MB112 Business Ethics
Assessment 1 – Ethical Dilemma Case Study Analysis
Instructions:
Read the following case study carefully and answer all four questions linking relevant subject literature to demonstrate understanding of the key topic contents from Topic 1-4.
Please write out each question and then proceed with the co
esponding answer.
Consistent intext references from your reference list is required in your answers to pass this assessment. Word limit: XXXXXXXXXXwords
Please upload your submission by Sunday of Week 5, 4th of April, 11.59pm.
Managing a Mining Crisis in a Complex Environment: The Case of Calgary Star Corp. in Peru - Author: Christopher Robertson
Abstract
In this case an executive from a fictitious multinational mining firm faces a dilemma in which various perspectives must be considered. The decision-maker must evaluate a mine collapse situation that has occu
ed in Peru from an ethical, financial, operational, and stakeholder perspective. Students have the opportunity to evaluate the situation from different lenses yet will also need to develop a proposed course of action which incorporates the task of conceptualizing a timeline under uncertain conditions.
Case
Learning Outcomes
Students must evaluate the different options available to an executive in the mining industry when his firm is faced with a serious crisis at a subsidiary in Peru. Students will learn to assess the impact of a range of plausible decisions on different local stakeholders involved while also attempting to protect the firm’s reputation and stakeholder interests. Moreover, completion of this case should shed light on cross-cultural management issues and the ethical decision-making process.
Introduction
As the Senior Vice President of International Mining Operations for the fictitious Calgary Star Corp, a Canadian mining firm that specializes in the exploration and extraction of various precious minerals including silver, gold and nickel, you are responsible for all global operations. You report directly to the Chief Executive Officer (CEO) and Board of Directors. The top management team includes three other members of the Board of Directors who report directly to the CEO: Senior Vice President Finance; Executive Vice President of Mining Exploration; and Senior Vice President and Legal Counsel. The firm’s overall performance has been strong in recent years and the trajectory looks good going forward. Over 80% of your firm’s revenues over the past five years have been generated by operations in Latin America, and annualized revenue growth in the region has averaged over 10% per year over the same period. Your performance as the head of international operations has caught the attention of the Board of Directors, and with the CEO planning retirement within two years you are top on the list of potential succession candidates. Life is good.
Early one December morning, while picking up your pre-work coffee, you receive a text message from the head of your operations in Peru, Santiago Guzman. The message is simply five words, “major mine collapse near Arequipa.” This is followed by another short text, “call me ASAP.” As you take your first sip of coffee you wonder how bad the situation is in Peru. You know that one of your largest mines is near Arequipa and your heart skips a beat. You think about who should be in the loop immediately if the worst-case scenario plays out. You must assess the different stakeholder needs and potential ethical implications of various possible decisions going forward.
The Crisis
A quick call to Santiago reveals that your concerns are indeed true. One of your firm’s mines has collapsed high up in the Andes Mountains. The mine, named Estrella, is in an area in which your firm had to negotiate heavily with the local government and Indigenous people to obtain permission to use the land. As Santiago describes the situation it becomes clear that he is not sure about how many miners are trapped below the surface. He conveys that most likely somewhere between 15 and 20 individuals must be rescued. He also alerts you to the very strong possibility of protests by local families of miners, which could create major negative media attention. A decision must be made quickly regarding short-term and long-term courses of action as well as who should be involved in the process.
Peru has recently emerged as one of the more stable economic stars of Latin America. With one of the stronger average gross domestic product growth rates in the region over the past decade and a number of recent free trade agreements (including one with the United States) the attractiveness of doing business in Peru has increased. Mining still remains one of the drivers of economic growth and despite improving conditions, wages tend to lag behind more developed countries and poverty in the mountain region is commonplace. Calgary Star has offered additional benefits such as excellent healthcare, wages above the local average, and educational assistance for workers and families. These benefits have helped recruit and retain a strong workforce.
Managing the Crisis: Communications, Rescue, and Timing
After instructing Santiago to find out as much information as possible and report back quickly, you head to your office with many thoughts on your mind. A decision must be made soon. One issue that you must address is the communication strategy for your firm. Does it make sense to make any public statements before obtaining more information? Waiting too long is generally seen as representative of weak crisis planning. Moreover, you need to designate a crisis management team to work on all aspects of the dilemma. You know that some of the key challenges will be related to the following questions:
1. How do we communicate with the local Peruvian government and miners’ families?
2. What do we tell our investors?
3. Who is best suited to assist with the rescue of our miners?
4. Who should go to Peru from Corporate Headquarters?
5. What is our timeline?
You also must confirm if your firm has enough assets and equipment within the country that can be moved to Estrella to help expedite rescue operations. If not, are there other sources of rescue assets nea
y or must they be flown in? No doubt, time is of the essence.
Another thought that enters your mind is lessons learned from other mining accidents in recent history. Of course, the miraculous rescue of the 33 miners from the 2010 San José Mine in Northern Chile after being trapped for 69 days was the best-case scenario. However, you know from being in this industry that many accidents often turn to tragedy quite quickly. You think of the 2006 Sago Mine accident in West Virginia where 12 miners were found dead after just two days, or the Soma Mine explosion in Turkey in 2014 in which 301 were killed. Generally, collapses are better than explosions when hoping for the possibility of survivors, and Santiago seemed quite sure this was a collapse situation. You realize that you need to move quickly to mobilize rescue efforts in the mine and for the
and.
As you reflect on your firm’s safety record you know that it is integral to the company’s competitive advantage and overall reputation. Your firm has been known as the “Qantas of the mining industry.” Qantas is generally considered the safest airline due to the firm never having a fatality related to a flight. The safety record of Calgary Star has inspired many investors to come to your firm because of the minimal risk that is involved. Moreover, your firm’s safety record has been an excellent recruiting tool for the young talented managers as well as workers at the mines in the region. Calgary Star has a strong safety protocol and generally utilizes a mix of corporate headquarters, local managers and contracted experts to address safety related issues. An international crisis communications expert has been kept on retainer should an unfortunate situation arise. Nonetheless, this is the first collapse of this nature which has resulted in significant uncertainty su
ounding the protocols in place.
Stakeholder Management and Ethical Dilemmas
You contemplate how a possible worst-case scenario could do substantial damage to your firm’s name
and and notoriety in the industry. Protecting the
and is important yet protecting lives of workers is the primary concern in the immediate future. Although various approaches to this situation are possible, making the wrong decision at any point could result in profound ethical implications for the firm, such as the unwa
anted death or injury of workers, release of toxins into the air, water or soil su
ounding the mine, loss of jobs, etc. Protecting against these issues is crucial. As you a
ange the team to
ing with you it is not clear to you who exactly are the best people to help you manage the many different components of this crisis. You know that there are legal, environmental, publicity, and many human resource challenges. You must discuss with the CEO, and he may want to go as well to help emphasize the seriousness of the situation. You quickly tell your administrative assistant to book the next flight to Lima, Peru. Then you start addressing the many salient questions that are at the front of your mind.
Discussion Questions
1. Beyond the miners, their families, investors and the Peruvian government, are there other stakeholders that you must consider in the decision-making process? Why? What are the ethical implications?
2. Who exactly should join you on the trip to the mine to work on the rescue operations? Are there other people in Peru or South America that work for your firm who could be helpful as well? Also, should the CEO join you?
3. Without many details available what should your initial press release look like? How do you reassure the public without causing too much shock and fear?
4. Can a timeline be developed with certain checkpoints and categories? You want to make sure that all parties affected by the mine collapse are kept informed as the rescue operations commence.
Further Reading
Greenstone, J. L. , & Leviton, S. C. (1987). Crisis management for mediators in high stress, high risk, potentially violent situations. Mediation Quarterly, 3(1), 20–30.
Headrick, D. (2015). Global mining at the edge of transformation. Research-Technology Management58(6), 5.
Jones, T. M. (1991). Ethical decision making by individuals in organizations: An issue-contingent model. Academy of Management Review, 16(2), 366–395.
Mitchell, R. K. , Weaver, G. R. , Agle, B. R. , Bailey, A. D. , & Carlson, J. (2016). Stakeholder agency and social welfare: Pluralism and decision making in the multi-objective corporation. Academy of Management Review, 41(2), 252–275.
Thadani, T. (2015). Relive the moments: 33 Chilean miners rescued alive 5 years ago. USA Today, October 13, 2015. Retrieved from https:
www.usatoday.com/story/news/2015/10/13/chilean-miners-resuce/ XXXXXXXXXX
Useem M. , Jordán R , & Koljatic, M. (2011). How to lead during a crisis: Lessons from the rescue of the Chilean miners. MIT Sloan Management Review, Fall 2011 Issue, August 18, 2011. Retrieved from https:
sloanreview.mit.edu/article/how-to-lead-during-a-crisis-lessons-from-the-rescue-of-the-chilean-miners
Ying, L. , Zhijia H. , & Lianbao, L. (2012). Motivation mechanism of accident prevention in coal mine. Procedia Engineering43, 174–179.
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either