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You are the CEO of SPB Ltd., a solar panel and battery manufacturing company. In producing solar panels and batteries, toxic chemical waste is generated
You are the CEO of SPB Ltd., a solar panel and battery manufacturing company. In producing solar panels and batteries, toxic chemical waste is generated and proper disposal is very expensive. A recently hired engineer has brought to you a project code-named "Stealth Disposal" (SD). SD involves constructing underground chambers in which the toxic waste would be dumped. Since your company is in a remote location, it is unlikely that regulators would discover this unconventional disposal method. The engineer projects that there is less than a 25% chance that the waste will leak into ground water, which is used as drinking water by the nearest city. There is an up-front cost to constructing SD, but projected cost savings from using SD rather than normal disposal look very significant each year for the next 10 yearsthiscould have an extremely positive impact on your performance bonus each year. After 10 years, the SD site would be full and other disposal methods would need to be considered. What considerations are important for your decision to accept SD or reject it? How might this tie into the principal-agent
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