Ethical dilemma

Lowering operating expenses

D28-06-017
By: Ana Judith de Anda Gonzlez

In the metropolitan area of Guadalajara,

Mexico, in mid-2006, the company Rome
was dedicated to shoe manufacturing. Its
sales were good but werent reflected in
its profit margins. Concerned about the
situation, Rubn Gonzlez, General
director, asked the Finance director, Jos
Manriquez, a change in the business
operations to improve its profits, at any
cost. The finance director knew his job
was at stake, he needed to find a solution,
otherwise he would be fired and would
face short-term economic problems.

Civil partnership
Mr. Manriquez knew a way to lower the
companys workload: it consisted in
changing some of the workers to a civil
partnership as industrial partners. Their
services would be paid under the concept
of food which exempts them from paying
income tax and also has no limits on the
amount. In other words, they wouldnt be
part of Rome company and be discharged
into a civil partnership with the minimum
wage. This service was within the laws on
subject. The civil partnership would issue
a commercial invoice so Rome Company
could deduct these expenses from their
financial statements.

He would present the proposal to all

factory workers (120) with the objective
of changing the most number of workers.
While reviewing the proposal numbers
(see Table 1) Jos thought: "... Im sure
Mr. Gonzalez will like the numbers and I
get to keep my job ...".
While checking more into details, Jos
realized the downside employees would
face if they decided to switch contracts:
theyd lose their benefits such as health
insurance, seniority, retirement among
others. Jos Manriquez thought these
"details" could be omitted so the
employees would switch contracts for the
benefit of a higher wage.
Accepting the proposal made by the
Finance director would reduce costs by
16% and, consequently, improve profits,
but the workers would lose benefits
immediately in exchange for an increase
of 8% of their monthly income. The
question was whether or not to inform on
the loss of benefits to employees who
would agree to switch, because it had to
be voluntary, or, dismiss the idea.
Undertake a series of adjustments and
changes in other areas to reduce costs,
even though it would take longer.

Este dilema tico se elabor con el propsito de servir como material de discusin en clase, no pretende ilustrar buenas o
malas prcticas administrativas. Algunos datos de este documento han sido modificados a peticin de las personas e
instituciones involucradas. Derechos Reservados Instituto Tecnolgico y de Estudios Superiores de Monterrey; Av.
General Ramn Corona No. 2514 Col. Nuevo Mxico, Zapopan, Jalisco 45140, Mxico. El ITESM prohbe cualquier
forma de reproduccin, almacenaje o transmisin de la totalidad o parte de esta obra, sin autorizacin por escrito.

Lowering operating expenses

Ethical dilemmas

Tabla 1. Proposal for Rome Company.

Tabla 2 PRO PUESTA PARA EMPRESA RO MA
Pe sos Me xicanos MXN
Tipo de Cambio USD = 10.92 (Julio 2006)
CO STO S E INGRESO S (1O EMPLEADO S)
CO NCEPTO

ACTUALES

CO N SCP

Costos empresa Roma

111,373.33

93,576.67

Ingresos del empleado

80,226.67

86,645.00

Disminucin en costos

-16%

Incremento en ingresos

8%

CO STO S PARA EMPRESA RO MA

CO NCEPTO

ACTUALES

Remuneraciones

90,820.00

Cuotas IMSS

13,568.33

Aportaciones INFONAVIT

4,746.67

Impuesto sobre nminas

1,898.33

IET U de salarios exentos

340.00

Costo de administracin 8%
T OT AL

111,373.33

CO N SCP
$

86,645.00

6,931.67

93,576.67

INGRESO S DEL EMPLEADO

CO NCEPTO
Remuneraciones

ACTUALES
$

90,820.00

Retencin del ISR

-$

8,158.33

Retencin del IMSS

-$

2,435.00

80,226.67

Ingreso Neto

CO N SCP
$

86,645.00

86,645.00

Source: authors creation