The main ethical concern is seen in not disclosing the information for drawing of funds from the capital account. In the given case, Craig has bought a new house from the shared capital account of both his and Michelle. It is not ethical to withdraw funds from the capital account without informing of the drawing activities to all the partners of the business. Moreover, Craig consider withdrawing funds from the salary he receives or from his share of profit, but it is not ethical for him to directly withdraw funds from the capital account that too for his personal benefit/ personal use. The funds in the capital account should be used only for business purpose and not for personal gains. The withdrawing of funds from the capital account will have a negative impact on the share of profit of Michelle, even though she has not carried out any withdrawal activities from the capital account during that financial year.
According to Buchholtz and Carroll (2012), the primary ethical issue has been observed with Craig who seems to be taking advantage of Michelle’s lack of confidence with the accounting knowledge and management of the finance. Moreover, Michelle has shown her confidence and trust with Craig which is also being compromised. The ethical issue has been observed with Craig investing in purchasing a new house and financing a deposit for which he took $ 20,000 from the capital, investment of the partnership. Michelle is observed as the major stakeholder of the company and he appears be deprived personally as per the relative contribution made by the company in return of the partnership (Poplawska et al. 2015). As per the partnership agreement, Craig is observed to be earning more than Michelle. Although, both the partners are observed to be making equal contribution still Craig is observed to be sharing more amount of profit. As, both the stakeholders contribute equally and rewarded with equal amount of compensation it is more reasonable to share that both the stakeholders receive equal amount of profit (Weiss 2014).
The main concern regarding the breach of ethics is seen in the buying of new house by Craig after withdrawing $ 20000 from the capital fund. It has been further observed that Michelle accepted the same and did not consider the implication of this in the distribution of profit. Furthermore, at a later stage Craig is seen to be withdrawing another amount of $ 20,000 from the capital reserve of the company for the reducing the amount of the mortgage on the house. This has further shown the implications for profit of both then partners. Michelle was not informed about incidents and hence led to several ethical issues. Michelle did not know the net result in the reduction of the profit amount, this was a surprise to the
Hence, the analysis of the various types of the issue directly highlight on the ethical issue of the business. This is clearly shown by the ignorance of Craig and not explaining to Michelle about the different types of the drawing activities. This unjustified as a partner of the company and Craig should have clearly informed his partner about the impact on the profit in the drawing activities. The decrease in the profit of the company was not only unjustified but also intentional in nature to clear the mortgage amount (Carroll and Buchholtz 2014).
Hence, the primary ethical activities are affected by the drawing of the funds from the capital account of the company and furthermore keep this activity uninformed to Michelle as and when the decision to withdraw the funds was taken by Craig. Thus, it was clearly observed that Craig was taken undue advantage from Michelle for not informing about the activities related to the transfer of the finds.
Buchholtz, A.K. and Carroll, A.B., 2012. Business & society: Ethics & stakeholder management. South-Western Cengage Learning.
Carroll, A.B. and Buchholtz, A.K., 2014. Business and society: Ethics, sustainability, and stakeholder management. Nelson Education.
Poplawska, J., Labib, A., Reed, D.M. and Ishizaka, A., 2015. Stakeholder profile definition and salience measurement with fuzzy logic and visual analytics applied to corporate social responsibility case study. Journal of Cleaner Production, 105, pp.103-115.
Weiss, J.W., 2014. Business ethics: A stakeholder and issues management approach. Berrett-Koehler Publishers.
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