CASE STUDY

CASE STUDY JOHNS-MANVILLE COMPANY UNETHICAL CORPORATE

CULTURE

Term Paper- Spring 2014

EM 501: ORGANIZATIONAL SYSTEMS

Course Instructor Prof. ADIL M BUTT

SUBMITTED BY
M. Rizwan Ali Hashmi (CE-74/2013-2014)

Date of Submission: 07-May-2014

DEPARTMENT OF CIVIL ENGINEERING

NED UNIVERSITY OF ENGINEERING & TECHNOLOGY

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 CASE STUDY

Johns-Manville Company Unethical Corporate Culture

Asbestos is a fibrous mineral used for fireproofing, electrical insulation, building materials, brake linings,
and chemical filters. If you are exposed long enough to asbestos particles usually ten or more years
you can develop a chronic lung inflammation called asbestosis, which makes breathing difficult and
infection easy. Also linked to asbestos exposure is mesethelioma, a cancer of the chest lining that
sometimes doesnt develop until forty years after the first exposure. Although the first major scientific
conference on the dangers of asbestos was not held until 1964, the asbestos industry knew of its dangers
over fifty years ago.

As early as 1932, the British documented the occupational hazards of asbestos dust inhalation. Indeed, on
September 25, 1935, the editors of the trade journal Asbestos wrote to Sumner Simpson, president of
Raybestos-Manhattan, a leading asbestos company, asking permission to publish an article on the dangers
of asbestos. Simpson refused and later praised the magazine for not printing the article. In a letter to
Vandivar Brown, secretary of Johns-Manville, another asbestos manufacturer, Simpson observed: The
less said about asbestos the better off we are. Brown agreed, adding that any article on asbestosis should
reflect American, not English data.

In fact, American data were available, and Brown, as one of the editors of the journal, knew it. Working
on behalf of Raybestos-Manhattan and Johns-Manville and their insurance carrier, Metropolitan Life
Insurance Company, Anthony Lanza had conducted research between 1929 and 1931 on 126 workers with
three or more years of asbestos exposure. But Brown and others were not pleased with the paper Lanza
submitted to them for editorial review. Lanza, said Brown, had failed to portray asbestosis as milder than
silicosis, a lung disease caused by long-term inhalation of silica dust and resulting in chronic shortness of
breath. Under the then-pending Workmens Compensation Law, silicosis was categorized as a
compensable disease. If asbestosis was worse than silicosis or indistinguishable from it, then it too would
have to be covered. Apparently Brown didnt want this and thus requested that Lanza depict asbestosis as
less serious than silicosis. Lanaza complied and also omitted from his published report the fact that more
than half the workers examined - 67 of 126 were suffering from asbestosis.

Meanwhile, Sumner Simpson was writing F.H. Schulter, president of Thermoid Rubber Company, to
suggest that several manufacturers sponsor further asbestos experiments. The sponsors, said Simpson,
could exercise oversight prerogatives; they could determine from time to time after the findings are made
whether we wish any publication or not. Added Simpson: It would be a good idea to distribute the
information to the medical fraternity, providing it is of the right type and would not injure our
companies. Lest there should be any question about the arbiter of publication, Brown wrote to officials
at the laboratory conducting the tests:

It is our further understanding that the results obtained will be considered the property of those who are
advancing the required funds, who will determine whether, to what extent and in what manner they shall
be make public. In the event it is deemed desirable that the results be made public, the manuscript of your
study will be submitted to us for approval prior to publication.

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Industry officials were concerned with more than controlling information flow. They also sought to deny
workers early evidence of their asbestosis. Dr. Kenneth Smith, medical director of a Johns-Manville plant
in Canada, explained why seven workers he found to have asbestosis should not be informed of their
disease:

It should be remembered that although these men have the X-ray evidence of asbestosis, they are
working today and definitely are not disabled from asbestosis. They have not been told of this diagnosis,
for it is felt that as long as the man feels well, is happy at home and at work, and his physical condition
remains good, nothing should be said. When he becomes disabled and sick, then the diagnosis should be
made and the claim submitted by the Company. The fibrosis of this disease is irreversible and permanent
so that eventually compensation will be paid to each of these men. But as long as the man is not disabled,
it is felt that he should not be told of his condition so that he can live and work in peace and the Company
can benefit by his many years of experience. Should the man be told of his condition today there is very
definite possibility that he would become mentally and physically ill, simply through the knowledge that
he has asbestosis.

When lawsuits filed by asbestos workers who had developed cancer reached the industry in the 1950s, Dr.
Smith suggested that the industry retain the Industrial Health Foundation to conduct a cancer study that
would, in effect, squelch the asbestos-cancer connection. The asbestos companies refused, claiming that
such a study would only bring further unfavorable publicity to the industry and that there wasnt enough
evidence linking asbestos and cancer industry-wide to warrant it.

Shortly before his death in 1977, Dr. Smith was asked whether he had ever recommended to johns-
Manville officials that warning labels be placed on insulation products containing asbestos. He provided
the following testimony:

The reason why the caution labels were not implemented immediately, it was a business decision as far
as I could understand. Here was recommendation, the corporation is in business to make, to provide jobs
for people and make money for stockholders and they had to take into consideration the effects of every
thing they did, and if the application of a caution label identifying a product as hazardous would cut our
sales, there would be serious financial implications. And the powers that be had to make some effort to
judge the necessity of the label vs. the consequences of placing the label on the product..

Dr. Smiths testimony and related documents have figured prominently in hundreds of asbestos-related
lawsuits, totaling more than $1 billion. In March 1981, a settlement was reached in nine separate lawsuits
brought by 680 New Jersey asbestos workers at a Raybestos-Manhattan plant. Several asbestos
manufacturers, as well as Metropolitan Life Insurance, were named as defendants. Under the terms of the
settlement, the workers affected with share in a $9.4 million court-administered compensation fund. Each
worker will be paid compensation according to the length of exposure to asbestos and the severity of the
disease contracted.

By 1982, an average of 500 new asbestos cases were being filed each month against John-Manville and
the company was losing more than half the cases that went to trial. In ten separate cases, juries had also
awarded punitive damages, averaging $616,000 a case. By August, 20,000 claims had been filed against
the company, and John-Manville filed for bankruptcy in federal court. This action froze the lawsuits in
their place and forced asbestos victims to stand in line with other John-Manville creditors. After more

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than three years of legal haggling, John-Manvilles reorganization plan was finally approved by the
bankruptcy court. The agreement set up a trust fund valued at approximately $2.5 billion to pay John-
Manvilles asbestos claimants. To fund the trust, shareholders were required to surrender half the value of
their stock, and the company had to give up much of its projected earnings over the next twenty-five
years.

Required:

The Johns-Manville Company has become synonymous with behavior that is not only detrimental to
employees but to the corporation as well. The company was charged with ignoring employee health and
safety over several decades; legal claims finally brought the firm into Chapter 11 bankruptcy.

You are required to analyze the Johns-Manville Company behavior in dealing with asbestos related
suffering caused to its employees. Your report should include:

1. Concern for short-term shareholders interests outweighs long-term interests of the employees
health and company survival. Any other factor(s) disregarded in management decision-making.
2. What changes in corporate culture would have called for preventive action much sooner than it
occurred.
3. As the CEO of Johns-Manville, what recommendations would you have given to the Board of
Directors to deal with this scenario.
4. Give a detailed and illustrative example of one contemporary corporate or public issue in Pakistan,
similar to the Johns-Manville case.

Instructions:
1. All project reports must be typed, single spaced (double in between paragraphs) and not more than
15 pages in length including the title page.
2. Reports longer than 15 pages shall be penalized.
3. Spelling mistakes, grammatical errors and late submissions shall also be penalized.

Due Date: May 7, 2014

ANSWER # 4
KARACHI, Pakistan Fire ravaged a textile factory complex in the commercial hub of Karachi early
Wednesday, killing almost 300 workers trapped behind locked doors and raising questions about the
woeful lack of regulation in a vital sector of Pakistans faltering economy.
It was Pakistans worst industrial accident, officials said, and it came just hours after another fire, at a
shoe factory in the eastern city of Lahore, had killed at least 25.

Flames and smoke swept the cramped textile factory in Baldia Town, a northwestern industrial suburb,
creating panic among the hundreds of poorly paid workers who had been making undergarments and
plastic tools.

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They had few options of escape every exit but one had been locked, officials said, and the windows
were mostly barred. In desperation, some flung themselves from the top floors of the four-story building,
sustaining serious injuries or worse, witnesses said. But many others failed to make it that far, trapped by
an inferno that advanced mercilessly through a building that officials later described as a death trap.

Rescue workers said most of the victims died of smoke inhalation, and many of the survivors sustained
third-degree burns. As firefighters advanced into the wreckage during the day, battling back flames, they
found dozens of bodies clumped together on the lower floors.

One survivor, Muhammad Aslam, said he heard two loud blasts before the factory filled first with smoke,
then with the desperate screams of his fellow workers. Only one entrance was open. All the others were
closed, he said at a hospital, describing scenes of panic and chaos.

Mr. Aslam, who was being treated for a broken leg, said he saved himself by leaping from a third-floor
window.

Hundreds of anguished relatives gathered at the site, many of them sobbing as they sought news. Some
impeded the rescue operation, and baton-wielding police officers tried to disperse the crowd but failed.

If my son does not return, I will commit suicide in front of the factory, one woman shouted before news
cameras as relatives tried to console her.

The death toll rose quickly. By evening, the Karachi commissioner, Roshan Ali Sheikh, said that 289
people had died, most of them men. The provincial health minister, Sagheer Ahmed, put the toll at 248,
which he said was the number of bodies accounted for at major hospitals. The number was expected to
rise further.

In the shoe factory fire in Lahore, 25 people were reported killed and dozens wounded. Officials said that
blaze had been set off by a generator that caught fire and ignited chemicals stored nearby in the factory,
illegally located in a It was Pakistans worst industrial accident, officials said, and it came just hours after
another fire, at a shoe factory in the eastern city of Lahore, had killed at least 25.

Flames and smoke swept the cramped textile factory in Baldia Town, a northwestern industrial suburb,
creating panic among the hundreds of poorly paid workers who had been making undergarments and
plastic tools.

They had few options of escape every exit but one had been locked, officials said, and the windows
were mostly barred. In desperation, some flung themselves from the top floors of the four-story building,
sustaining serious injuries or worse, witnesses said. But many others failed to make it that far, trapped by
an inferno that advanced mercilessly through a building that officials later described as a death trap.

Rescue workers said most of the victims died of smoke inhalation, and many of the survivors sustained
third-degree burns. As firefighters advanced into the wreckage during the day, battling back flames, they
found dozens of bodies clumped together on the lower floors.

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 CASE STUDY

One survivor, Muhammad Aslam, said he heard two loud blasts before the factory filled first with smoke,
then with the desperate screams of his fellow workers. Only one entrance was open. All the others were
closed, he said at a hospital, describing scenes of panic and chaos.

Mr. Aslam, who was being treated for a broken leg, said he saved himself by leaping from a third-floor
window.

Hundreds of anguished relatives gathered at the site, many of them sobbing as they sought news. Some
impeded the rescue operation, and baton-wielding police officers tried to disperse the crowd but failed.

If my son does not return, I will commit suicide in front of the factory, one woman shouted before news
cameras as relatives tried to console her.

The death toll rose quickly. By evening, the Karachi commissioner, Roshan Ali Sheikh, said that 289
people had died, most of them men. The provincial health minister, Sagheer Ahmed, put the toll at 248,
which he said was the number of bodies accounted for at major hospitals. The number was expected to
rise further.

In the shoe factory fire in Lahore, 25 people were reported killed and dozens wounded. Officials said that
blaze had been set off by a generator that caught fire and ignited chemicals stored nearby in the factory,
illegally located in a