Himachal Fertilizer Corporation (A), (B) and (C): An Ethical Conundrum

This case series raises a broad range of interconnected issues relating to corporate governance, ethics and giving voice to values in the context of decision-making by an individual in a business organization. In Case (A), a non-executive independent director (Neil Shah) on the board of directors of Himachal Fertilizer Corporation (HFC) is approached by a bidder, India Ports Limited (IPL). Neil is informed that because of a last minute change in the bidding process, IPL’s bid for handling naphtha for HFC’s planned new fertilizer plant had not been considered. The IPL executive, Paul alleges that the change in the bidding process was deliberate, in order to favor its competitor BPL, which thereby becomes the only valid bid. Without fully comprehending the implications of his action, Neil agrees to meet Paul. The meeting sets off a chain of events that test Neil’s ability to deal with issues in governance and ethics while attempting to giving voice to his values. Case (B) deals with the manner in which Neil chooses to deal with the private information provided to him by Paul. Through appropriate questions during the meeting, Neil unravels the information that a key parameter of the bidding process, namely the time for submission of bids had indeed been advanced at the last minute. As a result, IPL is unable to submit the bid in time. This leaves Bharat Ports Limited (BPL), a rival of IPL as the only successful bidder. Arguing that elimination of competition from bids implies perhaps higher cost for HFC, Neil suggests that fresh bids should be invited for the contract. Mr. Anil Nair, Chair of the Investment Committee that was evaluating the bids, agrees with Neil. Fresh bids are invited and eventually the contract is awarded to IPL. Thus by giving voice to his values and by fulfilling the fiduciary responsibility as a board member, Neil is able to ‘right the wrong’ that was sought to be done to IPL. Case (C) documents Neil’s discomfiture when he is approached by Paul (executive from IPL) on behalf of the major shareholder of IPL with a proposal to transfer 5000 shares of IPL in favor of Neil, without any payment, as a mark of IPL’s gratitude. By that time Neil has ceased to be a director on the board of HFC. Should Neil accept the gift? Would accepting the shares that are of significant value imply taking a bribe? Would it still be a bribe if Neil were to pay the issue price for the shares being changed in the impending Offer for Sale (OFS) to public? Neil now faces an ethical dilemma. What should he do? The three cases provide a platform to instructors to fully explore the nuances of the principles of corporate governance and ethical behavior when an individual in an organization gives voice to his values. The instructor’s manual accompanying the case details the maze of issues that arise due to the manner in which Neil conducts himself through the incidents described in the cases. The case highlights the interconnectedness of concepts and ideas from corporate governance, ethics and Giving Voice to Values (GVV). The cases also demonstrate that decision making by an individual from awareness, to analysis and to action is fraught with pitfalls that are difficult to recognize and avoid. Neil epitomizes the difficult choices executives and board members face in real organizations.