Ethical challenge

Question:

I am an Admin. Manager that oversees two departments — one of which is Accounts Payable. In July I received a statement showing we owed $150 for an invoice in February 2014. It was for parts that were originally on back order which delayed processing for payment. It was our error that we didn’t copy the PO for our back order file.  If we had, I would have tracked the invoice down within a couple of months of the original order and paid it.  Our Operations Superintendent located the freight invoice we shipped the parts to our field office.  When I sent in the invoice to the head office for processing I received this email back, “CFO and I were discussing this. VENDOR should have written this off due to their negligence on following up with the payment on this invoice. Currently it is over 2.5 years old. Yes, we did receive the item per Ops. Supt. but when they’re this old, how can we know for sure if we did receive the item?  Perhaps we went to another vendor to get these parts. With that said, CFO would like for you to discuss this invoice with VENDOR and see if they will write it off. There is a very good possibility that they were just sending us the statement in hopes that we would pay and were prepared to write it off anyways.”

I don’t feel comfortable with this request. We ordered the parts, we received them, we used them, and we should pay for them. It was our fault for not copying the PO to track the back order, and it was the Vendor’s fault for not following up on this sooner. If this was a late fee or a service charge I would feel better about asking for them to write it off, but since it is for actual items we received, and we know we received them, I feel it lacks integrity. Is this common practice? How do I tell my boss that I don’t want to, or refuse to do this?  While I understand we are watching our pennies, it seems like this is going over the line.  A part of me takes umbrage that I was even asked to do this, and I question if I want to work for a company that would ask this of me.  Am I over reacting to a simple request?

Answer:

No you are not.  You are acting ethically.  The concept of ethics translates to doing the right thing.  We can have a lengthy philosophical discussion about the various concepts and types of ethics but generally speaking this business practice would be wrong from almost any ethical perspective.   Furthermore, our legal system helps us define ethical values by defining legal rights, identifying wrongs and establishing duties.   This is “deontological ethics” – ethics based on the adherence to established rules.  While your CFO says the vendor’s invoice is too old and therefore payment should be avoided, Alaska law provides an ethical basis with established rules.  The legal limitations period to bring a civil action under contract is 3 years.  It is a much longer period of 10 years for an account stated which I believe fits these particular circumstances.   Accordingly, the legal “ethics” or rules say this invoice is not too old to seek a court remedy for payment.  So, at least from a legal “deontological” sense, your CEO is seriously out of alignment.

©Richard Birdsall, J.D. is a Senior Associate at The Growth Company, Inc. You can follow him on LinkedIn and Twitter. For more information on reference checks and/or background investigations contact Richard Birdsall at Rick@thegrowthcompany.com or 907-276-4769.

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