BUS203: CEO and Managing Director of Broom Broom Ltd –
Internal Code: 1IIBG Task:
CLASS PRESENTATION AND ASSIGNMENT This assessment task has two components:
- A class presentation
- A written assignment submission
For this task you are asked to work in a small group of two students to prepare a presentation on one of the following questions, which address ethical issues. You are then asked to
write up your presentation refining your material in the light of feedback from your classmates and further research.
There are three questions, which will be evenly distributed across your tutorial group. An opportunity to choose a question and a week for your presentation
QUESTION 2 ( This is the question I choose)
As a USC graduate, you are the CEO and Managing Director of Broom Broom Ltd, which is a major Australia vehicle manufacturer. Broom Broom makes one vehicle only, the Yacka, a hardy and inexpensive utility vehicle.
The Yacka sells well particularly in third world countries where it is seen as a workhorse.
Over 250,000 units are sold annually. The company is very profitable earning profits of $500m annually.
The Vice President of Research and Development, Mr Rick Finegold, comes to you with a report establishing that a major fault has been discovered in the vehicle’s fuel delivery system causing one vehicle in every 100,000 to explode suddenly into flames without warning. He adds that the problem has been repaired on all future models, but not on the estimated existing 8 million models currently in use.
You call your management team together and discover that a recall of all existing models for repair world-wide will cost $750m. Moreover, if the repairs are not affected, between 10 and fifty people will die or be seriously injured every year on average. The legal counsel, Mr Richard Headingly, added that annual compensation claims of $5m could be expected for the next ten years and it is because most of Broom Broom’s vehicles are sold in third world countries that compensation claims can be kept to these minimal levels.
You consult Broom’s Chairman Mr Boris Grimm who explains that the shareholders, including mum and dad investors and superannuation funds, will not accept a recall expense as it will remove many dividends for the next few years and markedly lower the company’s share price. Grimm adds that an admission of fault will also negatively impact future vehicle sales.
What should you do?
January 28, 2023