ACCCOB2 GROUP REFLECTION PAPER ON ETHICS

Term 1, Academic Year 2023-2024

ETHICAL DILEMMA
Jose Magaling is the president, founder, and majority owner of Magaling Medical Group,
an emerging medical technology products company. Magaling is in dire need of additional
capital to keep operating and to bring several promising products for final development, testing,
and production. Jose, as owner of 51% of the outstanding shares, manages the company’s
operations. He places heavy emphasis on research and development and long-term growth.
The other principal shareholder is Juan Masipag who, as a non-employee investor, owns 40%
of the shares. Juan would like to deemphasize the R & D functions and emphasize the marketing
function to maximize short-run sales and profits from existing products. He believes this strategy
would raise the market price of Juan’s shares.
All of Jose’s personal capital and borrowing power are tied in his 51% hare ownership. He
knows that any offering of additional shares will dilute his controlling interest because he won’t
be able to participate in that issuance. But Juan has money and would likely buy enough shares
to gain control of Magaling. He then would dictate the company’s future direction, even if it
meant replacing Jose as president.
The company already has considerable debt. Raising additional debt will be costly, will
adversely affect Magaling’s credit rating, and will increase the company’s reported losses due
to the growth in interest expense. Juan and other minority shareholders express opposition to
the assumption of additional debt, fearing the company will be pushed to the brink of bankruptcy.
Wanting to maintain control and to preserve the direction of “his” company, Jose is doing
everything to avoid a share issuance and is contemplating a large issuance of bonds, even if it
means the bonds are issued with a high effective-interest rate.

You are to prepare a written report discussing the following:

1. Who are the stakeholders in this situation?
2. What are the ethical issues in this case?
3. What would you do if you were Jose?

Requirements:
The written report should be type-written, with the following format:
a) Paper size: 8.5” x 11”
b) Margin: 1” on all sides
c) Font and Font size: Arial 11
d) Paragraph alignment: Justified
 e) Paragraph spacing: Double-spaced
f) Length of written report: 3-4 pages, including cover page
g) Deadline of written report: December 9, 2023
h) The cover page should be as follows:

ETHICAL DILLEMA

A Group Reflection Paper

Presented to the
Accountancy Department
De La Salle University

In partial fulfillment
Of the course requirements
In ACCCOB2 (Section)

SUBMITTED BY:
Surname, Given Name, M.I.*
Surname, Given Name, M.I.

Date

*NOTE: The names should be arranged alphabetically

RUBRIC FOR ASSESSMENT:

Reflection Paper on Ethics in Financial Reporting

CRITERIA EXEMPLARY SATISFACTORY DEVELOPING BEGINNING RATING
(4) (3) (2) (1)
Contains a partial
Contains an
Explanation Fully explains what explanation of the explanation of the Does not
issue/event, is
of Issue the issue is about issue or event, but contain a
unclear at points,
(25%) using fact support not always clear or clear
lacking factual
claims. contain full factual explanation.
support.
support.
 Fully analyzes and
makes conclusions Analyzes and
Ethical about general concludes on Does not
Describes, but
concerns ethical concerns-- general ethical present
does not analyze
(35%) who is impacted, concerns, but may ethical
ethical concerns.
what is the right be lacking some concerns.
and wrong of the points.
issue.
Student interprets
the connections Student
Analysis Interpretation is
between the issue, interpretation Analysis not
(30%) more descriptive
examples, and present, but not as present.
than analytical.
multiple ethical in depth.
concerns skillfully.
The paper
lacks editing
and review. It
The grammar in this The paper has has
The grammar is
Grammar essay/paper is several errors. distracting
excellent. There
(10%) good. Few errors. Needs editing. fragments
are little to no
(Less than 3 per (Less than 5 per /run-ons,
mistakes.
page) page) usage errors,
spelling.
(More than 5
per page)