The Empire Globe Corporation.29 Susan Bond is Corporate Economist at Empire Globe Corporation, a chemicals company. CEO John Treadstone created the position so that he could have someone to help him with economic analysis of market trends and company proposals. Bond was attracted to the company by Treadstone’s professed philosophy of creating a partnership with stakeholders.He created a

“Partnership Conduct Team,” consisting of four experienced managers, to develop ethical guidelines that exceed legal requirements and monitor compliance with them. Ten years ago, Treadstone located a processing plant in economically depressed Feldport, Oklahoma, against the advice of his staff, because he believed the company could create an effective partnership with the local players. In fact, they were so eager to attract jobs that the bank offered financing at discounted rates, the town council granted a five-year exemption from real estate taxes, the union (reluctantly) negotiated a no-strike clause, and the power company agreed to a low rate.

The Feldport plant has recently become an issue, however. As the special concessions expired, profit margins at the plant began to shrink. Treadstone set out to obtain similar concessions for the next few years. He indicated that if the company could not obtain adequate return on its capital investment, it would be obliged to relocate. The company managed to obtain most of what it wanted.

The town agreed to a partial tax concession, the union ceded a cap on wages and reinstated the no-strike clause, and the bank provided further financing at below-market rates. However, Empire has not yet obtained the 4.25 cents per kwh rate it wants from the power company. To address this, Treadstone scheduled a negotiation session with the power company, involving himself, Bond, and Jim Doran, the VP for finance.

It is the day before the session. Bond is already concerned that the company is demanding excessive concessions from the community, but her discomfort grows when she receives a late-afternoon message from Treadstone. It states that he and Doran won’t be present for the meeting, due to a commitment in Washington, DC, and that she is on her own. Furthermore, there’s a change in strategy. She must obtain a rate of 3.80 cents per kwh.

The next morning, Bond cancels the meeting and contacts Ted Bates in the finance department to ask for data that might justify demanding a lower rate. Ted lets slip in the conversation that Empire has just landed a lucrative contract with the Defense Department that calls for a 25% increase in production at Feldport. She realizes that this was the agenda for the Washington meeting and that the threat to relocate is a bluff. She first tries to reach Doran, head of the negotiating team, but he finds himself too busy to talk about the issue. She finally calls Treadstone, who acknowledges the Defense contract when Bond brings it up. Bond asks him about his commitment to partnership, whereupon Treadstone responds that the low rate is necessary to justify his bid to Defense, and the added production will mean more jobs in Feldport. Besides, there is nothing wrong with making a profit, and they have obligations to their stockholders.

Bond asks what happens if she is unable to get the 3.80 cents per kwh rate. Treadstone responds,

“Susan, negotiating means getting agreements. Anything else on your mind?”

Hints. The negotiation principles discussed in Case 6.3 may be useful. A utilitarian analysis can also be central to this case.