An Ethical Analysis of Kardell Paper Company Decision

Topics: Ethics, Term, Profit Pages: 6 (1629 words) Published: November 2, 2007
An Ethical Analysis of Kardell Paper Company Decision

Executive Summery

The Board of directors of Kardell Paper Company should accept the installation of the new processing technology witch protects the environment by refining the company's waste water .Implementing this new technology will increase the company's long- term profitability and reputation by providing enough power and ability to compete and operate efficiently in the future market.

This ethical solution is offered, after analyzing Kardell's board of directors' decision to refuse the new technology due to its high turn over costs. The impacts of this decision on the company's primary stakeholders is studied carefully by using the 5-question ethical approach. The assessment has been made by comparing the profitability, legality, fairness and rightness of the company's decision and its impacts on major groups of stakeholders and their interests.

Introduction

The Kardell Paper Company (KPC) is a publicity traded company with good financial record and a profit of $1.7 million per year.Kardell's original mill which is not designed with accordance to high environmental protection standards, is located near the Riverside, a community of 22,000 residents.(Brooks 371) The local community has been suffering from an unusually high rate of miscarriages and respiratory disorders since 1985.Therefore,in the same year, a research has been done on the water sample of the river which showed high level of industrial chemical called sonox.Also,it was discovered that the plant lab failed to mention the high sonox level in its monthly report to the managers. However, after informing the CEO and the Board of Direcors, no serious action has been taken to solve this problem and proven the situation. They failed to undertake an appropriate environmental audit and even refused the possible solution of adopting a new technology to refine the company's waste water.(Brooks 372)

The Issues

In fact, KPC's board of directors faced two major problems in adopting the new technology. First, the $70 million cost of implementing the new technology which would affect the productivity and profitability of the company. Second, the issue of unemployment and job loss that will occur, as a result of shutting down during the retrofit.

To analyze and asses KPC's decision, the 5-question framework will be used. This approach requires identifying the company's most important stakeholders, prioritizing their interests and applying five questions to examine the impacts of the company's decision on each stakeholders group (Tucker 348).

Identification of Stakeholders and their Interests

According to the Corporate Social Responsibility (CSR), companies are concerned for the well being of the people, society and the environment (Brooks 399). Therefore, identification of all the stakeholders and their concerns are quite important for analyzing companies' business decisions and ensure their long term success. The most important stakeholder groups that are impacted by KPC's decision can be recognized and ranked as follow.

Current and Future Shareholders

The impact on this group measures in terms of profit or loss. In this case, current shareholders will face a short-term reduction in the dividend payments due to the high cost of adopting the new processing technology ($70 million) and the probability of capacity level reduction during the retrofit. However, if the decision becomes known, the company may end up paying high clean up and compensation costs as well as Governmental fines.On the other hand, the future shareholders such as ethical investors are more interested in long-term profits and give more value to moral and ethical behavior of the company.

KPC's Employees and Labor Union

They may potentially get unemployed or receive less salaries and benefits due to the productivity reduction during the retrofit. However, KPC is putting its employees and their family's life...
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