Saturday, January 7, 2012

Quest Revenue Recognition Principle

This memo is the result of an examination of misstated revenue recognition in the financial statements of Qwest for the years of 2000 and 2001. Issues regarding revenue recognition according to GAAP and directory revenue recognition are addressed.  The memo will define the revenue recognition principle, describe Qwest fraud issues discovered in 2000, and address internal control deficiencies and ethics.  This case should serve as an example for fraud detection regarding revenue recognition.  The conclusion addresses possible changes to directory revenue recognition.      

Revenue Recognition Principle Defined

The revenue recognition principle states that revenues are recognized when realized or realizable and when earned; also, revenue from a transaction must meet both criteria to be recognized for recording in the financial statements.  Revenues are realized when products are exchanged for cash or claims to cash, and are realizable when related assets received are readily convertible to cash.  Revenues are earned when products are delivered or services are performed.  These principles are important in defining revenue recognition, which helps auditors identify fraud and misstatements.  Users of financial statements will have a better understanding of an entity’s economic landscape with these principles in place.  Not using these principle have lead to several methods of revenue inflation such as recording sales of unfinished products, recognizing shipments that never occurred, and early recognition of sales that occurred after the end of the fiscal period but booked in a prior period. 

 Qwest GAAP Noncompliance

Qwest upper management inappropriately mandated that the Colorado Springs Dex directory revenues be recognized in December, 2000 instead of January, 2001.  Qwest also changed accounting methods from GAAP approved amortized revenues, where straight line amortization is often used, to a point of publication accounting method (often used by newspaper media where most revenue is recognized at time of delivery) without disclosure.  Revenue recognition of Dex directory sales was not appropriate under GAAP because the principle requires transactions to be both realized and earned to be recognized.  Qwest recognized Dex revenue from their 2001 directory sales in December 2000 instead of January 2001 as scheduled.  This revenue was realized but not earned, which violates the principle for recognition in 2000 and also violates the SEC criteria for revenue recognition where delivery has occurred or services rendered.  This revenue should have been recognized in 2001 and the early recognition of sales that actually occurred after year-end inflated and misstated 2000 financial statements.  Qwest also failed to disclose on their 2000 Form 10K that the increase of $28 million in revenue and $18 million EBITDA, which accounted for 30 percent of Dex’s 2000 year-over-year revenue increase, was not earned in 2000 and would be deducted from 2001 revenues.  Qwest also practiced “gap closing” strategies of billing customers for 13 periods instead of 12- changing their initial contracts without consent.  Qwest was basically billing for more than what the customer ordered. This violates SEC criteria that states the seller’s price to the buyer is fixed or determined. 

Qwest Internal Control Concerns

Qwest failed to provide reasonable assurance regarding the reliability of financial reporting and compliance with SEC regulations by overstating Dex’s revenue recognition in 2000.  This failure demonstrates an ineffective system of internal controls.  An effective control environment consists of five interrelated components which consists of the control environment, risk assessment, control activities, communication and monitoring.  The components of internal controls can be defined as deficiencies by Qwest. 

The control environment sets the tone for an entity and influences the control consciousness of its people.  Qwest’s upper management set aggressive revenue targets which were not achievable by Dex without making misleading revenue disclosures from booking revenues which properly belonged in subsequent quarters. Officials at Qwest instructed Dex management to perform accounting changes that effectively transferred the following year’s revenues (earned in 2001) -to its current year (2000). Despite Dex management objections communicated to upper management, the discipline and structure of Qwest was to make revenue targets at all costs which encouraged the practice of overstating revenues thus violating SEC regulations by including unearned revenue recognition on the financial statements. 

  Upper management at Qwest failed to assess the risks associated with their activities. 
Control policies and procedures that would monitor and prevent revenues realized but not earned were not in place; the result was overstated financial statements.  When linking internal controls to financial statement assertions for revenue accounts, it is evident that several management assertions were incorrect and not corrected by controls.  False management assertions fell into the categories of accuracy, valuation and disclosure.  Regarding accuracy and valuation, the management assertion that all items are included in the financial statements at the right amounts was inaccurate because Qwest management recognized 2001 revenues in 2000.  Regarding presentation and disclosure (management’s responsibility for ensuring that disclosures are clear and mistake free) Qwest failed to disclose early revenue recognition and changes in accounting methods (from amortized to point of publication methods).  Poor internal controls and the lack of ethical standards by upper management lead to misstatements and fraud.  

Qwest Ethical Issues

Qwest’s senior management team exerted great pressure to meet aggressive revenue targets.  This “tone at the top” had more focus on meeting targets and less concern about ethical standards.  Tone at the top can refer to how an organization’s leadership creates an ethical environment in the workplace. Upper management's actions have a trickle-down effect on employees. If top managers uphold ethical values so will employees. However, if upper management appears unconcerned with ethics and focuses entirely on aggressive revenue targets, employees will be more likely to commit fraud and feel that their ethical conduct isn't a priority. Suffice it to say, employees will follow the examples of upper management.  Qwest’s tone at the top was unethical and created a high risk of financial misstatements and fraud.  In addition to the lack of integrity existing in Qwest’s control environment, management’s philosophy and commitment to competence was a myopic view of making the bottom line- which lacked concern regarding the consequences of overstated revenue recognition.  The structure and assignment of authority dictated the Dex management was to follow directives by Qwest’s upper management, despite Dex’s objections to unrealistic targets, accounting practices and disclosure. 


Point of publication methods are not allowed by GAAP, but maybe they should be considered, according to a report by Ernst & Young entitled “Media & Entertainment Revenue Recognition” (1).  Under current US GAAP, revenue generated from advertising included in the directories typically is recognized on the amortization method over the life of the directory, which is usually one year. With respect to contracts with advertisers, a directory publisher will have performance obligations to print an advertisement, distribute the directory and make available directories for the entire ad period of one year.  Qwest was wrong to use point of publication method and especially for changing accounting practices without disclosure. 

I believe Dex was wrong by changing accounting methods mid-year and recognizing revenues early in December 2000 as opposed to 2001.  However, I believe that control of an advertisement in a printed directory should transfer when the directory is printed and distributed.  If so, revenue will be recognized at the time of distribution. This would result in the majority of revenue being recognized in the early part of the contract when the directories are distributed, with some amount deferred and recognized as additional directories are distributed, according to Ernst & Young (1).  This would be a significant change in the timing of revenue recognition for printed directories as compared to GAAP’s current principle of revenue recognition.


 A balanced scorecard is a way for a business to measure its performance.  It is a methodological tool meant to help business manage their future growth, objectives and plans (4).   The balanced scorecard provides measures which help determine whether a set of goals have been met.  The tool was developed by Dr. Robert Kaplan and David Norton in 1992 as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executive a more “balanced” view of organizational performance (2).  The balanced scorecard evaluates activities in four categories: financial, customer, internal business processes, and learning and growth.  The balanced scorecard tracks the objectives, measures, targets and initiative of each subset.  It provides a framework that not only provides performance measurements, but helps planners identify what should be done and measured and enables executives to execute their strategies (2).  Both profit and non-profit organizations use this tool to align business activities to the vision and strategy of the organization, improve internal and external communications and monitor organization performance against strategic goals (1).  The scorecard has been advantageous to many businesses, but is no “cure all” (4).  This tool has limitations including costs and time needed to implement.  This paper will describe the advantages and disadvantages of using a balanced scorecard as a tool for strategic management.

The balanced scorecard has evolved to a full strategic planning and management system with many advantages.  Some of the advantages are realized by the planning and management of the four scorecard components which are the learning and growth perspective, business process perspective, customer perspective and financial perspective(4).  Understanding each of these components is necessary to see the advantages.

The learning and growth perspective includes employee training and corporate cultural attitudes related to both individual and corporate self improvement.   In the current climate of rapid technological change, it is becoming necessary for workers to be in a continuous learning mode.  Metrics can be put into place to guide managers in focusing training funds where they can help most (2).  Learning and growth constitute the essential foundation for success of any “knowledge-worker” organization and focus on this perspective fosters communication that allows workers to readily get help on a problem when needed (2).  The learning and growth perspective includes employee training and corporate cultural attitudes related to both individual and corporate self improvement.   This perspective covers the intangible drivers of future success such as human capital, organizational capital and information capital including skills, training, organizational culture, leadership systems and databases (3).  This perspective also addresses whether a company can continue to progress and be seen by customers as adding value through product or service innovation (5).

The internal business perspective refers to internal business processes.  Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements or “the mission” of the mission statement (2).  This perspective covers internal operational goals and outlines the key processes necessary to deliver the customer objectives such as employee satisfaction, product quality control and cost reduction (5-book).

The customer perspective refers to how well the organization is doing regarding criteria such as speed to market, service, quality and price (5).  This perspective is on customer satisfaction with the knowledge that if customers are not satisfied, they will eventually find other suppliers that will meet their needs.  Poor performance from this perspective is a leading indicator of future decline, even if the current financial picture looks good (3).  This perspective has measurable metrics which covers objectives such as customer satisfaction, market share goals as well as product and service attributes. 

                The financial performance perspective covers the financial objectives of the organization and allows managers to track financial success and shareholder value.  This perspective addresses the concerns of stockholders and other stakeholders about profitability and organizational growth (5).  This perspective also includes additional financial-related data such as risk assessment and cost-benefit data. 

                By looking at the four aspects of a company’s performance, one can get a balanced view of company performance.  The balanced scorecard provides a powerful framework for building and communicating strategy.  The business model is visualized in a strategy map which forces managers to think about cause and effect relationships (3).  This means that performance outcomes as well as key enablers or drivers of future performance are identified to create a complete picture of the strategy (3).  The mapped strategy improves communication and execution and allows companies to communicate strategy internally and externally. 

                The scorecard provides better management information by forcing organizations to design key performance indicators for their various strategic objectives which ensures that companies are measuring what actually matters.  The scorecard can provide improved strategic alignment with objectives.  In order to execute a plan well, organizations need to ensure that all business and support units are working towards the same goals.  Cascading the balanced scorecard into those units will help to achieve that and link strategy to operations (4).  Also, the scorecard can provide for better organizational alignment processes such as budgeting, risk management and analytics with the strategic priorities (4).  By using a balanced scorecard strategy, a company can be sure that any strategic action implemented matches the desired outcomes. 

                While there are quite a few advantages to using a balanced scorecard, there are also disadvantages.  Balanced scorecards take a great deal of forethought.  Also, the four areas covered with a scorecard do not provide all business information needs.  The financial information is limited and because of this, it is recommended that the balanced scorecard be part of a bigger strategy for company growth that includes meticulous accounting methods (4).  Finally, many companies use metrics which are not applicable to their own situation.  It is important when using balanced scorecards to make the information being tracked applicable to the business needs.

                There are additional concerns when using a balanced scorecard.  Some of the concerns include time needed for upkeep, high initial costs, a company verses profit development and metrics verses strategy approaches.  These issues are mostly cost verses benefit arguments which will merit the following explanations.          

                There is a great deal of time needed to maintain a balanced scorecard once in place partly due to the many different elements that go into creating a scorecard.  Once the scorecard is created, the business environment can change which will mandate changes to the scorecard.  If the company cannot put in the time to create and change the scorecard, it might not be a good solution for the business (6).

                Balanced scorecards have high initial costs.  Implementing a scorecard system can cost a lot of money in training time and consultant fees which are needed during the setup process.  The costs include training costs, software, facilitation, license fees, testing fees and labor needed to maintain the system (6).  In addition, there will be maintenance costs for both the software and training .  These fees can add up to a large sum.

                Company verses profit development can be an issue in the eyes of the stockholder.  Because of the high initial costs of the program in addition to with the time spent on developing employees, the balanced scorecard program may appear as if the company is not maximizing wealth.  Shareholders who want maximum profits may find the expenses of the scorecard wasteful, even if its use would be beneficial in the long run (6).

                Finally, there is the metrics verses strategy argument which does not support the balanced scorecard.  The balanced scorecard provides a top down overview of the entire company.  It does not, however, provide ideas to improve company performance (6).  The balance scorecard acts as a fact sheet, but requires that you analyze the facts and come up with an evaluation and strategy.  The scorecard will not solve all the company’s problems and it must be combined with a larger overall strategy to achieve potential benefits (6).

                Considering that there are various advantages and disadvantages of balanced scorecards, it is important to recognize that this tool can be very beneficial when integrated into a system of accounting.  If a company relies on the balanced scorecard entirely for performance metrics, they might not have visibility to all aspects of the business environment.  However, if the balanced scorecard is used as one component of an overall strategy for measuring the health of a business, the tool can provide beneficial results.  The balanced scorecard can assist management with a better understanding of important aspects of the organization which could foster improved product, service and financial plans.

Wednesday, December 14, 2011

The Ethics of Outsourcing

The ethics and morals of US outsourcing is multifaceted with political, social and economic divisions which challenge its place in the U.S. economy. Many ask if outsourcing is a way for corporations to earn bigger profits while others state it is a necessity in the global economy for survival. Some question if outsourcing eliminates or creates jobs. Economist challenge whether outsourcing will affect the infrastructure of our society and what effect it will have on the global community. From an ethical perspective, some U.S. companies are engaged in outsourcing as “Friedman Egoist” concerned only about themselves and profits, but many companies use outsourcing for utilitarian competitive survival reasons. There are many contrasting views on outsourcing rightful place in the U.S. economy and the global marketplace. Explanation is necessary to understand what outsourcing is, its advantages and disadvantages, the economic impact of outsourcing and finally whether corporations should be morally engaged in its practice. My intention is to present the facts about outsourcing and draw the conclusion that outsourcing at its current pace is ethically wrong because it will hurt future generations of the U.S. economy.

Outsourcing is contracting overseas companies to do specific functions which fit a certain criteria. Mostly, the functions being outsourced are considered non-core to the business and the criteria might be where the activity is not central to generating profits, the job is routine, or the task needed is only temporary (3). Some of the most common forms are information technology outsourcing (ITO) and business process outsourcing (BPO). Business process outsourcing involves call centers, human resources, accounting and tax preparations, and claims processing outsourcing. Many of these outsourcing agreements  involve contracts worth millions of dollars (5). The process of outsourcing involves the following stages:  (A) strategic thinking involving outsourcing role, (B) evaluation of which outsourcing projects, (C) contract development and (D) governance of the working relationship (3). In most cases, success depends on executive level support, good communication and management of service providers. There is strong public opinion regarding outsourcing. Many feel that outsourcing has a bad effect on job disruption and security. However, supporters claim outsourcing will bring down prices providing economic benefits to all. It is necessary to review both the advantages and disadvantages of outsourcing to better gauge its ethical practice.

Advocates of outsourcing state it can be a strategic tool for making a business more profitable, open up opportunities of growth and financial stability and will lead to more Americans holding jobs at higher levels. Over 70% of U.S. executive interviewed said their companies presently outsourced one or more business processes to external service providers (4).  A Gartner Group interview showed 84% of large company CEO’s are satisfied with their outsourcing experience (4). Many believe market perception has shifted from outsourcing as a way for companies to meet short term financial objectives to a technique for strong companies to improve competitive position where outsourcing is essential for prosperity in the 21st Century.

Considering the many factors that motivate companies to outsource, one of the most significant is cost savings. Many times, the reduced costs increase profits and the lower prices are passed to the consumer. Another advantage of outsourcing is that people and infrastructure can be focused on the core business. Cost restructuring is yet another advantage where there are changes to the balance of fixed costs to variable costs making variable costs more predictable.  This ratio change can improve a company’s credit rating. When a company uses the right service level agreement, many companies claim quality is improved. Some of the factors that improve quality consist of outsourcers having access to wider experience and a larger talent pool. A key advantage to outsourcing might be reduced time to market where foreign suppliers are capable of accelerated production through specialization (13). Tax advantages are yet another advantage of outsourcing where many companies offer tax breaks for moving manufacturing operations to their country. Finally, many executives claim that when outsourcing routine projects, they have more leisure time to be with their families and loved ones (2).

Outsourcing can have a negative influence on productivity where on the surface it appears productivity is improved simply because workers are paid less. This is viewed as “non-real productivity” where production is maintained with reduced costs but there is no resource development for improved technology (12). “Real Productivity” would be increases in productivity due to better tools or methods which would enable an employee to do more work (12). The result of choosing non real over real productivity is that a company can fall behind advances in technology and can become obsolete. Also tied to productivity is that staff turnover is higher with many overseas outsourcers. This high turnover translates to a lack of exponential increases in employee knowledge which could prevent consistency in quality and productivity. To alleviate some of the potential risks in outsourcing, it is advised to use the Freedman model having the outsourcing as an important stakeholder with specific management guidelines and contracts in place to consistently monitor security, quality and production.

      Under the Friedman model where a company’s primary objectives are to sell products and make profit for the shareholders, outsourcing could play a vital role through cost reductions.  But the benefits of outsourcing may be outweighed by not supporting the U.S. economy and can have a negative economic impact on future generations. Many Americans who are in poverty and willing to do minimally skilled jobs find it harder to find employment because of outsourcing. Poverty reduces consumer spending and tax revenues. There is data that provides evidence that many lower income jobs are lost forever (2). A study of manufacturing jobs by the University of California-Santa Cruz found that in a period of 20 years, in the labor intensive industries such as leather, textiles, footwear and clothing, about one third displaced workers could not find reemployment within a three year period, and even those people who did, about half of them experienced wage cuts by at least 15%. (8). Many computer, technology and accounting middle income jobs are now being outsourced. These areas of outsourcing are not leaving enough jobs for U.S. workers.  A person without a job can’t buy a home or spend money and less buying can lead to less production of goods which ultimately leads to more unemployment (8). One other negative effect of outsourcing is the loss of income by local, state and federal governments. The reduction of jobs means less payroll taxes and less contributions to Social Security and Medicare. The costs to the government includes unemployment benefits and the unemployed lower spending power results in reduced sales and other tax revenue. 

      Outsourcing is losing skilled labor positions in the United States and also the monetary gains with this labor. Manufacturing jobs create national wealth where service jobs absorb wealth and outsourcing has reduced manufacturing jobs but has increased service jobs. The loss of manufacturing jobs has reduced the industrial infrastructure with the closing down of American factories and then exporting the capital to other countries. This loss of capital is then not available for expanding the U.S. economy. According to research data, more than 400,000 U.S. jobs have moved abroad and the total is estimated to hit 3.3 million by 2015 (9).   

            Outsourcing is rapidly eroding the U.S. status of being a superpower.  Beginning in 2002, America started running trade deficits in advanced technology products with Asia, Mexico and Ireland. Since these countries are not leaders in advanced technology, the deficits obviously stem from U.S. offshore manufacturing (11). One could say that the U.S. is giving away its technology.  This technology is rapidly being captured, while U.S. firms reduce themselves to a “brand name with a sales force” (11).

There are many ethical questions that face U.S. corporations that use outsourcing. For example, international competition has forced many companies to take drastic measures just to survive which includes cost cutting via outsourcing. One can argue that it is more ethical to do whatever is necessary to save U.S. jobs and profits, rather than go out of business. From a utilitarian perspective which is doing the “greatest good for the greatest number” (14), taking measures that can protect existing employees from ceased operations is ethical. But Kantian ethics would argue that the employees are merely a means to an end and are not treated as the end, meaning the employees are simply a means for the corporation to make profit. This view can be supported by a contradiction in many company hand books where they claim to value their employees, yet outsourcing contradicts these statements and can destroy company credibility. 

      Consumers typically get the most benefits from cost savings and a greater variety of goods that international outsourcing affords, so outsourcing is doing something positive for the masses. One can charge that this makes it ethical. From a utilitarian perspective, it does. One could also argue for the foreign outsourcing employees. Considering the abundance of wealth in the U.S., you can argue it is good to provide jobs and economic infrastructure for these low income foreign workers instead of financial aid. Some may contend it is virtuous and just to spread the abundant wealth America posses to countries in need. Others will argue that laws are needed prevent these actions. Outsourcing builds foreign skills and infrastructure while reducing the same in the U.S. and many want laws to protect the American manufacturing base for the purposes of national and economic security (6). There are several very profitable U.S. companies, with Wal Mart as an example, that use outsourcing to enhance their margins for the sole purpose of making more money. Some challenge if this is ethical. This is perfectly acceptable according to the Milton Friedman business model. Friedman believed that the responsibility of business is to: “conduct the business in accordance with their desires (employers), which generally will be to make as much money as possible while conforming to the basic rules of the society” (14). Many question if everyone from abroad prospers from outsourcing. Not all people in other countries economically benefit from outsourced jobs, and some companies aren’t dedicated to providing humane working conditions. Outsourced work may be performed by children, or inhumane working conditions. Abuses of foreign employees might not benefit U.S. trade or political relationships and some would challenge the morality of enabling foreign companies that treat their employees inhumanly (10). The argument for “humane” treatment of employees gets complicated when dealing with foreign cultures where ethical relativism may dictate that employee treatment is humane by the foreign country’s culture. Cultural differences must be understood when dealing with this issue.

      Outsourcing can play a role in our educational system. The long term effects have not been responsibly studied. Some educators ask if students should continue studies in computer programming or software development with the knowledge that many of these jobs might be outsourced. Another middle income vocation experiencing changes is the field of accounting.  Lou Dobbs reported recently on CNN, “tax experts estimate between 150,000 and 200,000 American tax returns were prepared in India this year” (7). Our colleges and universities may find a drop in enrollments by students in these fields based on a reduction of job opportunities because of outsourcing. Other middle income outsourced jobs include architecture, engineering design, news reporting, stock analysis and medical and legal services. Many of these middle income jobs pay a bulk of tax revenues to fund U.S. education, health, infrastructure and Social Security. The ethical dichotomy from the utilitarian perspective could be that outsourcing is efficient and reduces costs which benefits the masses, but also reduces job opportunities which could hurt the masses through unemployment, lower tax revenues and an eroded manufacturing infrastructure.  

      Outsourcing is a very difficult issue with advantages and disadvantages, but will probably remain and play a vital role in business and our economy. Virtually no one, on any side of the argument concedes that outsourcing can be eliminated completely (9). There are those who feel that corporations are evading taxes and depriving the government of needed money and suggest corporations should be taxed for outsourcing, and rewarded for keeping jobs in the United States. Others feel the temporary loss of jobs will be followed by greater economic growth in the U.S. and could ultimately be worth the cost of job displacement. 

      In conclusion, despite the fact that outsourcing benefits the masses through lower prices and helps corporations with increased profits, its use at the current level will hurt the U.S. economy and this damage will offset outsourcing advantages. The updated ethical view of utilitarianism states “the goal is to maximize the utility of all persons affected by an action or policy is to maximize the utility of the aggregate group” (14). This view’s application to outsourcing shows that U.S. job losses which increase poverty, decrease government tax receipts and erode the manufacturing infrastructure will not “maximize the utility of all persons.” Kantian ethics state that persons should be treated as ends and never purely as means to ends of others.  Considering that outsourcing is causing unemployment at lower and middle income brackets, reduced prices are meaningless for the unemployed who have no spending power so the end users are disadvantaged by outsourcing.  Also, the working conditions for many of these outsourced employees is inhumane with very few rights to a safe work environment, so these workers are treated as means to an end which is a lower cost of goods. This action goes against Kantian ethics. 

Laws surrounding outsourcing’s current use must change.  Supporters of the Friedman business model will argue that by virtue, it is morally appropriate and just to use outsourcing for maximum profits respecting management’s fiduciary relationship with stockholders. They argue that outsourcing is necessary for survival.  We must change the laws which will make outsourcing appear less attractive.  The U.S. should increase taxes for all goods imported through outsourcing.  Also, taxes should be significantly reduced for manufacturing corporate income tax and there should be an end to the double-taxation of foreign derived revenue (taxed once in the nation where the revenue was raised, and once from the U.S.) (14). Proposed tax changes will alleviate corporate outsourcing and make the U.S. more attractive to foreign companies. The time for Laissez-Faire policies, or doctrines opposing government regulation, are a thing of the past.  The U.S. will need to adopt Modified Market capitalism, which controls the human desire for riches and greed through more regulation than the “let alone” philosophy of Laissez-Fair (15). With these laws in place, in addition to restrictions for labor union wages, the U.S. will be able to manufacture products at competitive costs domestically.  This cost benefit will appease Friedman model activist to choose U.S. manufactured goods, save U.S. jobs, increase government tax revenues and rebuild the manufacturing infrastructure. 

The short term effects from higher taxation for outsourced products could be higher prices and inflation.  However, one could induce that with employment protections in place and lower unemployment, inflationary prices could be afforded by working individuals.  The ethical dichotomy of what benefits the masses between lower prices with higher unemployment verses inflationary prices with lower unemployment remains. I contend that the current use of outsourcing is creating poverty and eroding our middle class, breaching our national security and the right to work.  From a utilitarian perspective and the good of the majority, with all things taken into consideration, I feel that the current use of outsourcing is not ethical if it will ultimately destroy the United States economy. Reducing outsourcing grip on U.S. commerce is the right thing to do morally and ethically to protect future generations of American society.