Harvard Case - Rohner Textil AG (A)
"Rohner Textil AG (A)" Harvard business case study is written by Patricia H Werhane, Michael E. Gorman, Matthew M Mehalik. It deals with the challenges in the field of Business Ethics. The case study is 8 page(s) long and it was first published on : Jan 22, 1997
At Fern Fort University, we recommend Rohner Textil AG (RTA) implement a comprehensive strategy to address the ethical and sustainability concerns raised by the recent incident. This strategy should focus on fostering a culture of ethical leadership, transparency, and corporate responsibility throughout the organization. This will require a multi-faceted approach encompassing organizational change, leadership development, stakeholder engagement, and regulatory compliance.
2. Background
Rohner Textil AG (RTA), a family-owned Swiss textile manufacturer, faces a crisis following the discovery of illegal activities in its Chinese subsidiary. The incident involves the use of child labor and the falsification of production records, jeopardizing the company's reputation and jeopardizing its long-term sustainability. The case highlights the challenges of managing ethical and sustainable practices in a complex global supply chain.
The main protagonists are:
- Hans Rohner: CEO and owner of RTA, facing a critical decision regarding the future of the company and its ethical stance.
- The Rohner Family: The family's values and legacy are at stake, demanding a decisive response to the crisis.
- The Chinese subsidiary: The subsidiary's actions have exposed the company to serious legal and ethical consequences.
- Stakeholders: Employees, customers, suppliers, investors, and the broader community are all impacted by the crisis and expect accountability from RTA.
3. Analysis of the Case Study
This case study can be analyzed using the Stakeholder Theory framework, which emphasizes understanding and balancing the interests of all stakeholders. The framework helps us understand the various stakeholders' concerns and how RTA's actions impact them.
Key Issues:
- Ethical Violations: The use of child labor and falsification of records are serious violations of international labor standards and business ethics.
- Corporate Governance: The lack of effective oversight and control in the Chinese subsidiary highlights weaknesses in RTA's corporate governance structure.
- Reputation Damage: The scandal has severely damaged RTA's reputation, potentially impacting customer loyalty, investor confidence, and brand value.
- Sustainability Concerns: The incident raises concerns about RTA's commitment to ethical and sustainable practices, particularly in its supply chain.
- Legal and Regulatory Risks: RTA faces potential legal action and regulatory scrutiny in both Switzerland and China.
4. Recommendations
1. Immediate Actions:
- Transparency and Accountability: RTA must immediately acknowledge the incident, apologize to stakeholders, and commit to taking swift and decisive action. This should include a public statement outlining the specific violations, the steps taken to address them, and the measures implemented to prevent future occurrences.
- Independent Investigation: RTA should commission an independent third-party investigation to thoroughly examine the incident, identify root causes, and determine the extent of the violations. This investigation should be transparent and involve stakeholder representatives.
- Compensation and Remediation: RTA must provide appropriate compensation to the affected individuals, including the children who were employed illegally. This should include financial compensation, educational support, and rehabilitation programs.
- Legal and Regulatory Compliance: RTA must comply with all relevant laws and regulations in both Switzerland and China. This includes cooperating with authorities, addressing any legal claims, and implementing necessary changes to ensure future compliance.
2. Long-Term Strategy:
- Organizational Culture Transformation: RTA must establish a strong ethical culture throughout the organization, emphasizing transparency, integrity, and accountability. This requires a shift in organizational values and a commitment to ethical decision-making at all levels.
- Leadership Development: RTA should invest in leadership development programs that focus on ethical leadership, corporate social responsibility, and sustainability. This will ensure that future leaders are equipped to uphold the company's values and ethical standards.
- Stakeholder Engagement: RTA should actively engage with its stakeholders, including employees, customers, suppliers, investors, and the broader community. This engagement should be transparent, inclusive, and focused on building trust and understanding.
- Supply Chain Management: RTA must strengthen its supply chain management practices to ensure ethical and sustainable sourcing. This includes implementing robust due diligence processes, establishing clear ethical standards for suppliers, and monitoring compliance through regular audits.
- Corporate Governance Reform: RTA should review and strengthen its corporate governance framework to enhance oversight, accountability, and transparency. This includes establishing clear ethical guidelines, implementing robust risk management systems, and ensuring independent board oversight.
- Sustainability Initiatives: RTA should develop and implement a comprehensive sustainability strategy that addresses environmental, social, and governance issues. This includes setting ambitious sustainability goals, measuring progress, and reporting transparently on its performance.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: RTA's commitment to ethical business practices and sustainability is essential to its long-term success. The recommendations align with these core values and ensure the company's actions are consistent with its mission.
- External customers and internal clients: The recommendations address the concerns of all stakeholders, including customers who value ethical products, employees who want to work for a responsible company, and investors who seek sustainable investments.
- Competitors: The recommendations help RTA maintain a competitive advantage by demonstrating its commitment to ethical and sustainable practices, which are increasingly important factors for consumers and investors.
- Attractiveness ' quantitative measures: While it is difficult to quantify the impact of ethical and sustainable practices, the recommendations are expected to improve RTA's long-term financial performance by enhancing its reputation, attracting talent, and reducing risks.
- Assumptions: The recommendations assume that RTA is committed to making the necessary changes to address the ethical and sustainability concerns. They also assume that the company will be transparent and accountable in its actions.
6. Conclusion
The Rohner Textil AG (A) case study highlights the importance of ethical leadership, transparency, and corporate responsibility in today's globalized business environment. By implementing the recommendations, RTA can address the current crisis, restore its reputation, and build a sustainable future for the company.
7. Discussion
Alternatives:
- Ignoring the incident: This option is highly risky and would likely lead to further damage to RTA's reputation and potential legal consequences.
- Minimizing the incident: This option would lack transparency and credibility, further eroding trust in the company.
- Selling the Chinese subsidiary: This option might be seen as a quick fix but could be perceived as a lack of commitment to ethical practices.
Risks:
- Lack of commitment: RTA's commitment to implementing the recommendations is crucial for success.
- Implementation challenges: Implementing the recommendations requires significant organizational change and may face resistance from some stakeholders.
- Reputation recovery: Rebuilding trust and restoring RTA's reputation will be a long-term process.
Key assumptions:
- The Rohner family is committed to ethical business practices.
- The company has the resources and expertise to implement the recommendations.
- Stakeholders will respond positively to RTA's efforts to address the ethical concerns.
8. Next Steps
- Immediate actions: Implement the immediate actions outlined in the recommendations within the next 30 days.
- Independent investigation: Complete the independent investigation within 60 days.
- Long-term strategy development: Develop a comprehensive long-term strategy within 90 days.
- Implementation of the strategy: Implement the long-term strategy over the next 12-18 months.
- Continuous monitoring and evaluation: Continuously monitor the effectiveness of the implemented initiatives and make adjustments as needed.
Timeline:
| Milestone | Timeline |
|---|---|
| Public Statement and Apology | 1 week |
| Independent Investigation | 2 months |
| Compensation and Remediation | 3 months |
| Organizational Culture Transformation | 6 months |
| Leadership Development Programs | 1 year |
| Stakeholder Engagement Strategy | 3 months |
| Supply Chain Management Review | 6 months |
| Corporate Governance Reform | 1 year |
| Sustainability Strategy Development | 6 months |
By taking decisive action and implementing these recommendations, Rohner Textil AG can emerge from this crisis stronger and more resilient, demonstrating its commitment to ethical business practices and sustainable development.
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Case Description
This series of cases (see also the B [UVA-E-0108], C [UVA-E-0109], D [UVA-E-0110], and E [UVA-E-0147] cases) takes students through five design-and-manufacturing decisions confronting Albin Kalin, managing director of Rohner Textil AG, a textiles manufacturer in northeastern Switzerland. Faced with community pressure to use quieter machinery and challenged by increasingly stricter environmental regulations, Kalin has committed himself to improving the ecological profile of the mill. He has adopted a set of rule-based design imperatives proposed by William McDonough based on McDonough's concept "waste equals food." Given these strict environmental parameters, Kalin attempts to design and manufacture a compostable fabric for DesignTex, a division of the U.S. company Steelcase. The A case examines Kalin's choice of a twisting-yarn supplier: the two alternatives pose significant differences in product quality, reliability, and performance.
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