Safety? What Safety?

[vc_row][vc_column width=”1/1″][vc_tabs style=”tab-style-one”][vc_tab title=”Case” tab_id=”1425040931-1-71″][vc_column_text]Topic: Corporate Social Responsibility

Characters: Bob, President John, Chemical Engineer Henry, Controller Kirk, Assistant Controller

Kirk was a bright individual who was being groomed for the Controller’s position in a medium-sized manufacturing firm. After his first year as Assistant Controller, the officers of the firm were starting to include him in major company functions. For instance, today he was attending the monthly financial statement summary given at a prestigious consulting firm. During the meeting, Kirk was intrigued at how all the financial data he had been accumulating was transformed by the consultant into revealing charts and graphs.

Kirk was generally optimistic about the session and the company’s future until the consultant started talking about the new manufacturing plant the company was adding to the current location and the costs per unit of the chemically plated products it produced. At that time, Bob (the President) and John (the chemical engineer) started talking about waste treatment and disposal problems. John mentioned that the current waste facilities were not adequate to handle the waste products that would be created by the “ultramodern” new plant in a manner that would meet the industry’s fairly high standards, although they could still comply with federal standards. Kirk’s boss, Henry, noted that the estimated cost per unit would be increased if the waste treatment facilities were upgraded according to recent industry standards. While industry standards were presently more stringent than federal regulations, environmentalists were pressuring strongly for improving regulations at the federal level. Bob mentioned that since their closest competitor did not have the waste treatment facilities that already existed at their firm, he was not in favor of any more expenditures in this area. Most managers at this meeting resoundingly agreed with Bob, and business continued on to another topic.

Kirk did not hear a word during the rest of the meeting. He kept wondering how the company could possibly have such a casual attitude toward the environment. Y et he did not know if, how, or when he could share his opinion. Soon he started reflecting on whether this was the right firm for him.

Author: G. Stevenson Smith, Ph.D., CPA, CMA, Professor of Accounting, West Virginia University

Co-author: Curtis Jay Bonk, Ph.D., CPA, Assistant Professor of Educational Psychology, West Virginia University

[/vc_column_text][/vc_tab][vc_tab title=”Key teaching notes” tab_id=”1425040931-2-25″][vc_column_text]What Are the Relevant Facts?

1. The new facility will produce waste products that will meet current federal standards but will not meet the more stringent industry standards.
2. Additional treatment facilities will increase the cost per unit.
3. The company’s products face a competitive market. The closest competitor does not have the waste treatment facilities that already exist in this firm. The president and most managers at the meeting are not in favor of additional expenditures for waste treatment facilities.
4. Kirk is concerned about management’s attitude toward the environment.

What Are the Ethical Issues?

1. To what extent is it Kirk’s responsibility to take any actions?
2. How can the interests of the firm and its stockholders be balanced with the interests of the environment?
3. What obligation does the company have to future generations of citizens and employees?
4. If no changes are made, is Kirk under an obligation to leave the company?

Who Are the Primary Stakeholders?

• Kirk
• Bob
• John
• Company and its stockholders
• Future generations

What Are the Possible Alternatives?

1. Kirk can determine on his own the decrease in profitability the firm would experience by purchasing more treatment equipment.
2. At the next executive meeting, Kirk can mention his concerns.
3. Kirk can approach Henry, the Controller, about his concerns.
4. Kirk can talk to John, the chemical engineer, about potential problems.
5. Kirk can contact an environmental group active in this area to learn more about their viewpoints.
6. Kirk can do nothing and be satisfied that the company is already doing its share.
7. Kirk can find a more environmentally concerned firm for which to work.

What Are the Ethics of the Alternatives?

1. Does Kirk have a duty to take some action in this situation?
2. Does the company have an obligation to do more than its competitors or more than federal regulations require?
3. Is the company receiving unjust benefits by not dealing more aggressively with pollution from its new facility?
4. Are any of the following groups being harmed by the company’s practices?

• Stockholders
• Future generations
• Local government and industry

5. How can the company justify a higher concern for the environment than for its stockholders?

What Are the Practical Constraints?

6. As an Assistant Controller, Kirk has very little true knowledge about pollution issues.
7. The heart of this issue is outside Kirk’s professional area within this firm.
8. No one else at the company seems to believe that there is an environmental issue in the company’s decision.
9. Expenditures for more treatment equipment would reduce the company’s competitive edge in a competitive market.

What Actions Should Be Taken?

1. What actions should Kirk take?
2. Do you agree with the following course of action? Kirk does nothing at work, but he does contact an environmental action group in a local university community to learn more about pollution issues. He begins to attend the group’s evening meetings. He is withholding judgment on any further decisions until he is more certain about the company’s position and intentions.

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