Reference no: EM131942162
Mr. James Elliott, CEO and Chairman of Byte Products, Inc., presents his recommendation to the Board of Directors to purchase an existing plant in Plainville as a temporary plant until the new one is in three years. All on the one (10-1) seem to favor the proposal. What ensues is the discussion between Elliott and Kevin Williams, board member, over the proposal to purchase a plant with the intention of closing it in three years.
Byte Products has three existing plants operating at full capacity (24 hours a day and 7 days a week). The new plant proposed to be built in the southwestern United States will require three years before it is fully This means that Byte cannot meet the anticipated demand for its products. Alternative courses have been explored - (1) license Byte products and technology to other U.S. , and (2) overseas facilities and licensing. Top management found an existing plant in Plainville, New England that would meet the company's immediate production needs until the new plant will be online in three years. The Plainville facility had been closed for the last eight years. It would take about three months to get the Plainville plant online.
The discussion between Elliott and Williams focuses on the impact on the town and on the potential 1,200 employees opening this temporary plant. The town and the townspeople had gone through a catastrophic closing eight years ago when the plant in question was closed. After a lengthy discussion between Elliot and Williams, a recess in the meeting is called. When the board meeting is reconvened, a major shift has taken place. The vote could be 7-4, or 6-5 for the proposal, but Elliott desires a unanimous vote. As the case ends, Williams is asked if a compromise can be reached. He responds, respectively, "I have to say no."
Decision Date: No Date Sales: $265,000,000
1) Is there a symptom of bad corporate governance based on the information provided in this case?
2) What impact does a plant closing have on a small town like Plainville? What impact does the closing have on the employees?