The Stakeholders In The Broderick Corporation Case

a) A stakeholder, according to the Stanford Research Institute, is defined as “those groups without whose support the organization will cease to exist. (Kosnik 1).” In other words, a stakeholder is any group that if it does not support the business, then the business will not function. For this case, the Broderick Corporation is the business. The stakeholders mentioned in this scenario include upper-level management and employees of the company, such as Phil Prior and the other staff. Both of these stakeholders are considered to be internal stakeholders, or people who work directly for the company. Other potential stakeholders not mentioned in this scenario may also include shareholders, such as investors who purchase the company’s stocks,

Before performing such a critical action, one must evaluate the outcomes of said actions. Prior is tempted to increase the useful life and salvage values of the equipment. If Prior performs these actions, then in the short run, his job and the staff could potentially be saved, and net income would be increased. However, in the long run, since Prior sold the equipment, then there is a possibility that people might discover this fraudulent behavior of randomly and maliciously increasing equipment value. As a result, a plethora of employees, including Phil Prior and even upper-level management, could lose their jobs and reputation. Additionally, Broderick Corporation would be bombarded with potentially hundreds of millions of dollars of fines and penalties, possibly to the point where the company would be terminated. Before performing such actions, “management cannot just benefit the company in the short run… accounting must also benefit the company in the long run, which is what ultimately matters (Chong 3).” Broderick Corporation would like to report the most optimal figures to the stakeholders. However, Broderick Corporation must also analyze the outcomes of increasing the useful life and salvage values in the short run and the long

In 1998, Waste Management “avoided depreciation expenses on their garbage trucks by both assigning unsupported and inflated salvage values and extending their useful lives…[etc.]…the company acknowledged that it had misstated its pre-tax earnings by approximately $1.7 billion (Newkirk 1).” A new CEO, A. Maurice Myers, analyzed the books and transactions, and he discovered the fraudulent behavior. The penalties to Waste Management were that the company had to settle a shareholder class-action lawsuit with the amount of $457 million, and the Securities and Exchange Commission (SEC) fined the prior CEO, Arthur Andersen, $7 million. Moreover, once the news became viral, Waste Management’s shareholders lost over $6 billion in the market value and stock prices dropped about 33%. If Prior commenced in increasing the useful life and salvage values of the equipment, then history would repeat itself, and Broderick Corporation would face the same, if not higher, amount of penalties. Therefore, if I were in Prior’s situation, I would accept the fact that in the long run, it is not worth the sacrifice of losing my job and ruining my reputation. Rather, it would be optimal to not increase the useful life and the salvage values of the equipment and report all of the figures honestly and