Case: Ethical Issues Identification Statement

| August 31, 2015

SUBJECT: “Ethical Issues Identification Statement.” Choose three ethical issues in the case and use three sources in writing the case and put the sources names This is what the Ethical Issues Identification Statement must include: Distinguish ethical issues from purely management, marketing, finance, etc. issues. Distinguish legal issues from ethical issues, and explains the inter-relations between them. Use and integrate concepts of fiduciary duties in analyzing managers’ ethical responsibilities Identify fiduciary duties arising in factualcircumstances. Articulate alternative courses of action, evaluating them in terms of implicated stakeholder interests, fiduciary duties. Persuasively justify one alternative course as best for the business, considering both ethics and bottom line. Properly attribute words and ideas from other sources. Case “Cattywampus, Inc was a long- term military contractor and munitions manufacturer, with annual revenues of $500 billion. The company employed 105 workers. All were highly paid UAW technicians and mechanics. Cattywampus manufactured body armor and armored vehicles for the United States military.” “Contrary to international law and treaties, it also manufactured landmines exporting them to Afghanistan and Iran, its best foreign customers. More than half of its profits derived from these clandestine operations.” “All of Cattywampus’ products had problems. Although paid handsomely for its body armor and armored vehicles, the materials used in manufacturing were substandard. The body armor did not protect service members from most antipersonnel ammunition. The simple addition of a standard issue flak jacket would have prevented most injuries, but Cattywampus did not tell the military because it feared it would lose its contract. In addition its armored vehicles, though quite strong and sturdy on the sides and top, had only a thin sheet of steel on their undersides, making them especially vulnerable to IED (Improvised Explosive Device) explosions.” “The landmines it sold to the Taliban in Afghanistan and to the Iranian government were themselves defective. Many of those who attempted to plant the mines were themselves killed in the process because of the use of faulty switches. Most of the mines’ victims however, were children and soldiers.” “As the US military began to understand the problems with the body armor and armored vehicles it had purchased from Cattywampus, Department of Justice lawyers became involved and the families of injured or killed US service members consulted attorneys. Cattywampus’ corporate leaders were themselves now looking down the barrels of criminal prosecution, and classes of plaintiffs were forming and growing quickly. The Cattywampus board knew the company’s days were numbered. The company could easily afford to pay the class-action plaintiffs. Its top executives, if imprisoned, could be replaced. The board came to the conclusion that its fiduciary duties to shareholders would best be fulfilled by moving its production facilities from the U.S. and establishing a factory in Argentina, a country that did not extradite to the United States, and Colombia, where union organizing is not a problem because unionists are regularly murdered.” “But first Cattywampus had to try to get out from under the potential legal liabilities, both to the families of service members who had been injured or killed as a result of Cattywampus products, and to the workers in its American plant who are protected by a collective bargaining agreement and by US labor and employment laws.” “Since it had more than 100 employees, under THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION (WARN) ACT the company would have had to give employees 60 days notice of its departure from U.S. operations.” [See in relation to the act. Note that this is supporting information. You are reading the actual case in this message. “Such notice to employees however would have several undesirable consequences. First, it would also give notice to plaintiffs and to the US military that it was planning on leaving the country. Second, the company was concerned that the exceptionally militant and well-paid UAW workers would undertake acts of sabotage or, alternatively would leave on their own terms rather than when Cattywampus preferred they go. Violation of the law would impose significant back pay liability on the company, which it wanted to avoid. Even if the WARN Act were complied with, under the UAW collective bargaining agreement, workers were entitled to significant amounts of severance pay in the event of a plant shutdown or mass layoff.” “Cattywampus formulated a plan. First, it would outright fire five workers for no cause and would offer an early retirement package to five others, which they could not refuse. This would bring the number of workers to 95, which would remove the company from the jurisdiction of the WARN Act. Then it would file for bankruptcy under which it was certain to be able to reject the collective bargaining agreement. [When a company files for bankruptcy protection, the Bankruptcy Court has the power to relieve the bankrupt company from its contractual obligations, when this is necessary. Bankruptcy is often used by companies who feel excessively burdened by Union demands.]” “These two courses of action were successfully undertaken in remarkably short order. Cattywampus now had neither notice requirements under the WARN Act, nor severance liability under a now rejected collective bargaining agreement.” “The bankruptcy also short-circuited the class-action suit brought by the families of injured or killed service members. With all remaining assets of Cattywampus in the hands of a court-appointed trustee in bankruptcy, no one would be paid for anything.” “In the interim, Cattywampus had established relationships with contractors in Argentina and Colombia and had factories up and running even before it filed bankruptcy papers. Officers transferred company assets to banks in Argentina and in Switzerland which assured customers that money would be safe from creditors. These actions maintained Cattywampus’ profits and share value.” “Argentina and Colombia were ecstatic to have Cattywampus in the country. Individual lower-level administrators in these countries were handsomely rewarded by Cattywampus for enabling the businesses to function smoothly and not be bothered by the host countries’ environmental laws, labor laws, and other (admittedly minimal) business restrictions. Argentinean and Colombian government leaders believed that the radiation and chemical leaking into the local groundwater was a small price to pay for the cut-rate military equipment it received in return, enabling it to battle insurgents, union activists, and drug dealers.”

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