Pinoy MBA: Left on a Mountainside (HBR Case Study)

Left on a Mountainside
Author(s): Julia Kirby, Kenneth Eisold, Dee Soder, Jeffrey P. Kahn, Charles M. Elson

Description:
Davidson is on top of the world, literally and figuratively, at the beginning of this fictional case study. He's in the Swiss Alps, headed for Davos and his first experience as a delegate to the World Economic Forum's annual conference. And he has reason to believe he is about to be made president of his company, Carston Waite--and, therefore, heir apparent to the CEO position. Then his phone rings. It's his mentor, Frank Maugham, the CFO and a board member at Carston Waite, calling to inform him of a major setback. "David asked me to let you know you are not going to be named president," he says. "At least not yet. He wants to stay close to the business." But Frank has a plan to change the CEO's mind. Meanwhile, Ed feels betrayed and humiliated--and his desire for revenge against the CEO mounts. When the news comes that Frank's plan has failed and has cost Frank his job, Ed is already deep in a plot of his own. He's in Davos because David had to back out; Ed is supposed to deliver the CEO's remarks in his stead. But why not use this opportunity on the world stage instead to deal a parting blow?

Left on a Mountainside Case Analysis (by PinoyYuppieHusband and the Yuppie Group)

1. Statement of the Problem:
Should Ed use a nasty secret about his CEO in altering the speech he will deliver at the World Economic Forum to try to salvage his career?


2. Objectives:
2.1. To determine whether Ed should keep his ethical standard and not try to ruin David’s reputation by altering his speech.
2.2. To be able to recommend future course of actions regarding improvement of Carston Waite succession planning.


3. Areas for Consideration:
3.1 Characters:
Edward “Ed” Davidson – Central character, rising star at Carston Waite, youngest Division head at 38 yrs old
Frank Maugham – CFO and Board member at Carston Waite, previously failed to be CEO, survivor, had real influence, manipulative, unethical
David Paterno – Carston Waite CEO, former mentor of Ed
Lucy Keh – Ed’s old B-school section mate, met Ed during the forum, whom Ed confided his problem with

3.2 Facts:
Ed is at Zurich to represent his CEO and present a speech at the World Economic Forum, will not be named yet as President of Carston Waite.

It was mentioned in the case that David Paterno is not naming Ed as president, at least not yet as David wanted to stay close to the business. Ed’s perception that David thought he couldn’t cut it was just perceived as David’s betrayal.

Frank is “going to call around to the rest of the board members and see if we can’t prevail upon David to change his mind”.

Frank was accused of insubordination by David and his actions were deemed by the board of directors not compatible with the interest of the business and its shareholders. He was fired.

Frank cooked up an understanding with David that he and Ed will throw their weight behind David’s candidacy as CEO and once David got the job he will grant Frank a seat at the board and make Ed president. Heir apparent.

David Paterno was able to win the position only because of the backing of Ed and Frank together with some misrepresentations done by Frank.


3.3. SWOT Analysis:

Edward Davidson
Strengths
· formidable analytical skills
· technical innovator
· incisive
· developed selling skills
· golden – was able to engineer greatest uptick in profitability among all divisions
Opportunities
· represent Carston Waite’s CEO at the World Economic Forum
· keep his job
· become company president in the future
Weaknesses
· arrogant
· too dependent on other people
· easily manipulated
· lack of control and confidence
· unethical
Threats
· undermined by Frank
· danger of being fired from Carston Waite


4. Alternative Courses of Action:

ACA # 1:
Ed can deliver the speech unaltered and talk to David about keeping his job. There is no clear information that David really reneged on his promise to name him president. He has information only from Frank who may be selectively presenting information.

Pros
· Ethical thing to do.
· Keep his reputation and the reputation of his CEO and company.
· Give him the best chance to keep his job.

Cons
NONE


ACA # 2:
Ed can blackmail David to enable him to salvage his career in the company.

Pros
· Give him leverage to keep his job.

Cons
· Unethical
· Can be ground for termination.


ACA # 3:
Ed can reveal David’s nasty secret and real track record on social responsibility to the leaders present in Davos to exact revenge on him.

Pros
· Satisfy his vengeful fantasy.
· Unethical
· Surefire way to get fired.

Cons
· Confirm he is not ready to become CEO.
· Humiliate himself, David and his company.
· Ruin his career.


5. Conclusion and Recommendation:
It is to Ed’s best interest to go the high road and keep his ethics intact by giving the speech unaltered. He should use the opportunity that he has in Davos to prove to David that he can very well represent the company and can be on the league of the other leaders present in the World Economic Forum. Whether David really reneged or not on his promise of naming Ed president and heir apparent, it is not ethical for him to try to undermine David in the world stage. After the conference, he should talk to David and clarify with him the reason for his decision. Ever since he received the message from Frank, he has not talked to anybody but Frank who may be selectively presenting him information.

There is a seriously flawed approach to CEO succession in Carston Waite. First, David Paterno was able to win the position only because of the backing of Ed and Frank together with some misrepresentations done by Frank. The decision of David not to name Ed as president showed that succession planning at Carston Waite is being driven by the CEO and not the board of directors. Clearly, there is a lack of good corporate governance in the company with respect to succession planning. Most companies have specific guidelines on the responsibility of succession planning. An example for Intel Corporation is shown below. Carston Waite should adopt a similar guideline.

Taken from Intel Corporation Board of Directors Guidelines on Significant Corporate Governance Issues, March 19, 2008 (1):

The primary responsibilities of the Board of Directors are oversight, counseling and direction to the management of the company in the interest and benefit of the company’s shareholders. The Board’s detailed responsibilities include:
(a) Selecting, regularly evaluating the performance of, and approving the compensation of the Chief Executive Officer and other senior executives;
(b) Planning for succession with respect to the position of Chief Executive Officer and monitoring management’s succession planning for other senior executives;


References:

(1) Intel Corporation, Board of Directors Guideline on Significant Corporate Governance Issues, March 2008.