Desperate Air

What would I do if I was in George Nash’s position as Vice President of Real Estate at Desperate Air Corporation (a company in dire financial straits), and my pending sale of Florida property potentially had toxic waste buried beneath the surface. I found this to be the least challenging question posed thus far in terms of my own ethical beliefs. In this instance I would proceed with the sale without disclosing the information regarding what I had heard about the toxic waste.

Clearly Florida law states that you do not have to disclose that there is a hazardous substance on commercial property as long as there is not a fraudulent statement about the property. Nash did his due diligence by hiring someone to do an environmental study. The company hired found nothing and a report was submitted to the buyers. Nash also consulted his attorney about what should be disclosed. Fledgling, the company purchasing the property, had the responsibility of performing their own due diligence.

While a representative walked the property and found nothing, the article did not state whether or not Fledgling did a full environmental study as well. That should have been part of the purchaser’s process. If you purchase a home it is your responsibility to hire an impartial building inspector to look at your home and report on its condition. The Fledgling representative had the same responsibility to obtain an impartial environmental study. Had the representative done so, they probably would have discovered the toxic waste. It doesn’t matter that the DAC report did not include the disclosure.

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Unfortunately Fledglings representative was at fault here in my opinion. The fact that Nash prayed about the situation shows that he is not a cold hearted capitalist with only selfish motivations. Similarities between “Desperate Air” and the Seglin article are that two executives had to make choices that they believed would prevent their companies from potential financial ruin. Although I believe there are differences in the level of disclosure (I believe the CEO of the aircraft company had a financial responsibility to disclose his findings to the auditors), the process of deciding what to disclose is similar.

Both parties consulted their attorneys whose guidance instructed them that they did not have to disclose the information. The motivating factor in both decisions was to protect the livelihood of their companies. The facts of the information that had been revealed to each company had not been proven. Had Nash followed the RDCAR process I believe the outcome of his decision may have been different. Nash did not go through the process of recognition. There was no survey of stakeholders. He did not even disclose the findings to his CEO.

There was no chance to find out if withholding the toxicity information was something that would make other staff members uncomfortable. Nash did not engage in discovery. There was no attempt to build internal and external transparency. Fledgling did not have the opportunity to react to the information. There was a possibility that the sale would not have progressed if the information on toxic waste had been disclosed. It may have only delayed the sale, but there was no way to find that out. There was no cognition. No one in DAC management or any other DAC staff was presented with a “what would you do? scenario that would have spelled out company values. No policy or action was put into place to deal with the situation. The only action taken was that Nash consulted an attorney. Nash did reflect on the decision, but no one else in the company had the opportunity to do so. Due to the fact that there was no legal reason to disclose the information of toxic waste to Fledgling, and the fact that they failed to do their own due diligence, in this instance I would agree with Nash’s decision to proceed with the sale in order to help protect the financial position of DAC.

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