Question

Case 1: John Snyder

John Snyder is VP of International Manufacturing for GoodChem USA, and has recently signed a deal to build a major new chemical manufacturing plant in Southeast Asia. He is working through the final details of the proposal with Alex, the appointed Director of the new facility, when a letter arrives from Tang Chen, the VP for International Affairs at GuddoKagaku, the joint venture company that helped GoodChem work through the red tape which often hampers foreign investors in Southeast Asia. Tang’s letter reminds John once again that neither he nor Tang was happy with the decision that had been made by the two companies to not install US-style scrubbers in the production process. Tang realizes that there was no legal requirement, and that installation of the scrubbers would cost them time and money, which may be critical in securing the competitive edge over the domestic producers – an edge that would make the venture viable. But he is still concerned over the environmental impact this will have on his country. As a side note, he also mentions that he has heard rumors that a powerful and well-connected environmental activist group is preparing to make the actions of GoodChem their next big PR scandal. Alex is anxious to secure the Director’s position and points out that none of the domestic producers have scrubbers in place, and that should the venture not meet the expectations of senior management, it would be Alex’s career, not John’s, on the line. Alex also reminds John that if this project is successful, it will most likely secure John’s place in the race for CEO. But John keeps thinking of Tang’s closing remarks that ask John to think of his children before he makes a last decision not to install the scrubbers.

QUESTIONS

1. Would John want his family to live next to a plant without scrubbers?

2. What is the short-term cost/long-term risk trade-off in not installing scrubbers?

3. In what instances is it acceptable to adhere to host country standards that are less stringent

   than those of a company’s home country?

Answer 1

The case study presented in the question essentially highlights a central ethical dilemma pertaining to any business or production-related decision which is primarily concerned with the environmental or overall ecological impacts of those decisions or undertakings. In this context, the possible collaborative decision by GoodChem, USA, and GuddoKagaku to install production scrubbers as part of a commercial or business venture would primarily induce a higher competitive advantage over the domestic producers and increase the potential possibilities of higher economic profitability through the successful or effective implementation of the concerned venture project. On the other hand, as emphasized by Mr. Tang Chen, the VP for International Affairs at GuddoKagaku, a major concern regarding the installation of the scrubbers center around the negative environmental externality that the operation of the scrubbers would exert thereby, endangering the lives of the local communities and habitat residing near the production plants where the scrubbers would be installed. Mr. Chen has also pointed out the possible externality impacts of the scrubber installation in the future and any possible environmental detriment caused by such environmental detriment is also likely to influence Mr. John Snyder's final decision on the installation of the concerned production scrubbers. Therefore, from an ethical standpoint, Mr. Snyder has been considering the trade-off between the immense economic or commercial success of the company and personal career growth that such a large scale business project can generate and the possible environmental cost or damages that it will exert in distant future. It can be reasonably assumed that from a personal point of view, as a rational and socially responsible human being or individual he would certainly not want his family members including children to reside near the plants containing the scrubbers, mainly based on ethical and emotional considerations.

With absolute consideration of the short term costs or impacts of scrubber installation in the production plants which mainly includes a considerable financial investment and other adjoining costs/expenses and a significant competitive advantage that it would expectedly generate over the domestic producers, the other long-term or distant impacts of such decisions also requires a careful and profound perusal. As pointed out by Mr. Chen, the immense economic and commercial benefits of this venture project are incredibly immense given the amount of money and financial investment it would warrant, but a relatively longer-term broader environmental impact of such undertaking also needs to be considered. In this regard, the chemical pollution and contamination generated by the scrubber operation in the plants would cause detrimental health impacts on the people residing near the plants and other negative environmental and ecological repercussions on the local habitat and plant life which could practically persis for long term over successive generations in the posterity. On the other hand, if the scrubbers are not installed and the concerned project is invalidated, then at least in the short term, Mr.Snyder could lose the golden opportunity to become the CEO of GoodChem and Alex's (the appointed Director of the new facility) career could also be jeopardized. This could also presumably affect Mr. Snyder's future career and professional aspirations. Furthermore, in the long run, the company could lose the opportunity to secure a competitive advantage in the market, considering that none of the domestic producers have installed the scrubbers yet as mentioned by Alex, and further be deprived of the potential economic or commercial benefits or advantages that the concerned business undertaking could possibly generate. Hence, these are some of the odds that all the concerned stakeholders, in this instance, have to seriously consider while arriving at any final conclusion regarding the project implementation.

Now, any foreign investment or business decision involves several important considerations for any company or business organization or company. Some of the favorable factors or considerations to undertake any foreign business or commercial investment generally includes less stringent economic and financial policies in the host country such as congenial business tax relief or reduction, government financial incentives and subsidies, relatively more flexible flow or movements of factors inputs and raw material, easy accessibility to factor/input and consumer markets, accessibility to cheap raw materials and factor inputs which can lead to economies of scale, relaxation of the environmental standards and regulations, and so forth. These are some of the foremost considerations in the process of undertaking any foreign investment of business decisions. In this particular instance, one of the major concerns pertains to the relevant environmental regulations and standards in both the host and the home country but however, these other afore-mentioned factors or considerations are also extremely important given that the environmental standards and restrictions are less stringent in the host country compared to the home country.