Several years ago, senior executives at energy company CanOil wanted to acquire an exploration company (HBOG) that was owned by another energy company, AmOil. Rather than face a hostile takeover and unfavorable tax implications, CanOil’s two top executives met with the CEO of AmOil to discuss a friendly exchange of stock to carry out the transaction. AmOil’s chief executive was previously unaware of CanOil’s plans, and as the meeting began, the AmOil executive warned that he was there merely to listen. The CanOil executives were confident that AmOil wanted to sell HBOG because energy legislation at the time made HBOG a poor investment for AmOil. AmOil’s CEO remained silent for most of the meeting, which CanOil executives interpreted as an implied agreement to proceed to buy AmOil stock on the market. But when CanOil launched the stock purchase a month later, AmOil’s CEO was both surprised and outraged. He thought he had given the CanOil executives the cold shoulder, remaining silent to show his disinterest in the deal. The misunderstanding nearly bankrupted CanOil because AmOil reacted by protecting its stock. What perceptual problem(s) likely occurred that led to this misunderstanding?

This incident describes true events in Dome Petroleum’s acquisition of Conoco, Inc. subsidiary Hudson Bay Oil and Gas (HBOG). (See: J. Lyon, The Rise and Fall of the House that Jack Built (Toronto: McMillan, 1983)). HBOG’s high acquisition price (due to Conoco’s resistance strategy) along with other debts, increasing interest rates, and falling oil prices put Dome on the brink of bankruptcy. The company was later acquired by Amoco. 

This incident is a classic example of false-consensus effect. The CanOil executives interpreted the AmOil CEO’s silence as tacit agreement with the plan, likely because they wanted to believe AmOil would support the stock swap strategy. Not only was this plan critical to the CanOil’s executives’ personal goals; it was also a high risk strategy that relied on questionable accounting procedures. These conditions likely further added to the CanOil executives’ perceptual bias that the AmOil CEO was on side.

Comments

Post a Comment

Popular posts from this blog

After hearing a seminar on organizational learning, a mining company executive argues that this perspective ignores the fact that mining companies could not rely on knowledge alone to stay in business. They also need physical capital (such as digging and ore processing equipment) and land (where the minerals are located). In fact, these two may be more important than what employees carry around in their heads. Evaluate the mining executive’s comments.

This question relates to the importance of organizational learning perspective in achieving organizational effectiveness. Meanwhile, the question emphasizes the critical understanding that organizational effectiveness is a function of an overall holistic system view of the effective and efficient interplay of all three elements of software (the knowledge and processes), hardware (the structures and the people) and the harmonious relationship between the organization and its environment. Focusing on any one component at the expense of the rest would definitely result in incomplete picture of an effective organization. Some executives still view land and capital as a company’s most valuable assets . They give lip service to the idea that “People are our most value assets” but still don’t understand that land and capital have little value without people . For instance, this mining company would not have found land with ore deposits unless it had the knowledge to find those minera...
Read more

“All decisions are ethical decisions.” Comment on this statement, particularly by referring to the concepts of moral intensity and moral sensitivity.

This sweeping statement is false. In other words, not all decisions are having equal right/wrong or good/bad dimensions. We are saying there is a threshold which defines ethical concern, and it is a function of moral intensity and moral sensitivity. For a decision to have an ethical dimension, i t has to have some moral intensity associated with it. Moral intensity is a characteristic of the situation. It refers to the degree to which an issue demands the application of ethical principles. “Who should be laid off?” would have high moral intensity. On the other hand, a decision to take an umbrella to work because it might rain has no moral intensity. This is because morally intense issues involve others in the society who may think the decision is good or evil, or the issue quickly affects people. Moral sensitivity refers to a characteristic of the decision maker, not the situation. Faced with the same issue, two decision makers may be more or less moral sensitive, depending on emp...
Read more

Two college graduates recently joined the same major newspaper as journalists. Both work long hours and have tight deadlines for completing their stories. They are under constant pressure to scout out new leads and be the first to report new controversies. One journalist is increasingly fatigued and despondent and has taken several days of sick leave. The other is getting the work done and seems to enjoy the challenges. Use your knowledge of stress to explain why these two journalists are reacting differently to their jobs.

This incident describes two journalists with similar stressors experiencing different levels of stress and stress consequences. This illustrates the distinction between stressors and stress. It may also highlight the importance of individual differences in stress. One possible reason why these two journalists are experiencing different stress levels is that they might perceive the situation differently. The low stress journalist might have higher self-esteem and confidence that he/she can complete the work. A second explanation might be that the journalists have different threshold levels of resistance to a stressor . Both are recent graduates and we don’t know if they are a similar age. However, the high stress journalist might have less resistance because he/she has recently experienced other stressors , such as death of a family member. Finally, the different stress levels might be explained by the different strategies used to manage the stress. The ...
Read more