Am I cheating stock holders if I don't bring this to management's attention?

Question

I am taking a Business Organization and Management course, and one of the questions we have to answer (for homework) is:

You are aware of fellow workers in your office who are taking pencils, paper, tape, and other such items for their own personal use. It probably amounts to $50 per year for each employee, but about half the office workers are doing it. Are you cheating stock holders if you don't bring this to management's attention?

I just want an idea as to why or why not I would be cheating stock holders. I don't know if I am, or if I am not since I am not familiar with how stealing supplies affects stock holders of the company.

Answer 1

Everyone has given you an excellent answer.. but they skipped one thing. Morally, and ethically, theft is theft and you should keep YOURSELF clear by NOT stealing anything from the company.

I was the owner for many years of a business and I know there is a certain amount of  "shrinkage" but if someone did steal on a consistent basis I'd fire them for it...and that sets an example for the rest of the employees.

To my way of thinking its on par with having someone else punch in on the time clock because you were 30 minutes late to work.. a def. no-no

Answer 2

From a strictly dollars and cents points of view, yes, you are cheating stockholders.  Supplies cost money and are asn expense.  Expenses reduce the company's profits.  Profits drive stock price and dividends.  By reducing profits through theft, stockholders will not see their stock appreciate as much nor receive any added dividends as a result of lowered profit.

From a psychological/behavioral point of view, it could be that the small ($50) level of theft translates into an extremely small part of the overall expense of the company.  If you reported the thefts, one of two things could happen - the employee(s) get fired or they get reprimanded.  If they get fired, it could actually cost the company more in recruitment costs to backfill the positions, thus lowering stockholder value comparative to the theft.  If the employees got reprimanded, it could cause hard feelings (Big Brother watching) which would have th effect of reducing morale and possibly productivity - reducing stockholder value if the lowered productivity was greater than the savings from stopping theft.

Ethically, one should never steal, so it should be reported.

Answer 3

It costs the company money to buy this stuff, and since the company is public, the shareholders are paying for it, thus, technically their are being ripped off.

I guess you could report it to management. However, everyone in the office will be quite upset when their are being reported. Technically they should not take the items that are not theirs and make it personal use.

Answer 4

Yes it cheats the stockholders.  The company has inflated expenses, lower profits, etc.