Management 10th Edition by Richard Daft

Exercise 1

Empress Luxury Lines
From what computer technician Kevin Pfeiffer just told him, it looked to Antonio Melendez as if top management at Empress Luxury Lines finally found a way to fund the computer system upgrade he'd been requesting ever since he'd taken the job two years ago.
It all began innocently enough, Kevin said. When he reported to the luxury cruise lines corporate headquarters, his supervisor Phil Bailey informed him that the computer system had been hit by a power surge during the fierce thunder-storms that rolled through southern Florida the night before. "Check out the damage, and report directly back to me," Phil instructed.
When Kevin delivered what he thought would be good news the damaged underground wires and computer circuits could be repaired to the tune of about $15,000 he couldn't understand why Phil looked so deflated. "Go out to the reception area. I've got to call Roger," Phil snapped, referring to Empress's CFO-and Antonio's boss. In a few minutes, Phil called Kevin back into the office and instructed him to dig up nearly all the underground wire and cable and then haul it all off before the insurance adjustor appeared. If Kevin carried out Phil's orders, he knew the costs would balloon astronomically to about a half-million dollars, a tidy sum that would go a long way toward covering the costs of a computer system upgrade, as Phil pointed out.
Kevin took a deep breath and refused, even though as a new hire he was still on probation. When Antonio congratulated Kevin on his integrity, the technician shook his head. "Didn't really matter," he said. "On my way back to my cubicle, Matt passed me on his way to do the deed."
Antonio could guess at the motivation behind the scam. During the 1990s, Empress increased its fleet of ships in response of the healthy demand for its luxury cruises during the stock market bubble. But the bubble burst, the nation was traumatized by September 11, and some of the vacationers who did venture onto cruises were felled by an outbreak of the Norwalk virus. Bookings fell off precipitously. To top it all off, the 2005 hurricanes hit, forcing Empress to write piles of refund checks for their Caribbean and Gulf cruises while coping with seteep increases in fuel costs. Seriously sagging earnings explained why Antonios requests for that system upgrade went unheeded.
He could also guess at the likely consequences if he chose to do the right thing. Since taking the job, he'd heard rumors that Empress successfully defrauded insurance companies before he arrived.
He dismissed them at the time, but now he wasn't so sure. No confidential mechanism was in place for employees to report wrongdoing internally, and no protections were available for whistle-blowers. Shaken, Antonio wasn't feeling at all confident that, even if he bypassed the CFO, he would find upper-level management all that eager to thwart the scheme. He had a hunch that the person most likely to be penalized was the whistle-blower.
"I debated about just calling the insurance company," Kevin said, "but 1 decided to come to you first." So what should Antonio do? Should he advise Kevin to go ahead and report Empress to the insurance company? Or should he treat Kevin's communication as confidential and deal with the situation himself; in effect putting only his own job in jeopardy? And really, considering the high degree of personal risk and the low probability that the problem would actually be addressed, should he just sweep the problem under the rug?
If Antonio or Kevin were fired because they reported Empress's fraud, would they be justified in removing all traces of their employment at the cruise line from their resumes so they don't have to explain to a prospective employer why they were fired? Why or why not?