KingJewel is a good case to study ethical practice in corporate and dilemmas that an ethical practice can lead to. It is also a good case to study how leadership and corporate structure can work to promote or inhibit unethical practices. The ethical issue in this company entails a discovery that a senior employee, Clement Tam, was accepting advantages to allow buying of low quality gemstone for use in the company. In addition, Tam was colluding with other employees to conceal the scandal (Lau, A., and Wong, R., 2006, 3). The other ethical issue lies with Tam Wai Man, Clement Tam’s sister, who was the finance controller in the company. She is met with an ethical issue on whether she should expose her brother considering the effects that could result from such an act.
The nature of leadership in KingJewel could have contributed to the scandal. The company’s owner and founder was also the chief executive officer of the company. Andy Wong could be described as having an entrepreneurial leadership quality. He had started the company after working in another jewel firm but was able to establish his own firms (Lau, A., and Wong, R.,2006, 4). Most of the individuals in management in his firms were his close associates and friends. In addition, the individuals in management position were related to each other. Friendship, and close relation among individuals in management position could have contributed to unprofessional attitude.
As an entrepreneurial leader, Wong was very motivating to his employees. Although he was motivating, this quality impeded his ability to monitor the operation of the company. As an entrepreneur, Wong was very much involved in obtaining market for his product (Lau, A., and Wong, R , 2006, 7). Thus, he was mostly involved in operations outside the company. This made him to leave internal operations to Clement Tam. As a chief executive officer to the firm, his withdrawal from internal operation of the company created an opportunity for the scandal to happen. Mr. Clement was given his responsibility to oversee the internal operation of the firm not by academic qualification but out of mutual trust that he had with Wong. The leadership is questioned in that the scandal involves an individual whom Wong trusted mush and vested with the major responsibilities in the firm.
Lack of proper separation of duties was the main cause of scandal. Clement Tam, the main individuals in the scandal had various overlapping responsibility in the firm. Tam was in charge of overall internal operation as operation director in the firm, which placed him second from the chief executive officer. He was also responsible for head of gem sourcing department. Being the operating director in the company made Tam to be responsible for all other operation in sourcing for materials and manufacturing of jewels. Thus, head of production and authentication, Jonathan Ho was in the real sense under Tam. As operation director, Tam had indirect authority over other department. His other responsibility as a head of gem sourcing department implied that his operations would be monitored by Jonathan Ho. However, Ho was under Tam in the overall structure of the organization making it almost imposable to block Tams operations (Lau, A., and Wong, R ,2006,10). Operations of gem sourcing department should not have been given to Tam since his higher responsibility was an oversight responsibility on all other operations. This overlap of responsibilities made it possible for the gem fraudulently acquired to bypass authentication department.
KingJewel compensation plan was tagged to the profit made by the firm. This implied that bonus to key employees would increase ability to meet the target set. Thus, increase profit by the organization could not be questioned but appreciated. In fact, Tam uses this criteria to defend himself in his conversation with Wai Man.
The scandal in KingJewel took a long time to be exposed. The culture in the organization contributed a lot to this. Although most of t he worker had knowledge of the scandal or suspected the existence of a scandal in gem acquisition, they could not report the issue due to fear (Lau, A., and Wong, R , 2006, 9). In addition, similar practices were common and accepted in China. Culprit to such acts in the community went unpunished, thus employees could not risk their jobs by reporting.
As an accountant, accounting ethics is very important to Wai Man. Her dilemma is that some of the individuals involved are her relatives and friend. She should be courageous enough to face the scandal in an objective way without influence of relationship. Investigations made by Wei indicate that various individuals were involved in the scandal. She should report her findings to the CEO. Record that give evidence of the scandal should be collected and produced as evidence. The risk of Wei being caught in subsequent investigations should not hold her back since further cover up could lead to more severe effects to her and other workers.
Jelinek, R., and Jelinek, K. Auditors gone Wild: The “other” problem in public accounting. New York: Kelly School of Business Press, 2008.
Lau, A., and Wong, R. KingJewels: ethical leadership in practice. Hong Kong: Asia Case Research Centre, University of Hong Kong, 2006.