REFUND

HISTORICAL BACKGROUND
The electric utility company faces big cash flow problem after the court
ordered the utility to refund all its customers the corporate income tax collected
through its rates from 1985-2000. It will cost a total of P40 Billion which they
have agreed with the court and the regulators to pay for 15 years.
The utility company was known for their noble corporate social
responsibility projects, because of their efforts they have received several
citations and awards every year. But due to the big cash flow problem the
company is facing, Diane, the head of the CSRO Office, was instructed to
reduce her CSRO projects and also instructed to find other means to fund and
sustain existing scholarship programs and other annual dole outs. Diane
mentioned her dilemma to Ryan, her husband and is the Vice President of
Consumer Process, on how can her office survive with limited funds and where
to source additional funds of around P2 million annually.
The court and the regulators instructed the company that all refunds to
consumer that can no longer be traced or cannot be accounted for shall be
placed in an escrow account and if after 5 years, there will be no legal claims,
the money will be turned over to the government.
The management immediately gave instruction to Ryan to extract from
the information system all the information of consumers who will be entitled for
the refund and to those accounts that will be forwarded to an escrow acct. The
company have submitted to the regulators that the escrow account is estimated
to reach around 60 million.
After a week Ryan received a report from Bernard, an IT specialist who
managed the customer management system of the company for 25 years who’s
looking forward to his retirement after two years, that the refund for the
terminated accounts totaled to P100 million.
Ryan decided to call for a closed-door meeting with Bernard, Diane, and
the Corporate Finance Officer together with the Chairman to discuss Bernard’s
report. Ryan proposed to the chairman that the escrow account may reach
P100 million instead of only P50 million as initially reported to the regulators.
Thus, the company will save around P40 million. He also proposed that the
company can use the savings to support the needed funds of CSRO so that it
can continue to its noble projects rather than the whole escrow account will be
turned over to the government whom they distrust because of its rampant
corrupt practices. This could be done by altering the customer database that
can be easily done by Bernard and the changes are unnoticeable.
 The Chairman approved of the proposal and thanked Ryan’s group for
their valuable support and contribution to the company.

PROBLEM
 The electric utility company faces big cash flow problem on how they will
reduce the cost of refund.
 The company also has a problem on how to continue to fund and sustain
their noble CSRO project.

COURSE OF ACTION
They have declared to the regulators that the escrow account is
estimated to P60 million when in fact it is P100 million as reported by Bernard
after he had check the consumer database. They will save around P40 million
that can be used to support the needed funds for CSRO project. The company
will then alter the customer database where changes will be unnoticeable. They
will declare in its books the P100 million for refund expenses and the “savings”
(P40 million) will be declared as donations from other sources.

OPTIONS AVAILABLE
 Reduce the CSRO Projects or find other means to fund the existing
project.
 Borrow from the banks to finance the refund to maintain the acceptable
cash flow of the company.

RECOMMENDATIONS
We recommend that they will continue the proposal regarding the escrow
accounts because there’s no other way to reduce the cost of refund of the
company. If they will borrow money from banks, the banks will be asking for
higher interest rates for their new credit in which the company will have to pay
its debt for over 15 years. Through their proposal, they will reduce the cost of
refund and even continue the noble CSRO projects for the community.
CASE RELEVANCE
This case related to the lesson in Lesson 6 which is the Ethical Decision
Making Process in Organizations and What Ethics Is Not. Ethical decision
making is the process of trying to established organizational values from which
ethical decisions will be based from. It relates to the ethical Decision Making
Process and What Ethics Is Not because the Chairman decided to approve the
proposal even if it means cheating to the government. They may not follow the
rules of the regulators but they will do it to prevent the government to corrupt
those escrow accounts. They will use it for their Corporate Social Responsibility
projects to help the community. It may not legal but it is an ethical action where
the community will benefit from it.

QUESTIONS
1. Is the action taken by the Chairman be considered an act of
common good? Briefly discuss why or why not?
Yes. In philosophy, economics, and political science, the common
good (also commonwealth, commonweal or general welfare) refers to
either what is shared and beneficial for all or most members of a
given community, or alternatively, what is achieved by citizenship,
collective action, and active participation in the realm of politics and
public service.
So, Instead of giving the whole escrow account to the government
knowing that they have corrupt practice, why not directly give it to
CSRO project, in which I or even you would be rest assured that it
would be a huge help to the community.

2. If you were Bernard, who has only two years to stay with the
company before retiring and is much concerned with his retirement
benefits, will you be able to justify that your action is morally good?
Please provide a short explanation.
Yes. A moral act is an act that will benefit humanity. It will be a
huge help to increase the cash flow of the company and even to the
community to help sustain and fund the noble CSRO projects of the
company. Also, if I was Bernard who’s concerned about the retirement
benefits, I will do it, for my retirement benefits would also be secured
because the company will take charged for their cash flow.
3. Can the principle of double-effect be applied to the actions by Ryan
and Diane? Explain briefly.
Yes. The principle of double-effect aims to provide specific
guidelines for determining when it is morally permissible to perform an
action in pursuit of a good end in full knowledge that the action will also
bring about bad results.
It can be good for the company and for the community but if ever
the regulators will find out about the truth the company might be facing
a big trouble and worse it will create bad image for the company.

4. Is it right to “cheat” a corrupt government? Why or why not?

"Be fair and honest, even if other are not, even if others will not
and even if others cannot. Because he who walks honestly walks surely.”
- Abhishek Tiwari
But we think of the second thought that cheating can be good,
depends to the purpose or reason like might as well, it would be okay to
cheat from the government for the community will directly benefit to the
funds rather than being honest to the government who might corrupt the
funds that is supposed to be for the community.
It may always be bad for the eyes of others and for the eyes of
our country but this reason can be considered because it is not for the
good of ourselves but for the good of our community.
Final Requirement
Case Study: REFUND

BAHR 213: #0639

Good Governance and Social Responsibility

Submitted to: Prof. Brenda Corcino, MBA

Submitted by: Tampos, Nina B.
Cabaraban, Louise Claire
Mabite, Joyce
Arcite, Michelle Ann
Pelongco, Dianne