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PROBLEM DEFINITION Subjective understanding on bona fide emergencies which resulted to the subjective approval of some salary loans which were in violation of the company rules and policies. II. OBJECTIVE To limit or control the approval of salary loans in accordance with the company rules and policies by granting such salary loans which are only to be used in cases of bona fide emergencies and that such cumulative outstanding loans to an employee should not exceed one months regular pay. III. AREAS FOR CONSIDERATION a. Mr. Zeld Sorenson, the President and General Manager of Worldchem Philippines, Inc., delegated responsibilities to the Company Controller and Company Personnel Manager in order that Mr. Sorenson can concentrate on the manufacturing and marketing activities of the firm. b. Mr. Gaston Fernandez, the Controller, would be responsible for all company purchases up to one thousand pesos. He could also delegate purchasing authority to each department placing a limit as to the amount. He would also be responsible to salary loans to all employees earning a base salary of more than three hundred pesos. c. Mr. Felipe Fajardo, the Personnel Manager, would take charge of loans to employees with a base salary of three hundred pesos or less. d. All employees of Worldchem Philippines, Inc. were already informed about the conditions under which the company would approve salary loans. e. After six months, the entry Salary Loan Advances had more than tripled in amount. Mr. Sorenson sought some answers from Mr. Fernandez. Mr. Fernandez said that the figure was correct and that there was no dramatic increase in genuine emergencies. Mr. Fajardo suggested that all the salary loans he approved were justifiable and that each case had to be judged on its own merits. f. Mr. Fajardos reasons as to the approval of such salary loans were not valid in Mr. Sorensons point of view. IV. ALTERNATIVE COURSES OF ACTION a. Mr. Fajardo should review the companys rules and policies as to the approval of salary loans.

Mr. Fajardo doesnt have a base line as to what should be considered as a bona fide emergency case. As such, he depends on personal judgement on approving certain salary loans. A review on companys rules and policies

may help Mr. Fajardo distinguish as to what kind of salary loan should be approved or not. Clarification on this matter by reviewing the company policies on such loans may help prevent any further subjective approvals. However, there is still a possibility that Mr. Fajardo may still approve certain salary loans that do not qualify with the companys policies. By looking at what he did in the case, Mr. Fajardo mixes subjective reasoning in deciding whether to approve the loan or not. The line he frequently reasoned out, Im afraid it would affect his mental attitude, shows that he takes into consideration the present situation of the employee applying for the loan. b. Mr. Sorenson should reprimand Mr. Fajardo that approving such loans without adhering to the company policies will lead to unfavorable consequences. The act of Mr. Fajardo is a violation of the company policies and it may lead to suspension or dismissal.

Company rules and policies are important especially that they act as the guide of employees in rendering their services. Warning Mr. Fajardo of the possible consequences if such act continues will instill trepidation. As such, he will adhere to company policies in approving such loans. This alternative course of action may help Mr. Fajardo to focus on the two criteria on loans approval. But the problem of Mr. Fajardos perspective as to what bona fide emergencies are still remains.

c. Enumeration of examples of bona fide emergencies should be stated (in case the company policy is silent as to the degree of the emergency that should be approved) in order to have a distinction as to what is a genuine emergency and what is not. Given the enumerations, Mr. Fajardo may concentrate or use the enumerations as guidelines.

The enumeration of certain genuine emergencies may help distinguish the stated reasons as to the application of salary loans if such reasons are indeed emergencies. In addition to the enumerated examples, Mr. Fajardo should objectively decide the approval of loans. If the employees find out that other loan applications were given special consideration, they would also expect that their loan application, though they are not for emergency purposes, will also be given such consideration.


To set some limits or distinction on the approval of salary loans and to set some guidelines as to what loans should be approved, the third alternative is recommended. Enumerations of general classifications of genuine emergencies and using these enumerations as guidelines help the Personnel Manager decide whether to approve the loan or not. This course of action may also be mixed by a reprimand from the President or General Manager that may keep the Personnel Manager in the light that approving loans without valid reasons will put him in trouble. Such actions may help the Personnel Manager focus on making the right decisions concerning loan approval and not concern himself on other factors that are not considered as genuine emergencies.