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Empress Luxury Lines Case Analysis

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    To provide background regarding the Empress Luxury Lines case, in the case Kevin Pfeiffer, a computer technician initially told Antonio Melendez that it appeared that top management found a way to fund the computer system upgrade that he requested two years prior. The beginning of this originated from problems incurred with the computer system when it was hit by a power surge from fierce thunderstorms from the night before. When this occurred, Phil Bailey, who was Kevin Pfeiffer’s supervisor was instructed to observe the damage to the system from the thunderstorm and report back to him.

    Once this request was made, Kevin Pfeiffer reported back to Phil Bradley and instructed that the damage to the underground wires and computer circuits could be repaired for about fifteen thousand dollars. Once Kevin Pfeiffer made these observations, Phil Bradley did not appear happy and simply instructed Kevin Pfeiffer to go to the reception area while he called Roger, who was the chief financial officer, and also Antonio Melendez’s superior.

    After this was done, Phil Bradley called Kevin Pfeiffer back into his office and instructed him to dig up nearly all of the underground wire and cable and then haul it all off prior to the arrival of the insurance adjustor. Carrying out this task would result in a damage estimate of roughly five hundred thousand dollars, which of course is much higher than the amount Kevin Pfeiffer estimated based on the true damages.

    Phil Bradley’s primary purpose for instructing Kevin Pfeiffer to do this was to simply help obtain insurance funds for damage to the current system to help cover the costs of a new system. In response to Phil Bradley, Kevin Pfeiffer refused to carry out the task, though he was a new hire and technically on probation. Antonio Melendez congratulated Kevin Pfeiffer for his refusal, though in the end, it did not really matter since another individual, Matt, was called upon to do the task. Antonio Melendez saw the motivation behind the whole scam that Phil Bradley was trying to pull.

    From Antonio’s observations, during the 1990’s, Empress increased its fleet of ships in respond to a healthy demand for its luxury cruises during the stock market bubble. As one knows, due to environmental factors such as the stock market bubble and terroristic events that occurred on September 11, 2001, demand decreased. In addition to this, in 2005 many hurricanes hit which caused Empress to refund many of the checks for their Caribbean and Gulf cruises, while coping with steep increases in fuel costs at the same time.

    With this being said, the sagging of earnings was the primary reason why Antonio Melendez’s request for a computer system upgrade went unnoticed. Antonio Melendez was faced with a difficult situation in that he realized that he could face consequences about the measures being taken by Phil Bradley and Roger. One thing that Antonio Melendez did know was that since taking the job, Empress had successfully defrauded insurance companies before, though he dismissed these in the past due to the fact that the occurrences happened before his arrival.

    Now, Antonio Melendez was not so sure these concerns should be dismissed. Within the company, no mechanism was in place to report wrong-doing internally, and no protections were available for whistle-blowers. Antonio Melendez did not feel confident that, even if bypassed by the chief financial officer that he would find upper level management all that eager to thwart the scheme. His gut feeling told him that the person most likely to be penalized internally was the whistle blower. Kevin Pfeiffer was faced with a difficult task as well.

    He debated as to whether just call the insurance company and inform them of the situation; however, he decided to go to Antonio Melendez first. Antonio Melendez was faced with the situation, being Kevin Pfeiffer’s superior as to whether to instruct Kevin Pfeiffer to report Empress to the insurance company, or rather, to treat the conversation between he and Kevin Pfeiffer as confidential and deal with the situation himself, therefore, only putting his position in jeopardy. Overall, there was a high degree of personal risk for Antonio Melendez and Kevin Pfeiffer.

    In addition to this, there was a low probability that the problem would actually be addressed; therefore, Antonio Melendez was concerned about whether or not he should just sweep the issue under the rug. In the analysis of this case, the first issue to be addressed is what obligations Antonio Melendez has to his subordinate, Kevin Pfeiffer if he uses the utilitarian approach to decision making. Before applying this approach to the situation between Antonio Melendez and Kevin Pfeiffer, one must first have an understanding of what the utilitarian approach involves.

    To define, as Daft (2010) states, the utilitarian approach is “the ethical concept that moral behaviors produce the greatest good for the greatest number” (p. 132). This approach to decision making was espoused by philosophers Jeremy Bentham and John Stuart Mill (Daft, 2010). When applying the utilitarian approach, the decision maker is to consider the effect of each decision alternative on all parties and select the one that optimizes the benefits for the greatest number of people.

    In the Express Luxury Lines case, Antonio Melendez’s obligation to Kevin Pfeiffer can be looked at in two ways if he were to use to utilitarian approach. If Antonio Melendez applied the utilitarian approach, he would be basing his decision of what obligations he has to his subordinate based on what is good for the greatest number of people. When one considers what the greatest number of people actually consists is, one can view it as if the number of people in the company, being Empress Luxury Lines, or the number of people working in businesses in general. Both examples shall be examined.

    If Antonio Melendez perceives doing what benefits the greatest amount of people as only the people working at Empress Luxury Lines, Antonio Melendez’s obligation to Kevin Pfeiffer using the utilitarian approach is not every existent. He would not have any obligation to fight for him. By using the utilitarian approach in this scenario, Antonio Melendez would be inclined to just turn a blind eye to the whole situation, though he may view it as wrong, since it would help out the company as a whole with generating almost a half a million dollars to perform system upgrades that would be beneficial to the company.

    In turn, this may end up saving jobs since Empress Luxury Lines would not have to cut other costs in order to someday obtain the system that Antonio Melendez wants to upgrade to. If Antonio Melendez views the people working for Empress Luxury Lines as the group of people considered to be the greatest amount of people, Antonio Melendez is likely to tell Kevin Pfeiffer that he is on his own and that he agrees in fraudulently claiming more damage than what was actually done for the mere fact that the extra money would help the company, along with its employees.

    If Antonio Melendez perceives doing what benefits the greatest amount of people as everyone working in business, he is likely to inform the insurance company or another member of upper management or possibly a board member of what Phil Bradley and Roger wanted Kevin Pfeiffer to do, which ultimately was done by Matt, being causing more damage than what was actually incurred.

    The reasoning for this is that if Antonio Melendez viewed the greatest amount of people as the group of people working in businesses in general, rather than just in his own organization, he would likely believe that by making fraudulent claims, it would lead to the cost of insurance coverage rising for companies in general, and especially neighboring companies located in close proximity to Empress Luxury Lines, because they may be viewed as higher risk.

    It is logical to think that if there was a great deal of damage done to a company due to a weather event in a certain area, other companies located in close proximity would be seen in a high risk category when determining insurance premiums. Therefore, this would be a financial burden for surrounding companies and could hurt their businesses along with their employees. The second issue to be addressed is what obligations Antonio Melendez has to his subordinate, Kevin Pfeiffer if he uses the individualism approach.

    Before applying the individualism approach to this situation, it is necessary to state that the individualism approach contends that acts are moral when they promote the individual’s best long term interests (Daft, 2010). By using the individualism approach, individuals calculate what has the best long term advantage to themselves as a measure of a decision’s individual goodness (Daft, 2010). Essentially, by using the individualism approach, the individual would take the action that is intended to produce a greater ratio of good to bad for the individual compared with other alternatives (Daft, 2010).

    As Daft (2010) states, in theory “with everyone pursuing self-direction, the greater good is ultimately served because people learn to accommodate each other in their own long-term interest” (p. 133). Many think that individualism leads to honesty and integrity because that works best in the long run. People believe this because it is viewed by many that lying and cheating for short term gain only causes others to lie and cheat for their own short term gain.

    As Daft states, individualism, “ultimately leads to behavior toward others that fits standards of behavior that people want toward themselves” (p. 133). If Antonio Melendez employs the individualism approach in regard to the obligation he has to his subordinate, Kevin Pfeiffer, it is likely that he would encourage Kevin, and join Kevin in fighting against the fraudulent activity of trying to assist in making a false claim against the insurance company.

    The reason for this is that making a fraudulent claim is not in the best interest of Antonio Melendez, the individual, or Kevin Pfeiffer as well. One may initially think that making the fraudulent claim is in the best interest of Antonio Melendez, because it will allow Empress Luxury Lines to receive enough funding to obtain the system upgrades it did not have funding for, however, this is only a short term incentive. This does not represent Antonio Melendez’s best long term interests or Kevin Pfeiffer’s best long term interests.

    If the fraudulent activity is committed, Empress Luxury Lines will receive an extra half a million dollars and will ultimately have the funding to pay for system upgrades, however, the upgrades that the half a million dollars would fund would eventually become obsolete. Therefore, with this being said, at some point in the future, Empress Luxury Lines would need system upgrades once again. In addition to this, committing the fraudulent activity encourages dishonest behavior throughout the company.

    If this type of behavior is encouraged, it only sets an example for Kevin Pfeiffer that committing fraudulent activities is acceptable, and if Antonio Melendez is his superior, it could be likely that Kevin Pfeiffer could commit fraudulent activities against Antonio Melendez in the future if this precedent is set. As Daft states, individualism, “ultimately leads to behavior toward others that fits standards of behavior that people want toward themselves” (p. 133).

    Therefore, since committing a fraudulent activity is not something that Antonio Melendez would want done to him, it is likely that he would encourage Kevin Pfeiffer to fight against making a fraudulent claim and join him in doing so. In addition, it is in their best long term interest because even if it leads to adverse consequences by Empress Luxury Lines, they will be able to know that they did the right thing, and perhaps the insurance company that Empress would have defrauded would hire both Antonio Melendez and Kevin Pfeiffer if they reported activity that led to them saving half a million dollars.

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