Deck 4: Corporate Social Responsibility

Question 1

In the past five years, as part of its strategic resource development program, Global Oil Inc. had made strategic capital investments in African countries with historically unstable government regimes and highly sensitive tribal relationships in order to tie up future oil reserves. With each investment, Global Oil placed considerable emphasis (and PR attention) on its role as a "partner" or "good neighbor" in each region, making very public donations to local infrastructure projects, schools, and health care initiatives.
Jon Bennett had risen through the ranks in his 15-year career with Global Oil to the position of director of Corporate Social Responsibility for the African Region. In this role, Bennett's responsibilities could be summarized in one phrase: Keep the locals happy at each one of Global's project sites. With enough funds in the CSR budget to support a few strategically placed projects, this goal had been easy to achieve, and Bennett had received his fair share of coverage in the local media as he promoted all of Global's community projects. However, in the last nine months, one particular area had begun to show up on Bennett's daily incident reports with increasing regularity.
The Odone people were the first to admit that Global's presence on their land (and the few community projects it funded) had brought some improvement to the welfare of their citizens-there was some preventive health care now, an improved water supply, a couple of schools for the children, and regular work for an increasing number of men drawn away from their traditional farming work to the higher-paying oil crew jobs. However, with all those benefits had come substantial profits for Global Oil and many negatives for the Odone people: Global had experienced several oil spills that damaged the coastal waters of the region, and there were increasing reports of accidents and threats to any employees who considered discussing Global's business activities with local journalists. The frequent positive press coverage of Global's good neighbor programs in the region provided a constant reminder of the disparity between perception and reality.
The Odone's discontent started to express itself through picketing outside the refinery gates and small acts of property damage. Slowly their case began to gather a higher media profile until it reached the attention of an environmental and human rights organization that began to spread the Odone story to its worldwide membership. With this higher profile came an increase in momentum. The picketing became more vocal, and the property damage more expensive. It was obvious that tempers were beginning to rise.
Two weeks later, one of the leading members of the human rights organization was found badly beaten in a remote area of Odone land. He never recovered from his injuries and died a week later. The media response was immediate and extremely negative, accusing Global Oil (without any proof) of either direct or indirect involvement depending on the angle of the story.
Suddenly Jon Bennett's reputation in the region came under extreme scrutiny. The good neighbor was suddenly the corporate bully, and the environmental and human rights organizations quickly built support for boycotts of Global products and any Global customers or suppliers. Bennett's bosses at Global Oil headquarters wanted answers and action-quickly!

Bennett stuck with what he knew best-his media contacts. Responding to the obvious urgency of the situation, he launched a new initiative-"A Plan of Action for the Odone People"-in which he pledged, as a corporate officer of Global Oil, to clean up all the oil spills, address any threats to local employees, and further increase Global's community projects in the area. In short, Bennett committed to addressing all the complaints on the Odone's list of grievances, though in true corporate fashion, the pledges came without specific performance deadlines. In the interests of saving time and getting the greatest PR bang for his buck, Bennett announced his new initiative at a press conference from Global's regional headquarters. No one from the Odone was informed of the new initiative before the press conference, nor was anyone from the Odone people invited to attend.
The environmental and human rights activists claimed an immediate victory and switched their attentions to other corporate wrongdoers elsewhere in the world. Bennett kept his job. But the next morning, the picket line outside the refinery was larger and louder than ever.
Did Global Oil commit any ethical violations here Why or why not

Answer 1

Case summary:
Company GL Oil Inc. planned for a strategic entry in the AF Countries by having tying arrangements with oil firms in the various part of the continent. The firm started its operations by creating a good neighbour image of itself who is ready to work as a partner in these countries. The firm emphasized on the public relations issue and assigned Person JB, the director's position of handling Corporate Social Responsibility (CSR) in these regions. The firm ordered him to keep the locals happy while conducting business functions. Initially, everything went on a proper note, and one of the communities in these regions Community OD also appreciated Company GL for developing their region, however, when GL started spilling oil in the water it devastated several coastal water resources used by Community OD. As a result, the community people started picketing against GL and forced the firm to correct its things.
In this case, Company GL Oil Inc. committed ethical violations by spilling oil into the water bodies in its operations related to oil refining, transportation, and drilling. As per legal rule, the oil firms should take extreme care in undertaking their business operations and should ensure that the oil and its processing does not contaminate the water bodies or any other thing. However, the business operations of GL have devastated the water bodies and several costal water reserves used by the people of Community OD. Owing to this, the community people could not make effective use of the water which created a shortage of water for them. Preventing community people from making effective use of the water bodies surrounding their area is a crime, and on this basis, it can be said that Company GL Oil Inc. committed ethical violations by spilling oil into the water bodies.

Question 2

Would the CSR policies of an organization influence your decision to use their products or services Why or why not

Answer 2

CSR (corporate social responsibility) refers to the legal obligation of the business firms wherein it is required for them to contribute effectively towards the charitable and philanthropic activities by voluntarily working for ethically-oriented practices.
The CSR policies of an organization impresses an individual and affects his decision to use the organization's products or services in a way that when an individual finds out that the particular firm is proactive in working for the welfare for the society and its people, then this encourages an individual to buy the products and services of such firm. The individual feels grateful for the firm and buys its products and services in order to show its gratitude towards the welfare activities undertake by the firm in favor of the community and its people.
In other words, the individual gets impressed by the firms that donate money and other resources towards charity and philanthropic activities which majorly influences his decision to buy the firm's products and services. When a particular firm undertakes business activities that affects the environment in a reduced manner, and creates less carbon footprint, it encourages the individual to become a loyal customer of that firm in order to show his appreciation for the firm's actions. Similarly, when a firm donates generously towards social causes like building houses for underprivileged ones, donating for old-age homes, orphanages, reduction of poverty, etc. it increases the firm's image in the mind of the customers, and encourages him to use the organization's products or services.

Question 3

If a carbon offset project is already profitable, is it ethical to provide credits over and above those profits Why or why not

Answer 3

Individuals can purchase credits to offset the emissions to render themselves "carbon neutral." Consider the use of the credits over and above profits. The Kyoto Protocol is an agreement between 160 countries that became effective in 2005 and it requires developed nations to reduce their greenhouse gas emissions. A company that has an abundance of credits to facilitate the trading of those credits so that those organizations with high emissions and a larger demand for offset credits can purchase those credits in larger volumes than most individual projects would provide. In some cases, there are inflated market prices for credits, the sale of credits from projects that never existed, and the sale of the same credits from one project over and over to different buyers that are unable to verify the effectiveness of a project based on their remote geographical area.

Question 4

Economists define costs in terms of opportunities forgone. What opportunities are forgone by Walmart's "everyday low price" marketing strategy Who pays the costs of Walmart's low prices

Question 5

In 1999, following a campaign by a student group known as Students Organizing for Labor and Economic Equality (SOLE), the University of Michigan instituted a Vendor Code of Conduct that specified key performance criteria from all university vendors. The code included the following:
General Principles
The University of Michigan has a longstanding commitment to sound, ethical, and socially responsible practices. In aligning its purchasing policies with its core values and practices, the University seeks to recognize and promote basic human rights, appropriate labor standards for employees, and a safe, healthful, and sustainable environment for workers and the general public. … In addition, the University shall make every reasonable effort to contract only with vendors meeting the primary standards prescribed by this Code of Conduct.
Primary Standards
• Nondiscrimination
• Affirmative Action
• Freedom of Association and Collective Bargaining
• Labor Standards: Wages, Hours, Leaves, and Child Labor
• Health and Safety
• Forced Labor
• Harassment or Abuse
Preferential Standards
• Living Wage
• International Human Rights
• Environmental Protection
• Foreign Law
Compliance Procedures
University-Vendor Partnership. The ideal University-vendor relationship is in the nature of a partnership, seeking mutually agreeable and important goals. Recognizing our mutual interdependence, it is in the best interest of the University to find a resolution when responding to charges or questions about a vendor's compliance with the provisions of the Code.
On November 30, 2004, SOLE submitted formal complaints against one specific university vendor-the Coca- Cola Company-with which the university held 12 direct and indirect contracts totaling just under $1.3 million in fiscal year 2004. The complaints against Coke were as follows:
• Biosolid waste disposal in India. The complaint alleged that bottling plant sludge containing cadmium and other contaminants has been distributed to local farmers as fertilizer.
• Use of groundwater in India. The complaint alleged that Coca-Cola is drawing down the water table/aquifer by using deep-bore wells; water quality has declined; shallow wells used by local farmers have gone dry; and poor crop harvests near bottling plants have resulted from lack of sufficient irrigation water.

• Pesticides in the product in India. Studies have found that pesticides have been detected in Coca-Cola products in India that are in excess of local and international standards.
• Labor practices in Colombia. Data showing a steep decline in SIALTRAINAL, a Colombian bottler's union (from approximately 2,300 to 650 members in the past decade); SOLE claims repeated incidents with paramilitary groups threatening and harming union leaders and potential members, including allegations of kidnapping and murder. SOLE is also concerned about working conditions within the bottling plants.
The Vendor Code of Conduct Dispute Review Board met in June 2005 to review the complaints and recommended that Coca-Cola agree in writing no later than September 30, 2005, to a third-party independent audit to review the complaints. An independent auditor satisfactory to both parties had to be selected by December 31, 2005. The audit had to be completed by March 2006, with the findings to be received by the university no later than April 30, 2006. Coca-Cola would then be expected to put a corrective action plan in place by May 31, 2006. Since one of the 12 contracts was scheduled to expire on June 30, 2005, with another 7 expiring between July and November 2005, Coca-Cola was formally placed on probation until August 2006 pending further investigation of the SOLE complaints. The board also recommended that the university not enter into new contracts or renew any expiring contracts during this period and that it agree only to short-term conditional extensions with reassessment at each of the established deadlines to determine if Coca- Cola has made satisfactory progress toward demonstrating its compliance with the Vendor Code of Conduct.
The situation got progressively worse for Coca-Cola. By December 2005, at least a dozen institutions worldwide had divested from the Coca-Cola Company on the grounds of alleged human rights violations in Asia and South America. On December 8, New York University began pulling all Coke products from its campus after Coke refused to submit to an independent investigation by that day's deadline.
On December 30, 2005, the University of Michigan suspended sales of Coke products on its three campuses beginning January 1, 2006, affecting vending machines, residence halls, cafeterias, and campus restaurants. Kari Bjorhus, a spokesperson for the Coca-Cola Company, told the Detroit News , "The University of Michigan is an important school, and I respect the way they worked with us on this issue. We are continuing to try hard to work with the university to address concerns and assure them about our business practices."
Which ethical standards are being violated here

Question 6

Ethical, altruistic, or strategic
Divide into three groups. Each group must select one of the following types of CSR: ethical CSR, altruistic CSR, or strategic CSR. Prepare a presentation arguing for the respective merits of each approach, and offer examples of initiatives that your company could engage in to adopt this strategy.

Question 7

What is the social contract model of corporate management

Question 8

Walmart's wages are above the legally required minimum wage, and health benefits are not legally mandated. Are there reasons for a business to take actions not required by law that might reduce profits

Question 9

MegaDrug advertises that it is a socially responsible organization that puts its stakeholders first. Is Tony being ethically responsible to his customers here Read the definition of ethical corporate social responsibility (CSR) on page 66 for more details.

Question 10

In the past five years, as part of its strategic resource development program, Global Oil Inc. had made strategic capital investments in African countries with historically unstable government regimes and highly sensitive tribal relationships in order to tie up future oil reserves. With each investment, Global Oil placed considerable emphasis (and PR attention) on its role as a "partner" or "good neighbor" in each region, making very public donations to local infrastructure projects, schools, and health care initiatives.
Jon Bennett had risen through the ranks in his 15-year career with Global Oil to the position of director of Corporate Social Responsibility for the African Region. In this role, Bennett's responsibilities could be summarized in one phrase: Keep the locals happy at each one of Global's project sites. With enough funds in the CSR budget to support a few strategically placed projects, this goal had been easy to achieve, and Bennett had received his fair share of coverage in the local media as he promoted all of Global's community projects. However, in the last nine months, one particular area had begun to show up on Bennett's daily incident reports with increasing regularity.
The Odone people were the first to admit that Global's presence on their land (and the few community projects it funded) had brought some improvement to the welfare of their citizens-there was some preventive health care now, an improved water supply, a couple of schools for the children, and regular work for an increasing number of men drawn away from their traditional farming work to the higher-paying oil crew jobs. However, with all those benefits had come substantial profits for Global Oil and many negatives for the Odone people: Global had experienced several oil spills that damaged the coastal waters of the region, and there were increasing reports of accidents and threats to any employees who considered discussing Global's business activities with local journalists. The frequent positive press coverage of Global's good neighbor programs in the region provided a constant reminder of the disparity between perception and reality.
The Odone's discontent started to express itself through picketing outside the refinery gates and small acts of property damage. Slowly their case began to gather a higher media profile until it reached the attention of an environmental and human rights organization that began to spread the Odone story to its worldwide membership. With this higher profile came an increase in momentum. The picketing became more vocal, and the property damage more expensive. It was obvious that tempers were beginning to rise.
Two weeks later, one of the leading members of the human rights organization was found badly beaten in a remote area of Odone land. He never recovered from his injuries and died a week later. The media response was immediate and extremely negative, accusing Global Oil (without any proof) of either direct or indirect involvement depending on the angle of the story.
Suddenly Jon Bennett's reputation in the region came under extreme scrutiny. The good neighbor was suddenly the corporate bully, and the environmental and human rights organizations quickly built support for boycotts of Global products and any Global customers or suppliers. Bennett's bosses at Global Oil headquarters wanted answers and action-quickly!

Bennett stuck with what he knew best-his media contacts. Responding to the obvious urgency of the situation, he launched a new initiative-"A Plan of Action for the Odone People"-in which he pledged, as a corporate officer of Global Oil, to clean up all the oil spills, address any threats to local employees, and further increase Global's community projects in the area. In short, Bennett committed to addressing all the complaints on the Odone's list of grievances, though in true corporate fashion, the pledges came without specific performance deadlines. In the interests of saving time and getting the greatest PR bang for his buck, Bennett announced his new initiative at a press conference from Global's regional headquarters. No one from the Odone was informed of the new initiative before the press conference, nor was anyone from the Odone people invited to attend.
The environmental and human rights activists claimed an immediate victory and switched their attentions to other corporate wrongdoers elsewhere in the world. Bennett kept his job. But the next morning, the picket line outside the refinery was larger and louder than ever.
Why did "the good neighbor" suddenly become "the corporate bully"

Question 11

Consider the company you currently work for (or one you have worked for in the past). What initiatives could they start to be more socially responsible How would you propose such changes

Question 12

Does Walmart have any responsibilities to its suppliers other than those specified in their contracts

Question 13

J ennifer decides to follow Tony's instructions and leave the shelves stocked with much more of MegaDrug's own brand than the name brands that many customers use exclusively.
As the day progresses, the allergy medicines continue to be a top-selling item because it is the middle of allergy season, and by noon the stocks of name brands are getting low. Now Jennifer has a choice to make. Does she follow Tony's instructions and encourage customers to try MegaDrug's own brand Or does she simply apologize for the item being out of stock, with the risk that upset customers will ask to speak to the manager
After a few minutes, Jennifer hits upon a solution-rain checks! She'll work the register for the rest of the day (Tony was only going to have her do paperwork anyway), and anyone who complains about the name brand being out of stock will be issued a rain check with a sincere apology.
By closing time, 24 rain checks have been issued. Jennifer provides Tony with the numbers and suggests that a more even balance of brand-name and own-brand items be placed on the shelves. The good news is that the store would have a new delivery by tomorrow afternoon.
Did Jennifer do the right thing here

Question 14

In 1999, following a campaign by a student group known as Students Organizing for Labor and Economic Equality (SOLE), the University of Michigan instituted a Vendor Code of Conduct that specified key performance criteria from all university vendors. The code included the following:
General Principles
The University of Michigan has a longstanding commitment to sound, ethical, and socially responsible practices. In aligning its purchasing policies with its core values and practices, the University seeks to recognize and promote basic human rights, appropriate labor standards for employees, and a safe, healthful, and sustainable environment for workers and the general public. … In addition, the University shall make every reasonable effort to contract only with vendors meeting the primary standards prescribed by this Code of Conduct.
Primary Standards
• Nondiscrimination
• Affirmative Action
• Freedom of Association and Collective Bargaining
• Labor Standards: Wages, Hours, Leaves, and Child Labor
• Health and Safety
• Forced Labor
• Harassment or Abuse
Preferential Standards
• Living Wage
• International Human Rights
• Environmental Protection
• Foreign Law
Compliance Procedures
University-Vendor Partnership. The ideal University-vendor relationship is in the nature of a partnership, seeking mutually agreeable and important goals. Recognizing our mutual interdependence, it is in the best interest of the University to find a resolution when responding to charges or questions about a vendor's compliance with the provisions of the Code.
On November 30, 2004, SOLE submitted formal complaints against one specific university vendor-the Coca- Cola Company-with which the university held 12 direct and indirect contracts totaling just under $1.3 million in fiscal year 2004. The complaints against Coke were as follows:
• Biosolid waste disposal in India. The complaint alleged that bottling plant sludge containing cadmium and other contaminants has been distributed to local farmers as fertilizer.
• Use of groundwater in India. The complaint alleged that Coca-Cola is drawing down the water table/aquifer by using deep-bore wells; water quality has declined; shallow wells used by local farmers have gone dry; and poor crop harvests near bottling plants have resulted from lack of sufficient irrigation water.

• Pesticides in the product in India. Studies have found that pesticides have been detected in Coca-Cola products in India that are in excess of local and international standards.
• Labor practices in Colombia. Data showing a steep decline in SIALTRAINAL, a Colombian bottler's union (from approximately 2,300 to 650 members in the past decade); SOLE claims repeated incidents with paramilitary groups threatening and harming union leaders and potential members, including allegations of kidnapping and murder. SOLE is also concerned about working conditions within the bottling plants.
The Vendor Code of Conduct Dispute Review Board met in June 2005 to review the complaints and recommended that Coca-Cola agree in writing no later than September 30, 2005, to a third-party independent audit to review the complaints. An independent auditor satisfactory to both parties had to be selected by December 31, 2005. The audit had to be completed by March 2006, with the findings to be received by the university no later than April 30, 2006. Coca-Cola would then be expected to put a corrective action plan in place by May 31, 2006. Since one of the 12 contracts was scheduled to expire on June 30, 2005, with another 7 expiring between July and November 2005, Coca-Cola was formally placed on probation until August 2006 pending further investigation of the SOLE complaints. The board also recommended that the university not enter into new contracts or renew any expiring contracts during this period and that it agree only to short-term conditional extensions with reassessment at each of the established deadlines to determine if Coca- Cola has made satisfactory progress toward demonstrating its compliance with the Vendor Code of Conduct.
The situation got progressively worse for Coca-Cola. By December 2005, at least a dozen institutions worldwide had divested from the Coca-Cola Company on the grounds of alleged human rights violations in Asia and South America. On December 8, New York University began pulling all Coke products from its campus after Coke refused to submit to an independent investigation by that day's deadline.
On December 30, 2005, the University of Michigan suspended sales of Coke products on its three campuses beginning January 1, 2006, affecting vending machines, residence halls, cafeterias, and campus restaurants. Kari Bjorhus, a spokesperson for the Coca-Cola Company, told the Detroit News , "The University of Michigan is an important school, and I respect the way they worked with us on this issue. We are continuing to try hard to work with the university to address concerns and assure them about our business practices."
Do you think the university would have developed the Vendor Code of Conduct without the aggressive campaign put forward by SOLE

Question 15

Read Friedman's article-what are the assumptions of his argument

Question 16

Why would companies choose to inflate the image of their corporate citizenship

Question 17

Review the CSR policies of a Fortune 100 company of your choice. Would you classify its policies as ethical, altruistic, strategic, or a combination of all three Provide examples to support your answer.

Question 18

What should Jennifer do now

Question 19

Do you agree or disagree with the social contract approach model Why

Question 20

Is it ethical to direct company donations to "nonprofit groups closely aligned with the interests of the corporation's employees, communities, and business objectives" Why or why not

Question 21

Define corporate social responsibility.

Question 22

J ennifer decides to follow Tony's instructions and leave the shelves stocked with much more of MegaDrug's own brand than the name brands that many customers use exclusively.
As the day progresses, the allergy medicines continue to be a top-selling item because it is the middle of allergy season, and by noon the stocks of name brands are getting low. Now Jennifer has a choice to make. Does she follow Tony's instructions and encourage customers to try MegaDrug's own brand Or does she simply apologize for the item being out of stock, with the risk that upset customers will ask to speak to the manager
After a few minutes, Jennifer hits upon a solution-rain checks! She'll work the register for the rest of the day (Tony was only going to have her do paperwork anyway), and anyone who complains about the name brand being out of stock will be issued a rain check with a sincere apology.
By closing time, 24 rain checks have been issued. Jennifer provides Tony with the numbers and suggests that a more even balance of brand-name and own-brand items be placed on the shelves. The good news is that the store would have a new delivery by tomorrow afternoon.
What do you think Tony will do when he finds out

Question 23

List the five major trends driving CSR.

Question 24

Is it ethical to direct company donations to support "pet projects of senior managers or board members" Why or why not

Question 25

Payatas Power. On July 1, 2000, a mountain of garbage at the Payatas landfill on the outskirts of Quezon City in the Philippines fell on the surrounding slum community killing nearly three hundred people and destroying the homes of hundreds of families who foraged the dump site. In 2007, Pangea Green Energy Philippines Inc. (PGEP) a subsidiary of Italian utility company Pangea Green Energy, announced an ambitious plan to drill 33 gas wells on the landfill to harvest methane gas from the bottom of the waste pile. An initial U.S.$4 million investment built a 200-kilowatt power plant to be fueled by the harvested methane. The power generated makes the landfill self-sufficient and allows excess power to be sold to the city power grid.
However, the real payoff will come from carbon-offset credits. Methane gas is 21 times more polluting that carbon dioxide as a greenhouse gas. Capturing and burning methane releases carbon dioxide and therefore has 21 times less emission impact-a reduction that can be captured as an offset credit. PGEP will arrange trading of those carbon credits in return for a donation of an estimated U.S.$300,000 to the Quezon City community-funds that will be used to develop the local infrastructure and build schools and medical centers for the Payatas community. The landfill has now been renamed "Quezon City Controlled Disposal Facility."
The PGEP-Payatas project is being promoted as a win-win project for all parties involved. Is that an accurate assessment Why or why not

Question 26

Give four examples of a corporation's legal obligations.

Question 27

Which one do you think is the most important Why

Question 28

Why would budgeting a fixed percentage of pretax profits for corporate philanthropy be seen as a more convincing commitment to CSR than just funding a variety of projects

Question 29

Would organizations really be paying attention to CSR if customers and federal and state agencies weren't forcing them to Why or why not

Question 30

Payatas Power. On July 1, 2000, a mountain of garbage at the Payatas landfill on the outskirts of Quezon City in the Philippines fell on the surrounding slum community killing nearly three hundred people and destroying the homes of hundreds of families who foraged the dump site. In 2007, Pangea Green Energy Philippines Inc. (PGEP) a subsidiary of Italian utility company Pangea Green Energy, announced an ambitious plan to drill 33 gas wells on the landfill to harvest methane gas from the bottom of the waste pile. An initial U.S.$4 million investment built a 200-kilowatt power plant to be fueled by the harvested methane. The power generated makes the landfill self-sufficient and allows excess power to be sold to the city power grid.
However, the real payoff will come from carbon-offset credits. Methane gas is 21 times more polluting that carbon dioxide as a greenhouse gas. Capturing and burning methane releases carbon dioxide and therefore has 21 times less emission impact-a reduction that can be captured as an offset credit. PGEP will arrange trading of those carbon credits in return for a donation of an estimated U.S.$300,000 to the Quezon City community-funds that will be used to develop the local infrastructure and build schools and medical centers for the Payatas community. The landfill has now been renamed "Quezon City Controlled Disposal Facility."
How could Quezon City officials ensure that there is a more equitable distribution of wealth
Sources: Melody M. Aguiba, "Payatas: From Waste to Energy," www.newsbreak.com, September 24, 2007; and www.quezoncity.gov.ph.

Question 31

Explain why organizations are struggling to adopt CSR initiatives.

Question 32

The authors of this article claim that "an effectively managed contribution program can deliver strong returns to a corporation." What might those returns be

Question 33

Instrumental or social contract
Divide into two teams. One team must prepare a presentation advocating for the instrumental model of corporate management. The other team must prepare a presentation arguing for the social contract model of corporate management.

Question 34

Which is more ethical: altruistic CSR or strategic CSR Provide examples to explain your answer.

Question 35

Why would customers be cynical of CSR initiatives

Question 36

Does the fact that Target and General Mills donate five times more than the minimum 1 percent make them five times more socially responsible Why or why not

Question 37

In the past five years, as part of its strategic resource development program, Global Oil Inc. had made strategic capital investments in African countries with historically unstable government regimes and highly sensitive tribal relationships in order to tie up future oil reserves. With each investment, Global Oil placed considerable emphasis (and PR attention) on its role as a "partner" or "good neighbor" in each region, making very public donations to local infrastructure projects, schools, and health care initiatives.
Jon Bennett had risen through the ranks in his 15-year career with Global Oil to the position of director of Corporate Social Responsibility for the African Region. In this role, Bennett's responsibilities could be summarized in one phrase: Keep the locals happy at each one of Global's project sites. With enough funds in the CSR budget to support a few strategically placed projects, this goal had been easy to achieve, and Bennett had received his fair share of coverage in the local media as he promoted all of Global's community projects. However, in the last nine months, one particular area had begun to show up on Bennett's daily incident reports with increasing regularity.
The Odone people were the first to admit that Global's presence on their land (and the few community projects it funded) had brought some improvement to the welfare of their citizens-there was some preventive health care now, an improved water supply, a couple of schools for the children, and regular work for an increasing number of men drawn away from their traditional farming work to the higher-paying oil crew jobs. However, with all those benefits had come substantial profits for Global Oil and many negatives for the Odone people: Global had experienced several oil spills that damaged the coastal waters of the region, and there were increasing reports of accidents and threats to any employees who considered discussing Global's business activities with local journalists. The frequent positive press coverage of Global's good neighbor programs in the region provided a constant reminder of the disparity between perception and reality.
The Odone's discontent started to express itself through picketing outside the refinery gates and small acts of property damage. Slowly their case began to gather a higher media profile until it reached the attention of an environmental and human rights organization that began to spread the Odone story to its worldwide membership. With this higher profile came an increase in momentum. The picketing became more vocal, and the property damage more expensive. It was obvious that tempers were beginning to rise.
Two weeks later, one of the leading members of the human rights organization was found badly beaten in a remote area of Odone land. He never recovered from his injuries and died a week later. The media response was immediate and extremely negative, accusing Global Oil (without any proof) of either direct or indirect involvement depending on the angle of the story.
Suddenly Jon Bennett's reputation in the region came under extreme scrutiny. The good neighbor was suddenly the corporate bully, and the environmental and human rights organizations quickly built support for boycotts of Global products and any Global customers or suppliers. Bennett's bosses at Global Oil headquarters wanted answers and action-quickly!

Bennett stuck with what he knew best-his media contacts. Responding to the obvious urgency of the situation, he launched a new initiative-"A Plan of Action for the Odone People"-in which he pledged, as a corporate officer of Global Oil, to clean up all the oil spills, address any threats to local employees, and further increase Global's community projects in the area. In short, Bennett committed to addressing all the complaints on the Odone's list of grievances, though in true corporate fashion, the pledges came without specific performance deadlines. In the interests of saving time and getting the greatest PR bang for his buck, Bennett announced his new initiative at a press conference from Global's regional headquarters. No one from the Odone was informed of the new initiative before the press conference, nor was anyone from the Odone people invited to attend.
The environmental and human rights activists claimed an immediate victory and switched their attentions to other corporate wrongdoers elsewhere in the world. Bennett kept his job. But the next morning, the picket line outside the refinery was larger and louder than ever.
Did Bennett's response reinforce Global's public commitment to CSR

Question 38

Closing down a factory.
Divide into two groups, and prepare arguments for and against the following behavior: Your company is managing to maintain a good profit margin on the computer parts you manufacture in a very tough economy. Recently, an opportunity has come along to move your production capacity overseas. The move will reduce manufacturing costs significantly as a result of tax incentives and lower labor costs, resulting in an anticipated 15 percent increase in profits for the company. However, the costs associated with shutting down your U.S.-based operations would mean that you wouldn't see those increased profits for a minimum of three years. Your U.S. factory is the largest employer in the surrounding town, and shutting it down will result in the loss of over 800 jobs. The loss of those jobs is expected to devastate the economy of the local community.

Question 39

Explain the term triple bottom line.

Question 40

Did the Montrose Chemical Corporation violate any ethical standards in manufacturing and selling DDT to the public

Question 41

In 1999, following a campaign by a student group known as Students Organizing for Labor and Economic Equality (SOLE), the University of Michigan instituted a Vendor Code of Conduct that specified key performance criteria from all university vendors. The code included the following:
General Principles
The University of Michigan has a longstanding commitment to sound, ethical, and socially responsible practices. In aligning its purchasing policies with its core values and practices, the University seeks to recognize and promote basic human rights, appropriate labor standards for employees, and a safe, healthful, and sustainable environment for workers and the general public. … In addition, the University shall make every reasonable effort to contract only with vendors meeting the primary standards prescribed by this Code of Conduct.
Primary Standards
• Nondiscrimination
• Affirmative Action
• Freedom of Association and Collective Bargaining
• Labor Standards: Wages, Hours, Leaves, and Child Labor
• Health and Safety
• Forced Labor
• Harassment or Abuse
Preferential Standards
• Living Wage
• International Human Rights
• Environmental Protection
• Foreign Law
Compliance Procedures
University-Vendor Partnership. The ideal University-vendor relationship is in the nature of a partnership, seeking mutually agreeable and important goals. Recognizing our mutual interdependence, it is in the best interest of the University to find a resolution when responding to charges or questions about a vendor's compliance with the provisions of the Code.
On November 30, 2004, SOLE submitted formal complaints against one specific university vendor-the Coca- Cola Company-with which the university held 12 direct and indirect contracts totaling just under $1.3 million in fiscal year 2004. The complaints against Coke were as follows:
• Biosolid waste disposal in India. The complaint alleged that bottling plant sludge containing cadmium and other contaminants has been distributed to local farmers as fertilizer.
• Use of groundwater in India. The complaint alleged that Coca-Cola is drawing down the water table/aquifer by using deep-bore wells; water quality has declined; shallow wells used by local farmers have gone dry; and poor crop harvests near bottling plants have resulted from lack of sufficient irrigation water.

• Pesticides in the product in India. Studies have found that pesticides have been detected in Coca-Cola products in India that are in excess of local and international standards.
• Labor practices in Colombia. Data showing a steep decline in SIALTRAINAL, a Colombian bottler's union (from approximately 2,300 to 650 members in the past decade); SOLE claims repeated incidents with paramilitary groups threatening and harming union leaders and potential members, including allegations of kidnapping and murder. SOLE is also concerned about working conditions within the bottling plants.
The Vendor Code of Conduct Dispute Review Board met in June 2005 to review the complaints and recommended that Coca-Cola agree in writing no later than September 30, 2005, to a third-party independent audit to review the complaints. An independent auditor satisfactory to both parties had to be selected by December 31, 2005. The audit had to be completed by March 2006, with the findings to be received by the university no later than April 30, 2006. Coca-Cola would then be expected to put a corrective action plan in place by May 31, 2006. Since one of the 12 contracts was scheduled to expire on June 30, 2005, with another 7 expiring between July and November 2005, Coca-Cola was formally placed on probation until August 2006 pending further investigation of the SOLE complaints. The board also recommended that the university not enter into new contracts or renew any expiring contracts during this period and that it agree only to short-term conditional extensions with reassessment at each of the established deadlines to determine if Coca- Cola has made satisfactory progress toward demonstrating its compliance with the Vendor Code of Conduct.
The situation got progressively worse for Coca-Cola. By December 2005, at least a dozen institutions worldwide had divested from the Coca-Cola Company on the grounds of alleged human rights violations in Asia and South America. On December 8, New York University began pulling all Coke products from its campus after Coke refused to submit to an independent investigation by that day's deadline.
On December 30, 2005, the University of Michigan suspended sales of Coke products on its three campuses beginning January 1, 2006, affecting vending machines, residence halls, cafeterias, and campus restaurants. Kari Bjorhus, a spokesperson for the Coca-Cola Company, told the Detroit News , "The University of Michigan is an important school, and I respect the way they worked with us on this issue. We are continuing to try hard to work with the university to address concerns and assure them about our business practices."
Is the university being unreasonable in the high standards demanded in its Vendor Code of Conduct

Question 42

In the past five years, as part of its strategic resource development program, Global Oil Inc. had made strategic capital investments in African countries with historically unstable government regimes and highly sensitive tribal relationships in order to tie up future oil reserves. With each investment, Global Oil placed considerable emphasis (and PR attention) on its role as a "partner" or "good neighbor" in each region, making very public donations to local infrastructure projects, schools, and health care initiatives.
Jon Bennett had risen through the ranks in his 15-year career with Global Oil to the position of director of Corporate Social Responsibility for the African Region. In this role, Bennett's responsibilities could be summarized in one phrase: Keep the locals happy at each one of Global's project sites. With enough funds in the CSR budget to support a few strategically placed projects, this goal had been easy to achieve, and Bennett had received his fair share of coverage in the local media as he promoted all of Global's community projects. However, in the last nine months, one particular area had begun to show up on Bennett's daily incident reports with increasing regularity.
The Odone people were the first to admit that Global's presence on their land (and the few community projects it funded) had brought some improvement to the welfare of their citizens-there was some preventive health care now, an improved water supply, a couple of schools for the children, and regular work for an increasing number of men drawn away from their traditional farming work to the higher-paying oil crew jobs. However, with all those benefits had come substantial profits for Global Oil and many negatives for the Odone people: Global had experienced several oil spills that damaged the coastal waters of the region, and there were increasing reports of accidents and threats to any employees who considered discussing Global's business activities with local journalists. The frequent positive press coverage of Global's good neighbor programs in the region provided a constant reminder of the disparity between perception and reality.
The Odone's discontent started to express itself through picketing outside the refinery gates and small acts of property damage. Slowly their case began to gather a higher media profile until it reached the attention of an environmental and human rights organization that began to spread the Odone story to its worldwide membership. With this higher profile came an increase in momentum. The picketing became more vocal, and the property damage more expensive. It was obvious that tempers were beginning to rise.
Two weeks later, one of the leading members of the human rights organization was found badly beaten in a remote area of Odone land. He never recovered from his injuries and died a week later. The media response was immediate and extremely negative, accusing Global Oil (without any proof) of either direct or indirect involvement depending on the angle of the story.
Suddenly Jon Bennett's reputation in the region came under extreme scrutiny. The good neighbor was suddenly the corporate bully, and the environmental and human rights organizations quickly built support for boycotts of Global products and any Global customers or suppliers. Bennett's bosses at Global Oil headquarters wanted answers and action-quickly!

Bennett stuck with what he knew best-his media contacts. Responding to the obvious urgency of the situation, he launched a new initiative-"A Plan of Action for the Odone People"-in which he pledged, as a corporate officer of Global Oil, to clean up all the oil spills, address any threats to local employees, and further increase Global's community projects in the area. In short, Bennett committed to addressing all the complaints on the Odone's list of grievances, though in true corporate fashion, the pledges came without specific performance deadlines. In the interests of saving time and getting the greatest PR bang for his buck, Bennett announced his new initiative at a press conference from Global's regional headquarters. No one from the Odone was informed of the new initiative before the press conference, nor was anyone from the Odone people invited to attend.
The environmental and human rights activists claimed an immediate victory and switched their attentions to other corporate wrongdoers elsewhere in the world. Bennett kept his job. But the next morning, the picket line outside the refinery was larger and louder than ever.
How could Global Oil have handled things differently
Source: Adapted from David Wheeler, Heike Fabig, and Richard Boele, "Paradoxes and Dilemmas for Stakeholder Responsive Firms in the Extractive Sector: Lessons from the Case of Shell and the Ogoni," Journal of Business Ethics 39, no. 3 (September 2002), p. 297.

Question 43

Explain the term e thical CSR.

Question 44

What should they have done differently

Question 45

Tony would rather have one or two customers complain about an unavailable item than lose profitable sales of MegaDrug's own brand. Is denying customers a choice of products a valid solution

Question 46

In 1999, following a campaign by a student group known as Students Organizing for Labor and Economic Equality (SOLE), the University of Michigan instituted a Vendor Code of Conduct that specified key performance criteria from all university vendors. The code included the following:
General Principles
The University of Michigan has a longstanding commitment to sound, ethical, and socially responsible practices. In aligning its purchasing policies with its core values and practices, the University seeks to recognize and promote basic human rights, appropriate labor standards for employees, and a safe, healthful, and sustainable environment for workers and the general public. … In addition, the University shall make every reasonable effort to contract only with vendors meeting the primary standards prescribed by this Code of Conduct.
Primary Standards
• Nondiscrimination
• Affirmative Action
• Freedom of Association and Collective Bargaining
• Labor Standards: Wages, Hours, Leaves, and Child Labor
• Health and Safety
• Forced Labor
• Harassment or Abuse
Preferential Standards
• Living Wage
• International Human Rights
• Environmental Protection
• Foreign Law
Compliance Procedures
University-Vendor Partnership. The ideal University-vendor relationship is in the nature of a partnership, seeking mutually agreeable and important goals. Recognizing our mutual interdependence, it is in the best interest of the University to find a resolution when responding to charges or questions about a vendor's compliance with the provisions of the Code.
On November 30, 2004, SOLE submitted formal complaints against one specific university vendor-the Coca- Cola Company-with which the university held 12 direct and indirect contracts totaling just under $1.3 million in fiscal year 2004. The complaints against Coke were as follows:
• Biosolid waste disposal in India. The complaint alleged that bottling plant sludge containing cadmium and other contaminants has been distributed to local farmers as fertilizer.
• Use of groundwater in India. The complaint alleged that Coca-Cola is drawing down the water table/aquifer by using deep-bore wells; water quality has declined; shallow wells used by local farmers have gone dry; and poor crop harvests near bottling plants have resulted from lack of sufficient irrigation water.

• Pesticides in the product in India. Studies have found that pesticides have been detected in Coca-Cola products in India that are in excess of local and international standards.
• Labor practices in Colombia. Data showing a steep decline in SIALTRAINAL, a Colombian bottler's union (from approximately 2,300 to 650 members in the past decade); SOLE claims repeated incidents with paramilitary groups threatening and harming union leaders and potential members, including allegations of kidnapping and murder. SOLE is also concerned about working conditions within the bottling plants.
The Vendor Code of Conduct Dispute Review Board met in June 2005 to review the complaints and recommended that Coca-Cola agree in writing no later than September 30, 2005, to a third-party independent audit to review the complaints. An independent auditor satisfactory to both parties had to be selected by December 31, 2005. The audit had to be completed by March 2006, with the findings to be received by the university no later than April 30, 2006. Coca-Cola would then be expected to put a corrective action plan in place by May 31, 2006. Since one of the 12 contracts was scheduled to expire on June 30, 2005, with another 7 expiring between July and November 2005, Coca-Cola was formally placed on probation until August 2006 pending further investigation of the SOLE complaints. The board also recommended that the university not enter into new contracts or renew any expiring contracts during this period and that it agree only to short-term conditional extensions with reassessment at each of the established deadlines to determine if Coca- Cola has made satisfactory progress toward demonstrating its compliance with the Vendor Code of Conduct.
The situation got progressively worse for Coca-Cola. By December 2005, at least a dozen institutions worldwide had divested from the Coca-Cola Company on the grounds of alleged human rights violations in Asia and South America. On December 8, New York University began pulling all Coke products from its campus after Coke refused to submit to an independent investigation by that day's deadline.
On December 30, 2005, the University of Michigan suspended sales of Coke products on its three campuses beginning January 1, 2006, affecting vending machines, residence halls, cafeterias, and campus restaurants. Kari Bjorhus, a spokesperson for the Coca-Cola Company, told the Detroit News , "The University of Michigan is an important school, and I respect the way they worked with us on this issue. We are continuing to try hard to work with the university to address concerns and assure them about our business practices."
How should Coca-Cola respond in order to keep the University of Michigan contracts
Sources: University of Michigan, www.umich.edu; Associated Press, December 30, 2005; The Michigan Daily, September 29, 2005; and University of Michigan News Service, June 17, 2005.

Question 47

Explain the term a ltruistic CSR.

Question 48

Was it ethical to manufacture and sell DDT to other countries after the Environmental Protection Agency (EPA) banned its use in the United States due to its harmful effects

Question 49

J ennifer decides to follow Tony's instructions and leave the shelves stocked with much more of MegaDrug's own brand than the name brands that many customers use exclusively.
As the day progresses, the allergy medicines continue to be a top-selling item because it is the middle of allergy season, and by noon the stocks of name brands are getting low. Now Jennifer has a choice to make. Does she follow Tony's instructions and encourage customers to try MegaDrug's own brand Or does she simply apologize for the item being out of stock, with the risk that upset customers will ask to speak to the manager
After a few minutes, Jennifer hits upon a solution-rain checks! She'll work the register for the rest of the day (Tony was only going to have her do paperwork anyway), and anyone who complains about the name brand being out of stock will be issued a rain check with a sincere apology.
By closing time, 24 rain checks have been issued. Jennifer provides Tony with the numbers and suggests that a more even balance of brand-name and own-brand items be placed on the shelves. The good news is that the store would have a new delivery by tomorrow afternoon.
What would the consequences have been for MegaDrug if Jennifer had not done this

Question 50

Do investors always invest money in companies to make a profit

Question 51

Explain the term s trategic CSR.

Question 52

Did the EPA make the right decision when it banned DDT

Question 53

Review the annual report of a Fortune 100 company of your choice. What evidence can you find of triple bottom-line reporting in the report Provide examples to support your answer.

Question 54

How would you measure your carbon footprint

Question 55

How would you describe the managerial philosophy of Walmart What principles are involved What are the overriding aims, values, and goals of Walmart

Question 56

Should Muller's Nobel Prize be taken away now that DDT has been found to be harmful

Question 57

Name two other terms that may be used for socially aware corporate behavior.

Question 58

A limited campaign.
Divide into two groups and prepare arguments for and against the following behavior: You work in the marketing department of a large dairy products company. The company has launched a "revolutionary" yogurt product with ingredients that promote healthy digestion. As a promotion to launch the new product, the company is offering to donate 10 cents to the American Heart Association (AHA) for every foil top from the yogurt pots that is returned to the manufacturer. To support this campaign, the company has invested millions of dollars in a broad "media spend" on television, radio, Web, and print outlets, as well as the product packaging itself. In very small print on the packaging and advertising is a clarification sentence that specifies that the maximum donation for the campaign will be $10,000. Your marketing analyst colleagues have forecast that first-year sales of this new product will reach 10 million units, with an anticipated participation of 2 million units in the pot-top return campaign (a potential donation of $200,000 without the $10,000 limit). Focus groups that were tested about the new product indicated clearly that participants in the pot-top return campaign attach positive feelings about their purchase to the added bonus of the donation to the AHA.

Question 59

Evaluate the management philosophy of Walmart from the point of view of stockholders, employees, customers, the local community, and suppliers.

Question 60

Is the ability to save lives worth the risk to the environment

Question 61

Payatas Power. On July 1, 2000, a mountain of garbage at the Payatas landfill on the outskirts of Quezon City in the Philippines fell on the surrounding slum community killing nearly three hundred people and destroying the homes of hundreds of families who foraged the dump site. In 2007, Pangea Green Energy Philippines Inc. (PGEP) a subsidiary of Italian utility company Pangea Green Energy, announced an ambitious plan to drill 33 gas wells on the landfill to harvest methane gas from the bottom of the waste pile. An initial U.S.$4 million investment built a 200-kilowatt power plant to be fueled by the harvested methane. The power generated makes the landfill self-sufficient and allows excess power to be sold to the city power grid.
However, the real payoff will come from carbon-offset credits. Methane gas is 21 times more polluting that carbon dioxide as a greenhouse gas. Capturing and burning methane releases carbon dioxide and therefore has 21 times less emission impact-a reduction that can be captured as an offset credit. PGEP will arrange trading of those carbon credits in return for a donation of an estimated U.S.$300,000 to the Quezon City community-funds that will be used to develop the local infrastructure and build schools and medical centers for the Payatas community. The landfill has now been renamed "Quezon City Controlled Disposal Facility."
The Payatas project is estimated to generate 100,000 carbon credits per year. At an average market value of U.S.$30 per credit (prices vary according to the source of the credit), PGEP will receive an estimated U.S.$3 million from the project. On those terms, is the U.S.$300,000 donation to the Payatas community a fair one

Question 62

What is the instrumental model of corporate management

Question 63

Should business management always seek the lowest prices for its customers and the highest rate of return on investment What reasons might there be for seeking something less for customers and stockholders