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Kardell Paper

Kardell Paper. Who are Kardell’s stakeholders? Are their claims equally important? What factors would you suggest the Board consider in its decision? Did the Board make any mistakes? Why? Apply moral imagination for a better decision?. Senior Salary Cases. Eleanor Clitheroe – Hydro One

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Kardell Paper

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  1. Kardell Paper • Who are Kardell’s stakeholders? • Are their claims equally important? • What factors would you suggest the Board consider in its decision? • Did the Board make any mistakes? Why? • Apply moral imagination for a better decision?

  2. Senior Salary Cases • Eleanor Clitheroe – Hydro One • $2 million/$6 million golden parachute • $300,000 nanny costs, $40,000 reno., 7 clubs • Jack Welch – GE • NY Central Park condo, company jets • $2 million payback per year • Ken Lay – Enron • $141 million, $10 cash, $131 stock options • Stock options have “no cost”

  3. Betaseron (A) Case Three Problems • Pricing • Distribution • Supply

  4. Stakeholder Identification & Interests POWER LEGITIMACY Dynamic Influence URGENCY

  5. Ranking Stakeholder Interests • Most offensive to values: • decision maker • corporate • local country • consumer markets • capital markets • Most vulnerable • Most concern to public/press

  6. Stakeholder Impact Analysis Should a proposed action be taken? Sniff tests…mom, paper… If it smells, then... 5 Questions: Is it profitable? Is it legal? Is it fair? Is it right? Is it sustainable? If not …Modify …Moral Imagination

  7. CHALLENGES FOR PROPOSED ACTION: Profitable? Legal? Fair? Right? Sustainable? TYPICAL FLAWS ENCOUNTERED: Short run Only test? To all? Personal+ Optional No modification Stakeholder Impact Analysis

  8. EDM: Moral Standards Approach Three Challenges: M. Velasquez • Individual rights impact • Justice (fairness) impact • Utilitarian impact • Maximize social benefits & minimize social injuries • Net benefit to society as a whole • Cost-benefit analysis (CBA)

  9. Cost-Benefit Analysis Maximize Net Present Value (NPV) NPV = P.V. of Benefits – P.V. of Costs for each option Example: JM Co in text

  10. JM Co. Ltd. Pollution Control University Equipment Admission Protecting WorkersScholarships Benefits (PV at 10%) Reduction in worker health costs borne by society $500,000 Increase in worker productivity 200,000 Improve. earnings of scholarship recipients$600,000 $700,000 $600,000 Costs (PV at 10%) Pollution Equipment 350,000 Scholarships paid 400,000 Net Benefits $350,000 $200,000 Benefit/cost ratio 2/1 3/2

  11. EDM: Mark Pastin’s Approach • Ground rule ethics - organization’s values • End-point ethics • Risk-benefit analysis (CBA+) • End-point ethics • Rank stakeholders • Identify ethical alternatives • Intangible factors included • Rule ethics • Social contract ethics

  12. The Ford Pinto Case Benefits: Savings 180 Burn Deaths $200,000 each $36,000,000 180 Serious Burn Injuries 67,000 “ 12,060,000 2,100 Burned Vehicles 1,470,000 $49,530,000 Costs: 11 Million Cars $11 each $121,000,000 1.5 Million Light Trucks $11 “ 16,500,000 $137,500,000 Issues: looking forward, valuing intangibles, moral imagination

  13. Fundamental Challenges • Well-offness • More benefits than costs • Fairness • Of distribution of benefits & burdens • Right • No offence to stakeholders &/or decision maker All three must be satisfied

  14. Diagnostic Typology of Organizational Stakeholders Stakeholder’s Potential for Threat Low High Type 4 Mixed Blessing Type 1 Supportive Stakeholder’s Potential For Cooperation With Organization High Strategy Collaborate Strategy Involve Type3 Nonsupportive Type 2 Marginal Low Strategy Defend Strategy Monitor Source: G. Savage et al, “Strategies for assessing and managing organizational shareholders”, The Executive 5, no. 2 May), 1991, 65.

  15. Microsoft Antitrust Case • Predator or Fierce competitor? • Found guilty of antitrust violations, 11/5/98 • Forcing OEM PC makers to take Windows/Explorer package. • 95% of market for PC operating systems • Significant barriers to entry • Lack of viable alternatives • Also guilty on appeal, 6/01 • Government changed, refused to split Microsoft into 2 parts • Stakeholder management analysis using the Savage model. Source: Business Ethics, 3e, by Joseph Weiss, South-Western, 2003, 31-32.

  16. Diagnostic Typology of Stakeholders for Microsoft Corporation Stakeholder’s Potential for Threat Low High Type 4 Mixed Blessing Strategy: Collaborate Type 1 Supportive Strategy: Involve High Many Customers Employees Suppliers, Trade Associations Shareholders, Many Customers Stakeholder’s Potential For Cooperation Type3 Nonsupportive Strategy: Defend Type 2 Marginal Strategy: Monitor Low Federal & /State Gov., AOL Sun Microsystems, 18 states Netscape& Spyglass OEMs, ISPs, OLS, ICPs Media, Apple(OS), IBM (OS/2)

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