THE RECALCITRANT DIRECTOR AT BYTE, INC. : CORPORATE LEGALITY VS. CORPORATE RESPONSIBILITY BACKGROUND OF THE CASE (INTRODUCTION) Byte products have three existing plants operating at full capacity (24 hours a day & 7 days a week). The new plant proposed to be built in the South Western US will require 3 years before it is fully on line. This means that byte cannot meet the anticipated demand for its products. Alternative courses have been exploded- 1. ) Licensed byte products and technology to other U. S. manufacturers, 2. ) Utilize overseas facilities and licensing. Mr.
James Elliot CEO and chairman found an existing plant in Plainville, (a small town in northeastern United States) that would meet the company’s immediate production needs until the new plant comes on-line in three years. The Plainville facility has been closed for the last 8 years. It would take about three years to get the Plainville plant on-line. Mr. James Elliot present his recommendation to the Board of Directors to purchase an existing plant in Plainville as a temporary plant until the new one is on-line in three years. All on the Board except one (10-1) seem to the favor the proposal.
What ensues the discussion Elliot and Kevin Williams’s board member over the proposal purchase a plant with the intention of closing it in three years. The discussion between and Elliot and Williams focuses on the impact on the town and on the 1,200 potential employees of opening this temporary plant. The town and the townspeople had gone through a catastrophic closing eight years ago when the plant in question was closed. A recess in the meeting is called and when the board meeting reconvened, a major shift has taken place. The vote could be 7-4 or 6-5 for the proposal, but Elliot desires a unanimous vote.
As the lengthy discussion ends – Mr. Williams is asked whether a compromise can be reached. He responds, “I have to say no and I don’t see a middle ground. ” Statement of the Problems 1. How will the Byte products Inc. meet the high demand and expectations of the market of their products? a. Licensing authorization. b. Overseas facilities and licensing a. Will the Board of Directors approve or disapprove in the proposal short- term solution of CEO? b. Will the Board approve a lease contract of an abandoned plant in Plainville, USA? c.
Will the company executives inform the town and potential employees that this is temporary plant? d. Assuming that the lease contract will expire and the new facility is done, what would be the main effect of the abandonment of the lease property to the town of Plainville? Objectives of the Problem: • Short- term objectives 1. To choose the best alternative solution not only for the Byte Products Inc. but also to the stockholders. 2. To evaluate the pros and cons of the given alternative solution and show how one vote affects the vote of the board. 3.
To discuss the ethical issues: should the company executives inform the town and potential employees that this is a temporary plant? • Long- term objectives 1. To determine how would the Byte Products Inc. cope up with demand of the market. 2. To give conclusions and recommendations after analyzing and evaluating the given information about the study. “Highlight of the Problem” If the temporary nature of the facility were known, the local government and banking community would not be forthcoming with the funds required to capitalize the projects for the new employees.
If Byte hid the temporary nature of the facility, the funding for the projects would be supplied, but in three years when the plant closed, and the community could become an unemployed ghost town. The temporary plant may supply enough products to meet demand, but the location is far away from the market. This may ultimately cause distribution and service problems. Williams concluded that it was not a legal issue, but a moral responsibility. For the employee, the temporary plant is not a good solution. Not knowing the job is temporary, many employees may begin to make a permanent home for their families.
When the layoffs begin due to the plant closing, the employees will be the ones to suffer. “Option/ Strategy of the Problems 1. A renovation of an abandoned factory in Plainville, New England. Advantages • The temporary plant may supply enough products to meet demands. • Renovation can inexpensively be completed in three months and attractive lease terms are available • There is no need for any licensing, foreign, or domestic • Quality control remains firmly in the hands of the firm • An increase in the price of the products will be unnecessary. Disadvantages The plant would never be an efficient producer of the Byte Products. • Profitability would be low because of High labor costs due to a strong union presence in the area, warehousing expenses and inadequate transportation links to Byte’s major market and supply. 2. License Byte’s product and process technology to other manufacturers. Advantage • It can meet immediate demand in the short run Disadvantages • The other manufacturers would not shoulder the fixed costs of producing appropriate components for such a short term. • This would make Byte’s own products available to its customers at an unacceptable price. . Overseas facilities & licensing (both domestic and international) Advantage • Profitability would be high because of low labor cost. Disadvantages • Domestic licensing would not result in higher production costs and lower margins. • International licensing goes against Byte’s philosophy of remaining a domestic operation and patent issues could not be properly protected in the international environment. • Both domestic and international licensing could not result in lower product quality and another threat to Byte’s market share.