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 # 1

In employer should be inform for hazardous for employees about chemicls and take decision making for
the factors of harmful to human being.
He Workplace Hazardous Materials Information System, or WHMIS as it is often called, is a national
system designed to ensure that all employers obtain the information that they need to inform and train
their employees properly about hazardous materials used in the workplace. Through legislation,
theWHMIS consensus establishes uniform requirements to ensure that the hazards of materials
produced or sold in, imported into, or used within workplaces in Canada are identified by suppliers and
employers using standard classification criteria.

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WHMIS is consistent with the worker's "right to know" what the hazards are and what needs to be
done to control them in the workplace. Existing occupational health and safety legislation in Canada
requires that workers be informed about the risks they may encounter on the job. WHMIS provides
employers and workers with one additional tool to improve their understanding of hazardous materials.
To make the best use of this tool, suppliers and employers have certain responsibilities.
A "supplier" is a manufacturer, processor or packager of a controlled product or a person who, in the
course of business, imports or sells controlled products. A "controlled" product is defined
for WHMISunder the federal Hazardous Products Act as meaning any product, material or substance
specified by the regulations to be included in any of the classes listed in Schedule II of the Act. An
"employer" is, for the purposes of WHMIS, the user of a controlled product in the workplace or the
producer of a controlled product as part of a workplace process.
Suppliers must convey hazard information to purchasers in a specified manner by means of labelling
on the controlled products or containers of the controlled products and by providing more detailed
information concerning the controlled product in the form of a material safety data sheet (MSDS).
Under occupational health and safety legislation, employers are also required to provide their
employees with hazard information received from suppliers and in respect of controlled products
produced in the workplace.

Employers' Responsibilities

Use of Labels and Other Forms of Warning in the Workplace

Employers must ensure that supplier-provided containers of controlled products are labelled
with WHMISsupplier labels. As long as a controlled product remains in its supplier- provided
container, the supplier label must remain attached to the container and legible.
For workplace processes, employers are required to furnish some form of workplace warnings such as
labels, tags or markings. Although there is no specified format for workplace labelling and other forms
of hazard warnings, information on the safe handling, storage and use of the controlled product and a
product identifier (e.g., brand name, code name or the chemical name of the product) must be
provided. Reference must also be made to the availability of a material safety data sheet.
Where a controlled product at the workplace is contained in a pipe, a piping system including valves, a
process or reaction vessel, a tank car or tank truck, ore car, conveyor belt or similar conveyance, the
employer must ensure that the content is clearly identified to workers through appropriate means and
through worker education. Other provisions have been made for portable containers and decanted
products under various circumstances, as well as for labelling procedures in laboratories.
For controlled products or containers of controlled products received in bulk or multi-
containershipments, employers are required to provide the supplier information on a supplier or
workplace label or by any other appropriate form of hazard warning.

Use of Material Safety Data Sheets (MSDSs)

Employers are responsible for obtaining from suppliers an MSDS for each controlled product used in
their workplaces. The employer may also develop an MSDS to use at the workplace instead of a
supplierMSDS, provided that the employer MSDS contains at least the same information found on the

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supplierMSDS and indicates that a supplier MSDS is available. MSDSs are to be updated at least
every three years or as soon as further information relating to the hazard becomes available for a
material.
The format in which the MSDS information is provided is not specified. However, while the
information can be computerized or stored by the most practicable and cost- effective means, there are
minimum content requirements for MSDSs. Employers should become aware of what
the MSDS requirements are for a controlled product produced in a workplace process by referring to
the Controlled Products Regulations of the federal Hazardous Products Act.
As an important source of detailed information on controlled products, supplier and employer MSDSs
for controlled products are to be readily accessible to employees at each work site and supplied or
made accessible to safety and health committees or representatives.

Employee Education and Training

Besides disclosing to workers hazard information on controlled products, employers are to ensure that
instruction is provided for employees who handle, are exposed to, or are likely to handle or be exposed
to hazardous materials. This should result in the employees becoming more aware of and better able to
apply hazard information to ensure their health and safety.
The instruction should include a description of all the mandatory and performance-oriented aspects
ofWHMIS and of the responsibilities of the employer and employees. The employee education
program should include:
instructions with respect to the product identifier;
instruction on the content required on the supplier and workplace label and the purpose and
significance of the information contained on the label;
instruction on the content required on an MSDS and the purpose and significance of the
information contained on an MSDS;
procedures for the safe handling, use, storage and disposal of a controlled product, including
information relating to the disposal of a controlled product contained or transported in piping
systems and vessels; and
procedures to be followed in the case of an emergency involving a controlled product.

Employers are required to consult with health and safety committees or representatives, where they
exist, during the development of education and training activities with respect to exposure to hazardous
materials. Employers are required to review the information and training provided to workers
concerning hazardous materials in consultation with the health and safety committees or
representatives at least annually, or more frequently if new hazard information becomes available or if
required by a change of conditions.

Hazard Identification and Ingredient Disclosure

Employers are responsible for evaluating those products produced in a workplace process using the
hazard criteria identified in the Controlled Products Regulations.

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Subject to a confidential business information exemption and specific concentration cut-off limits, all
ingredients of a controlled product that fall into any of the following categories must be disclosed on
an employer-developed MSDS:
1. an ingredient identified as being hazardous under the WHMIS criteria,
2. an ingredient included on the Ingredient Disclosure List established by the Hazardous Products
Act
3. an ingredient that the employer has reasonable grounds to believe may be harmful, or
4. an ingredient whose toxicological properties are not known.

Confidential Business Information Exemptions

WHMIS strikes a balance between the employee's need for protection and the employer's need to
protect the confidentiality of business information.
An employer may consider claiming for some product information that is eligible for exemption,
namely:
the chemical identity of any ingredient of a controlled product;
the concentration of any ingredient of a controlled product;
the name of any toxicological study that identifies any ingredient of a controlled product;
the chemical name, common name, generic name, trade name or brand name of a controlled
product; and
information that could be used to identify a supplier of a controlled product.

All requests by employers for the non-disclosure of information on an MSDS or label for controlled
products must be submitted to the Hazardous Materials Information Review Commission for review
and validation. Where information is withheld by means of a confidential business information claim,
a notation is to be made by the employer on the MSDS or label to that effect, together with the
registration number assigned to the claim

ANSWER # 2

For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business
employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

For tax years beginning in 2014 or later, there will be changes to the credit:

The maximum credit will increase to 50 percent of premiums paid for small business employers
and 35 percent of premiums paid for small tax-exempt employers.
To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled
in a qualified health plan offered through a Small Business Health Options Program (SHOP)
Marketplace.
The credit will be available to eligible employers for two consecutive taxable years.

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Heres what this means for you. If you pay $50,000 a year toward workers health care premiums and
if you qualify for a 15 percent credit, you save... $7,500. If you save $7,500 a year from tax year 2010
through 2013, thats total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20
percent, your savings go from $7,500 a year to $10,000 a year.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit
back or forward to other tax years. Also, since the amount of the health insurance premium payments is
more than the total credit, eligible small businesses can still claim a business expense deduction for the
premiums in excess of the credit. Thats both a credit and a deduction for employee premium payments.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no
taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your
income tax withholding and Medicare tax liability.

And finally, if you can benefit from the credit this year but forgot to claim it on your tax return, theres
still time to file an amended return.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, lets determine if you can
claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage
for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs).
Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in
2014) per year. Remember, you will have to purchase insurance through the SHOP Marketplace to be
eligible for the credit for tax years 2014 and beyond.

Let us break it down for you even more.

You are probably wondering: what IS an FTE. Basically, two half-time workers count as one FTE. That
means 20 half-time employees are equivalent to 10 FTEs, which makes the number of FTEs 10, not 20.

Now lets talk about average annual wages. Say you pay total wages of $200,000 and have 10 FTEs. To
figure average annual wages you divide $200,000 by 10 the number of FTEs and the result is your
average annual wage. The average annual wage would be $20,000.

Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity,
the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as
adjusted for inflation beginning in 2014), the amount of the credit you receive will be less.

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit.
For detailed information on filling out this form, see the Instructions for Form 8941.

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If you are a small business, include the amount as part of the general business credit on your income tax
return.

If you are a tax-exempt organization, include the amount on line 44f of theForm 990-T, Exempt
Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit,
even if you don't ordinarily do so.

Dont forget... if you are a small business employer, you may be able to carry the credit back or forward.
And if you are a tax-exempt employer, you may be eligible for a refundable credit
.
ANSWER # 3

By analyzing the case study the current scenario I conclude that there are a number of changes that must
be made if the firm is to be turned around. The most important ones are ; More attention must be given to
the employee health. The most vital factor for success in the production of the consumer goods produced
by Johns Manville Co is an effective Employee Health. There must be use of machines in manufacturing
products rather heavily rely on human because asbestos is dangerous to employee. Due to this quality will
be improved. It may be very costly. There must be a reduction in the number of people in the operation
and safety precaution and manual must be implemented on all the prohibited/ dangerous area where
employees exposed to asbestos material. A hospital should be developed to cure the employee health.

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.

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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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.

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.

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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

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