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 Wilson’s 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 didn’t 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 he’d 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 Wilson’s 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 company’s 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 Brownlee’s previous company in bringing the right talent to the company.

At Brownlee’s 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.

Baydown’s 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 shouldn’t 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

Mike’s 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.

Mike’s lawyer hadn’t disputed the change in performance but claimed it to be a result of a custody fight between Mike and his ex-wife. Mike’s Lawyer stated that Terry’s reaction to the slide in performance had been brutal.

Sydney Baydown decided that the they were going to file a response to Mike’s 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 board’s audit committee. She asked what the board’s 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 they’d 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 Wilson’s 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 Mike’s performance was dipping, but Terry Samples’s 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 Browntree’s who had just got

back from a holiday trek in the Himalayas, asked why the company didn’t 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 could’ve referred the problem to an ethics officer. Arch replied that Mart’s plate was full and that he feels he should’ve given it more attention

in retrospect. Arch and Sheila agreed to meet for breakfast the next morning. It’s 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 Browntree’s 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 could’ve 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 board’s audit committee, discussing the CEO, COO.