57. In 1995, British steelmaker Ispat purchased Kazakhstan’s largest steel plant:

Little known outside the steel world, Ispat has in recent months assumed a new visibility—as an example of Western companies’ problems in the former Soviet Union. Hundreds of its employees come to work drunk; its biggest customer is broke; and Chechen gunmen have been spotted prowling the plant’s perimeter, threatening suppliers and hitting customers up for bribes. Despite all their experience in the developing world, the Ispat officials at Karmet “are up against problems we never dreamed about,” says Lakshmi Mittal, the company’s chairman.

Since arriving, Ispat has ladled out $11 million for back pay, $31 million to repay debts to raw material suppliers, and $75 million to begin rebuilding the crumbling plant. Overall, the company has pledged to pay $450 million over the next four years, plus an additional $550 million for new technology.

Because the company is the first Karmet owner in years to have any money, it was quickly viewed as a soft target. The local union is seeking a 75% increase in workers’ pay, and a Temirtau child-care center is hitting up plant managers for more money.

Soon after Ispat arrived, a man claiming to represent a society for the blind asked the company for donations. If Ispat would donate steel, he said, the society could resell it and raise money. After the company agreed, 68 other societies for the blind turned up. “Karmet in 1995 was not a steel plant. It was looked upon more as a social institution,” says Arabinda Tripathy, Ispat’s personnel director.
So, Ispat embarked on an ambitious goal—to teach its workers about capitalism.
Senior managers get a weeklong course, beginning with the basics of how a market economy works and progressing to discuss how profits are calculated.
SOURCE: Kyle Pope, “Saga on the Steppes: A Steelmaker Built Up By Buying Cheap Mills Finally Meets Its Match,”
The Wall Street Journal (May 2, 1996), pp. A1, A6. Reprinted by permission of The Wall Street Journal, © 1996 Dow Jones & Company, Inc. All rights reserved worldwide. Permission conveyed through the Copyright Clearance Center.

a. How would the quality considerations in the Temirtau, Kazakhstan, steel plant be fundamentally different from quality considerations in a more developed nation?

b. Should the ethical standards of conduct be different for managers in the Temirtau plant than in other plants operated by Ispat? Explain.