The Recalcitrant Director at Byte Products, Inc.:

Case 1

The Recalcitrant Director at Byte Products, Inc.:

Corporate Legality Versus Corporate Responsibility

Dan R. Dalton, Richard A. Cosier, and Cathy A. Enz

BYTE PRODUCTS, INC. IS PRIMARLY INVOLVED IN THE PRODUCTION OF ELECTRONIC components that are used in personal computers. Although such components might be found in a few computers in home use, Byte products are found most frequently in computers used for sophisticated business and engineering applications. Annual sales of these products have been steadily increasing over the past several years; Byte Products, Inc., currently has total sales of approximately $265 million.

Over the past six years, increases in yearly revenues have consistently reached 12%. Byte Products, Inc., headquarters in the Midwestern United States, is regarded as one of the largest-volume suppliers of specialized components and is easily the industry leader, with some 32% market share. Unfortunately for Byte, many new firms-domestic and foreign-have entered the industry. A dramatic surge in demand, high profitability, and the relative ease of a new firm’s entry into the industry explain in part the increased number of competing firms.

Although Byte management –and presumably shareholders as well-is very pleased about the growth of its markets, it faces a major problem: Byte simply cannot meet the demand for these components. The company currently operates three manufacturing facilities in various locations throughout the United States. Each of these plants operates three production shits (24 hours per day), 7 days a week. This activity constitutes virtually all of the company’s production capacity. Without an additional manufacturing plant, Byte simply cannot increase its output of components.

James M. Elliot, Chief Executive Officer and Chairman of the Board, recognizes the gravity of the problem. If Byte Products cannot continue to manufacture components in sufficient numbers to meet the demand, buyers will go elsewhere....