1. Executive Summary
Aluminum Company of America (Alcoa) is an aluminum company, originally
founded in 1888 as Pittsburgh Reduction Company. It is one of the leading companies
in aluminum production. Since its foundation, Alcoa has established a strong value-
based culture, which must be adopted by all employees in the company. The company’s
core values are: Integrity, Environment, Health and Safety, Customer, Accountability,
Excellence, People, Profitability. Since 1980’s those values are documented and since
1990, Alcoa has created a global program considering ethics and compliance.
This program has as its main goal to minimize illnesses and injuries of employees
worldwide, to all Alcoa’s facilities. In order to achieve that, Alcoa trains and
“educates” not only its employees but also its top managers. The “Health and Safety”
program, as top management of Alcoa names it, has a saying that: “ we do not want our
employees to return back home after a working day, in a worse condition than when
they arrived”.
Alcoa has given throughout the years much attention to all these ethical values
and ideals that company has for over 100 years, but in 1996 at an annual meeting of the
shareholders, a problem occurred. The company got accused for being inconsistent in
its facility in Mexico and that there were unreported injuries. Mr. O’Neil, the CEO of
the company, started immediately an investigation, and found out that indeed there was
a lack of report by the side of the management of the company in Mexico. Despite the
positive results that the Mexico facility was giving to the company, O’Neil decided to
fire the facility’s manager, considering the act as unacceptable to Alcoa’s values and
ethical beliefs.
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2. 1. How would you classify Alcoa’s ethical work climate? Which ethical criterion, as
shown in figure 5.1, was used by the company; egoism (self-centered), benevolence
(concern for others), or principles (integrity approach)? Or, using Professor Paine’s two
distinct ethics approaches, was Alcoa’s approach more compliance or integrity?
Ethical climate is the employees’ perception of what is and what not ethically
acceptable behavior in a company is. In other words, it is the moral atmosphere which
exists in an organization. Therefore employees feel, in away, which action is allowed
and which is forbidden.
According to the textbook, there are three ethical criteria that the company
might have been using, egoism, benevolence or principle. To begin with, egoism (self-
centered approach) states that interest is the only important thing. As a result, an
organization must seek its own economic benefit -that is profit- in order to be
prosperous and have sustainability in the business environment. As far as the second
criterion is concerned, benevolence (concern-for-others approach), deals with a more
socially responsible company which seeks team interest. This basically means that such
a company is concerned about the society in which it operates and the people affected
by its decisions and operations. The third component of ethical climate, principle
(integrity approach) illustrates that the company gives emphasis to its written or non-
written laws, rules and procedures. More specifically, the company expects all
employees to follow its rules and procedures in every single incident that occurs. In
addition, the laws and codes of the society the company is operating is as crucial as its
own.
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3. Concerning all of the above, Alcoa used the principle (integrity approach)
criterion as far as the termination of the facility’s manager is concerned. In order to
support this point of view, we can study Alcoa’s ethical work climate. First of all,
Alcoa has a strong values-based system, which all employees must implement, from the
board of directors to the low level positions. The company has documented values,
rules and procedures and places great emphasis at making its values-system part of their
employee’s culture. In addition, firing the manager shows that Alcoa cares more about
the work accidents that were not reported rather than its own economic efficiency as the
manager was very successful, profitable and kept the companies customers satisfied.
Alcoa required all injuries to be reported to the headquarters and the lack of reporting
injuries made the manager to be terminated.
Generally speaking, Alcoa uses a mixture of both three components of ethical
climate; however greater emphasis is given to the integrity approach.
Having in mind professor Paine’s two distinct approaches, compliance and
integrity, Alcoa’s approach was more integrity. Compliance stated that the company
tries to avoid legal sanctions and employees act in a legal way due to their fear of
punishment. On the other hand, integrity based approach says that employees are
accountable for action morally and they must do so in every single operation. As a
result, they must built honest relationships with all shareholders and be royal to the
company. The Alcoan integrity approach is absolutely clear if we consider that the
company expects for its employees to implement the laws and procedures of the
company as well as its values which highlight the importance of having trustworthy
relationships among all shareholders.
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4. 2. What role did top management commitment play in developing the ethical work
climate and organizational performance seen at Alcoa? What other ethical safeguards
are mentioned in the case to support the company’s efforts at developing a strong
ethical culture?
Top management commitment refers to the royalty of all managing positions in
the organization. In other words, top managers act as an example to all employees
working for the company. As far as Alcoa is concerned, top managers played a
significant role in developing its ethical work climate. First of all, as mentioned before,
executives are an example for the employees in the company. Therefore, when the
people working in the company see their supervisors implementing all specified laws
and procedures, they tend to act in a similar way as they do understand that ethics are in
high priority for their company. Moreover, all CEOs of the Alcoa Company stressed the
importance of having a strong values-based culture, with two great examples, Fred
Fetterolf and Paul O’Neill. The first decided that the organization needed to document
the values which all employees should follow; Integrity, Environment, Health and
Safety, Customer, Accountability, Excellence, People and Profitability. As a result,
employees had to live by those values and adopt them as part of their own culture.
Having integrity and accountability means that the company builds fair and honest
relationships with its suppliers, customers and generally speaking with all its
shareholders as well as being responsible for all actions affecting the environment in
which Alcoa operates leads to more effectiveness and efficiency and as a result
profitability. Furthermore, being excellence and profitability two of the company’s core
values, results in Alcoa’s organizational performance seen in the text. Excellence in
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5. every single operation in the company and seeking profits and benefits for all the
shareholders, made Alcoa the world’s leading producer of aluminum. As far as Paul
O’Neill is concerned, he highlighted the importance of health and safety as the
company’s core values and tried to eliminate all injuries and work accidents. “Zero is
possible” is one of the Alcoa’s sayings and O’Neill tried to materialize it by making it
part of the company’s culture.
Ethical Safeguards provide ethical awareness and direction to all employees in a
company. Alcoa has established a plethora of such safeguards in order to build and
maintain a strong ethical culture. In order to be more specific, an ethics and compliance
officer, a global code of conduct, ethics training and a global helpline reporting system
are just a few. The ethics and compliance officer is responsible for reporting to the
Alcoa’s CEO and the board of the directors incidents that may occur and concern the
core ethical values of the company. In addition, the global code of conduct refers to the
common values that the company shares throughout the organization and among all
worldwide facilities. Moreover, there is ethics and compliance training which offers
employees continuous training and learning as far as the Alcoan ethics are concerned.
Last but not least, the global helpline reporting system provides the executives with all
necessary information dealing with the effectiveness of ethics training in informing
employees about the ethics of the company as well as in influencing employees’
behavior.
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6. 3. Was O’Neill justified in terminating the manager for his lack of reporting the
workplace accidents, even though no serious harm resulted from the workplace
incident?
Alcoa’s CEO, Paul O’Neill decided to fire the facility manager in Mexico. Such an
action might seem unfair or too strict as the manager did not anything illegal or
unethical. However, the CEO’s decision was justified as the facility’s manager did not
respect the procedures and the rules of the company and did not report the injuries
happened in Mexico. By acting like that, O’Neill stressed that Alcoa’s values are in top
priority and that rules and procedures set throughout 100 years in the company must be
respected by all employees in all global facilities. In addition, his decision aimed at
preventing similar actions in the future by other managers and making crystal clear that
employees’ health and safety is one of the top goals of the company, no matter the cost.
Furthermore, the Alcoan CEO terminated the manager due to the fact that he did not
give the chance for other managers of other facilities to learn and basically know how
to prevent situations like that might occur in the future. Moreover, O’Neill showed that
the company’s heritage of caring about its employees will not be affected by other
reasons, like profit or increased sales, something that the facility manager in Mexico
had achieved, and thus he terminated him with immediate effect. As he mentioned in an
open letter to the entire company: “It is imperative that there be no misperceptions
about our values. It is equally imperative that we all learn from this. Full compliance
with both the letter – and spirit – of our policies is imperative. Anything less is
unacceptable.”
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7. 4. Can Alcoa’s “values in practice” be adopted by other organizations as a universal set
of ethical standards leading to ethical employee behavior?
Alcoa’s “values in practice” can and should be adopted by other organizations. To
begin with, each organization must have documented its core values, so as for the
employees to learn to live by them and follow them in all operations and transactions of
the company. In addition, a company must care about the hearth and the well-being of
its employees as they are its living assets who make the company be prosperous and
economically efficient. Furthermore, an organization ought to have in high priority
concepts like accountability and integrity as it will be essential in order to built strong
and honest relationships with its suppliers, customers and generally speaking all
shareholders which will lead to the company’s success, effectiveness and profitability.
Last but not least, a company must be socially responsible. Caring about the
environment in which the business is operating, being concerned and accountable about
the consequences that the company’s business activities may cause as well as seeking
win/win situation among all shareholders benefit not only the organization but the
society in general and is something that all companies should follow.
However, in order to establish a strong values-based system, an organization
must have all the required economic resources in addition to a well organized internal
structure. Such a system requires not only more employees working in a company, but
also training programs and a reporting system which will provide the managing
positions with the appropriate feedback.
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8. Bibliography
"Alcoa: About: Corporate Governance: Ethics and Compliance: Ethics and Compliance
Program." Alcoa Inc. -- Primary Aluminum (aluminium) and Fabricated Aluminum
Products. Web. 25 Sept. 2010.
<http://www.alcoa.com/global/en/about_alcoa/corp_gov/sustainability_metrics.asp>.
"Alcoa: About: Vision & Values: Overview." Alcoa Inc. -- Primary Aluminum
(aluminium) and Fabricated Aluminum Products. Web. 25 Sept. 2010.
<http://www.alcoa.com/global/en/about_alcoa/vision_and_values.asp>.
"Alcoa: Worldwide: Sustainability: Sustainability of Operations: Social: Health." Alcoa
Inc. -- Primary Aluminum (aluminium) and Fabricated Aluminum Products. Web. 25
Sept. 2010.
<http://www.alcoa.com/sustainability/en/info_page/operations_soc_health_zip.asp>.
"Alcoa: Worldwide: Sustainability: Sustainability of Operations: Social: Health." Alcoa
Inc. -- Primary Aluminum (aluminium) and Fabricated Aluminum Products. Web. 25
Sept. 2010.
<http://www.alcoa.com/sustainability/en/info_page/operations_soc_health_zip.asp>.
Lawrence, Anne T., and James Weber. Business and Society: Stakeholders, Ethics,
Public Policy. Boston: McGraw-Hill Irwin, 2008. Print.
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