After graduation you obtain a management position with a rapidly growing start-up preparing for an initial public offering (IPO). The company has secured huge investments from venture capitalists. You, as well as many other managers, receive a modest amount of stock options to encourage hard work and loyalty. And everyone does work hard and long, sometimes up to 20 hours a day, including required attendance at an occasional 2:00 a.m. meeting.
The 40-year-old founder and CEO, Andy, is the company’s largest shareholder at 30%. Andy has a dynamic personality, a dominant physical presence at 6 feet 5 inches, and nonstop energy. He is an eloquent visionary who attracts trust and a cultlike following from employees, despite being highly impulsive. Andy lives a lavish lifestyle and owns three luxury homes and a private jet. Company expenses are out of control with $1 billion in losses last year, but that money could be recovered quickly if the upcoming IPO meets current expectations.
During your first few weeks of employment you observe Andy occasionally join hardworking employees for a shot of tequila and a marijuana break, which he supplies. Some employees think this is “cool” and down to earth; others feel awkward. During the summer you attend the often-talked-about company-wide weekend retreat where the wild “work hard, play hard” water cooler stories are confirmed. The brainstorming, planning, and goal-setting meetings are interspersed with college fraternity and sorority type activities involving excessive consumption of alcohol and drugs and drunken sexual harassment by both men and women.
On the Monday following the retreat, after a series of tense meetings preparing for the IPO, you lunch at an isolated restaurant quite a distance from work to get away from everyone. To your surprise, eating by herself, with an empty chair next to her, is a board member. It’s obvious she’s not expecting anyone to join her. Board members have a legal obligation to make decisions based on the best interests of the company. You wonder if the board member knows the extent to which the CEO has developed a reckless work culture and how that might impact the upcoming IPO as more information about the company becomes public. The opportunity to speak confidentially with her about your work experiences will not likely happen again.
Critical Thinking Questions
What could you do?
What would you do?
A. Ask to join her and share what you know about the CEO’s behavior and work culture
B. Write an anonymous note documenting some of the worst misbehaviors and secretly leave it on her table when she’s not looking or mail it to her
C. Do nothing because many employees enjoy the work environment, and this is way beyond your job description
D. Something else (if so, what?)
Why is this the right option to choose?
What are the ethics underlying your decision?
Chapter Questions:
1. What are the roles of ethical values for the six traditional shareholder-oriented governance systems?
2. What are the two primary ways boards of directors determine the shareholders’ best interests?
3. How can companies implement three innovative stakeholder-oriented governance systems?
4. What are some of the best practices for good corporate governance?
5. What are several common governance problems and issues?
