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Identify ethical dimensions of a given case

Develop and explain your position on the problem presented


Present a reasoned decision and review that decision

Case Study Facts
Chip Brownlee = Chairman and CEO of Galvatrens
Arch Carter = Lead Director of Galvatrens
Galvatrens = Houston based consumer products company
Brownlee told Carter that a former divisional sales manager filed a lawsuit against the
company for wrongful termination because he tried to report an illegal scheme to inflate
sales
Mike Fields = plaintiff, former divisional sales manager, fired from Galvatrens 3 weeks ago
Greg Wilson = another divisional sales manager
Fields accused Wilson of having a plan to ship goods to a few of Wilsons biggest customers,
bill them, and book the sales (with a side agreement of returning the shipments and getting
a 2$ discount on goods accepted and paid for in the following quarter)
The purpose of the channel stuffing scheme would be to meet quarterly sales targets and
trigger bonuses
Harry Mart = COO of Galvatrens
Fields found out about the scheme by accident, and didnt know who else would be involved
in it and so he contacted Mart.
Terry Samples = Fields boss, former senior VP of sales
Mart referred the matter to Samples.
Fields stated that Samples told him his performace was not good enough, and that hed have
to accept demotion and a transfer to Indianapolis if he wanted to stay with Galvatrens.
Fields claimed this demotion and transferring was in relatiation for exposing the channel-
stuffing scheme. Fields also claimed that Samples knew Fields was a divorced father with
joint custody of his kids, and could hence not leave town.
Brownlee thinks Samples found out about Wilsons plan from Fields
Wilson resigned to take a job in California about a month ago
Samples resigned 1 week ago
Fields thinks the channels for confidential reporting of misconduct dont work well. He claims
the company made it easier for Samples to retaliate against Fields.
When Brownlee came in as chairman and CEO, he expanded the companys product
portfolio, and also announced an initiative to make the company the sort that would listen
to and learn from its employees and customers. He wanted the company to have preferred
employer status.
Brownlee brought in Sydney Baydown, who had played a central role in Brownlees previous
company in bringing the right talent to the company.
At Brownlees request, Baydown upgraded Galvatrens procedures for uncovering
misconduct and solving conflicts in the workplace
Galvatrens ended up having an open door policy for raising concerns or problems in the
workplace. The policy encouraged employees to go to their supervisors whenever possible,
and emphasised that employees could also approach any manager at any level for
assistance. The policy included a ban on retaliation. A 24 hour hotline was also set up to
report violations of the code of conduct. An ethics officer was added to the ranks of the
company and an ethics awareness campaign was set up.
Baydowns suggestion that the company should have an ombudsman, and that the board
should make a director or a committee of directors responsible for ethics oversight, was not
taken on board.
Research had already revealed that having a truly impartial ombudsman who reported to
the CEO would have made employees much more likely to come forward. Instead, the
procedure went Fields > Mart > Samples > Fields demotion
Ombudsman = people can report issues anonymously and with confidentiality. There could
be informal means to help resolve the issues.
Dale Willis = senior VP of HR at the time the ombudsman idea was rejected. He argued that a
foreign entity shouldnt be allowed to take part and that affairs should stay internal to the
company. Otherwise, serious problems could slip through the cracks. Browntree ultimately
decided to not create the ombudsman role as a result.
Sydney Baydown confirmed that Wilson had pitched channel-stuffing scheme to two of his
biggest customers, but dont know if he did anything other than that
Mikes performance declined considerably in the last 10 months of his stay. His team missed
sales targets, he had been unreachable during business hours increasingly, and he had
missed important meetings. Before that, he had been a solid producer.
Mikes lawyer hadnt disputed the change in performance but claimed it to be a result of a
custody fight between Mike and his ex-wife. Mikes Lawyer stated that Terrys reaction to
the slide in performance had been brutal.
Sydney Baydown decided that the they were going to file a response to Mikes lawsuit,
denying his charges of wrongful termination. At the same time, an independent
investigation would be held into the channel-stuffing allegations. Sydney Baydown would be
the liaison between the outside investigators and the board.
Sheila Cruse = chair of the boards audit committee. She asked what the boards role in the
investigation should be, who should the investigation report to, and whether or not a special
committee should be set up.
Arch Carter (lead director) said that although the company does need to sort out the issues
pointed out by Cruse, it is more important that they focus on responding to the lawsuit.
There are big reputational risks on the line from battling with Fields, who raised serious
allegations against the mission and values of Galvatrens.
Sydney Baydown replied to Arch Carter saying that they do have to respond to the lawsuit.
Denying the claims and investigating and negotiating is standard procedure according to her.
The board decided to meet again in 6 weeks when theyd have more fact sand would be in a
better position to weigh their options.
6 weeks later, the board met again at a fancy hotel and spa complex (potentially ethically
wrong). Mart was absent due to problems at factories from hurricanes Katrina and Rita, due
to merger talks, and due to a labour dispute.
Independent investigators found out that customers had ignored Greg Wilsons channel
stuffing proposal.
Terry Samples had forced Greg out upon learning of the plan let Greg resign and did not
tell anybody else about the scheme.
Investigators could not get Terry to answer he told them through his lawyers that he was
taking his time to review the questions.
Investigators confirmed that Mikes performance was dipping, but Terry Sampless role was
murky.
Investigators confirmed that Fields had done his best to raise the alarm about Greg.
Dan Richardson, a software entrepreneur and a friend of Chip Browntrees who had just got
back from a holiday trek in the Himalayas, asked why the company didnt hear about things
sooner and why nobody except Fields came forward. He said it was disappointing that Terry
Samples didnt report it and that he wondered if others in Sales knew about it. He also
wondered why customers didnt voice anything out.
o Syd responded that : research over the years has revealed that employees who see
misconduct in a company dont come forward.
Sheila Cruse said that clearly good things put in place by the company arent working because
Harry Mart didnt take the original complaint seriously, and nothing came in through the
hotline. Nobody contacted the ethics officer or HR.
Arch felt it was unrealistic to expect Harry Mart to deal with something like this, because of
how busy he is doing things.
Cruse felt that at least Harry couldve referred the problem to an ethics officer.
Arch replied that Marts plate was full and that he feels he shouldve given it more attention
in retrospect.
Arch and Sheila agreed to meet for breakfast the next morning.
Its clear at this point that the company spends lavishly on meetings.
Breakfast meeting:
o Arch: feels that a board retreat is needed to deal with the situation, to mull things
over, to look at themselves. He feels they didnt meet their oversight responsibilities
and are not ready for something like this.
o Sheila: agreed. She claimed that we as a board did not know what our role was
supposed to be. She took it for granted that Chip Browntree and Sydney Baydown
had established channels for anonymous reporting already which the audit
committee and the full board needed to provide oversight.
o Arch: felt that Chip Browntree should be evaluated. Despite the procedures put in
place, he questioned why only one person came forward (Mike Fields) and why this
person has ended up suing the company. He questioned Chip Browntrees decision
to keep Dale Willis on for long enough to let him deny the need for an Ombudsman
or a separate committee of directors responsible for ethics oversight. Felt curious to
see how morale is now, especially in the Sales department.
o Sheila: hesitated. She agreed with Arch about Chip but felt that Harry couldve done
more. She felt that they should look at consequences for him as well as expectations
for Chip.
Breakfast meeting was between lead director and chair of the boards audit committee,
discussing the CEO, COO.