Case Study: Building a Corporate

Culture at
Lorain Products
General partners will be liable individually for business liabilities, and limited
partners will have the liability of their contributed amount of capital

Ownership of share will be equal and clearly stated

All partners will equally contribute in case of loss

All partners will receive an equal share of the profit

In the case of the addition of a new partner, revision of the contract is a must

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Lorain Products
Company
▸ During the year 1930, the US had the
highest number of telephones and as a
result long distance calls were also
increasing at a growth rate of 6 percent.
▸ Problem: Equipment used for calling
often broke down because of moving
parts used inside generators.

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Lorain Products
Company
▸ Problem solved by invention of
equipment which had no moving parts.
▸ Inventor: Paul Stocker a young engineer
from Ohio
▸ Invention: An improvement Instrument
called Sub-Cycle
▸ Lorain Products based its product line on
the production of the Sub-Cycle.

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Change of Leadership
& Ownership
▸ In 1973, Lorain Company merged with
Reliance Electric. Due to health concern, Paul
stepped down and succeeded by Martin Huge
and followed the corporate culture set by
Paul.
▸ Martin Huge promised to maintain Stocker’s
tradition and maintained open door policy,
spirit of team work, and recognition of
contributors.

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Change of Leadership
& Ownership
▸ In 1979, Reliance was purchased by
ENCO which was a subsidiary of Exxon
Corporation.
▸ Reliance was again sold to investors from
Citicorp & Prudential- Bache Securities.
▸ Pete Paradissis became the vice
president and GM of Lorain Products,
followed business philosophy of founder,
and maintained MBWA-Management by
Walking Around.

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Corporate Culture
Established by Paul
Stocker
▸ Paul stocker was: Humble, Intelligent,
Modest
▸ Paul was highly committed to absolute
integrity as he replaced faulty products
even though the company almost faced
insolvency, which ultimately helped the
company to expand its product line.
▸ The company grew and also its
commitment to its employees. Paul
established an employee profit sharing
plan with a commitment to distribute a
15% of pretax profits to its employees
along with retirement plan.
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Corporate Culture
Established by Paul
Stocker
▸ Paul maintained a good personal relation
with company’s employees even though
the company had enlarged to a greatest
extent.
▸ Employees’ opinions were respected and
they had the chance to select alternative
working hours.
▸ Because of Paul, the company was
recognized by customers, employees,
and suppliers as highest quality and
unquestionable quality of products,
services, and personal relationship.

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Corporate Culture
Established by Paul
Stocker
▸ Paul didn’t maintain any rigid hierarchy
with the employees. He was open and
frank with all the employees and
maintained an equal healthy relation with
everyone.
▸ The name of Lorain Products
Corporations is identified with the name
of Paul Stocker for his hard work,
dedication and higher moral qualities.

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Virtue Theory
▸ According to Aristotle, In order to
achieve morally good life practice
virtue.
▸ Virtue shared common cultural
tradition source of morality,
moral values
▸ Unity in Diversity
▸ Virtue is established through the
examples set by actions of individuals
which resembles excellence.
▸ Passed on from generation to generation
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Virtue Theory for
Business
▸ Friendship meaningful relationship
▸ Practice virtue: Honesty, Fidelity (loyalty),
Honor, Generosity to achieve Happiness
▸ According to David Stewart writes that ‘What
eudaimonia (Happiness) is to the
individual, profits are to the business.’
▸ Business Goals: Profit through Quality of its
product, service to the customers, and a
commitment to ensuring a stable community
and work force.

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Offering to replace any defective
frozen sub-cycle free even if it was
out of warranty.
Ethical in the light of: Authority’s point of view: Outsider’s point of
▸ Aristotle’s ‘Virtue According to Aristotle people like Mr. Paul is view:
Theory’ of Moral considered as ‘courageous person’ for doing ▸ It was a right
values heroic things. It also reflects company’s decision for
▸ Hobbes’ theory, “We ‘corporate culture’ such as: remaining true to
should keep promises ▸ Offering to replace any frozen sub-cycle company’s ideal or
and perform ‘free of charge’ even if it was out of moral values.
contracts to which we warranty. ▸ Saved company’s
have agreed” ▸ The company could have face ‘Financial reputation from the
Disaster’ controversy.
▸ It was small and had limited resource. ▸ Regained
▸ Lorain product paying freight in both customer’s loyalty
ways by taking the
▸ This gesture almost brought the firm to defective products
insolvency back by free.
▸ Believed that the ultimate success of the▸ It could’ve set an
company depend on the absolute exemplary for next
integrity of its operation leaders
▸ Maintaining
corporate culture. 11
Company’s commitment toward its
employees.
Ethical in the light of: Management’s point of view:
▸ Thurow’s capitalism As Thurow’s point of view ‘ Firms
Theory the effectively provide security to
▸ Aristotle’s ‘Virtue generate group solidarity obtain
Theory’s employees who are more directed
implication in in their focus, more willing to
business mobilize and prolong their efforts
(relationship to make firm goals, more willing to
between employee sacrifice immediate self-interests
and employers) and more interested in achieving
goals for the firm’. The company
provide security like:
▸ Paid Retirement plan,
▸ Establish an employee profit
sharing plan with a
commitment to distribute 15%
of pretax profit to employee
▸ Maintaining close relation with
the Employees
Outsider’s point of
view: Yes they choose
ethically right decision
to provide these
benefits/make a good
bonding with employees.
Aristotle also emphasize
on the importance of
friendship for the
achievement of
happiness. But in
business term
“friendship’ is
inappropriate but it can
have loyal customers,
faithful stockholder and
dedicated workers.
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Prevent a rigid hierarchical
organization.
Ethical in the light of:Management’s point of view:
▸ Aristotle’s ‘Virtue Paul Stocker worked diligently to prevent
Theory’s role of a rigid hierarchical organization
moderation ▸ Adamant in his belief that excess
level of hierarchy worked counter to
effective decision making in many
corporation.
▸ Keep the structure simple and direct
at Lorain Product
▸ Continued ‘walk around’ method of
management
▸ Suggestion arose on changing the
hours of working schedules, the
authority had employees select
alternatives through a company-wide
vote
▸ Very frank and friendly towards
employees
Outsider’s point of view:
Yes it is ethical. According to
Aristotle’s Virtue theory of
moderation is: seeking
mean between the extreme.
The right action is always
mid-point in between
‘Excess and Deficiency’.
Aristotle, in another work on
ethics, entitled ‘Eudemian
Ethics’, to lay out a series of
moderate action that lie
between excess and
deficiency. Now in another
word rigid hierarchy means
maintaining extreme
hierarchy in corporation so it
wouldn’t be appropriate. So
Mr. Paul chose to be ‘Virtue’
not vice.
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The story of Mr. Stocker was passed
on the next generation through
stories
Ethical in the light Management’s
of: point of view:
▸ Aristotle’s ‘VirtueAristotle’s virtue theory states
Theory’ that morality can be achieved if
there is a shared common
cultural tradition and that virtue
can be learned from studying
lives of heroic figures in the
society. So in business context,
virtue can be learned from
stories where company
management stayed ethical
regardless of the temptation of
earning profit through illegal
means.
Outsider’s point of view:
▸ The modern world today is
indeed a challenging place.
Values and opinions of each
and every person are different.
Hence there should be a
common intersection. This
intersection is known as
“virtue”.
▸ The newer management did
know, in order to stay
successful and remain
profitable they should stick to
the corporate culture that Mr.
Stocker delivered. It was also
seen stories of Mr. Stocker was
told as reference when it
comes to administrating the
business. 14
To Conclude
▸ Question may arise:
Can the culture of Lorain Products Company
be intact if the circumstances are changed?
▸ Answer:
If virtuous decisions are made, passed on,
and practiced form generation to
generation, at the end Corporate Culture will
be intact.

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Conclusion
▸ Mr. Paul followed virtue theory and took
risky virtuous decisions.
▸ Paul’s successors Martin huge and Pete
Paradissis followed Mr. Paul’s ideologies,
leadership, and virtuous culture.
▸ Corporate Culture remain intact despite
changing circumstances as all of them
practiced basic principles of virtue
theory.

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