For Engineering and Science
Michael J. Rabins
Commentary On
"Honesty is the best policy" is such a well-known and overused cliche (like "To thine own self be true", or "Truth will always out") that we seldom take the time to consider the consequences of not being truthful or even why these cliches have come into existence. One author has said that he is not smart enough to lie because he can not remember what different lies he told to different people and then keep all the balls juggling in the air correctly. The 3rd and 4th Fundamental canons of the NSPE code of Ethics ("Issue public statements only in an objective and truthful manner" and act in professional matters for each employer or client as faithful agents or trustees") are there to provide us guidance and support as engineers to say and do the right (honest) things when faced with situations like Scott Lewis had to deal with at ABC.
Scott is a trustee of ABC's reputation, good will and long-standing position in the marketplace. If he won't stand up to do the right thing for his company (and synonymously, the public) who will? If he allows Tom Treehorn to break the law for just some short-term financial gains, is he really doing ABC a favor? If he does tell a 'white lie' and look the other way when Tom breaks the law to cart away the toxic waste, as in phase II of the case, the consequences of this action can have disastrous long-term effects as clearly shown in phase III. Now he must testify in court that he knowingly abetted Tom in breaking the law and that by not reporting Tom he committed the lie of omitting to report. At best he stands self-convicted of an error of judgement back in phase I now that he is on the witness stand in phase III. Worse still, by current federal law ("Resource Conservation and Recovery Act" - RCRA) he stands liable to be criminally indicted. Others in similar situations in real life now have a record of a convicted felony after a jury trial based on this law.
Putting aside the effects Scott Lewis personally suffered by not reporting Tom, one still needs to consider the effect his actions had on his company. True, he and Tom may have saved some money, time and trouble for ABC in the short term, but what will the long term effect on ABC's reputation be after a messy, front-page trial for toxic dumping? What effect will that have on ABC sales, stock-dividends, employment outlook and community tax-base contributions? What about the long-term effects on the professional pride and self-esteem of all the employees at ABC who, like Scott and Tom, are under obligation to "Hold paramount the safety, health and welfare of the public in the performance of their professional duties"? (The first Fundamental Canon of the NSPE Code of Ethics.)
This case is reminiscent of several other real life situations that the interested reader may wish to pursue. There is a wealth of writings on "Love Canal" and the Hooker Chemical Company that raise related issues. The recent case of the "Aberdeen 3" is very similar in some of the circumstances of this case. The hypothetical situation in the T.V. tape "Gilbane Gold" put out by the NSPE has some similar overtones of toxic waste issues. Also, the NOVA series has a number of T.V. tapes available in most college library audio-visual centers on such issues as PCB dumping and asbestos related issues that also relate to this case. The NOVA series and the NSPE tape are professionally done presentations that are effective for class-room use.
One last comment needs to be made regarding this Waste Disposal case, particularly with regard to phase I. The way the questions are posed in the phase I presentation of the case naturally brings up a number of important related considerations such as loyalty, differing professional opinions and whistle blowing. Regarding the latter, there is an excellent paper by Michael Davis, "Avoiding the Tragedy of Whistle Blowing"
In regard to as loyalty to his company and his fellow workers, Marcia Baron has some very relevant advice to offer Scott in her monograph "The Moral Status of Loyalty".
Finally, why should we even pay attention to what our Professional Society codes of ethics tell us to do in general terms? The NSPE Fundamental Canons, as well as other codes, offer us support to do the right thing as professionals regardless of what other pressures (time, money, bureaucratic, political, etc.) come to bear. In "Thinking Like an Engineer: The Place of a code of Ethics in the Practice of a Profession", Michael Davis
Commentary On
It would appear that Dan Dorset has been somewhat imprudent in putting his money down for the skiing condo vacation on such a tight timetable with his work. By not leaving any slack in his schedule, he is inviting Murphy's law to go into operation. This fact puts him in a negative light when discussing his situation with Ed Addison and others at Rancott.
First and foremost, Dan must "act in professional matters for each employer or client as a faithful agent or trustee" (NSPE Fundamental Canon #4). As a salaried employee of Rancott he owes allegiance to their policies and procedures. He is fully expected to loyally carry out Rancott's policy of sending one of it's engineers to supervise all installations. This does not mean accepting Boulding employee Jerry Taft's offer to supervise the installation in his place. Even if Jerry Taft were more qualified than Dan Dorset to supervise the installation, that would not abrogate Dorset's responsibility to sign off on correct installation as an employee of Rancott, therefore assuming Rancott liability.
One other unlisted possibility that may be feasible in version I of the case, is for Dan to go to the "nearby ski resort" and start his skiing vacation as scheduled. Then, when the two late units arrive two or more days later, he could arrange for Jerry to call him and interrupt his vacation for the "full day to install them". This would mean some additional travel and cost to Dan, but he would still be meeting all of his professional obligations. In this case, depending upon company policy and how well he gets along with his supervisors, it might be reasonable for him to request reimbursement for the cost of the extra travel since the late delivery of the two units was ostensibly Rancott's fault. Also, Rancott would certainly have had to approve Dan's vacation in advance, so his supervisors had to have known about Dan's vacation plans. However, it is difficult to make a case for any reason for Dan Dorset to call Rancott's home office to ask permission to let Jerry take care of the two units. Similarly, it is difficult to justify Dan's just leaving for his vacation while accepting Jerry's offer to supervise the installation.
In either one of these latter scenarios, Dan and Jerry would obviously have had to sign off on the final installation documentation (version IV) in clear violation of several aspects of the NSPE code of ethics. First there is the Fundamental Canon about issuing public statements in a truthful manner (I-3). Then there is the Rule of Practice regarding not signing any plan or document not prepared under their direction and control (II-2-b). Next there is the Professional Obligation to not sign any specifications that are not in conformity with accepted engineering standards (III-2-b). The standard here is the announced Rancott policy of having their salaried employee supervise all installations. Finally there is the Professional Obligation to avoid misrepresentations which are misleading or intended to create an unjustified expectation (III-3-a). Here the unjustified expectation by Boulding would be that the installation had been overseen by a Rancott employee (not Jerry Taft, their employee), and that Rancott was accordingly assuming liability.
Version II of the case raises some additional flags. First, it is not clear that Ed Addison's cocktail conversation with Dan was appropriate. It misses all of the points raised in the previous paragraphs about the professional ethics of the situation or the expected loyalty of Dan (and Ed) to Rancott. The question is not whether Dan should have left early if he had known Ed's position when he was at Boulding. The question is really whether Ed's position was acceptable and what should Dan have told him-- in a nice way over a second beer. Incidentally, Ed's final response to Dan's question in version II about the risk involved raises still other questions. How could the risk be estimated of installing the units without Dan's supervision? How safe would be safe enough? There is some excellent literature on risk analysis and risk management which may be relevant reading for Rancott management in reviewing their policy. Some of this literature differentiates between voluntary risks (like skiing) and involuntary risks (like using equipment not properly installed by others).
The new idea introduced in version III of the case is that Rancott is not required by law or contract to supervise installations. This fact really does not change previous arguments presented above. The Rancott policy of requiring installation supervision by a Rancott employee supersedes whatever contractual arrangements have been negotiated between Rancott and Boulding. Further, legality does not equal morality. There have been many laws in the past that were clearly immoral (supporting slavery or genocide for example) and there has been an absence of many needed laws which would have pointed to moral behavior. The resulting laws following Watergate are a case in point.
Version V introduces a new consideration, namely that instead of a skiing vacation, a following important assignment of a second installation is a scheduling conflict. Regardless of Dan's conversation with Ed (in version III) it is incumbent on Dan to either get Rancott to send a substitute for him to Boulding or to rearrange his follow-on schedule. For all of the reasons given above, Dan should not allow himself or the company to be put in a vulnerable position just to maintain a schedule. Whether in this version or the following one (VI) where he went skiing and nothing ever goes wrong, it is still incumbent upon Dan and his company to do the right and professionally acceptable thing.
Commentary On
Let us first consider the issues confronting Tony in part I of the case. Tony does make a compelling case about not wanting to be a Scrooge and ruin the Christmas holidays for his workers. Having personally been in somewhat similar circumstances (on both sides of the issue) earlier in my career, I can attest that it is very appealing for many reasons to adopt Tony's non-Scrooge stance, if all other things are equal. Unfortunately, they rarely are. For example what if one of Tony's workers is offered an attractive new employment opportunity over the holidays, and, not knowing about the impending layoffs, turns it down because he enjoys working for Tony so much? Or what if someone else personally purchases an expensive new instrument for his own tool chest that will enable him to do his job better for Tony? Or what if still another worker has signed up for an intensive three day short course over the holidays to improve his performance on the job for Tony?
There are many different scenarios that could emerge that would make it inconsiderate for Tony not to inform his workers immediately of the layoffs. In fact, just about the only scenario that would make it considerate is if all of the workers do not get involved in any personal or professional planning for the future over the holidays; an unlikely event. What is involved here is the golden rule or the Kantian respect for persons philosophy. Tony, as group leader, has the responsibility of thinking through his options, considering all of the possible consequences of his actions that he can, and then asking just how he himself would want to be treated if he were in the place of his workers. This is a tough situation for Tony to be in, but presumably he has demonstrated the necessary mental toughness for the job or else he would not have been promoted into it. Also, taking on these tough responsibilities is exactly what he is being paid for as an administrator.
In phase II of the case a different issue has arisen. Once Arnold has his embarrassing chance conversation with Ralph at the church Christmas Eve service, Tony now stands indicted of not just poor judgement but also insubordination. Depending upon Tony's and Arnold's prior relationship, it is entirely possible that the angry telephone call from Arnold to Tony on Christmas Eve could end in Tony being fired. If Tony decides not to be a Scrooge and delay termination notification to his 15 workers until after Christmas, he must tell Arnold of that decision immediately. He cannot blindside Arnold on this since there may be other factors that are involved that Arnold did not take the time to explain to Tony. For example there may be some year-end payroll considerations, or year-end benefit commitments that kick in if the workers are still on the payroll on January 1st. Aside from the insubordinate nature of Tony's action of not doing what Arnold tells him, it is just plain disloyal and, when you get down to it, stupid. The subsequent event between Arnold and Ralph certainly supports the shortsightedness of Tony not telling Arnold that he was going to delay his layoff notifications until after Christmas.
Commentary On
Before commenting on Gerald Wahr's circumstances, it appears that a logical inconsistency in the presentation of the facts of the case need some attention. It is not convincing that Gerald must interview Pro-Growth Pesticides, Inc. in order to save the farm. In the second paragraph it is stated, "Since Gerald had expected to return to the farm, he already missed many opportunities for job interviews". Well, since Gerald had planned on returning to the farm anyway it is reasonable to suppose that the Wahr family anticipated additional income from his presence. With his father in the hospital the extra income would not materialize, but bills would. If the hospital stay will be for an "extended period of time," it is not clear why Gerald couldn't work on the farm, for at least a while, and wait for additional engineering employment opportunities to present themselves. There would have to be a breathing room period during which the medical bills and mortgage payments would not yet be overdue. Gerald's presence on the farm would maintain farm income at previous levels, and other engineering employment opportunities could possibly materialize.
To make the urgency of the Pro-Growth Pesticides interview more compelling and convincing, it might be advisable to restate some of the circumstances of the case. For example, Gerald might be in the middle of the first semester of his chemical engineering M.S. degree program when his father unexpectedly passes away after an expensive hospital stay during which the bills quickly mounted. Further, the economic times might be so bad that Gerald is lucky to have even just the one interview with Pro-Growth Pesticides. Grim circumstances, but realistic--and perhaps more convincing for the questions that follow.
Having said all of the above, let us now presume that Gerald is faced with the real quandary of whether or not to interview Pro-Growth Pesticides. It would almost appear that this situation raises questions of common sense as much as ethics, although there are ethical dimensions to the situation that need to be discussed as well. Let us turn to Shakespeare for some guidance on the common sense issues. In "Hamlet", Polonius gives the following sage advice (in addition to quite a bit more) to his son Laertes who is about to travel abroad: "To thine own self be true, for it then follows as the night the day, that thou canst not then be false to any man." If Gerald interviews and subsequently accepts a job with Pro-Growth Pesticides, he clearly will not be true to his own or his father's views on pesticides. If he is truly convinced that pesticides are not only harming the environment generally, but farm products in particular, then there is no way that he will be able to honestly act as a faithful agent or trustee for his employer (NSPE Fundamental Canon #4). It does not take much imagination to envision situations in which, as a Pro-Growth Pesticide employee, he will have to act in violation of his own conscience (while being false to others) and probably of one or more strictures of the NSPE Code of Ethics.
Turning to Gerald's conversations with his friends (part II), several ethical issues do immediately arise. Allen's view that the work will be done even if Gerald refuses the interview ("Your refusing the job won't change a thing") is an age-old rationalization for doing something we know may be or is wrong. If enough people turn their backs on such a rationalization, maybe things will change. Change for the better, whether evolutionary or revolutionary, comes about because a critical mass of people do opt for the morally right path.
Bob's utilitarian argument is based on the premise that Gerald will slow things down a little by not being gung ho after he takes the pesticide job. This raises serious issues involving the means-end principle. Does the good end (organic farming eventually prevailing) justify the dubious means of Gerald dissembling on the job by being less than gung ho?
Don's advice to take the job and try to introduce a few reforms from the inside only makes sense if Gerald is up-front about that in his interview. If Pro-Growth Pesticides is willing to hire someone with Gerald's entrenched views on pesticide use, then maybe he could make a difference. But then Gerald better make sure there are mechanisms within the company to raise differing professional opinions. A number of companies have such mechanisms as company ombudsmen, ethical hotlines or reword procedures for productive disagreements with company policy. If it is Gerald's intent to change the company from within, he better make sure that the opportunities are there to do so.
However, from part III of the case (The Interview), it is made pretty clear that Pro-Growth Pesticides, Inc. does not agree that change is needed. Once Gerald is asked his views on pesticides, he pretty much has to have made a decision, in advance, to either have changed his mind or to prevaricate on the issue. If his family's welfare, and the farm are that important to him, Gerald must recognize that he must forego the luxury of his previous strong feelings about pesticides. Only if he can make that conscious decision is he justified in continuing the interview, once into it.
In part IV of the case (Jobs) the question is raised about what kinds of engineering related jobs might be declined because of ethical concerns. Many graduating engineers carefully limit the kinds of companies they interview to rule out (or in) companies involved in Defense Department weaponry contracts or environmentally impact-prone companies. Whatever the case, and whichever the concerns, it is wise for interviewee to think through these issues before even signing up for an interview.
Commentary On
Before getting too carried away about justice, fairness and "level playing fields" it is helpful to recognize some basic facts about the situation surrounding this Tool and Die case. First and foremost, Tool and Die is a for-profit company with several clear missions: it must deliver a profit to its owners or stockholders, it must justify the salaries it pays to its employees and mangers, it must deliver a competitive quality product and it must maintain professional standards in all of its operations. It is not in business just to support the outside vendors, although it clearly must maintain productive symbiotic relationships with those vendors.
If the internal tool and die department at T&D can produce the tooling designed by T&D at a price competitive with the cost of using outside vendors, then it would be foolish for T&D not to take advantage of that opportunity to save money. The question is how to do that while being fair enough to maintain continued open channels of communications with the outside vendors which will probably continue to be needed at some level.
Now, before we can consider the questions raised in version I of this case, it would seem appropriate to consider a different kind of competitive bidding than what has been used prior to T&D's internal tool and die department getting into the act. Previously, each outside vendor was undoubtedly asked for a single dollar price bid on each request for proposals. This dollar value is not really directly comparable to what the internal tool and die department will be bidding. The outside vendors' bids will include all direct costs, indirect costs (like heat, electricity, cleaning services, etc) and profit. The inside department bids will include just the first two items. That is what must be somehow compared. The equivalent of profit on the internal department bids is the moneys made available to the internal department (or others) for bonuses, other rewards for productivity and growth (i.e., profit reinvested in expansion or increased stock dividends).
To compare internal and external direct and indirect costs it would seem appropriate to prepare a new bidding format that indeed levels the playing field. Further it would not be appropriate to share the external bids with the internal department until all of the bids are in. Only then are all the T&D players acting as faithful agents and trustees of the T&D company. The appearance of fairness must be maintained in order to keep the vendors bidding. Any suspicion of bid rigging by the internal tool and die department must be avoided.
According to this analysis of the situation the response here to the 4 questions in part I of the case would be a combination of 3 and 4. In response to part II of the case, the analysis surely would support not using selection #1 in part I. If fair comparisons are not made between internal and external vendors in this case, there is also the danger of doing damage to the morale in other departments at T&D. Other department heads could argue that with rigged bidding, the internal tool and tie department has an unfair advantage over other T&D departments in showing increased productivity and looking good to upper management.
Regarding the internal tool and die department head's reasoning in part III of the case, it certainly sounds convincing and it is obviously true that all the departments must work together to maximize company profit. But that does not mean that purchasing should be a party to drying up the availability to T&D of outside vendors when they are needed. By sharing each set of bids with the internal tool and die department head after that bid is awarded, the opportunity is obviously provided for the internal department to be more competitive the next time around if it has not won the previous bidding competition.
The internal tool and die department head can certainly learn from comparing his previous losing bid to the winning external vendor's bid just exactly how his department can be more economical in determining future bids. This will eventually translate into increased profit for T&D in the long run and also maintain good relations with the outside vendors for as long as they are needed.
The key for this process to work is a carefully spelled out bidding procedure that allows apples to be compared with apples and clearly identifies the cost of labor, materials, direct overhead and indirect overhead. The last item is the most difficult to pin down equitably and accurately. Also, isn't the new procedure intended to gauge whether vendor's estimates are fair? If internal department doesn't blind bid, they will tend to try to always undercut bid and perhaps submit unrealistic estimate.
The federal government has a long standing discussion going on with industry and academia regarding this indirect overhead determination. In fact the subject has recently been front page news in regard to Stanford University and the resignation of the University President over audited misuse of the indirect overhead moneys paid Stanford by the federal government. This fact is mentioned only to indicate that T&D will have its work cut out to develop a fair and accurate comparison between internal and external vendors.
Commentary On
L. Bryan Springer has at least four options, and perhaps some middle ground combinations of the four. Just listing them to start offers a basis of discussion for leading to a personally acceptable course of action for L. Bryan to follow. The options:
- Do as he is told and nothing else.
- Do as he is told, but on his own time develop as convincing a documented argument as he can to present to Max Morrison and Max' superiors to convince the company to change its dumping policy.
- Similar to 2, but to take his arguments outside of the company he is working for; possibilities include appropriate municipal agencies, federal regulatory agencies or the news media.
- Refuse to do as he is told, citing his personal convictions. He can then hope to be reassigned, or more likely, he can prepare to resign or be fired.
On option 1, L. Bryan must be aware of what laws he may be violating if he decides to follow Max's orders. He must be prepared to personally deal with the consequences of those laws (fine and/or imprisonment) if he is personally indicted for the felony of toxic waste dumping under the terms of the U.S. "Resource Conservation and Recovery Act" (RCRA). Perhaps just as important, he must be conscious of what he personally would be doing to the environment. There is a wealth of literature (and NOVA series T.V. tapes) on such famous toxic waste cases as "Love Canal", "PCB Dumping" and "Asbestos Manufacturing" that could help L. Bryan better understand some of the potential consequences of his following Max' orders without question.
Still in regard to option 1, as a budding engineer L. Bryan should be aware of the first Fundamental Canon in the NSPE Code of Ethics, "Hold paramount the safety, health and welfare of the public in the performance of their professional duties." Maybe driving a forklift is not yet one of his professional duties, but it is a means for him to get to those duties. Also, the company he is working for is ostensibly involved in engineering related work (it's machine coolant he was asked to dump); and the strictures of the NSPE code of ethics apply equally to companies as to individuals. A company can violate one of the code items only through the actions of its employers. So, in aiming its code of ethics at individuals, the NSPE is clearly also enjoining companies to follow those same guidelines. There is not and cannot be separate codes for individuals and companies to follow.
Option 2 will take a great deal of effort on Bryan's part. He must feel strongly about the issues involved to even contemplate embarking on this course of action. He will need to gather information on the toxicity of the specific chemicals he is dumping and what medical evidence is available about the effects of that toxic waste on the public. This is most effective if put in numerical terms such as the probability of whatever serious consequence is possible per unit level of exposure (for example, probability of the number of serious illnesses per 100,000 people exposed to one part per million in their drinking water). Next he will need to gather information on current applicable laws, and particularly what fines and penalties are at risk. Finally, he will need to present the cost of alternatives available to Max's company other than just outright dumping. That's a lot of work, but if L. Bryan is really disturbed about the situation and still wants to keep his summer job, he may have no other alternative to spending some significant research time in the local library.
If L. Bryan does opt to present this kind of a case he must do it with great tact and diplomacy. He must convince Max that seriously considering alternatives to dumping may be in Max's and the company's best interests. He must somehow convince Max to be his ally in trying to sell the cost of the alternatives to dumping to Max's superiors in the company. The appearance of an end-run by L. Bryan around Max to Max's superiors should be avoided at all costs. Michael Davis has written some pragmatic and effective advice on this subject in his paper "Avoiding the Tragedy of Whistle Blowing".(1)
That brings us to option 3, which is only different from the previous one in that L. Bryan would now be working outside of the company he is employed by (i.e., going public). There are those that make the case that this course of action only makes sense after one has resigned from the company, in other words after there is no longer anything personal (job and income) at stake. This may be a moot point since once he goes public, it is highly likely that L. Bryan will no longer be employed by his company. In any event there is a fairly extensive literature(2) on whistle blowing, when it is permissible, when it is obligatory, and how one may best be protected against the consequences of whistle blowing.
Option 4 is self-explanatory and needs no further discussion other than to note that it may be personally gratifying but does little to alleviate the basic situation.
Commentary On
It would seem that Alison Turner and her fellow committee members on the PNSRC do not yet have all of the information available to enable them to make a carefully considered judgement. But even before considering analysis of a single heat exchanger failure, as in part II, she has some professional obligations to consider. If Alison does not express her reservations in part I of this case, it is likely that the Justification for Continued Operation (JCO) will be forwarded onto the Nuclear Regularly Commission (NRC) for approval with no mention of the contingency check on the loss of one of the two heat exchangers under the required Single Failure Criteria.
It is not unreasonable to expect that the people who serve on the NRC have sufficient experience and expertise to turn down the JCO from the PNSRC just on the basis of the omission of this Single Failure Criteria assessment of the effect of losing one heat exchanger. Alison can make this point following the moment of silence on the initial vote in part I. She can try to convince her fellow PNSRC members that it is in their and their company's best interest to maintain the confidence of the NRC.
Most important she can try to convince her fellow PNSRC members about their responsibility to check all contingencies in order to hold paramount public safety according to all professional society codes of ethics. This is particularly sensitive given the nature of what is potentially at risk in this case.
In part II of the case it emerges that the Nuclear Safety and Licensing Department would only require 3 hours to perform the necessary calculations for the Single Failure Criteria issue of the effects of a possible loss of one heat exchanger. At this point in the discussion it appears that Mark Reynolds on the PNSRC is leaning towards supporting Alison's concerns. The fact that the containment spray heat exchanger is optional and the company track record is excellent, as Joe Carpello points out, is really not relevant to the question at hand, namely the responsibility of the PSNRC to consider all possible consequences of their actions. The fact that this is an accident mitigation system and there never has been an accident in the plant, as pointed out by Brad Louks, is also not relevant to the basic responsibilities the PNSRC faces.
Joe Carpello's statement that nothing is ever totally risk free is exactly right. But his point that their company has always been a leader in safety, so "...Let's not get carried away with 'possibilities'" seems precisely wrong just because nothing is ever totally risk free. It is exactly by letting oneself get deeply immersed in all failure mode possibilities that one maintains a position of leadership in safety.
Given that it is only 1:30 p.m. in the afternoon when this discussion takes place, and that the calculations for the missing Single Failure Criteria assessment would only take another 3 hours, it would seem that Alison and Mark could reasonably call for a tabling of the PNSRC vote until 4:30 that afternoon.
In part III of the case, it is hypothesized that subsequent calculations have shown that Alison's concerns were unfounded. Does that make it wrong for her to have requested a delay on the PNSRC vote? Just the fact that the substantiating subsequent analysis can now be included in the JCO to be forwarded to the NRC would seem to justify the delay.
The issue of setting a precedent of proceeding without unanimity on the PNSRC does not really seem to be an issue. Undoubtedly, once the Single Failure Criterion analysis is available, Alison will for sure be willing to join the majority to make the final recorded vote unanimous. But even without such a vote change, in something as critical as reviews like this one coming before the NRC, non-unanimity of a PNSRC vote may achieve the important function of requiring the NRC to look at any situation more carefully than it might otherwise have done.
The early days of the NRC actions are replete with some misguided risk assessment analyses that did not properly alert us to the kind of problems that arose at Three Mile Island. The interested reader is referred to the literature regarding the famous Report to the NRC headed by Professor Rasmussen of MIT (the so called WASH-1400 Report). There are also a number of informative reports and TV tapes on Three Mile Island that are relevant to some of the issues in this case.
Commentary On
The issue of conflict of interest, real or apparent, is of continuing concern to most companies who must deal with vendors and must try to avoid even just the appearance of wrong-doing. If it becomes general knowledge that Company X only buys from vendors who pay a hefty personal kickback to the company's purchasing agent, then that will chill the process of competitive bidding and the resulting honest economies for the company. One company has what it calls the New York Times front page test. The question is, if you are in doubt about whether to accept a proffered gift or consideration, how will it look to other vendors and others in your company if your actions are written up in detail on the front page of the New York Times? Clearly what Scott Bennett of the Upscale Company should or should not do must be based on well publicized Upscale Company policy.
This comes out in part II of this case where, after Scott has accepted the low cost condo rental offer from Larry Newman, the sales representative who does business with Upscale, an Upscale vice-president, sends out the new policy statement that says, in part, "Accepting incentives from vendors is strictly prohibited." Hopefully the new policy says a good deal more than that, because despite first impressions that might indicate that Scott should cancel his trip immediately, there are many other considerations that must be taken into account. Let's start with the word 'incentive'. Is a plastic ball point pen with Larry Newman's name on it an incentive? What if it's a gold-plated pen? What if it's solid gold? So for starters, the new company policy has erred by not putting some threshold level on the incentive. Some companies put an upper bound of $25 on any acceptable gift. Others flat out say, "No gifts at all." What if the proffered incentive is a free lunch? Does that mean that you can only order food and drink such that the bill (with tax and tip) is less than $25? Some large companies and the federal government (since Watergate) escape this problem by forbidding acceptance of any free meals. Even then the problem continues to grow. How do you define "vendor"? What if Larry Newman is a sales representative to Upscale for an industrial chemical supply company and Scott Bennett's engineering responsibility is only to specify and purchase electrical parts. Is Larry truly a "vendor" in this situation, or perhaps just a golfing buddy of Scott's.
The answer to this question has to include the consideration of whether Scott knows the Upscale engineer responsible for specifying and purchasing chemicals, and more important, whether he has any significant influence over those purchasing decisions. Even if he does, the book is not yet closed, because the question has to be raised whether there are any significant chemical purchases to be made in the near future, or alternatively perhaps a large 5 year chemical purchase agreement has been signed before Larry and Scott teed off together in their fateful foursome. Even beyond all of the above considerations the waters still remain muddy. Some companies encourage their employees to socialize with their vendors (in a balanced fashion) so that there is a close personal relationship between the vendor and the purchasing agent. The argument goes that knowing the vendor and his product in a thorough fashion, and being on a first name basis with the vendor will enable the purchasing agent to get treatment for his company in emergency situations that might not be otherwise available.
Certainly the reality and appearance of kickbacks has to be avoided, but even then many companies are truly delighted when their purchasing agents spend a weekend fishing, hunting or golfing with the vendors they are doing business with. From the perspective of the company, in one sense, they are getting free overtime effort from their purchasing agent that will translate into improved productivity or profitability. Finally if two company presidents who are negotiating a contract between their companies go off on a fishing boat together (that one of them owns) to conclude their negotiations, is that truly different from Scott and Larry, way down on the company roster, playing golf together?
The company policy must not depend upon rank or salary in the company. When all is said and done, it comes back to the issues of appearances and intent. If the proffered incentive is meant as a bribe and clearly appears to be such, then it must be avoided. Scott might have to discuss with his Upscale vice-president if the new policy applies to his circumstances.
