Organisational and Stakeholder Ethical Considerations - Xstratas - Case Study Example

?Introduction It is widely appreciated that organisations have an important position in society, impacting and being impacted by individuals and other parties within the society in numerous ways. The ideal scenario is one where the objectives of the organisation are met while the needs and concerns of the societies around them are safeguarded. “Living under a cloud” presents a good case that can be studied to explore the ethical dimensions of the relationship between organisations (in this case Xstrata) and their surrounding communities (Mt. Isa populace). Organisational ethical culture, corporate social responsibility, employee ethics, market ethics and community ethical dimensions will be studied based on this case. Ethical Organisational Culture Approach One of the approaches to analyse the case is through ethical organisation culture. Alvesson (2002, pp. 4) states that organisational culture refers to those shared rules that guide cognitive and behavioural aspects of membership to an organisation and the avenues through which they are developed and expressed hence a system of shared symbols and meanings. Ferrell, Fraedrich and Ferrell (2010, pp. 17) state that the concept of ethical culture in an organisation means the values and norms that an organisation puts forward as appropriate conduct to guide its employees in decision making process in determining whether their response to ethical issues is right or wrong. In this approach, the formal and informal efforts developed by an organisation to guide its operations in respect to being ethical are analysed. The organisation under study here is Xstrata which we can establish that it has in the first place failed to tame its mining process emissions that have the potential of causing lead-poisoning to the surrounding community; “Homes, gardens and waterways have been contaminated, and a recent study found that more than one-tenth of young children have high levels of lead in their blood” (Marks 2009). Xstrata has also failed to keep the surrounding community informed on the potential harms of lead poisoning as indicated by Brenda, a resident who claims that had she been aware of the risks she would not have raised her child in Mt. Isa. The firm also appears to use its financial might and high tax remission to get its way round enjoying independent testing of its emission systems and lack of censure by the government. Body, another resident, indicates that the firm has also failed to take responsibility of the poisoning claiming that the natural environment is the source. As Trevino and Nelson (2010, pp. 157) indicate it is the responsibility of the top management to guide organisations in the direction of ethical culture, something that is largely missing in Xstrata. Instead the management strives to shun ethics hence the rest of the firm follows suit (158). The leadership at Xstrata can be regarded as unethical since their cover-up actions and lack of responsibility indicate weakness in morality (161). This analysis indicates that the top management at Xstrata has failed to pursue ethical leadership; in one situation, an employee whose views on the source of lead pollution is contradictory to theirs, they let the interviewer know that the employee is presenting his personal views rather than what the firm stands for hence showing unethical leadership which is mutually exclusive with ethical organisational culture. Corporate Social Responsibility (CSR) and stakeholder theories Approach Examining the CSR issues in Xstrata’s case is another way of analysing the case. Bueble (2009, pp. 5) is of the view that CSR refers to the strategy through which organisations achieve their commercial objectives in a manner that takes into consideration ethical values and respects individuals, communities and the environment. The stakeholder theory is a concept in CSR that maintains that organisations have responsibility and obligation towards constituent groups within the society (groups that may benefit or be harmed by organisational operations) other than the stockholders and beyond the legal requirements (Crane 2008, pp. 62). Here, a case is analysed based on an organisation’s fulfilment of its stakeholder obligations and the paradoxes that may arise. Elements from the Xstrata case study that relate to CSR are all indicative of absence of a functional and structural CSR endeavour by the firm. The stakeholders mostly affected in this case are the individuals and community of Mt. Isa. Emissions from the mining activities of Xstrata are poisoning them with lead as indicated by the above WHO acceptable levels of lead in children. The consequences include physical and mental mal-development among children (Marks 2009), from which extrapolation would reveal massive health costs and social problems later on. Several members of the community are fighting legal battles with Xstrata and a good number of others appear oblivious of the consequences of lead poisoning and its source indicating ignorance and misinformation. Using insight from Crane (2008, pp. 55-67) it can observed that Xstrata leans more towards a shareholder value theory where the management’s fiduciary responsibility to maximise profits prevails at the expense of engaging in social activities for the Mt. Isa community’s welfare. Thus, the firm denies responsibility for lead poisoning; keeps the community in ignorance about consequences and source of lead poisoning; and financially arm-twists authorities to take its side against the community’s welfare and thus effectively neutralises the state’s power and mandate to reign in on its social, economical and environmental issues. A reflection into this approach confirms Xstrata’s shareholder alignment over stakeholder concerns. Undertaking reform in operations to reduce pollution would lead to savings, better reputation and employee attraction besides creating a healthy relationship with the Mt. Isa community that would translate to better business from a personal point of view. However, Xstrata seems not to appreciate this, appearing to hold the view that such an undertaking is unsustainable in the long term and would lead to reduced profitability which would translate to reneging on the firm’s fiduciary responsibility to its shareholders. Ethics and the employee: HRM Approach The Xstrata case can also be analysed from the angle of employee ethics and human resource management (HRM). Human resource management here refers to the strategy and approach undertaken by organisations to manage their most valuable assets; the employees, who are appreciated to be an integral part of the organisation’s effort to achieve its objectives (Armstrong 2009, pp. 3). The relevance of the HRM approach is based on the fact that employees arrive in an organisation having already undergone most of their ethical formation hence such traits are considered during recruitment but the organisation also has to take steps to maintain ethics in its employees after hiring and even develop this further (McDaniel 2004, pp. 39). We can identify several employees in Xstrata’s case whose ethics can be analysed. The executives and senior employees at Xstrata are determined to defend the firm’s operations that lead to lead emissions amongst other pollutants. Turley, the environment manager maintains that Xstrata’s air quality monitoring is the most intensive in the country while the opposite is stark obvious. We can also passively establish that the firm’s leadership pursues no functional corporate responsibility towards the community as evidenced by the lawsuits against it and its lack of concern for the Mt. Isa community hence it can be extrapolated that they would equally hire individuals who should maintain the same positions. One employee, Gordon the head of Xstrata’s air quality control, does not subscribe to this and openly reveals that the lead pollution is airborne from mining. As Woodall and Winstanley (in Storey 2001, pp. 37-56) explain, one of the areas that present ethical issues for organisations is in employer-employee relationship where in Xstrata’s case we can see Turley and a fellow senior manager being in collision with Gordon, an employee who obliviously contradicts their view that lead pollution is not emanating from the firm. As Ferrell, Fraedrich and Ferrell (2010, pp. 90-94) argue, formal codes by firms may remain structural if not practiced; it is the spirit and not the wording that matters most, both of which appear absent in Xstrata’s case. The analysis of Xstrata’s case from employee ethics perspective indicates that ethics is not a priority in the firm hence formal and cultural ethical guidelines are largely absent. It is imperative that the HRM integrates ethical considerations in the firm’s operations through training so as to enable the entire Xstrata workforce to be ethical i.e. recognise ethical dilemmas, undertake problem solving strategies that are principled and hence make ethical judgments and actions. Ethics and the market: Approaches (economic/Egalitarian) to Markets The prevailing market systems offer another perspective through which Xstrata’s case can be approached. The capitalist market system when unchecked may lead to inequalities which is the reason behind the advent of the economic egalitarianism concept involving the theme of equality in economic affairs (Kenworthy 2007, 4). In this approach, the responsibility of a firm in upholding the tenets of a just society in the light of a market system that results in inequality and undermining democracy is studied. The whole Mt. Isa community is dependent upon Xstrata for livelihoods; “An industrial operation on this scale would never be established so close to a populated area nowadays. But the town grew up around the mine” (Marks 2009). Besides, the organisation directly employs 4000 individuals from the Mt. Isa community while at the same time 5000 more people depend on it indirectly. However, the firm’s economic might is utilised to cause injustice as can be observed from the fact that the local administration, the government and even the body charged with the responsibility of regulating environmental impact EPA have sided with it at one time or the other against the community. With virtually every arm of governance in the firm’s side it is obvious that the community is rendered significantly powerless. According to Satz (in Cullenberg and Pattanik 2004, pp. 11-38) market systems result in establishment of overtly strong firms that cause inequality and hinder democracy. Although Xstrata may be fulfilling one ideal of egalitarianism in terms of providing employment and opportunities to the community (Bradhan et al. 20, pp. 120), it is using its financial ability especially in tax remittance to the government to hinder the government’s commitment to provide equal public health protection to Mt. Isa residents as the rest of Australia. Upon reflection, it is obvious that there is need for democracy, right to information and equality in the interrelationship between Xstrata and the community around it. As Graafland (2007, pp. 149) puts it, ethical dimensions reveal that free markets are wanting in terms of their treatment of society. The firm ought to recognise the fact that it is contributing directly to lack of democracy and inequality and hence take measures to correct this. The responsibility further shifts to the authorities which should regulate organisations in case they cannot practice justice on themselves. Ethics and the Community: Ethical shareholding, Social Reporting, and CPA Approach The continuing evolution of corporate involvement in the community offers another approach through which Xstrata can be analysed. Hess, Rogovsky and Dunfee (2002, pp. 110) explain that corporate philanthropy has evolved into an integral part of organisational strategy and is now being pursued with the aim of gaining competitive advantage over rivals and for economic benefits thereof. Social reporting involves firms disclosing and disseminating information about the social impacts of their activities (Hess, Rogovsky and Dunfee (2002, pp. 121). Ethical shareholding refers to investment informed by ethical decision-making where the investors maintain that their funds should be operated on an ethical platform (Russell 2001, pp. 194-205; Crane and Matten 2007, pp. 249). In this approach, the absence of such views indicates opposition to corporate social initiatives. In the case under study, several of the residents are oblivious of the consequences of lead poisoning and indicate this through claims that they have lived in Mt. Isa for years and have not observed any negative effects. Besides, the organisation appears determined to pursue profit maximisation at whatever cost and has used its position as a big tax payer and major employer to interfere with democracy within this society. Lack of concern and proper engagement with the community has already resulted in several lawsuits against the firm. The right corporate social initiatives should result in increased accountability, sustainable business operations and development alongside stakeholder democracy (Hess, Rogovsky and Dunfee (2002, pp. 110-125). In Xstrata’s case however, the firm has largely failed in disclosure and communication with the Mt. Isa society. The firm has denied playing any role in lead poisoning and insists that is happening through the natural environment, indicating a total lack of morality that should accompany social initiatives by firms in the society. There is also an absence of social initiatives that would legitimise Xstrata’s ventures. Instead, Xstrata has undertaken to undermine democracy in the society through its disproportionate power as a powerful global citizen. Xstrata’s failure to undertake any visible corporate social initiatives is shocking for such a big establishment as well as its failure to take responsibility for the lead poisoning that is taking place especially among the children in Mt. Isa. The perfect scenario should be integrating a meaningful corporate social responsibility plan into its core strategy, engaging the community, disseminating information about the effects of lead poisoning and taking measures to arrest the pollution among other community concerns. All these however require moral and ethical development of the organisation which is presently lacking. References Alvesson, M 2005, Understanding organisational culture, SAGE, London. Armstrong, M 2003, A handbook of human resource management practice, Kogan Page Limited, UK. Bardhan, PK, Bowles, S & Wallersten, M 2006, Globalization and egalitarian redistribution, Princeton University Press, UK. Bueble, E 2008, Corporate social responsibility: CSR communication as an instrument to consumer-relationship marketing, GRIN Verlag, Germany. Crane, A 2008, The Oxford handbook of corporate social responsibility, OUP, UK. Crane, A & Matten, D 2007, Business ethics: Managing corporate citizenship and sustainability in the age of globalization, Oxford University Press, UK. Cullenberg, S & Pattanaik, PK 2004, Globalization, culture, and the limits of the market: Essays in economics and philosophy, Oxford University Press, UK. Ferrell, OC, Fraedrich, J & Ferrell, L 2011, Business ethics: Ethical decision making and cases, Cencage-Learning, USA. Graafland, JJ 2007, Economics, ethics and the market: Introduction and applications, Taylor & Francis: Routledge, Abingdon. Hess, D, Rogovsky, N & Dunfee, TW 2002, “The next wave of corporate community involvement: Corporate social initiatives,” California Management Review, vol. 44, no. 2, pp. 110-125. Kenworthy, L 2007, Egalitarian capitalism: Jobs, incomes, and growth in affluent countries, Russell Sage Foundation, USA. Marks, K 2009, “Living under a cloud,” Good Weekend. McDaniel, C, 2004, Organisational ethics: research and ethical environments, Ashgate Publishing Company, USA. Russell, S 2001, “Ethical investment: whose ethics, which investment?” Business Ethics: A European Review, vol. 10, no. 3, Pp. 194-205. Storey, J 2007, Human resource management: A critical text, Thomson Learning, UK. Trevino, LK, and Nelson, KA, 2011, Managing business ethics: Straight talk about how to do it right, Wiley, Hoboken, NJ. Read More