The paper "Earon Company Decision-Making Model" is a good example of a management case study. The organizational decision-making process involves the development of alternative strategic options that seek to develop and establish appropriate and best possible organizational results. However, the development of these decisions is based on a range of factors including information availability, ethical considerations as well as possible outcomes implications. This report forms a review of the Earon Company. In this regard, the report evaluates the cause of its failure based on both the short and long term decisions developed by organizational management.
In this regard, the report evaluates the components and theoretical perspectives involved in Earon Company derivatives development and use decision-making processes. Thus, the report is structured through a case study analysis, theoretical review, recommendations, and finally a conclusion. 2.0 Background Summary A review of the organizational case study reveals a range of strategic decisions formulated by organizational management. On one hand, the study establishes that organizational management faced decreasing profits and the subsequent risks of reduced credit ratings. As such, such reduced ratings would reduce organizational capabilities as a trading and investment banking corporation.
Therefore, organizational management resulted in the application and use of derivatives. The adoption of this approach enabled the organization to mitigate its trading risks through off the balance sheet trading under the derivatives. As such, the corporation increased its credit rating allowing for increased creditors and stakeholder perception. However, in the long run, the organization could not meet its liabilities in the long run. As such, the decisions developed by the management led to the collapse and failure of the organization. In its analysis, the study establishes that organizational management was faced by a bounded rationality decision making process.
In this case, the management was required to develop decisions based on the balance sheet records that did not represent the actual company figures in the market. In addition, the organizational management resolved to the use of special purpose entities, that are sepia projects with the intention of investing funds collected from the derivatives, off the balance sheet earnings. Further, the review establishes that the organizational accounting firm doubled up as its advisor and consultant on financial matters.
As such, this resulted in increased opaqueness in the organizational financial reporting and management processes. Therefore, the case study analysis establishes that the unethical approach in the organizational decision-making process led to its eventual failure as well as that of Anderson, its accounting partner. In addition, the analysis establishes that the corrupt hiring system and faulty compensation and sanctions led to its eventual collapse. 3.0 Theoretical Analysis A theoretical review in the Earon Company case study reveals the application as well as the violation of a range of theories and decision making models as well as principles. 3.1 Ethics Application On one hand, the case study establishes the concept of ethics in organizational decision making.
Ethics, like Ferrell, Fraedrich, and Ferrell (34) argued incorporates the process through which organizational management develops decisions based on the overall societal good. In decision making ethics, organizations are bound by a series of alternative ethical alternatives. On one hand, is the utilitarian ethical approach? Under this approach, organizations evaluate the benefits and utility derived from the outcome of a decision. However, under a utilitarian theoretical approach, organizations perceive the short term implications of their decisions on the direct impacts.
Therefore, this ethical approach negates in the long term and indirect implications of organizational decisions. On the other hand, is the deontological ethical decision-making approach? Under this approach, actions are based as either appropriate or inappropriate in regard to their legality and allowance by principles. Finally, the ethical decision-making approach is the use of the virtual ethics approach as a decision-making criterion in organizations is the adoption of the virtual ethics approach.
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