Procomp Case

1) What were the key factors leading to the unethical business practices at Procomp?

The key factors leading to the unethical business practices at Procomp were the following:

• The unethical corporate culture. Procomp had a culture where engaging in unethical conduct was encouraged from top level management. For instance, Sophie Yeh, Procomp’s CEO, ordered employees to falsify shipment records and then persuaded them to conceal the scam with large cash incentives. She set an unethical tone for the business and employees followed her lead.

• A lack of independence in Procomp’s board. Many of the board members were Yeh’s family and close friends that made easier for Yeh to manipulate the actions of the board and to cover up illegal activity.

• Absence of Internal Audit Committee. Instead of having an Internal Audit Committee, the company invited supervisors to oversee the running of the board and investigate the company finances. However, they were not independent from Procomp.

• The compensation system adopted at Procomp. Even though “low base salary with higher stock bonus” incentive scheme was adopted by many IT companies in Taiwan at that time, I believe this kind of compensation approach contributed to the unethical business practices that took place at Procomp. It may work in the companies with high ethical standards of business practice, but not at Procomp where employees were encouraged to act in an unethical way to receive a higher stock bonus.

2) Why was there no whistleblower reported in the Procomp case? What are the problems or ethical concerns in whistle blowing?

There was no whistleblower reported in the Procomp case mainly because of conspiracy between the top level management and large monetary incentives provided to employees for acting unethical and concealing scams. Company’s executives had been colluding for years to overstate sales revenue, manipulate stock prices, illegally leverage assets and arrange bonds through fictitious companies....