You have just been named CEO of a small chemical refinery in the Northeast. Shortly
after assuming your new position, you discover that your three predecessors have kept
a horrifying secret. Your headquarters location sits atop thirty 5,000-gallon tanks that
have held a variety of chemicals—from simple oil to highly toxic chemicals. Although
the tanks were drained over 20 years ago, there’s ample evidence that the tanks
themselves have begun to rust and leach sludge from the various chemicals into the
ground. Because your company is located in an area that supplies water to a large city
over 100 miles away, the leaching sludge could already be causing major problems.
The costs involved in a cleanup are estimated to be astronomical. Because the tanks are
under the four-story headquarters building, the structure will have to be demolished
before cleanup can begin. Then, all 30 tanks will have to be dug up and disposed of,
and all of the soil around the area cleaned.
You’re frankly appalled that the last three CEOs didn’t try to correct this
situation when they were in charge. If the problem had been corrected 15 years ago
before the building had been erected, the costs would be substantially less than they
will be now. However, as frustrated as you are, you’re also committed to rectifying
After lengthy discussions with your technical and financial people, you decide
that a cleanup can begin in two years. Obviously, the longer you wait to begin a
cleanup, the riskier it becomes to the water supply. Before you begin the cleanup, it’s
imperative that you raise capital, and a stock offering seems to be the best way to do it.
However, if you disclose news of the dump problem now, the offering will likely be
jeopardized. But the prospect of holding a news conference and explaining your role in
keeping the dump a secret keeps you up at night.
Who are the stakeholders in this situation? What strategy would you develop for
dealing with the dump and its disclosure? Are you morally obligated to disclose the
dump right away? How will Wall Street react to this news? Does your desire to correct
the situation justify keeping it a secret for another two years?
Think about the due care theory presented earlier in this chapter. Can we draw
parallels between due care for the consumer and due care for the environment? What if
the dump for abandoned oil tanks mentioned in the hypothetical case was located in a
foreign subsidiary of a U.S. company, and the country where it was located had no laws
against such a dump? Would the CEO be under any obligation to clean it up? Should
American companies uphold U.S. laws concerning the environment in non-U.S.
locations? How much protection is enough?
1. What factors contributed to Johns Manville’s long silence on the dangers of
2. What role do you think the personality and other characteristics of a CEO play in
the handling of an ethical problem?
3. When other firms in your industry are behaving unethically, how can you buck the
trend and position your company to value ethical behavior? Why is that important?
Will it damage your company’s competitiveness?
4. Imagine that you’re the CEO of a large firm like any of the ones described in this
chapter. What concrete steps would you take to restore your company’s reputation
if it’s been sullied?
5. How much testing is enough when launching a new product?
6. How can the interests of multiple stakeholders be balanced?
7. Do you think long prison sentences will help deter corporate criminals?
8. Do you trust technology giants such as Google and Facebook to safeguard your
personal data? Is posting online any safer than posting your personal information
on a billboard along a busy highway? What kind of personal information would be
OK to share with the world? What are the potential pitfalls for you personally of
sharing sensitive information online?
9. How does a company’s reputation play a role in your purchasing decisions?
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