USMNC has just purchased Latin America Metallurgy Company (LAMC) from a competitor. LAMC is located near Managua, Nicaragua. There has been rapid growth in worldwide demand for the sheet metal and coil that LAMC makes. The acquisition substantially bolsters USMNC’s capacity to meet this new demand. For the acquisition of LAMC by USMNC to succeed, USMNC has to be able to move LAMC’s products out of the door quickly. With worldwide demand soaring, it cannot afford delays in production. 

USMNC management feels that all the company’s facilities worldwide must meet or exceed the state-of-the-art U.S. standards for health, safety, and the environment. This policy was developed after the chemical release in the Philippines described in Case 8.1. After that event, the CEO called for a safety audit of all the companies’ facilities worldwide. The audit showed that the company’s global safety, health, and environmental practices were not as strong as they should have been. Whereas before the Philippines event the company granted USMNC’s far-flung global subsidiaries substantial discretion to follow local practice, since the event, the company has tried to centralize control of safety, health, and environmental policies. In addition, it conducts regular audits to bring local affiliates into compliance with corporate policies and practices. 

The Audit at LAMC

 Shortly after acquiring LAMC, USMNC conducted a health and safety audit of LAMC’s plant. The main focus of the audit was on respirator use. LAMC engaged in a variety of operations that required workers to wear respirators. These operations included welding, cutting, smelting, and casting molten materials; sanding, grinding, crushing, drilling, machining, and sandblasting; and cleaning, spraying, plating, boiling, mixing, and painting various pieces of metals and metal parts that LAMC produced. These activities resulted in all kinds of fumes, dusts, and mists that could endanger human health and the environment. Gas and vapor contaminants that were present included inert gases such as helium, argon, and neon; acidic gases such as sulfur dioxide, hydrogen sulfide, and hydrogen chloride; and organometallic compounds such as tetraethyl lead and organic phosphates. 

Unfortunately, the audit team found that safety policies and practices at LAMC’s facility were not up to the company’s standards. For example, the team discovered that there was an insufficient number of respirators at the facility and that maintenance was not being done on them on a regular basis. It appeared that many of the respirators were not functional. Even more alarming was that many workers routinely took off their respirators. Others refused to wear them under any circumstances. Supervisors did little or nothing to stop them. Even when the workers wore the respirators, it was not at all clear to the members of the audit team whether they were wearing the right respirators for the jobs they were doing. The audit team observed that a stack of respirators of various kinds were kept piled in a corner of the plant, with workers deciding for themselves if and what kind of respirator they would wear. 

The audit team concluded that these problems were occurring largely because the plant management did not have any written policies in place regarding the use of respirators, did not supervise the respirator use, and failed to provide necessary training. Furthermore, there was no medical surveillance in place to ensure that workers were not having regular symptoms such as wheezing, coughing, and chronic bronchitis, nor were workers trained to recognize and address respiratory emergencies. 

The safety auditors took the time to interview workers about respirator use. These interviews revealed among other things that workers felt pressure to do their jobs quickly, and that respirators could interfere with getting the job done; that they needed to remove their masks to communicate; that they could not wear the masks comfortably for long periods of time; and that they thought the risks of not wearing masks were minimal. They also said their supervisors paid them to meet production goals and treated safety concerns as secondary. 

Overall, the findings of the audit team were very troubling. The final sentence of their report said that USMNC should consider shutting down the facility for a period to reassess worker safety issues and institute new policies and practices.

Trying to Prevent Harm

This finding posed an obvious dilemma for USMNC management. The company wanted to avoid the mistakes of the past and provide its workers with safe conditions. It was aware that the local media and activists worldwide were watching the company suspicious that it had purchased the plant in Nicaragua to save money by paying low wages and cutting corners on safety and environmental protections. USMNC already had been pilloried in the press for its accident in the Philippines and did not want more bad publicity. At the same time, temporarily closing the facility would mean missing out on a substantial amount of revenue. 

If you were a top manager at USMNC, how would you approach this dilemma? What is the central issue? Do you have all the facts you need to address it? What options do you have and what would their consequences be? In formulating your answer, keep in mind the lessons of this chapter. For USMNC, might it “pay to be good”? How can USMNC build from a short-term fix to a long-term solution? How might it employ interactive stakeholder engagement to address the issues?