RESOLVING ETHICAL BUSINESS CHALLENGES *
David Hannigan had come far since he started working at a subsidiary of Emper Corp., a manufacturer of automobile parts. He began as a line manager after graduating from UCLA four years ago. His skills at maintaining efficiency, his leadership, and his repartee with the factory workers soon gained the attention of management. Even the lowest factory workers seemed to respect David for his caring attitude and his ability to empathize with employees. While he made it clear he expected hard work, David had the ability to make every member of the factory floor feel like their contributions mattered. He shot up through the ranks and was recently promoted to Director of Personnel of this subsidiary when the previous director retired. In the entire history of the firm, nobody had moved through the ranks so quickly. David even received a letter of congratulations from the CEO of Emper Corp. after his promotion was announced. David was confident that within a few more years, he would be able to secure a highlevel job at the corporate headquarters in Chicago. A few months into his new position, David had lunch with a few key personnel from the company. One of them included Vice President Stanley Martin. Stan began the lunch meeting by praising all of them for their success. Later into his talk, he said, “You all know Emper Corp. wants to increase revenues and give big bonuses to as many employees as possible, but we need to become more efficient. That said, corporate decided the amount of automation in some of our factories, namely this one, needs to be increased.” Jane Newton from the accounting department replied, “But the cost and accounting analyses we sent to headquarters showed it wouldn’t be profitable to make changes like that in this particular plant. Why did they pick this one?” “Apparently,” replied Stan, “Top management wants to test robots and all the high-tech gadgets at one factory to see if they increase product quality and pay for themselves. They think that in the long run, stockholders will benefit from automation. Anyway, the decision has been made, and it’s our job to make it work. We’re going to have to sell the work force and the community on the decision.” David knew what this meant. He replied, “That won’t be easy. Hundreds of people are going to lose their jobs, and we are the largest source of employment for this town.” Stan’s reply was pleasant, yet forceful. “Some of the factory people will be able to stay on if they get additional training. We can convince the workers and the people in town that the decision was necessary, if we can show them accounting and cost information to justify the decision. If they see good, sound reasoning for the action, they’ll be less likely to resist and cause trouble. We all need to maintain productivity and efficiency until the new equipment is here. I want the accountants to work on a cost summary we can release to the employees and the town newspaper that shows why automation is a good idea.” Jane spoke up once more. “But Stan, I already told you. The net present value and other analyses I did earlier show this plant would benefit from staying the way it is.” Stan countered, “Jane, when you were working on the analyses, you said yourself that the benefits of automation are hard to identify and assign numbers to. You had to make several assumptions in order to do those analyses. If you change some of your assumptions, you can make the numbers look better. Try a longer useful life for the new equipment, or change some of the projected cost information. As soon as you have the new numbers, bring them to me to look at.” He stood up and addressed each member at the table and said, “Remember, if you can pull this off, your yearly bonuses will triple your annual salaries.” Stan walked out of the room. David felt uncomfortable about the situation. He could not understand why one of the company’s top leaders would advocate for such a massive change when the numbers clearly stated that automating the factory would cause more harm than good. He remembered hearing a rumor that Stan was under serious consideration as a candidate for a prestigious position at corporate headquarters. He wondered if Stan was trying to gain favor with those at corporate. Then again, this was mere speculation on his part. What David really worried about was what he was going to tell the employees.
QUESTIONS | EXERCISES
1. Compare and contrast the leadership characteristics of Stan and David.
2. Discuss whether David has any alternatives than implementing Stan’s orders.
3. Even if the automation is successful at increasing productivity, what might be some other consequences of Stan’s decision that could negatively impact the firm?