We should begin by noting that procurement decisions like
this one are usually made on the basis of complex calculations dealing not only
with current conditions, but also with projected conditions in the future and
assumptions regarding the most profitable choices available. If the decision to
drop Heinz in favor of other suppliers turns out to be incorrect that is a
matter for the usual mechanisms of corporate governance to handle, and if the decision
turns out to be a truly incompetent move that creates actual financial damage
to the stockholders there are a variety of legal remedies already in place. We
should also note that if such a move were to be made for nefarious reasons
there are already laws in place under which the perpetrators could and probably
would be charged. For our purposes, we can assume that the decision we are
discussing isn’t being driven by incompetence or malfeasance; what we must ask
is what motives are actually driving it…
If, for example, members of the management team have reason
to believe that their supplier’s new CEO is incompetent, irresponsible,
negligent, or otherwise likely to commit acts that will threaten their own
operations, then refusing to do business with that supplier would be entirely
in keeping with their responsibility to their own shareholders. In the case of
an executive who has for some years served as the CEO of a rival firm, the
suspicion that such an individual would retain feelings of animosity from his
previous position and thus not deal honestly or equitably with the company is probably
baroque, but certainly understandable. If previous direct dealings with that
executive, either as the CEO of the rival company or in some other capacity,
have led management to have doubts about that individual, that concern would
also be appropriate. Nor can we completely discount the possibility of animosity
based on personality conflicts, interpersonal relationships or social
interactions between this new CEO and members of the management team; however
unfortunate this might be…
The truth is that however much we might prefer to believe
that companies are run on a scientific basis by professionals trained in the
finer points of both management science and also in the finer points of their
specific industries, companies are still run by human beings, with all of the
intellectual and emotional frailty that implies. It is quite possible that
business dealings with someone with whom our company has been directly
competing for an extended period will carry additional risks, either because
that person does in fact harbor animosity towards us, or because we may be
unable to suppress such feelings on our side. But absent some concrete evidence
of that risk, can we reasonably act on that possibility, knowing that if we do so
we run the risk of depriving our shareholders of the best return on their
investment, costing employees of our existing supplier their jobs, and
potentially damaging the economy of the states or countries where those
companies do business?
Or, to put it another way, can we accept the possibility of
causing all of this harm in order to protect ourselves from a threat that may
or may not even exist? Alternately, can we accept the consequences of failing
to take precautions if the threat does exist? How do we determine the course of
action that will do the most good for the most people over the longest time
while maintaining our primary mission of running our own company to the benefit
of the shareholders who own it?
It’s worth thinking about…
No comments:
Post a Comment