The case of the Million-Dollar Decision

Significant Facts: Pegasus International Inc. is considering expanding their business to China. China allocates frequencies and makes franchise decisions cityby-city, district-by-district and a payoff is usually required to get licenses. Pegasus International Inc. has strong values such as integrity and intellectual honesty, respect for the individual, teamwork and trust, delight the customers. The corporate culture is characterized by integrity, honesty, teamwork, and respect for the individual. The CEO Tom Oswald models ethical leadership. The company also enjoys its excellent reputation among its customers and suppliers, high employee morale and ethics is a priority at the company. The United States law requires the CEO to sign the disclosure statement required by law saying that they know of no instance where they bribed for their business.

Interested Parties: The shareholders value can maximize if Pegasus International Inc. expands business to China. Shareholders have a stake in the outcome; shareholders are interested increasing their investment in the

company. Pegasus International Inc. has an interest in expanding market share and growing their business. Pegasus International Inc. has a positive reputation among its customers, suppliers, and employees. If Pegasus International sign the disclosure and get prosecuted for payoffs in China, they risk their reputation.

Decision Maker: The independent decision maker is the CEO, Tom Oswald.

Issues: Tom Oswald models ethical leadership. It will go against his values and Pegasus International Inc. values if he signs the disclosure and proceeds with payoffs. The value at stake is Toms honesty, trust, and respect. The principles at stake for Tom are his duty to maximize shareholders value and maintaining his ethical leadership. This decision risks the security of his job.

Options: Approve the expansion project to China. Use the third party company to proceed with payoffs to obtain license, which keeps Pegasus International Inc. out of knowledge of illegal activities, bribes. Do not approve the expansions project. Look for another way to enter

the China market with out payoffs. Might be a slower process but keeps company values. Have a conference with board members to discuss company values v.s maximizing shareholders value. Do more research and development on expanding Pegasus International Inc. to China.

Recommendation and Justification: Tom Oswald should create a special committee to conduct more research and development in regards to barrier entries in doing business in China. As a large successful company it is not worth creating a possible risk, signing the disclosure statement that no bribe was given or received, of unethical practices, the third party who would be hired to obtain licenses in China.

Chief Drawback: The company may loose market share in foreign markets. They have a risk of competitors having an edge in the Chinese market. Spending more time on R&D may lead to the same outcome of payoffs are necessary. The opportunity cost of $100million of business per year in China is forgone to maintain company values. Shareholders may strongly disagree and Tom may looser his job because he decided to truly remain a model ethical leader.