Reference no: EM133146369

Jack Smith is the majority owner and CEO of Aventura Mining Inc., a third-generation family business that made its fortune in aggregate mining.  Unfortunately, Jack can see the available supplies of aggregate dwindling and wishes to diversify Aventura Mining Inc. operations into a full-scale mining company.  He had some exploration done and a prospectus completed on the potential of mining various minerals from Mt. Richards and Mt. Sicker, which are near the City of Duncan on Vancouver Island.  There were considerable reserves of copper in the mountains and some of the minerals that could be extracted were precious metals in high demand currently. It also helped that world prices for these minerals was at an all-time high.  And fortunately, the family already owned the mineral rights to those areas.  He proposed to conduct open pit mining as it is the most cost-effective method of mineral extraction.

Jack called the family together for a dinner at his estate on Salt Spring Island where Jack announced his ambitious plans.  The younger family members (all millennials) cautioned him about mining without consideration for the environment and for the potential impacts on the local communities, including the Indigenous communities that are in proximity and within whose traditional territory the first mining operation would be located according to the proposal.  Jaqueline, his daughter, alerted him to a slide show highlighting two stakeholder approaches that she saw at the last mining convention that she attended.  Jack's wife, Mrs. Jolene Smith also cautioned Jack on the potential for financial loss to the company and to the family legacy if he failed to mitigate risk.  And his son Joe, a lawyer, advised him that any number of stakeholders could influence his plans.  Furthermore, Joe indicated that there would be several issues that should be contemplated and that the Green Coalition Group would be a problem for the project. Jack's other son, Jaxon said that the whole stakeholder thing was overrated and that all the stakeholders would see the benefits of the mine, including jobs and training and economic growth for all stakeholders, and most importantly, profits for the shareholders. It is our right he said - we own the mineral rights and business would benefit everyone.

Jack had become successful in part by listening to his shareholders, and the Smith family members were his nearest and dearest shareholders.  But he was also a businessman who was used to getting things done on a handshake and by consulting his network of business associates whom he often met locally at the Chamber of Commerce Social Club.  He knew that the local Member of the Legislative Assembly (MLA) of British Columbia was also the Minister of Mines and Resources, and the Minister could likely help Jack to manage the Indigenous stakeholders and to obtain the necessary permits.  Jack also heard that the Chief and Council of the closest Indigenous community were looking for funds to build a new school.  Perhaps a donation would be helpful.

At work on Monday Jack consulted with Jacqueline about these thoughts and the slide show she mentioned at the dinner. Jacqueline was taken aback by Mr. Smiths "old school" intentions and cautiously advised a more professional and expert approach.  And after discussing the contents of the slide show she convinced Jack that the most critical stakeholders to deal with were the local Hul'qumi'num people, who comprised 5 individual First Nations that collaborated collectively under one Nation for the purpose of negotiating over large-scale project proposals that had the potential of adversely impacting their Aboriginal rights and titles in their traditional territories.

Jack succumbed and wanted to do the right thing socially and to mitigate financial risk of the enterprise.  But he had never had to worry about the social impact of his aggregate operations.   He instructed senior management of Aventura Mining Inc. to retain you, the consultant, to draft a 7-page memorandum analysing the two approaches taken by the mining companies in the slide presentation and the issues at stake in his proposal. Jack heard that you were a recent graduate specializing in strategic planning with a focus on CSR, and an up-and-coming superstar in the field.  Jack was conscious of price and wanted to hire you before you became too famous and unaffordable.  He wanted to know who the stakeholders would be and whether he should deal with all of them or have some sort of priority management system.  He wanted to know whether he was correct in focussing on the Indigenous stakeholders.  Specifically, Jack wanted to know what approach he should take in engaging with the local Indigenous communities and why.  And whether the approach Jacqueline witnessed in the slide show at the conference could be used in all stakeholder dealings.  And finally, he wanted to know how to be prepared if issues did arise.  Given his family's admonitions he wondered if he should set up a separate department to deal with these new ethical, social, and legal obligations, and if so how - i.e., whether to have just an ethics department or a more fulsome CSR department.  He thought maybe he would put Jaxon, his son in charge of the new department. Or his daughter Jacqueline.  Or perhaps someone else - you? And lastly, should he even proceed with the project, and if so, what would be the best approach to solve all the stakeholders' concerns?

Using ONLY the slide show and your textbooks and class notes as resources you feel that you can answer Aventura's questions within budget.  What will be your advice to Mr. Smith?

You have made yourself a partial list of guiding questions:

-Which of the two approaches would work best for Aventura Mining Inc. in dealing with its stakeholders? Why?

-What stakeholder, ethical, and CSR issues can you foresee in this scenario?

-Should Aventura Mining Inc establish an ethics/CSR department with a mandate to deal with ethical and shareholder and CSR issues? If so, how should it look?  What approaches would you recommend?  And should Jack hire Jaxon, his son, or his daughter Jacqueline to lead such a department?  Or someone else - you?  This would go a long way toward advancing your budding career.

-Based upon the above analysis would you recommend Aventura Mining Inc. proceed with the proposal?  You envision plenty of challenges but is there a way out?  Your career may depend on your answer.

The slide presentation referred to is open in Moodle.

An assessment rubric for this project follows and will be deposited in the Moodle course management system.