Pinturas Windsor A Failed Attempt to Save a Company John Ledgerwood, MSA, CPA, CMA, CFM, CGMA...

Pinturas WindsorA Failed Attempt to Save a Company

John Ledgerwood, MSA, CPA, CMA, CFM, CGMATamilla Curtis, DBA

Embry-Riddle Aeronautical UniversityDaytona Beach, Florida

Agenda

• Background

• Problems

• The Decision

• An Ethical Dilemma

• Conclusion

• Questions2

BACKGROUND 3

Pinturas Windsor

• Company established in Ecuador on March 24, 1995

• A subsidiary of Windsor Group, based in Miami, Florida• Owned several manufacturing and

chemical companies • Presence in Chile, Peru, and Colombia

• Specialized in aerosol paints, shampoo, cologne, and talcum products

4http://previews.123rf.com/images/thirteenfifty/thirteenfifty1201/thirteenfifty120100337/12093449-can-of-spray-paint.jpg

Background Problems The Decision Ethical Dilemma Conclusion

Francisco Cevallos

• First General Manager

• 10 years of management experience in manufacturing

• Hired to set up the business

5http://www.leicestermercury.co.uk/images/localworld/ugc-images/275788/Article/images/19418435/4994214-large.jpg


Initial Investment

1. Old factory in Quito2. Hired 30 employees3. Purchased new machinery and

equipment (about $4.0 million)4. Set-up costs that included a $5

million insurance policy

• Total: approx. $6.0 million

6

http://farm8.static.flickr.com/7269/7464143826_2d02ffba37.jpg

http://hz00.i.aliimg.com/img/pb/323/749/468/468749323_732.jpg


PROBLEMS 7

Successful Years• Great success from 1995 to the

end of 1997

8

http://www.gdbinternational.com/paint/wp-content/uploads/2011/03/GDB0335.jpg

• By end of 1997, had 5 stores in Quito, and were suppliers to customers in other big cities throughout Ecuador

• Cevallos received congratulatory remarks from Board of Directors


Successful Years (2)

• Ecuador’s government expecting to invest heavily in construction

• Cevallos decided that in 1998, production should be doubled from 5 million units/year to 10 million units/year

9


Competition Moves In

• Cevallos did not consider effect that competition would have……..

10

http://www.pinturascondor.com/images/paint/generico.jpg

• Two weeks after accelerating production, Pinturas Condor (a major competitor) announced the start of operations in Quito

• Cevallos realized they were in trouble


Pressure from the U.S.

• Windsor Group decided to send Mary Petravsky, a senior level accountant to try and remedy the situation• CMA - Certified Management

Accountant• Member of IMA (Institute of

Management Accountants)

11http://dccorporateheadshots.com/wp-content/uploads/2012/05/Haase_Alice.jpg


THE DECISION 12

In Trouble

• Pinturas Condor (the competition) signed contract with government to be the sole provider in construction projects

• Cevallos remembered he had purchased an insurance policy…

13http://dccorporateheadshots.com/wp-content/uploads/2012/05/Haase_Alice.jpg

• By December 1998, Pinturas Windsor sales were down and inventory was huge……


The Accident• On March 25, 1999 (3 months after

Mary arrived), Mary picked up the newspaper to find that a fire at 3:00 a.m. had burned down half of the factory

• She was worried about how to communicate news to Windsor Group

• Cevallos claimed it was an electrical malfunction, however firefighters did not jump to a conclusion 14

http://www.nfa.com/pic12.jpg

http://murciatoday.com/images/articles/22322_two-injured-in-molina-de-segura-aerosol-factory-fire_1_large.jpg


The Accident (2)

• A few months later, investigation concluded that fire was caused by an electrical malfunction

• Cevallos and Mary met to discuss what to do with the $5 million, which the insurance company agreed to pay

• Cevallos revealed to Mary that he had been the one who caused the fire

15


AN ETHICAL DILEMMA 16

What Should Mary Do?

• Cevallos had behaved unethically and illegally….

• Mary knew she could lose her job if she didn’t save Pinturas Windsor• The $5 million was enough to save

the company from bankruptcy

17

https://nargaque.files.wordpress.com/2010/04/decision.jpg?w=300


Reference

• The Institute of Management Accountant’s (IMA) Statement of Ethical Professional Practice

• Principals, Standards and Guidelines

Four Standards

• Competence• Confidentiality• Integrity• Credibility

• IMA Statement of Ethical Professional Practice

18

http://www.imanet.org/PDFs/Public/Press_Releases/STATEMENT%20OF%20ETHICAL%20PROFESSIONAL%20PRACTICE_2.2.12.pdf

IMA Guidelines for Resolution of an Ethical Conflict

Follow employer’s established policies.

If this does not work, consider the following:

• Discuss the conflict with immediate supervisor or next highest uninvolved managerial level.

• If immediate supervisor is the CEO, consider the board of directors or the audit committee.

• Contact with levels above the immediate supervisor should only be initiated with the supervisor’s knowledge, assuming the supervisor is not involved.

Follow employer’s established policies.

If this does not work, consider the following:

• Discuss the conflict with immediate supervisor or next highest uninvolved managerial level.

• If immediate supervisor is the CEO, consider the board of directors or the audit committee.

• Contact with levels above the immediate supervisor should only be initiated with the supervisor’s knowledge, assuming the supervisor is not involved.

IMA Guidelines for Resolution of an Ethical Conflict

• Except where legally prescribed, maintain confidentiality.

• Clarify issues in a confidential discussion with an objective advisor.

• Consult an attorney as to legal obligations.

• Except where legally prescribed, maintain confidentiality.

• Clarify issues in a confidential discussion with an objective advisor.

• Consult an attorney as to legal obligations.

What Mary Did• Followed the IMA standards

• Revealed truth to Board of Directors of Windsor Group, as well as authorities in Ecuador

21



CONCLUSION 22

Conclusion• Ethical situations occur in

business.

• Follow your professions code of ethical conduct.

• Mary chose professional ethical conduct over keeping her job• Things turned out better than

she thought they would…. Returning to the US and later being promoted….

23



QUESTIONS 24

Pinturas Windsor A Failed Attempt to Save a Company John Ledgerwood, MSA, CPA, CMA, CFM, CGMA...

Documents

Transcript of Pinturas Windsor A Failed Attempt to Save a Company John Ledgerwood, MSA, CPA, CMA, CFM, CGMA...