Stacking the deck.

Say you get an offer from vendor for a service that your company purchases already. The hook: The competing vendor will contribute to your favorite charity. Can you make everyone happy? Read what two financial executives and an ethicist say they'd do in this hypothetical situation, in the third of a series of case studies in ethics.

THE QUANDARY

Beth Carpenter returned from a business trip and was surprised to find a message from a major credit-card company. Fearing the worst about her personal finances, she immediately phoned and learned the call was from Doug, a salesman marketing his company's purchasing credit cards. Beth was a little puzzled, even miffed, that as CFO of Anne Owens, Inc., she was receiving sales calls. But she soon realized why.

"We've got a new service that I needed to share with you directly," Doug explained. "I did a little perusing of the Internet and learned that you're both CFO of Anne Owens and a charter sponsor of the local symphony orchestra." Beth was at once taken aback that a salesman could glean this much from the Internet and impressed with his marketing skills. Doug continued, "My company is offering a new opportunity that can serve Anne Owens' bottom line, and at the same time benefit a charity like the symphony."

"Is this one of those affinity programs?" Beth asked. "In a way, yes," Doug answered. "You see, we know Anne Owens must take advantage of the flexibility and convenience of purchasing credit cards. Sure, these cards represent only a small portion of your purchases, but my company wants to earn your business. With this new service, we promise two fantastic benefits. Anne Owens receives no annual fees, which no one else offers. Plus, 1 percent of purchases, up to $100,000 per year, will be donated to the symphony in your and/or Anne Owens' name. Given your relationship to the symphony, Ms. Carpenter, you can see why it was so important that I reach you instead of your purchasing manager!"

Beth's gut reaction was sheer glee. As a friend of the symphony, she was upset by recent talk of the excellent orchestra's demise due to a shortage of contributions. On the other hand, Anne Owens' current purchasing card provider, while requiring annual fees, had been a good vendor. Beyond that, Anne Owens had consistently, albeit politely, declined every plea by Beth for the company to contribute philanthropically to the symphony. As Beth's mind raced, Doug rang in, "So, what do you think of this great deal, Ms. Carpenter?"

Should Beth pursue Doug's offer? If so, does it matter if she tells Doug to present the symphony contribution under her name or Anne Owens, Inc.? Would the ethics of the case change if the contribution were capped at $5,000 per year?

A CLEAR PATH by Gary Hammer Vice president, finance, and CFO DAC Vision Garland, Tex.

This case study introduces the age-old topic of the gray area that sometimes exists between business issues and personal issues. From my perspective, I see a couple of key facts that we should focus on in this case.

First, Anne Owens utilizes a purchasing credit-card program in order to streamline its procurement activities. The economics of this program must afford Anne Owens with a viable program at a fair price. There are many purchasing credit-card vendors who might be able to meet Anne Owens' objectives for this program. Beth Carpenter received a telephone call from one possible vendor.

Beth is an active participant in a charitable organization, the local symphony orchestra. She's submitted a number of contribution requests to Anne Owens in the past to support the orchestra, and the company has declined each of these requests. Therefore, I believe there is a clear path for Beth to take from an ethical perspective.

I believe she should forward Doug's offer to the appropriate procurement official within Anne Owens. The official can then make a thorough economic evaluation. The fact that Doug's company can offer a no-annual-fee program and still afford a significant charitable contribution leads me to both question the viability of this program and also challenge Anne Owens' current purchasing-card program vendor. At a minimum, the information provided gives the company some excellent negotiation tools.

Beth should inform Doug of her actions and decline further direct involvement. Under no circumstances should she force Anne Owens to change vendors and accept a contribution to the local symphony under her name. In my opinion, this would be a serious ethical breach.

If the contribution were capped at $5,000, it would introduce a more de minimis nature to the issue, but the ethical considerations would be the same. Anne Owens has already made clear its intentions not to support the local symphony in a financial way. Beth has a duty to uphold this corporate decision through her role as CFO.

A PURCHASING PARADOX by Scott Parker Assistant treasurer James N. Gray Construction Co. Lexington, Ky.

The opportunity presented to Beth Carpenter represents somewhat of a paradox. On one hand, Beth should be concerned about any appearance of favoritism toward a vendor that supports her favorite charity, but on the other hand, the vendor shouldn't be excluded from consideration just because this personal connection exists. It would be nice to know if Anne Owens is a public or private company, because the answer might vary slightly. However, in general, I'd suggest the following course of action.

First, I think Beth has an obligation, to some extent, to bring this apparently very competitive vendor to the attention of Anne Owens' purchasing department (or whatever forum exists for considering such vendors if the company doesn't have a formal purchasing department). In an effort to ensure there's no misperception about her involvement, she should disclose how she came to know of the vendor and the potential conflict of interest she has with regard to the local symphony orchestra, regardless of the amount of the contribution involved. This would allow the vendor's offer to be considered according to standard company policy and procedures with regard to price, quality of service and other appropriate factors.

While on the surface the offer sounds a little too good to be true - how can this card provider charge no annual fees, yet also contribute 1 percent to charity? - with normal due diligence Anne Owens should be able to determine if a more formal proposal from the vendor is warranted. If Beth is usually involved in selecting a vendor, she should excuse herself from the process in this instance to prevent any appearance of conflict of interest.

Second, assuming Anne Owens has, as part of its strategic plan or corporate mission statement, the objective of contributing to the communities in which it operates, then Beth should once again suggest (via the appropriate channels) the idea of contributing to the local symphony through this vendor's offer. By doing this, she'd "cover all the bases," so to speak, thus ensuring that both aspects of this opportunity have been subjected to the company's normal policy and procedures.

Certainly, should Anne Owens choose to pursue the offer, any contribution should be made in the name of the company and not in Beth's name personally (again, regardless of the amount). At any level of contribution, it would be inappropriate for the gift to be made in the name of an individual, since it was the efforts of the company as a whole that allowed the contribution to take place.

In summary, given Beth's position as CFO and the type of offer made to her, she should take all measures to protect herself from corporate scrutiny. As the CFO, Beth is most certainly held in high regard, and others in the company place great trust in her. By taking the steps described, she'll only reinforce that perception.

THE WRAP by David C. Smith President Council for Ethics in Economics Columbus, Ohio 

This case scenario, about a vendor using the promise of a charitable contribution as a "hook," highlights two key points for ethical decision-making. First, conflict of interest may exist even when it's not a question of acting for personal financial gain. Second, before we can make good decisions, we have to decide what the central issues and primary consequences are and focus on those matters, rather than on secondary considerations, such as the possibility of capping the contribution at $5,000 per year.

Our executive respondents address these points. They warn Beth not to act precipitously on her immediate feeling that this could be a win-win situation. Aggressive salesman Doug has gone over the head of Anne Owens' purchasing manager to reach Beth, but Beth would surely damage mutual expectations of responsibility if she took the decision out of that manager's hands.

Beth also has an opportunity to advance Anne Owens' reputation for good ethics by explaining politely to Doug why she can't go along with his end-run proposal. If she does this, she not only averts a potential conflict of interest but actually sets an example for other employees at her company and furthers the development of an ethical corporate culture.

The primary question for Beth and her colleagues must be: Is Doug's offer an attractive money-saver for Anne Owens? It looks good, but both of our respondents are rightly skeptical of a "free lunch" and call for careful scrutiny of a formal proposal. Instead of charging no annual fees, perhaps Doug's company charges a higher rate of interest or calculates balances in an unfavorable way, or waives annual fees for the first year only.

Let's assume, however, that Doug's offer turns out to be as good as it looks at first glance. What about the prospect of a donation to the symphony in Beth's - or Anne Owens' - name? For Beth to claim recognition in her own name would be a serious, dishonest act, even if the contribution is capped at $5,000 per year.

For the company, Doug's offer may be subject to negotiation. Perhaps the 1 percent of purchases could be donated to whatever charitable and philanthropic organization the company would designate through its usual decision structure. Of course, in internal deliberations Beth should feel free - even obliged if she's a trustee of the symphony - to advocate her particular cause.