CASE OVERVIEW

ORGANISATION-CHART

BOARD
Arch Carter - Lead Director
Sheila Cruse - Chair of boards audit committee
Dan Richardson

Chip Brownlee
CEO and Chairman

Sydney Baydown Terry Samples Harry Mart Dale Willis

General Council Senior V.P. Sales COO Senior V.P. HR

Mike Fields
Divisional Sale Manager

Greg Wilson
Divisional Sale Manager

About the company : Galvatrens, Houston-based consumer product company

Chip took over as CEO in January, 1997 from Walter Nikels. Chips previous company
was Paloreq and other prominent figures from the company who were in Paloreq are
Sydney Baydown and Dan Richardson.
Chip along with his trusted team modernized the company and expanded its product
portfolio simultaneously incorporating best business practices.
He took the initiative of a diversity campaign and an open-door policy was also
implemented.
At present, Galvatrens is facing a lawsuit from one of its former employee, Mike
Fields. The lawsuit is charged on wrongfully terminating Mike because he tried to
report an illegal scheme to boost sales.
An initial investigation was done and a board meeting was convened.
 The board of directors has taken the issue and have found the changes that Chip
tried to bring in has not been successfully implemented and a detailed investigation
was called for.

SITUATION ANALYSIS:
PRIOR TO THE LAWSUIT

Mike says he had found the malpractice by accident. According to him, for the past 4
weeks, Greg had proposed shipping goods to a few of his major clients billing them
with a side agreement which provided them a 2% discount on the goods that are paid
for in the following quarter.
Mike also alleged that he had reported the issue to Harry via voice mail as he was
unaware of the extent of the malpractice within the company. But Harry didnt
respond immediately and then later forwarded the issue to Terry.
Terry subsequently alleged that Mikes performance was not up to company
standards and that he faces a transfer with demotion to Indianapolis. This called for
further investigation as Terry was aware of Mikes divorce and issues regarding the
joint custody of his kids which required him to stay in town.
AFTER THE LAWSUIT
Chip had talks with the other 8 members of the Board of Directors, 3 days after
receiving the lawsuit.
Outside investigators were hired. The board met later after 6 weeks to discuss the
issue. Further investigation was called for.
After the investigators submitted their report, it was found that customers ignored
the channel-stuffing proposal. Terry had forced Greg out of the company and Greg
hasnt responded to the investigators.
They also confirmed Mikes decreasing sale performance and that the judge had
allowed discovery.
Consultants were hired and they had pointed out many loop-holes in the system and
also solutions for the very same.
SWOT ANALYSIS
STRENGTH
Company business policies

PROBLEM STATEMENT:
MAIN-PROBLEM is to tackle the law suit before it blows out of proportions. Find a
way to settle it while ensuring the ones responsible pay for it without harming the company
in the future.
SUB-PROBLEM is to find and solve the issue of poor communication across different
levels of the organisation. Why the principles implemented to ensure sound ethics within
the company is failing?

PROBLEM ANALYSIS:
After all the initiatives taken to make the business processes more transparent and
ethical, still a lawsuit was filed against the company by one of their loyal employees.
The board had to ensure that the channels made for communication is well
functioning and had to ensure that its roots had penetrated till the lower levels of
corporate hierarchy, else this wouldnt have happened. Mike did go to Harry first
addressing the issue, but his effort in that direction turned futile.
The company should have known before the lawsuit itself that it would face a crisis
like this.
A proper audit system would have prevented this. The books and records should
have been thoroughly checked for existence of malpractices. Channel stuffing is
illegal. If not dealt quickly, it can affect the companys status, market share,
customers, etc.
Mike also had to ensure that the upper levels of the company heard his plight. After
Terry blackmailed Mike about his job transfer, he should have taken the case to
Terrys seniors.
The board should have been informed when 2 employees (Mike and Greg) were let
go in short notice, especially when the sales division is facing bad turnover.
SOLUTION:
ALTERNATIVES:
FOR MAIN-PROBLEM
i) The company should come to an agreement with Mike outside the court and
settle his case with proper compensation and if possible reinstate him in the same
position. Also ensure that Terry and Greg must face the consequences of their
actions.
ii) Face the lawsuit in court with additional charges against Mike subject to
defamation. Also cut a deal with Terry and Greg ensuring consequences if such
behaviour prolongs.

FOR SUB-PROBLEM
i) The suggestions put forward by the consultancy;
Hire an ombudsman, in which case the employees can come forward with
issues keeping their anonymity
Proper audit committee must be placed
ii) The existing company policies must be ensured for 100% efficiency;
Appoint an ethics officer answerable only to the board of directors
24 hour hotline for reporting violations
Diversity campaign to achieve preferred-employer status
iii) Reframe the HR policies of the company which ensures the direct involvement of
the board of directors in such matters.
iv) Make provisions for complete transparency in all the corporate processes and
whistle-blowers to come forward without any second thoughts.

EVALUATION OF ALTERNATIVES :
FOR MAIN-PROBLEM
SOLUTION COST TIME EFFICIENCY
i Medium Low High
ii High High Medium

FOR SUB-PROBLEM
SOLUTION COST TIME EFFICIENCY
i High Medium High
ii Low Low High
iii Medium Medium Medium
iv Medium Medium High
BEST SOLUTION:
For the main-problem the best solution is solution number : (i)
For the sub-problem the best solution is solution number : (ii)

CONTINGENCY PLAN: