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Fairplay & Favoritism in an Organization

Was William Panny treated fairly? Was Mary Cunningham treated fairly? Explain your answer fully.

Is it possible to eliminate from an organization the kinds of political tactics that you think were being used in Bendix? If you do not think it is possible, explain why; if you think it is possible, describe the methods by which such tactics can be eliminated.

Case Study
On September 24, 1980, William Agee, chairman of Bendix Corporation was scheduled to address a special meeting of 600 company staff members at Bendix headquarters in Southfield, Michigan. There was plenty to talk about since under Agee's leadership the company was undergoing a major change in direction and a controversial major internal reorganization. Not only were employees concerned that theirs might be one of the dozens of jobs that would be cut from the new organization, there was also some residual uneasiness over Agee's firing of William Panny, the former president, and the simultaneous resignation of Jerome Jacobson, the former executive vice-president for strategic planning. At the
meeting Agee planned to announce his choice for Jacobson's replacement: Mary Cunningham, a young (twenty-nine-yearold) Harvard Business School Graduate who had been with Bendix for fifteen months. There was a problem, however. As he usually did when preparing a meeting, Agee solicited reports from his senior executives concerning what they felt were the most significant issues on the minds of Bendix employees. One of the items that appeared was a concern over the nature of the relationship between Agee and Cunningham and the rising rumors over what was termed "this whole female thing." Since Mary Cunningham's arrival at Bendix she had been working closely with Bill Agee, and he had quickly
promoted her from his executive assistant to vice president for corporate and public affairs. Both handsome people, the two necessarily worked and traveled together and gossip started when first Cunningham and then Agee separated from their spouses. As one Bendix staff member put it:
There were rumors for a long time, and they just grew and grew. The two of them were seen together at the GOP convention [in July 1980]. The TV camera panned in on them, with Agee on one side of Gerald Ford and Mary on [Agee's] other [side], and people though it was really stupid of them to be seen like that. But they acted like they didn't care. And with her being his top business aide, they traveled all over the country together. That got tongues to wagging. It was almost inevitable. Agee decided to deal with the rumors. At the September 24th meeting with 600 employees present, he announced Mary Cunningham's promotion to vice president for strategic planning, and then made the following statement: I know it has been buzzing around that Mary Cunningham's rise in this company is very unusual and that it has something to do with a personal relationship we have. Sure it's unusual. Her rise in this company is unusual because she's a very unusual and very talented individual. It is true that we are very close friends and she's a very close friend of my family. But that has nothing to do with the way that I and others in this company evaluate performance. Her rapid promotions are totally justified. If the announcement was intended to lay "the female issue" to rest, it failed. Prior to the meeting, William Agee had received a telephone call from a newspaper reporter who indicated that some Bendix people who were unhappy with Agee had gotten in touch with him. They were planning to "leak" Agee's statement to the press. It might be better, the reporter had suggested, if Agee allowed him to be present at the meeting. Agee had acquiesced. The day after the meeting the reporter printed the story, rumors and all, on the front page of a Detroit newspaper. By evening, the story had hit the news wires, and over the next few days it became national news. The event focused national attention on Bendix at the very time the organization was undergoing substantial changes. Some of the changes dated back to 1976 when William Agee took over the chairmanship of Bendix after W. Michael Blumenthal left the job to become secretary of the treasury under President Jimmy Carter. William Agee introduced a new, more open style of management into Bendix. The year after he took over as chairman he installed a special telephone line through which employees could contact him directly with complaints. He got rid of the large meeting table in the center of the headquarters' meeting room and replaced it with large comfortable chairs. He discarded the policy of reserving the best company parking space for himself, saying that it was deserved by the person who arrived first at work each day. The most important changes, however, grew out of a need to reevaluate the company's major operations. Ranked as the 88th-largest industrial company in the United States, Bendix sales had been steadily growing. In 1979 sales were $3.8 billion, up from $2.6 billion in 1975, and profits were $162.6 million, up from 1975 profits of $79.8 million. Bendix had large operations, however, in the automotive industry and in the forest products industry, and neither of these industries was doing well. DBA, its largest foreign automotive subsidiary, in fact, had a long history of deficits. And its forest products plants had been unable to develop more efficient technologies. As a consequence, Bendix earnings from these operations had started to slide and only its income from other investments had kept Bendix's overall income high. One obvious solution was to dispose of its holdings in these industries and to buy into other more profitable businesses. When William Agee took over the helm of Bendix, he hired William P. Panny as president (formerly a vice president of Rockwell International) to assist him in these changes. It was widely thought that eventually Panny would succeed Agee. Together, the two of them sold off a large part of the ailing DBA automotive subsidiary, reduced its workforce, and closed some of its plants. By 1980, a much reduced DBA would once again be operating in the black. Moreover, by 1979 Agee had begun work on selling off the Bendix forest products business. In September of 1980, he announced the completion of negotiations to sell off the forest products operations for $435 million. Other divestitures and further diversifications were in the offing. During these major change-overs, disagreements had begun to emerge between Agee and Panny. In 1978, William Agee felt that Bendix should purchase ASARCO, a mining company which had lost $30 million in 1977. Agee believed that ASARCO would be worth much more in the future than the then depressed price of its stock indicated. But Panny argued against the purchase as unreasonable and held that at most Bendix should purchase 20 percent of the company. Panny carried the day with the Bendix management team and only 20 percent of ASARCO was purchased. The next year ASARCO's profits climbed to $259 million and the price of its stock doubled. More important, however, was a disagreement over whether Bendix should abandon the automotive business altogether. Agee's publicly stated view was that the automobile industry was "in the winter of its life." Panny, however, disagreed. Bendix had been in the automotive industry for decades and the company had acquired great familiarity and experience with its workings. It would be unwise, Panny felt, to turn from a well-known business to others in which the company had little experience and with which its employees were not familiar. In June of 1979 Agee hired Mary Cunningham to serve as his executive assistant. Mary Cunningham was described as an "unusually brilliant," "uncommonly ambitious," "politically astute," "beautiful," "sophisticated," "poised" woman with "high ideals." Almost immediately after arriving from the Harvard Business School, she was assigned to put her extensive
financial analytical skills to work on some major Bendix investment projects. One of her largest projects was an analysis of the possible acquisition of the Warner and Swasey Company, a machine-tool business. The investment looked good. Bendix already had a machine-tool business that, together with the acquisition of Warner and Swasey, would make Bendix the second largest U.S. machine-tool builder. Relying on the analysis, Agee purchased Warner and Swasey in April 1980 for $300 million. The buy paid off: Warner and Swasey was holding $65 million in liquid assets and $40 million in stock, which, when disposed of, made their real purchase price $195 million. In June of 1980, Bill Agee promoted Mary Cunningham, then only twenty-nine, to vice president for corporate and public affairs. (The move was not unusual for Agee; in 1979 he had promoted Bernard B. Winograd, who was then twenty-eight,
to corporate treasurer.) By now the two were working closely together. A company staff person described her with the words: "She's his key advisor; she counsels him on the most important things in the company."4 But some insiders sensed trouble. Later, a Bendix executive commented, "She is very smart and she knows how corporations work--that's how she's done so well--but when it came to her relationship with Bill Agee, she didn't act smart, she didn't use her political sense." Several Bendix managers now began to complain that Cunningham had too much access to Agee and that he was
becoming increasingly inaccessible to others. Said one official: People don't like the way she conducts herself. She's not as careful as she should be. She's always invoking the chairman's authority for everything she does. Mary has so clearly identified herself with him that people don't feel
they can question her or contradict her. The feelings of the managers were further ruffled when Agee had Cunningham carry out an in-depth analysis of Bendix's automotive business in June 1980. Mary Cunningham angered several managers when she inspected the floors of the automotive plants without first telling the plant managers that she was going to do so. Bendix managers (including Mr.
Panny) afterwards harshly criticized the three-volume analysis that Mary Cunningham and her seven-person staff (derisively referred to as "Snow White and the Seven Dwarfs") had produced. The Cunningham report, according to the managers, was unenlightening and did not contain anything they did not already know. Agee's reorganization of the company had now started to move into its internal affairs. In early 1980 Agee announced that the company would be internally reorganized. Up to this time Bendix had been highly centralized: Most company divisions were run out of corporate headquarters in Southfield near Detroit. Agee intended to make the divisions much more autonomous. Panny, however, strongly opposed the reorganization, arguing that the company was not ready to be decentralized and that the employees did not want it. In September 1980, Agee fired Panny. According to Fortune Magazine it was rumored in Detroit that several Bendix executives had earlier gone to Panny to "complain" about Cunningham's relationship to Agee. Panny, according to the Fortune rumor, was "planning" to bring the matter to the Bendix board of directors, but Agee fired him before he had the chance. A few hours later, Jerome Jacobson, a Bendix executive, resigned from his position as vice president for strategic planning. Matters then became more heated. According to author Gail Sheehy, who interviewed both Cunningham and Agee, "anonymous letters" now began to be sent to Bendix board members, making "malicious references" to the conduct of the pair.9 The letters, according to Sheehy, urged board members, to "investigate their relationship" at once. Agee acted quickly. First he arranged meetings with Bendix's top managers and with the board's executive committee. To each group he said the same thing: The rumors going around were utterly false; he and Cunningham had "no romantic involvement." Then he moved to promote Mary Cunningham to the vacated position of vice president for strategic planning. At the fateful company meeting of September 24, he announced her promotion, and simultaneously attempted to lay "the female issue" to rest. The next day, however, the story was reported in the nation's newspapers along with the rumors suggesting that Mary Cunningham's rapid promotions were due to her "romantic involvement" with Bill Agee. The day the news broke in the papers, Mary Cunningham decided she had to move quickly if she was to out maneuver "them." (She did not know who had sent the anonymous letters.) Her first instinct was to resign, since this would prevent the board from firing her first and would ensure that Bill Agee would not be compromised by her continuing presence in the company. But by the next day she had instead decided to request a temporary leave of absence from the company. This tactic would leave her with a palatable option should the board want her to leave, but at the same time it would pressure the board to take the option of retaining her. Since the board had publicly approved her promotion only a few days earlier, it would probably not be willing to reverse itself publicly so soon afterwards. Consequently, on September 28, she submitted to the board a letter requesting an "immediate but temporary" leave which "should not be construed in any sense as tantamount to resignation." The letter continued by explaining that a resignation would set "a dangerous precedent" because it would enable "female executives to be forced out of a company through malicious gossip" and would also "tend to confirm the most base and erroneous assumptions suggested by the media."The next afternoon a committee comprised of a few members of the Bendix board of directors met and decided to announce in the name of the board that they had "complete confidence" in Mary Cunningham and that "it would be unjust for a corporation to respond to speculation in the media by accepting her request."After the meeting, one of the board members gave her a bit of advice: She should be careful because she was being used by others to get at Bill Agee and if the thing went on for much longer Agee's position would be in danger. The drama was not yet over. Mary Cunningham was still unsure whether it might not be better for her to resign. When the full board met a few days later and the members discussed the issue among themselves, a large number felt that she should not continue on at Bendix. Too many difficulties would confront her if she continued in her present role, they felt. This was made known to Cunningham. Subsequently, on October 9, she issued another statement: I have submitted my resignation, effective today, as an officer of the Bendix Corporation . . . I am convinced that the unusual convergence of events beyond my control has substantially impaired my ability to carry out my responsibilities as a corporate officer of Bendix . . . I am grateful for the many supportive communications from the business community and others concerned with the right to be judged on merit alone.

Solution Preview

Sincerely,The Bendix Controversy

Although this controversy happened in the late 70's, early 80's, it resonates to this day as it is one of corporate intrigue and workplace politics. William Agee, the instrumental chairman of Bendix Corporation has gotten to his position due to the growth and industrial leadership he provided to Bendix, a US corporation that provides parts for the automotive industry and has diversified to other businesses. He led at a time of corporate takeovers as part of growth strategies and as a leader he chose his team members and confidantes according to their capacities as well as personalities.

His firing of William Panny though was one of political move. In the last 15 months officers, managers and other members of the corporation has been witness to the meteoric rise and promotion of Mary Cunningham. While it started out as whispers, it did appear that Agee and Cunningham, a young MBA graduate from Harvard had a personal relationship. They believed that while it was her skills and education that got her the job, her rise was also due to her personal connection to Agee, While she did asses one account for takeover successfully, there had been many other individuals waiting in the Bendix wings and they questioned her immediate promotion to VP for Corporate Planning less than a year in Bendix employ. She frequently travelled with Agee as well and managers as well as other officers felt that this mars her promotion feeling positive that her personal relationship ...

Solution Summary

The solution looks at the case of Bendix Corporation, in particular the case of William Panny and Mary Cunningham who, due to the case of internal politics, favoritism and personal vested interests within an organization brought in executive breakdown and put to question issues of equality and fairplay in an organization. References are listed for further exploration of the topic. a word version is attached for easy printing.