Media today tends to be quite negative. I didn’t have to look very far to find the next “Enron-esque” tale. This story is about a woman name Sujata “Sue” Sachdeva. Sue was an employee of Koss Corporation, a major player in the stereophonic headphone industry. Sue was a veteran to the company of 15 years, VP of Finance, and principal accounting officer for Koss. To put things simply, Sue stole half the company’s pretax earnings over five years. On trial Sue pleaded guilty to embezzling $34 million dollars from Koss.
How did this happen? Sue had help. Senior accountant Julie Mulvaney helped Sue cover up her thefts in a number of false journal entries and false cashier checks. Another entry level account, Tracy Malone, didn’t blow the whistle during the five year scheme as well. How was each player in this story motivated? What personality traits would also play a role in allowing this embezzlement scheme to happen?
Sue Sachdeva was the first and main player. She had some interesting traits. It is obvious Sue was neurotic, and she displayed this by her erratic behavior. Her attorney’s defense was that she had “bipolar disease of compulsive shopping disorder.” According McClelland’s acquired-needs theory, her motivation might be found as “need for power.” With her high position she was able to influence and control Julie and Tracy. Her need for power was also shown in her uncontrollable spending habits and need for wealth and prestige.
Julie Mulvaney was as guilty as Sachdeva. As a senior accountant she was easily manipulated into doing the “dirty work”. She overstated assets, expenses, and cost of sales in the books. This type of deviant behavior might be explained by fear. Julie could have felt her job was threatened and over time just got numb to the illegal activity. Her motivation also could indicate a strong need for affiliation. If her main motivation was to make her boss happy, then the unethical behavior could be explained.
Finally, an entry level accountant, Tracy Malone, didn’t blow the whistle when she caught the mistakes in the ledger accounts. Tracy more than likely was scared as well about losing her job, but her overall moral conscience and commitment to the organization was non-existent over the span of five years.
Some internal auditing should have been done here because the external auditor didn’t catch the mistakes. Trust is a huge mechanism to hold upper management together, but some occasional inquiry and review is okay as well. Constant quality assurance isn’t the answer, but some moderate use would have been reasonable.
In the end Sachdeva was a true villain. It seems that historically villains find people to manipulate and control like her two “evil sidekicks.” Villains are selfish. Villains find glory where glory shouldn’t be found. Villains hurt a lot of people, ruin trust, and put companies underground. A lot can be learned here and this villain will pay the price behind bars.
My question for everyone would be this: In your opinion, how does unethical behavior by a high-level employee affect others in the organization? This could be other high-level executives or the janitors cleaning the hallways.
My question for everyone would be this: In your opinion, how does unethical behavior by a high-level employee affect others in the organization? This could be other high-level executives or the janitors cleaning the hallways.
Ryan Luginbuhl
Verschoor, Curtis C., How an Embezzler Stole Millions from a Small Company, Strategic Finance, Jan2011, Vol. 92 Issue 7, p13-61.
4 comments:
With the power of authority or experience, high level employees can greatly influence lower level employees. The case in point is evident here. These actions not only influenced Julie and Tracy, they also set some expectations in the workplace. Looking back at all the examples in the post, its evident Sachdeva set such a bad example to those closest to her that it also guided the tone and customs of ther people within the business.
-Matt M.
I believe that if your leaders are dishonest the people looking up to them will realize that they can probably do the same things without getting caught. The majority of people won't go out of their way to be "that person" to rat out the bad guy because they're worried about losing their job.
-Eddie Nemeth
I agree with Eddie, the fact that this scheme went on for five years before they got caught might lead someone to believe that if they do the same thing in a slightly different or sneakier way they could do it with no consequences. It is obviously setting a bad example and sadly, there are going to be people out there that, rather than learning from the mistakes of Sue, Julie and Tracy, they are going to try and do what they did only better.
Michael Loirmer
Unethical behavior displayed by upper management can be a confusing thing to grasp. To me it would be like being a little kid learning the ways to lead a moral and ethical life, and then seeing a parent or trusted adult shoplift. How do you react? Little kids might now think stealing is okay, and even the employees seeing this unethical behavior may perceive it as just a way business is done here. Recognizing and reporting unethical behavior can be even more tricky when your superiors, or even the head's of the company are doing business in unethical ways.
--Kaitlin Reichel
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