Business Case #6: Silver-Plating and Cyanide

 

The G.R. Bronson Company is a large publicly-owned conglomerate whose holdings are primarily in the retail sale of jewelry. Several years ago, it purchased for $10 million a plant that puts silver and gold plate on jewelry.  The seller, Hedda Wilson, stayed on to manage the company until last year.

Behind the plating facility there are three underground tanks.  One is filled with cyanide, a gas used in silver plating.  Last year, after spending $100,000 in legal fees, Bronson successfully fought zoning efforts that would have effectively forced the plant to move at a cost of $2.5 million.

Jerry, the new plant manager replacing Hedda, called Mason, a vice president at corporate headquarters, with the following report:

I think I have a serious problem, and I wanted you to know immediately.  I didn’t think I should put it in writing.  Last week, I noticed that the levels of cyanide are about 25 percent less than they should be, given the amount I had used.  I called Hedda, and she told me not to worry, that it was either a bad meter or bad records.

I checked this out with the foreman and discovered that the tank is 25 years old but the meter was replaced two years ago.  The foreman said that they had suspected a leak for some time but that Hedda said it would be much more expensive to fix the tank (at least $60,000) than to lose some cyanide.  Besides, Hedda thought the community would go berserk if they even thought there was a cyanide leak.

I am fairly certain there is a leak, but I am not sure.  It could be just an error in our records.  I don’t see how a leak could be dangerous, though, since the adjoining land is at least 150 yards away.  I suppose if the cyanide got into the water supply it could cause someone to get ill, but it would be much too diluted to cause serious harm.

I checked with local counsel who told me there is a state law requiring that we report a known leak to the authorities within 24 hours of discovery.  He says that the knowledge requirement is pretty strict and we probably don’t have enough certain knowledge to invoke the statue.  He says it is our call.

If I report what I know to the state, I’m told the authorities will immediately shut us down for at least one month and require us to dig out the tank and have it repaired or replaced and they will take all kinds of steps to test and treat the water and soil in the area and charge us all costs.  It could easily cost $100,000.  In addition, this is all the community needs to start a new drive to zone us out of business.

  1. What should Mason do or not do?
  2. What ethical principles are involved?
  3. Who are the stakeholders?

Suppose that Bronson is the rumored target of a hostile takeover and that Mason concluded that revealing the leak would subject the company to lawsuits and articles that would lower the stock price and seriously increase the likelihood of the take over.

  1. How do these facts affect Mason’s ethical obligations?

Assume Mason instructs Jerry to drain the tank and go about getting it fixed but in a way that attracts no attention, including from employees.  Two weeks later, Jerry reads in the paper that an infant living near Bronson’s facility had died and two members of the family had become quite ill.  reasons are unknown, but there are indications of cyanide poisoning.  No explanation has been offered (it is not generally known that Bronson uses cyanide in its operations, as previous zoning actions were based on aesthetic, not health, reasons).

  1. What should Jerry do?
  2. If Jerry tells Mason and Mason orders him to say nothing, what should Jerry do?

All the above facts are brought to the attention of the president of the company.

  1. What are his options?
  2. To whom does he owe his highest loyalty?
  3. What should he do about the potential leak?
  4. What should he do about Mason and Jerry?
  5. How candid should he be with the press when they contact the company?
  6. Is it justified to deceive the press in order to protect the company from the hostile takeover?
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