Business case study

INTRODUCTION TO BUSINESS

Case Study

A Dangerous Business

We all agree that ethical behavior is important when doing business. Companies should harmonize their operations with environmental demands and other vital social concerns. Not all companies, however, have taken steps to encourage a consideration of social responsibility and ethics in their decisions and day-to-day activities. Some regard such practices as a poor investment, in which the cost is not worth the return. Government regulation and public awareness are external forces that have increased the social responsibility of business. But business decisions are made within the firm—and there, social responsibility begins with the attitude of management.

The McWane Corporation, in the business of making iron into pipe, is the subject of this case study. In the 2003 FRONTLINE story, McWane is alleged to be one of the most dangerous companies in America. Iron foundries make the water and sewer pipes essential to our lives, however, danger is everywhere and demands on workers are relentless. McWane foundries stretch across ten states and Canada. They are privately owned by one of the wealthiest families in the country. The government says McWane has left a trail of death and dismemberment, amassing more safety violations than all its major competitors combined.

Tyler Pipe, in Tyler, Texas, is McWane’s largest plant. Since its purchase in 1995, federal officials say it stands out as repeat violator of safety rules—with a workforce that has endured burns, amputations, and violent industrial accidents. Many McWane workers say safety is sacrificed to increase productivity. Since the 1970s, the McWane way of management has spread as the company aggressively expanded. It has estimated annual revenues approaching $2 billion. Buying up antiquated plants, they now have foundries across North America, increasing profitability through what they call “disciplined management practices.”

The federal agency whose job it is to monitor and control the safety of workers in the United States is OSHA, the Occupational Safety and Health Administration. Since its establishment in 1970, there have been more than 200,000 workplace-related deaths. In all that time, there have been only 11 short jail sentences handed out. The judgment in Washington has been that regulation was strangling business. After heavy lobbying by industry, OSHA’s authority and budgets have been curtailed, making it easier for come companies to dismiss the agency. It has been said that under federal law you get a more severe penalty for harassing a wild burro on federal land than you do for willfully killing a worker in your factory!

Charles Jeffress was OSHA’s administrator in the late 90s. He tried to get McWane’s attention—without much success. He cites the current law as being inadequate to deal with serious, repetitive violators. “The penalties in the OSHA Act are inadequate to deal with people that don’t take their safety responsibility seriously. The penalties were first established in 1970. They’ve only been increased one time since then and it’s very low. A serious violation, something that might lead to someone’s death, carries a maximum penalty of $7000.” Over the years, the situation has not changed because there hasn’t been a groundswell from the public to get Congress’ attention to change the situation. Any change in the law has to come from Congress and in this era, regulatory programs, enforcement programs, are not popular in Congress. In addition, enforcing OSHA misdemeanors is not popular with federal prosecutors around the country.

Pipe foundries like the McWane plant are not only inherently dangerous, they are dirty. McWane plants have been declared in violation of pollution laws and emission limits more than 450 times. But environmentalists discovered that air pollution wasn’t the only problem. Plants were dumping pollution from their process wastewater and runoff from the plant into a pipe that ran into a village creek, which is an illegal discharge of polluted water. Wastewater contains oil, silica, and heavy metals. The law requires that it be collected in holding ponds, then treated and recycled. Wastewater from McWane’s holding tanks was regularly overflowing into storm sewers, eventually ending up in rivers nearby. McWane company officials say they are trying to do better and are spending tens of millions to clean up the air and water pollution from their foundries around the country. They have spent $5 million alone at the Atlantic States, where they say they have sealed off the foundry from the town’s storm drains. They claim they are fighting for survival, competing against foreign manufacturers who have “little or no regard for the safety of their workers or…the environment…”

McWane foundries thrive, still following the philosophy of “disciplined management practices.” They have an enviable record of commercial success and an unenviable reputation as one of the most dangerous workplaces in America.

Questions:

1. If you were the owner of a manufacturing company, describe “acceptable” working conditions? Be specific. Avoid using generalizations such as “safe, clean, proper,” etc.

2. Discuss McWane’s “disciplined management practices” as described in this case.

3. Should the government be solely responsible for regulating and policing safe working conditions in the United States? Why or why not?

4. List responsibilities you feel companies should assume with regard to the environment and to their workers. Refer to some of the ethical responsibilities discussed in our textbook.

5. Do you think that ethical behavior and profitability can co-exist? Why or why not? Cite at least one example of a company that proves your point.

INSTRUCTIONS

Provide an introduction which includes a thorough overview of the case including all relevant details in your own words. Be certain that anyone reading your introduction would understand the details of the case without having read the actual case itself.

Answer all questions including an explanation of the basic course principles which are involved and how they apply to this case. Answer each question in at least one separate paragraph. Do not number the paragraphs. For format information, refer to the handout on writing case studies.

End with a conclusion or summary of the case. Remember to include a Works Cited page.

For more information and updates on this case, visit the website: http://www.pbs.org/wgbh/pages/frontline/mcwane