Corporate Legality Versus Corporate Responsibility
Mr. James Elliott, CEO and Chairman of Byte Products, Inc., presents his recommendation to the Board of Directors to purchase an existing plant in Plainville as a temporary plant until the new one is online in 3 years. All on the Board except one (10–1) seem to favor the proposal. What ensues is the discussion between Elliott and Kevin Williams, board member, over the proposal to purchase a plant with the intention of closing it in 3 years.
Byte Products has three existing plants operating at full capacity (24 hours a day and 7 days a week). The new plant proposed to be built in the southwestern United States will require 3 years before it is fully online. This means that Byte cannot meet the anticipated demand for its products. Alternative courses have been explored: (1) license Byte products and technology to other U.S. manufacturers, and (2) overseas facilities and licensing. Top management found an existing plant in Plainville, New England that would meet the company’s immediate production needs until the new plant will be online in 3 years. The Plainville facility had been closed for the last 8 years. It would take about 3 months to get the Plainville plant online.
The discussion between Elliott and Williams focuses on the impact on the town and on the potential 1,200 employees needed in opening this temporary plant. The town and the townspeople had gone through a catastrophic closing 8 years ago when the plant in question was closed. After a lengthy discussion between Elliott and Williams, a recess in the meeting is called. When the board meeting is reconvened, a major shift has taken place. The vote could be 7–4, or 6—5 for the proposal, but Elliott desires a unanimous vote. As the case ends, Williams is asked if a compromise can be reached. He responds, respectively, “I have to say no.”
Decision Date: No Date Sales: $265,000,000
II. ISSUES AND SUBJECTS
Local Community Strategic Alternatives
Board of Directors’ Role Communications
Corporate Stakeholders Ethics and Values
Opening and Closing of Strategic Decision Making
Plants Social Responsibility to
•Impact on Town Local Community
•Impact on Employees
Copyright © 2001 and 2003 by Thomas L. Wheelen and J. David Hunger. Reprinted by our permission only for the Eighth and Ninth Editions of Strategic Management and Business Policy and Cases in Strategic Management.
III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS
(See Figures 1.5 on pages 20 and 21)
1. To discuss the social responsibilities of a corporation regarding the opening of a temporary plant and its closing on (a)the town, and (b)its potential employees
2. To illustrate the role of board members in strategic decisions
3. To discuss the ethical issues: Should the company executives inform the town and potential employees that this is a temporary plant?
4. To illustrate corporate governance in action
5. To illustrate the power of the Board of Directors
6. To show how one vote of dissent can sway a vote of the board after a long discussion of the pros and cons of a proposal. Point: The initial tentative vote was 10—1, and after the discussion the vote was likely to be 7—4 or 6—5.
7. To discuss how a compromise may be negotiated on a strategic issue so as to satisfy all affected stakeholders
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. We ask the students to vote on the pending proposal before the board. We make everyone commit to a position. What should be the role of the board in such a decision?
2. This case is an excellent open-class discussion case. We get much better discussion after we force each student to take a position on the proposal. The case revolves around how executives and...