Kardell Paper Company Ethics Case

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Pages: 6

Background

The Kardell paper mill was established at the turn of the century on the Cherokee River in southeastern Ontario by the Kardell family. By 1985, the Kardell Paper Co. had outgrown its original mill and had encompassed several facilities in different locations,
generating total revenues of $1.7 billion per year. The original mill continued to function and was the firm’s largest profit center. The Kardell family no longer owned shares in the firm, which had become a publicly traded company whose shares were widely held.
Kardell Paper Co. was a firm with a record of reporting good profits and had a policy of paying generous bonuses to the chief executive officer and other senior executives.
Kardell’s original mill was located
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Everyone on the board felt a responsibility toward the shareholders, but, in addition, some members of the board also paid special attention to community and labor concerns. The board was composed of the CEO and president of the firm, along with several “outside” directors: two local businesspeople from Riverside, a representative of the paperworkers’ union at the plant, a mutual fund manager whose firm held a large block of Kardell shares on behalf of the fund’s investors, an economist, a Riverside city councillor, and the corporation’s legal counsel.

Each member of the board spoke to Jack’s report from his or her perspective. The Riverside representatives—the city councillor and the two businesspeople—wanted assurances that the community was not in any danger. But they also said, in the absence of any firm proof of danger, that they were satisfied Kardell probably was not a source of harmful emissions. The lawyer pointed out that legally Kardell was in the clear: it was properly observing all existing regulations on emission levels; in any case, there was no clear indication that the Kardell mill was the only source of sonox emissions into the Cherokee River. While acknowledging the health concerns that had recently arisen over sonox, the lawyer thought it prudent to wait for the government to establish an acceptable limit for sonox emissions. Besides, the lawyer added, while liability actions had been