Question

Case Study

The statewide news carried a story about Core-Tex that evening. There were rumors swirling that one of the largest manufacturers in the state was facing serious questions about its social responsibility.

A former accountant for Core-Tex, whose identity was not revealed, made allegations about aggressive accounting methods and practices that overstated company earnings. He said he left Core-Tex after his supervisor and colleagues didn’t take his concerns seriously. The former accountant hinted that the company’s relationship with its external auditor was quite close, since Core-Tex’s new CFO had once been on the external auditing team.

Core-Tex had recently laid off 270 employees – a move that was not unexpected in these turbulent financial times. However, the layoff hit some parts of the site’s community pretty hard. Finally, inspectors from the state environmental protection agency had just issued a series of citations to Core-Tex for improper disposal and high emission at one of its larger manufacturing plants. A TV station had run an exposé on the environmental citations a week ago.

CEO Kelly Buscio clicked off the TV set and thought about the company’s next steps. Core-Tex ‘s attorney had cautioned the executive group earlier that week about communicating too much with the media and other constituents. The firm’s vice president for marketing countered the attorney by insisting that Core-Tex needed to stay ahead of the rumors and assumptions that were being made about the company. The marketing VP said that suppliers and business partners were starting to question Core-Tex’s financial viability. The vice president for information technology and the vice president for operations were undecided on the proper next steps. The vice president of manufacturing had not been at the meeting. Buscio wondered what tomorrow would bring.

To her surprise, the newspapers were pretty gentle on Core-Tex the next day. There had been a major oil spill, the retirement of a Fortune 500 CEO, and a major-league baseball championship game the night before, so the reporters were focused on those stories. The company’s stock price, which averaged around $11.15, was down $.35 by midmorning. Her VP of marketing suggested that employees needed to hear from the CEO and to be reassured about Core-Tex’s strong future. Her first call after lunch came from a member of the firm’s board of directors. The director asked Buscio what the board could do to help the situation.

What would you do ?

Answer 1

This is one of those times when the organisation needs to come clear on the rumours, pre assumptions and hoaxes. The CEO must be honest in his approach in communicating to the stakeholders and depict the real picture of the state of affairs of the different aspects of business viz. finances, operations, HR, Social responsibility among others. He also must clearly the rational of harsh decisions taken by the organisation and the future growth strategy to overcome the difficult times.

This approach will instill confidence and assurance in the minds of employees, suppliers, creditors and others and help to clear the rumours and help to re establish the rapport of the company in the business environment.