ASSIGNMENT: RadioShack Corporation
You've Got Questions...
At Texas-based RadioShack Corporation, whose brand positioning slogan reads, "You've Got Questions, We've Got Answers," the events of early February 2006 surely had the company's board of directors and top executives wondering whether the questions they had about former CEO David Edmondson would ever be answered to their satisfaction. The problems began when the company's hometown newspaper, The Fort Worth Star-Telegram, ran a story by reporter Heather Landy that the "unaccredited bible college from which Mr. Edmondson claimed two degrees said he and not graduated." The paper also reported that its investigation showed that on two occasions, Mr. Edmondson had been charged with (but not convicted of) driving while intoxicated. In addition, the paper reported that shortly after being named CEO, he was arrested on a third DWI CHARGE. "It was this last incident, scheduled to go to trial in April 2006 that had made the Star-Telegram sufficiently skeptical to begin checking out the local CEO."
Mr. Edmondson joined RadioShack in 1994, worked his way up the corporate ladder, and had been a senior executive since 1998. He served 2 years as senior vice before bring named as the company's president and chief operating officer in 200. When RadioShack's board of directors announced in January 2005 that CEO Len Roberts was transitioning out of the CEO position but would remain as the executive chairman of the board, it also announced that it had selected David Edmondson as the new CEO. This CEO transition had been a planned succession given that the two men had worked side-by-side for 10 years in revitalizing the company. Roberts had "always believed that on of the most important jobs of a CEO was to select, groom and mentor a successor," and he felt he had done that with the hiring of Edmondson. As the compnay's Web site stated, "From the first time he met Edmondson, Roberts instinctively knew that Edmondson. As the company ‘s Web site stated, "From the first time he met Edmondson, Roberts instinctively knew that Edmondson had the potential to one day become the company's CEO." And he mentored Edmondson, grooming him to take over the top spot someday.
When Roberts stepped down, Edmondson was named RadioShack's new CEO. During his 13 months' tenure in this position, the company struggled with flat sales and a lagging stock price. Three days after the newspaper story ran, Edmondson offered two apologies in a conference call with investors: one for the performance of the company and one for having lied about his educational background. He then announced a turnaround plan for the company that included the closing of 400 to 700 of the company's 7,000 stores and dropping slow moving products from its stores' inventory. He also reiterated that he was going to stay on as CEO. The stock market reacted with RadioShack's share price falling to a 3-year low. In a later phone news conference that same day, Mr. Edmonson replied to a question about whether the company had fired other employees for submitting false resumes by stating, "I would not want to comment on that." He also refused to comment as to whether his conduct violated the company's ethics code. At this point in time, RadioShack's board was still supporting its CEO.
However, by February 21, just days after he told investors that intended to stay as CEO, Edmondson resigned. Board chairman Roberts announced the resignation, stating that it was a "tough decision," but a mutual decision between the board and Mr. Edmondson. He said, "When our company's credibility becomes based on a single individual, it is time for a change. One of the most important things we have as a corporation is integrity and trust. We have to restore that back to the company.
Although the situation at RadioShack certainly seems to have nowhere to go but up, new questions have been raised about the severance package Edmondson received. According to a regulatory filing, he received a cash payout worth at least $1.03 million in addition to payments for accrued and unpaid vacation and salary. RadioShack did not state the total value of the severance package, which also included 4 months of insurance coverage and the right to exercise outstanding stock options and stock awards. Claire Babrowski, the company's chief operating officer, was named acting CEO while an outside search for a new CEO is conducted. In addition to these changes, an examination of the company's Web site, where the company's Code of Ethics can be found, showed the following stated in bold print on the front cover: "Revision 02.21.06." Would this ultimately be the answer to the ethical and corporate responsibility questions that were sure to follow?
Answer the Questions 3-4 pages in APA format
1. Evaluate this situation from the viewpoint of David Edmondson's ethical leadership. What could RadioShack have done differently?
2. What stakeholders might be impacted by this situation? What concerns might each stakeholder have had? Were any of the stakeholders concerns in conflict with each other? Explain. What impact might this have had on employees?
3. Do you think the board's decision to fire Edmondson was "tough," as Len Roberts suggested? Why or why not? Why do you think Mr. Roberts would have described this decision as such?
4. What impact do you think the company's severance package to Mr. Edmondson might have?
5. Could an organization ever prevent situation like this from happening? Why or why not? What could they do? How could company's Code of Ethics play a role? Go to the company's Web site (www.radioshack.com) and take a look at its Code.
6. In the March 2004 issue of Wired magazine, it reported that 44 percent of Americans lie about their work history. What's your reaction to this statistic? What problems can lying on a resume create for an organization?