable to fully recognise the

8
value provided by district managers and may also fail to recognise the significance of
employee and customer happiness.
Finally, what we can find in this case is that Ground Zero has limited flexibility and
autonomy. Despite being given freedom to run their districts, district managers' flexibility
and autonomy may be constrained by the assessment and incentive structure, which is mainly
centred on ROI targets. Managers can feel under pressure to put short-term financial rewards
first and rigidly follow rules, which might limit their capacity to look for new opportunities,
make strategic choices, and adjust to shifting market conditions. Increased autonomy and
flexibility in the incentive structure can promote innovation and long-term growth.
Consider the following suggestions to develop a more effective incentive structure that
is more evenly distributed, supports holistic performance evaluation, and is in line with
business objectives. To evaluate collaboration, creativity, and customer satisfaction,
performance criteria must be precisely defined and qualitative measures must be used. The
evaluation of the financial, customer, internal process, and staff development components
should be done using a balanced scorecard technique. Encourage continual feedback and
mentoring, cultivate a culture of fairness and transparency, and provide a range of incentives
beyond monetary compensation. To ensure the system's efficacy and alignment with
changing business needs, review and update it frequently. These solutions encourage the
development of a thorough and inspiring incentive programme that boosts staff productivity
and fosters business success.

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E) Violation Professional Ethics

There are several potential violations of professional ethics that can be identified.
The first key is conflict of interest. The case highlights a conflict of interest where the
same individual, Ron, is responsible for both the performance measurement system and
the operational control activities. This dual role can create a conflict between accurate
performance reporting and maintaining effective internal controls. It is generally
considered unethical for an individual to be responsible for both evaluating their own
performance and implementing controls to ensure accuracy.

The second key is lack of objectivity. The fact that Ron is responsible for both
designing the performance measurement system and implementing internal controls
poses a significant challenge to his objectivity. Objectivity is a crucial ethical principle
that professionals are expected to uphold, as it demands that they maintain a fair and
unbiased standpoint in their decision-making process. With Ron taking on both roles,
there are valid concerns regarding the objectivity and integrity of the performance
measurement system and internal controls.
Lastly, the company lacks transparency and accountability. According to the case,
Ron has reservations about disclosing performance measurement data to other
departments and external stakeholders, which leads to a lack of transparency and
accountability. It is crucial to highlight that professional ethics place immense
significance on transparently and accountably reporting performance information to
pertinent parties. In choosing to hold back this vital information, Ron is essentially
undermining and disregarding these ethical principles.

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F) Lack of Internal System
The company should think about putting some rules and systems in place to help keep
things organized and make sure everyone is doing their job correctly. A system of
independent audits means that someone who is not part of the company looks at the
company's financial records to make sure everything is correct and there is no cheating. A
system of segregation of duties means that different tasks are given to different people. This
helps to make sure that everyone has their own job and knows what they are responsible for.
By using these internal controls, the company can lower the chances of cheating or bad
behavior, keep its money safe, and be less likely to get in trouble with the law. A system of
checks and balances means that before something is done, it needs to be approved by more
than one person. This helps to make sure everything is done correctly and no mistakes are
made.

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DISCUSSION
1. a) Calculate ROI and RI for the Knoxville district.
Return on Investment (ROI) is the ratio of the profit to the cost of an investment. Usually,
ROI is used by businesses or individuals to evaluate the efficiency of risking their capital. On the
other hand, a high ROI will indicate that an investment may be worth the risk, while a low ROI
indicates that the capital could be used more efficiently in other ways. In this case, the ROI is
calculated for each unit using operating profit divided by the investment in the unit. Besides that,
Residual Income (RI) is a measurement of corporate performance that reflects the total income
generated after paying all relevant capital costs. Additionally, RI is the measurement of
tangential profits earned after subtracting all costs of capital related to generating that income.

2XX1 Q4 2XX2 Q1 2XX2 Q2

Operating Income 395 439 464

Total Revenues 2,500 2,600 2,650

Profit Margin (395/2,500) (439/2,600) (464/2,650)

(Operating Income/ Total = 15.80% = 16.88% = 17.50%
Revenues)

Total Revenues 2,500 2,600 2,650

Total Assets Committed 4,705 7,260 7,685

Asset Turnover (2,500/4,705) (2,600/7,260) (2,650/7,685)

(Total Revenues/Total = 0.5313 = 0.3581 = 0.3448
Assets Turnover)

ROI (15.80% x 0.5313) (16.88% x 0.3581) (17.50% x 0.3448)

(Profit Margin x Asset = 8.40% = 6.04% = 6.03%
Turnover)

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 2XX1 Q4 2XX2 Q1 2XX2 Q2

Operating Income 395 439 464

Total Assets 4,705 7,260 7,685

RI Charge (Total Assets (4,705 x 6%) (7,260 x 6%) (7,685 x 6%)

x 6%) = 282.3 = 435.6 = 461.1

RI 112.7 3.4 2.9

(Operating Income - RI
Charge)

b) What aspects of the incentive structure drove William’s behaviour?

The incentive system put in place by C. Ziegler, the man behind Ground Zero, has an
impact on Brewster's behaviour. With regard to the company's performance, particularly that of
district managers, C. Ziegler has contributed a strong entrepreneurial vision and an emphasis on
discipline. The necessity that district managers perform admirably in their duties and hit a
particular return on investment (ROI) objective of 6% each quarter is a crucial component of the
incentive structure. In keeping with this, managers are guaranteed bonuses if they meet or
surpass this goal, but no incentive is offered if the goal is not met. As a result, Brewster is
motivated to commit wrongdoing in an effort to lower operational expenses and boost operating
income, ultimately attempting to reach the ROI target and claim the promised bonuses.
Brewster decides to take matters into his own hands and start selling to Ground Zero
himself in an effort to reduce costs. He chooses to use his own resources and seek the aid of his
family members rather than hiring outside vendors for tasks like cleaning and maintaining coffee
machines. By doing so, Brewster can save costs and perhaps raise operating income for the
business. Brewster also works with Guatemalan farmers to create a snack bar in an effort to

13
increase his operating income. He uses Ground Zero's facilities for their development and only
offers these snacks to the company's divisions.
Brewster's objective for engaging in fraudulent behaviour, such as operating as a
self-vendor and earning extra money from the snack bar, is primarily his desire to meet the
organization's ROI objective and receive the promised bonus. Managers may employ unethical
tactics to accomplish the financial aim when the incentive structure only emphasises ROI
without taking into account other areas of performance evaluation or encouraging a holistic
approach. This emphasises the need for a more well-rounded and efficient incentive structure
that is in line with the objectives of the business, promotes moral behaviour, and assesses success
thoroughly beyond merely financial measurements.

c) Were these intentional features of the system?

It is likely that the use of ROI as the primary performance metric for the Knoxville
district was an intentional feature of the system. The CEO of Ground Zero, Cassandra Zeigler,
was focused on short-term profits. As a result, she may have intentionally designed the incentive
structure to incentivize district managers to make decisions that would boost the ROI of their
divisions, even if these decisions were not in the best interests of the company in the long term.

d) Would you recommend changes to the structure for Knoxville? Why?

Based on this case, all district managers are under their supervision. This Power leads to
the Leader or management not knowing when there are irregularities, fraud, or rule violations
within the company. Each district has full responsibility for asset investment and profit
acquisition. Therefore, the district manager has full control over asset investment. This complete
control over the management of the company's operations has allowed Brewster to do
inappropriate actions. Therefore, it is recommended to make changes to the incentive structure
for the Knoxville district.
With a primary focus on ROI targets, the current system inadvertently contributes to
ethical challenges and financial hardship. Instead of solely emphasizing financial performance,
the incentive structure should incorporate a more balanced approach that considers financial and
ethical goals. This could include metrics related to social impact, fair trade practices, and
sustainability goals, which align with Ground Zero Coffee's commitment to philanthropy and
supporting coffee-growing communities. By incorporating these additional metrics, incentive

14
structures can better align with company values and encourage sustainable growth while
reducing the likelihood of ethical and financial dilemmas.

15
2. Ground Zero’s bonus system for district managers is “all-or-nothing” with substantial
bonuses for meeting the quarterly ROI target and nothing if the manager misses the target.
a) How might this factor contribute to the behaviours involved?
A big incentive is only given to district managers under Ground Zero's all-or-nothing
compensation structure if the quarterly return on investment (ROI) target is achieved. No of how
close they are to hitting the target, managers do not receive a bonus if they miss it. Employees
may be inspired to work harder to achieve their objectives by this kind of incentive programme.
The likelihood of obtaining a bonus is slim if the ROI falls below the annual target of 24%, as
was the case in Ground Zero's Knoxville District. As a result of the district's struggles to reach
the anticipated ROI objective, Brewster may have trouble getting a bonus from Ground Zero.
Brewster's behaviour as a manager was significantly impacted by the bonus structure in
existence at Ground Zero, in part because of the personal challenges he was going through. A
horrific catastrophe that Brewster's family faced led to pricey medical care and other costs.
Ground Zero set up a fundraising for the Brewster family and offered medical insurance,
however the severity of the injuries exceeded the coverage limitations, leaving Brewster with a
large hospital cost. Their financial situation was further strained by the liability for the accident
brought on by another family, which exceeded their insurance limits and depleted their funds.
Due to these factors, Brewster was forced to rely significantly on Ground Zero's bonus
programme to help him manage his finances and provide for his family. Brewster had rising debt
and commitments, and the old bonus structure—which depended on hitting quarterly ROI
targets—proved insufficient to support them. Brewster felt pressured to manage the Knoxville
District improperly in order to meet the necessary ROI targets and collect his bonus as a result.
Brewster said that in an effort to save costs and improve the district's performance, he
personally performed vehicle maintenance and cleaning jobs and even got his kids involved.
Brewster faked two vendors in order to hide his actions, which allowed him to create a positive
image of cost control and achieve the ROI goals. Brewster was faced with a difficult choice:
either he met the ROI targets or ran the risk of his family losing their house as a result of the
financial strain they were experiencing.
The "all-or-nothing" aspect of the structure can unintentionally encourage unethical
behaviour among managers, such as Brewster, who have personal financial challenges, according
to our examination of Ground Zero's compensation scheme. We suggest Ground Zero look at

16
different bonus schemes to reduce these risks and make sure performance evaluation is more
ethical and equitable. There are two possible approaches: either establishing customer
satisfaction bonuses that compensate employees based on feedback and evaluations from
consumers, or introducing performance-based awards that are directly linked to individual or
team performance measures. These alternate arrangements would offer a more comprehensive
assessment of performance, lowering the risk of wrongdoing brought on by the need to meet
immediate ROI goals.

b) What are other possible alternative bonus structures?

Ground Zero may need to implement more effective bonus structures to mitigate any
potential repercussions within the company, particularly concerning instances of misconduct.
Two potential alternative bonus structures that Ground Zero could consider are the milestone
bonus and the annual bonus. The proposal for these bonus structures takes into account both the
company's profitability and the need to incentivize employees.
In addition to regular bonuses, a milestone bonus structure can be implemented in a
company to reward employees for achieving specific milestones or completing major projects.
This bonus can be given at any point during a project and the company can set the milestone and
timeliness in advance to work towards. Unlike other bonuses, a milestone bonus is earned
regardless of whether certain requirements are met and can be given even if the employee
exceeds the set target. For instance, if an employee sets a monthly goal of 100 deliveries and
earns an RM1,000 bonus upon achieving it, they can also receive the same bonus if they exceed
the target by delivering 120 orders. This type of bonus can encourage consistency and motivate
employees to focus on achieving their targets regularly, creating a culture of consistency.

c) How might alternative bonus structures affect district manager behaviour?

Regarding the predicament at Zero Ground, the present bonus system is binary in nature,
where district managers are rewarded only upon meeting their quarterly ROI objective. Such a
system may result in undue stress on managers to achieve their targets, which could potentially
cause them to engage in unethical conduct. For this case, Will is the district manager in
Knoxville who faced financial challenges in his personal life. Under the pressure of meeting his

17
quarterly ROI target, he felt compelled to make compromises that went against the ethical
standards of the company. As a result, his decisions negatively impacted the organization.

The alternative bonus structures will affect district manager behaviour. First, introducing
a bonus structure that aligns with long-term performance, which would motivate managers to
prioritize decisions that benefit the company's overall health in the long run, even if their
immediate impact on short-term results may be minimal. This would foster a culture of
investment, where managers might choose to invest in employee training, despite potential
temporary profit reductions. Implementing a bonus structure that encompasses a diverse range of
metrics, incentivizing managers to consider all the contributing factors behind the company's
prosperity, rather than solely focusing on a singular metric. This would promote a holistic
approach, where managers could be rewarded for expanding sales, enhancing customer
satisfaction, and minimizing costs simultaneously. Introducing a bonus structure centered around
team performance, fostering a collaborative environment among managers, and encouraging
them to work collectively towards shared objectives. For instance, a team of district managers
could receive rewards for successfully boosting sales within a specific region.

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3. a) Is the action that William took concerning the fake vendors and charging the company
for the work he performed fraud? Unethical?
The actions that William took concerning the fake vendors and charging the company for
the work he performed are fraud and unethical. From an audit point of view, these actions would
be considered fraudulent because they involved intentional misrepresentation of facts. William
created fake vendors and charged the company for work that was never performed. This is a clear
violation of the company's policies and procedures, and it could have serious financial
consequences for the company. From an ethical point of view, William's actions are also
unethical because they involved putting his own interests ahead of the interests of the company.
William was using the company's resources for his own personal benefit, and he was not acting
in the best interests of the company.
Specifically, William's actions violated his first professional ethical standard of integrity.
William's actions were dishonest and showed a lack of integrity. He knowingly created fake
vendors and charged the company for work that he did not perform. Secondly is objectivity,
William's actions were not objective. He was biased in favor of his own interests, and he did not
act in the best interests of the company. Lastly, confidentiality when William violated the
confidentiality of the company by creating fake vendors and charging the company for work that
he did not perform. William's actions could also be considered fraud. Fraud is defined as
intentional deception or misrepresentation that is made with the intent to deceive another person
or entity, and that results in some form of gain or benefit for the person or entity making the
misrepresentation. In this case, William's actions were intentional, and they resulted in a
financial benefit for him.
The actions that William took could also be considered embezzlement. Embezzlement is
the theft of money or property by someone who has been entrusted with it. In this case, William
was entrusted with the company's money and property, and he used it for his own personal
benefit. The actions that William took could have serious consequences for him. He could be
fired from his job, he could be sued by the company, and he could even be prosecuted for fraud.
It is important for companies to have strong internal controls in place to prevent fraud and other
unethical behavior. These controls should be designed to detect and prevent unauthorized
transactions, and they should be regularly reviewed and updated. Companies should also have a
code of ethics that outlines the company's expectations for ethical behavior. Employees should

19
be trained on the code of ethics, and they should be encouraged to report any suspected
violations. By taking these steps, companies can help to prevent fraud and other unethical
behavior.

b) Against company policy? Could he face criminal charges for his action?
William's actions violated company policy and he may face criminal charges as a
consequence. The company policy at Ground Zero probably forbids fraud and unethical conduct,
which William clearly violated. This could include actions such as creating fictitious vendors or
invoices, or billing the company for work that was not actually done. The things William did
could be seen as criminal, like fraud or embezzlement. Fraud involves deceiving or tricking
someone to gain an unfair advantage, while embezzlement is when someone fraudulently takes
someone else's entrusted property. William may be fined or imprisoned if he is accused of
committing a crime, but the severity of the punishment will be determined by the details of the
case and the laws of the location where the crime took place.
There are three policies that are relevant to William's situation. The first policy forbids
fraudulent and unethical behavior, including creating fake vendors or invoices and charging for
work not performed. The second policy outlines the rules for submitting expense reports and
requires proper documentation. William may have violated this policy by submitting expense
reports for work he did not do. The third policy prohibits any activities that could cause a conflict
of interest, like working with vendors with whom an employee has a personal relationship.
William may have violated this policy by working with a vendor he knew personally.

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4. A) What is Isabella’s professional responsibility concerning William and Ground Zero?
Isabella has a professional responsibility to uphold ethical standards and ensure that her
actions align with the values of Ground Zero Coffee. The current system at Ground Zero
inadvertently contributes to ethical challenges and financial hardship. Therefore, Isabella must
address these dilemmas and find solutions that promote ethical conduct while maintaining the
organization's financial viability.
As part of her role, Isabella is responsible for overseeing the financial management of
Ground Zero Coffee. This includes monitoring and striving to meet the organization's financial
goals. However, Isabella must also consider the ethical implications of financial decisions. She
should revise the incentive structure to incorporate metrics beyond solely financial performance
to align with the company's commitment to philanthropy and supporting coffee-growing
communities. This could involve incorporating metrics related to social impact, fair trade
practices, and sustainability goals.
Isabella is also accountable for fostering sustainable growth within Ground Zero. She
must develop strategies and initiatives that drive short-term success while ensuring the
organization's long-term viability. By promoting sustainable practices and minimizing the
likelihood of ethical and financial dilemmas, Isabella can lead Ground Zero Coffee towards a
more stable and ethically conscious future.
Furthermore, Isabella's professional responsibility extends to maintaining effective
communication and collaboration with stakeholders, including William and other organization
members. She should engage in open dialogue, keeping them informed about the revisions to the
incentive structure and emphasizing the importance of ethical considerations. By involving
others in decision-making and encouraging collaboration, Isabella can garner support and
cooperation in implementing changes that align with the company's values and objectives.

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b) What is an appropriate ethical response by Ground Zero leadership to the
circumstance?
The appropriate ethical response by Ground Zero leadership to the circumstance is to
terminate William's employment. William's actions were clearly unethical and have violated the
company's code of ethics. He has also committed fraud, which is a serious offense. Terminating
his employment is the only way to ensure that he does not continue to engage in unethical
behavior. Recalculate the profits of the Knoxville division. The profits of the Knoxville division
have been inflated by William's fraudulent activities. As a result, the company needs to
recalculate the profits of the division to reflect the true financial performance. Investigate the
incentive structure that led to William's behavior. The incentive structure that was in place at
Ground Zero may have contributed to William's unethical behavior. The company needs to
investigate the incentive structure to determine if it is creating an environment where employees
are incentivized to engage in unethical behavior. Implement stronger internal controls. The
company needs to implement stronger internal controls to prevent future instances of fraud and
misstatements. These controls should be designed to prevent employees from creating fake
vendors and charging the company for work that they did not perform.

c) Support your answer with sound ethical reasoning.

The ethical reasoning behind these actions is that terminating William's employment is
the only way to ensure that he does not continue to engage in unethical behavior. He has shown
that he is not trustworthy and that he is willing to violate the company's code of ethics. Secondly,
recalculating the profits of the Knoxville division is necessary to reflect the true financial
performance of the division. The company cannot continue to report inflated profits, as this
would mislead investors and other stakeholders. Next, investigating the incentive structure that
led to William's behavior is important to determine if the company needs to make changes to the
way it incentivizes employees. If the incentive structure is creating an environment where
employees are incentivized to engage in unethical behavior, then the company needs to make
changes to the structure. Lastly, implementing stronger internal controls is important to prevent
future instances of fraud and misstatements. The company needs to put in place controls that will
prevent employees from creating fake vendors and charging the company for work that they did
not perform. By taking these actions, Ground Zero leadership can demonstrate that they are

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committed to ethical behavior and that they are taking steps to prevent future instances of fraud
and misstatements.

CONCLUSION
In conclusion, the Ground Zero case emphasises the significance of internal controls,
professional ethics, and strategic performance evaluation within the organisation. Return on
Investment (ROI) as the major performance metric may not be a fair reflection of a district's
success, particularly in the context of the development of new services and ongoing investments.
To assess overall success, alternative metrics including employee, vendor, and customer
satisfaction levels should be taken into account. Brewster's autonomous decision-making raises
questions about the possibility of fraud and deception within the company given the absence of
supervision and internal controls. Strengthening internal controls can guarantee managers
concentrate on their main duties and stop unethical behaviour. In order to direct decision-making
and encourage truthful and ethical behaviour among employees, leaders, and clients, a code of
professional ethics ought to be formed. Ground Zero may increase productivity, uphold its
reputation, and meet its organisational objectives by putting a priority on strategic performance
evaluation, adopting efficient internal controls, and upholding ethical standards.

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