Ethics Corporate Governance and Social Responsibility Case Study

Introduction

Business activities are not solely established to generate profits for the investors and other stakeholders. The role of a business activity is to benefit the investor and also the community where the business is located. It is necessary to note that a business that actively participates in social activities maintains positive relations with the community.

Without corporate social responsibilities a business will not achieve the benefits of healthy relations with the community. In addition, corporate governance and ethics are key issues that determine the performance of businesses. This report presents an overview of the role of corporate governance, social responsibility and ethic and ways of improving service delivery.

Case Study 1: Tainted-Baby-Milk Scandal in China

This case study explores a situation where a company has supplied poisoned milk to the market. This was as a result of the presence of harmful chemicals that were alleged to cause kidney stones in infants. The baby powder milk supplied by China’s biggest dairy plant Sanlu Group caused the death of three children and subjected more than 6200 to kidney infections. This was not the first case of food contamination China has experienced.

In 2007 there was a similar case of pet food poisoning that took long before the products were recalled. It seems that food poisoning is becoming a common problem in China and this issue raises questions regarding the role of the department of health and standards in China.

However, the most shocking aspect about this incidence is the manner this problem was handled. The New Zealand Dairy Cooperative Fonterra got wind of this incidence on august but blames the Chinese authorities for delaying to recall the products. The Chinese Health Ministry announced came into existence by announcing in mid September that the baby powder milk was contaminated and gave the public the shocking statistics.

Andrew Ferrier, the chief executive officer of Fonterra put a brave face and blamed the Chinese systems for the delay. Even though, Zhang Zhenling offered an apology to the affected families he did not justify the delay in recalling the poisoned milk formula. Parents had raised questions regarding this product in March. China has had several instances of food poisoning including the 2004 incidence where 13 babies died, the 2007 discovering of poisonous fish, tooth paste, drugs and toys.

Fonterra’s Liabilities and Responsibilities

This company has several liabilities and responsibilities regarding the incidence of food poisoning that became a global issue. Human life is more important than all other aspects of life. However, this company has failed the integrity and liability tests regarding product and service qualities.

First this company has failed the compliance and value based culture that is traditionally supposed to steer companies to produce products based on value prescriptions. It produced substandard products and this means it did not conduct any quality tests to determine the appropriateness of its products for human consumption.

In addition, it failed to raise alarm regarding the quality of this product even though it received complaints months before the unfortunate incidence occurred. This means it failed in its strategies to develop a healthy corporate social responsibility. It affected the quality of life of children and their parents, perpetuated the spread of infections, disobeyed the law regarding quality production and made losses due to poor corporate social responsibility.

Secondly, it failed to separate and apply value and integrity based cultures in producing and supplying its products. This principle demands that in case a rule does not apply in a situation workers must use integrity issues to guide their activities. Therefore, they should have assessed the quality of their products based on moral issues before supplying them to the market.

Even though, the milk formula caused death, infections and traumatised families the management offered a half hearted apology without giving details of how the incidence occurred and the delay in recalling the product. This was an irresponsible behaviour that contributed to an increase in complications caused by their poisoned product. In addition, this showed that it was managed by ineffective and unethical leaders who did not have any abilities to influence safeguard the company’s image or address the pleas of consumers.

It failed to integrate corporate governance with corporate social responsibility and in the process failed to scan its strategic plans, ignored to monitor performance indicators and exhibited poor international practices. In addition, its labour capital seemed to lack adequate knowledge to handle challenges associated with quality production.

These events have affected the external environment of this business since consumers have lost hope in purchasing its products. In addition, the market share growth of this company will drop since investors will not risk investing their money in a company that has a bad image in both local and international markets.

Structural and Procedural Recommendations

Fonterra commands a wide market both in China and other countries and this means its operations are huge. However, the failure to notice errors in its products is a serious issue that demands an immediate reinstatement of its top managers in the production and quality department. The quality of a product is as good as a company’s name and thus these two issues cannot be separated. Secondly, it is important that this company considers evaluating its machines and adopt modern technology in evaluating product qualities.

Moreover, the public relations department seems to be unaware of its roles in encountering difficulties experienced during crisis. The company must develop a robust crisis management department that will address issues immediately they are raised. Lastly, it should not be ready to blame other stakeholders when a crisis occurs; however, it should develop its systems to ensure errors caused by other stakeholders are not perpetuated in its processes.

Case Study 2: The Oil Spill from the Exxon Valdez

1989 will remain an eyesore and a painful memory to residents of Alaska when Exxon Valdez grounded at Prince William Sound. The incidence led to marine oil spillages that were estimated to be about 10 million gallons. Despite the presence of an emergency plan that was expected to offer immediate action nothing was done 18 hours after the incidence occurred.

This coastline has eight emergency operators (Alyeska Pipeline Joint Ventures, Exxon, British Petroleum, Mobile, Arco, Unocal, Phillips Petroleum and Amerada Hess) that work together to ensure that vessels and people at the sea are safe from natural and man made hazards.

Moreover, Exxon was not fully equipped to handle any oil spillages since it admitted later that it was unable to handle the situation. This was within a few days after the incidence had occurred and this means that most marine activities had been adversely affected. In addition, this company claimed that there were difficulties in establishing coordination with other companies and this affected their work.

Poor Corporate Responsibility and Its Consequences

Even though, these companies were located next to each other they had never developed strategies of ensuring that they work together in fighting tragedies. Moreover, the situation worsened when Lawrence Rawls stayed away from all public comments for more than seven days; therefore, keeping the public in panic and suspense.

However, he made no effort to explain the tragedy and instead blamed God and other stakeholders for causing the accident. His management style had raised eyebrows since his assumption of office in 1985. More than 80, 000 workers were sacked including tanker crews and oil spill experts.

He cut down emergency costs, reduced personnel and ignored drill results that were essential in helping this company to manage hazards. In addition, he never paid attention to employees and how they performed their jobs. This was evident in the incidences where the vessels captain was found drunk on several occasions including the day when the accident happened.

This company was supposed to pay $ 400 according to the lawsuits filed against it for disciplinary damages. Even though, the clean up exercise cost the company about $ 2 billion it was not as successful as people expected. The fishing industry demanded a compensation of $ 180 million. This company was dealt a major blow when it was forced to pay $ 700 million for misdemeanors and felonies.

The failure to listen to other workers created room for disasters to have serious consequences on the business and other stakeholders. The manager failed to appreciate the role played by other stakeholders in ensuring all business activities run smoothly. It was not able to control the oil spillages since it had inadequate equipment. Moreover, 10 million gallons of oil cannot be controlled by a single company no matter how it has invested in equipment.

Recommendations

Leading by example is an effective leadership strategy that ensures junior workers and other stakeholders follow the steps adopted by the manager. People learn from others and those in authority play significant roles in shaping the behaviour of other employees. However, Lawrence Rawls became the opposite of the demands of learning corporate culture when he started sacking employees, cut down budgetary allocations on disaster management and ignored other related companies in conducting various disaster preparedness drills.

He ignored the need to maintain the corporate culture that would have ensured employees and other stakeholders feel to be part of the company. In addition, he wasted a lot of time in developing revenue generating measures and ignored its corporate social roles. This separated the business from the society and other key stakeholders.

Carroll proposes four key players (economy, law, ethics and discretion) in ensuring a company fulfills its corporate social roles. First, all businesses are investments that must generate income by offering quality services.

Production must follow both professional and legal requirements to ensure the business does not interfere with national values. In addition, they must conduct their operations in an ethical manner that respects the values, cultures and beliefs of its workers, neighbours and the community. Lastly, the society offers cheap labour and ready market for a company’s products and services. Therefore, it is advisable that the company should participate in philanthropic activities that ensure it appreciates the support offered by the society.

Conclusion

The performance of a company is determined by the abilities of managers to incorporate various issues in the processes of this company. Governance and corporate social responsibility ensures a company follows the economic, ethical, legal and communal requirements. Successful companies respect their employees, competitors, neighbours and local and foreign communities.