Transfield Holdings and the Activist Boycott of the Sydney Bienniale - Case Study Example

Case Analysis: Transfield Holdings and the Activist Boycott of the Sydney Bienniale Introduction This report examines the controversial boycott of the 2014 Sydney Bienniale by a number of artists in protest of the financial ties between Transfield Holdings and Transfield Services, a provider of services for offshore detention centres for the Australian government. A brief summary of the case is provided, followed by an analysis of the crisis in terms of social systems theory and concepts of corporate social responsibility and social value. The paper concludes with a presentation of an alternative, “what if” scenario had Transfield applied some of the ideas presented in the analysis. In the context of both social systems and corporate social responsibility, it is seen that Transfield Holdings and its Transfield Foundation through which it directly supported the Bienniale could not be separated from the connection to the detention centre issue even though they had no direct participation in it or control over it, thus leaving very few options for satisfactorily resolving the problem. Case Summary On February 4, 2014, Matthew Kiem, an art and design teacher based in Sydney, published an open letter to artists on his web blog calling for a boycott of the 19th Bienniale of Sydney due to the interest of the major sponsor and founder of the event, Transfield Holdings, in the management of offshore detention centres for asylum-seekers (Kiem, 2014).The detention centres, located on Nauru and on Manus Island, are part of the Australian government policy to hold people attempting to seek asylum in Australia (usually arriving by boat) at offshore locations for an indefinite period until their individual cases can be decided. The policy, which has caused a great deal of controversy in Australia, was developed after a similar program in the UK was implemented under the government of the Labour Party in that country in the late 1990’s (Woolley, 2014). Initially, there was some confusion over ‘which Transfield’ the protest was targeting. The detention centres are managed by Transfield Services, Ltd., which was founded by Transfield Holdings (hereafter referred to in this report as “Transfield”), but has since evolved into a separated company. Transfield Holdings, however, has a significant stake as a shareholder in Transfield Services, owning about 12% of the latter company’s stock, even though it is not represented on the Transfield Services Board of Directors and has no managerial control over the company. Transfield Holdings founded the Bienniale and managed it through its Transfield Foundation; its chairman, Luca Belgiorno-Nettis, the son of Transfield’s founder, also served as chairman of the Bienniale (Nicholson, 2014). Kiem and most media outlets who reported his call for the boycott were obliged to correct their earlier stories attributing the Bienniale sponsorship to Transfield Services, but even so, the supporters of the protest asserted that targeting Transfield Holdings and Chairman Belgiornio-Nettis was appropriate in spite of Transfield’s lack of influence over Transfield Services’ business, due to the financial connections between the two companies. Another factor linking Transfield Holdings to Transfield Services is the common approach to philanthropic and charity activities; both companies channel these efforts through the Transfield Foundation (Stone, 2014). Belgiorno-Nettis of course disagreed with the position of the protesters, and was backed by the rest of the Bienniale board, who took the position that artists were welcome to express social commentary and protest through their work, rather than threatening a boycott. An eventual total of nine artists scheduled to participate in the Bienniale joined the boycott, and both Transfield and Belgiornio-Nettis were subjected to harsh criticism both online in social media and in the traditional offline media. Finally, on March 7, 2014, Belgiornio-Nettis resigned as chairman of the Bienniale and the arts organisation severed all financial ties with Transfield, citing the intense public pressure brought to bear by the boycott (Safi & Farrell, 2014). The loss of financial support from Transfield deeply worried Belgiornio-Nettis and the Bienniale organisation, who expressed fears the festival might not be able to survive because of it (Taylor & Gruber, 2014). Analysis A Theoretical Basis for the Transfield-Activist Relationship A social system in the most basic terms is any group of people who interact with one another according to a common set of social rules or principles. Social Systems Theory was first developed by Niklas Luhmann in the study of law, but Luhmann quickly realised that the theory could be applied to any sort of social system, such as religion, politics, or business, that exists and functions within the larger system of society as a whole (Luhmann 1983, p. 992). According to Luhmann (1989), the two key characteristics of social systems that make it possible to identify them and assess their interactions with other systems are differentiation, which defines the relationship between a system and its environment, and the presumption that the differentiation must be self-defined; put another way, a social system is only identifiable when it purposefully behaves as a system with some degree of uniqueness or separation from other systems. Luhmann’s definition of social systems also means that they are systems of communication rather than action, and that communication consists of two main parts, the exchange of information and the understanding of it (Leydesdorff 2000, Stichweh 2000). What social systems theory does not provide, however, is a way to identify the causes and objectives of communication; it only concerns itself with whether or not communication occurs, and in what manner it does so (Hendry & Seidl 2003). If an organisation like Transfield is assessing a situation like the Bienniale boycott from a social systems perspective, the characteristics of the theory described above would help to define the social systems involved; on the one side is the social system of which Transfield is a part, which could be labelled “supporters or facilitators of arts”, and on the other is the social system to which the activist artists belong, which could be labelled “creators of arts”. The communication could be summarised as an exchange of messages. The final aspect of social systems theory that would help to explain how to manage the situation is autopoiesis, which means simply that elements of a social system – in other words, communicated messages – are created by the interactions of those elements in a sort of chain reaction (Stichweh 2000). By analysing what “new elements” were created by past messages – the reactions of the artists to messages given by Transfield – the company could predict, to some degree, what responses new messages would receive as it tried to manage the crisis. Transfield Commits a Classic CSR Error The dispute between the activist artists and Transfield was expressed by the very different messages the two sides were sending, receiving, and understanding. From Transfield, the message was that its support of the arts through its involvement in the Bienniale should be judged on its own merits. Luca Belgiorno-Nettis rather pointedly hinted at this in a statement shortly after his resignation from the Bienniale chairmanship: ““I wear two hats: one as chair of the Biennale of Sydney and the other as a director of Transfield Holdings.” (Safi & Farrell, 2014) From the activists, the message was that a perceived moral or ethical flaw tainted the value of that support, to the extent that the artists’ accepting it would make them a part of the wrong that they were protesting. Matthew Kiem explained, “A lot of people are surprised shocked and disappointed to learn that the Biennale is funded through the detention policies.” (Eltham, 2014) Browne and Nuttall (2013) argue that traditional CSR, corporate social responsibility activities that are treated as separate activities from the firm’s regular business, carries little external credibility. That is because the nature of business is in some ways extractive, focusing on what the business can obtain from its marketplace or society at large, things like higher revenues, greater market share, or more influence over regulation; CSR then is seen as a kind of mitigation, or as Browne and Nuttall put it, cover for the company’s irresponsible behaviour in some other area. This kind of arrangement is exactly what Transfield was perceived to be doing, and in fact, was implicitly confirmed by Belgiorno-Nettis’ “two hats” comment. The fact that activists connected Transfield’s interest in the detention centre business with Transfield’s role as the lead facilitator of the Bienniale is clear evidence that society considers the overall contributions of a company’s business activities rather than making the distinction between the company’s CSR efforts and its usual activities. This is part of the reason why Porter and Kramer (2011) stress that a broader “CSV” – creating social value – approach is necessary not only for the traditional reason bolstering the company’s reputation through social action, but to gain and maintain a competitive advantage. In a way, the outcome of the boycott is a form of proof of this, although it cannot be measured; Transfield’s reputation was harmed by the crisis, which would certainly erode its competitive advantage compared to other companies who are not associated with controversial businesses. Assessing the Effectiveness of the Boycott The supporters of the boycott immediately declared its success and proclaimed it an effective tool to protest disagreeable policies like the detention program as soon as Belgiorno-Nettis resigned his chairmanship and the Bienniale cut its financial ties with Transfield, but there are some reasons to question whether or not the protest actually did accomplish anything substantial. In their discussion of enhancing CSR through external engagement, Browne and Nuttall (2013) explain that one of the key objectives for any company is to “define the value it creates” through its business, and in a certain sense that can be applied to the protesters as well; in order for the boycott to have been truly effective, it required a clear definition of its objective, and it is not at all clear that it had one. The fundamental target of the protest was the Australian government’s policy of indefinitely detaining asylum-seekers from other nations in offshore facilities, such as those managed by Transfield Services on Nauru and Manus Island, and this is explicitly acknowledged by many of the boycott’s advocates (Lentin & de Costa, 2014; Stokes, 2014). Yet the originator of the boycott, Matthew Kiem, while describing the detention policy as wrong and immoral offered a more specific objective for the protest: That arts should not be funded by profits from objectionable business activities, and that profits earned from art events should not support those objectionable activities (Eltham, 2014). From the perspective offered by Kiem, the boycott was a success; it forced the disconnection of Transfield from the Bienniale, and as a result removed the financial connection between Transfield’s indirect interest in Transfield Service’s detention business and funding for the arts. But as Stokes (2014) and Joseph (2014) acknowledge, the boycott almost certainly will not affect the government’s detention policy one bit. That is perhaps why the boycott was characterised as “no more than commercial bullying” in an opinion piece in The Australian (Kenny, 2014); whatever the fundamental intentions of the boycott, its only target in reality was Transfield. And to that, the protesters have no counter-argument and offer no suggestions how “gestures and symbols matter”, as Stokes (2014) asserts. With the relationship of Transfield Holdings – and through it, the Transfield Foundation – with Transfield Services, it is virtually impossible to identify steps Transfield Holdings and Luca Belgiorno-Nettis could have taken to preserve both the elder company’s financial stake as a shareholder in Transfield Services and its leadership of the Bienniale. But working from a social systems perspective, Transfield might have been able to take the initiative and perhaps even pre-empt the boycott by addressing the issue before it was raised in protest. It is difficult to imagine that the company would have been unaware of the controversy over Australia’s detention policy, which is widely debated in public, and impossible that the connection between shared named “Transfield” would have gone unnoticed. Therefore, Transfield should have known that there was a strong possibility that the matter would emerge in connection with its other activities and prepared a response. Conclusion This paper has examined the artists’ boycott of the 19th Sydney Bienniale in protest of the chief organiser’s involvement in Australia’s detention policy for asylum-seekers, and analysed the issue in terms of social systems theory and concepts of corporate social responsibility. In terms of separating the festival from a source of funding considered objectionable by some, the boycott was a success; in terms of affecting Australian policy, it most like was not. Transfield’s delayed response to the protest meant it was left with no choice but to accede to the demands of the boycott. If the company had anticipated the protest and acted sooner, it could have better protected its reputation. Even if Transfield had been more pro-active, however, it would have had only two possible courses of action: Either to divest its interest in Transfield Services, or to withdraw from the funding and management of the Bienniale (which it was eventually forced to do anyway). That being the case, the decision would have been based on what provided better value to the company; Porter and Kramer (2011) suggest that the former choice, cutting it ties to Transfield Services, would have been the better option in the long run in terms of creating social value. Reference List Browne, J. and Nuttall, R. 2013, ‘Beyond corporate social responsibility: Integrated external engagement’, McKinsey & Company, March 2013, viewed 31 May 2014, SlideShare, . Eltham, B. 2014, ‘Sydney Biennale faces Transfield boycott threat’, ArtsHub Australia, viewed 31 May 2014, . Hendry, J. and Seidl, D. 2003, ‘The Structure and Significance of Strategic Episodes: Social Systems Theory and the Routine Practices of Strategic Change’, Journal of Management Studies, vol. 40, no. 1, pp. 175-196. Joseph, S. 2014, ‘The Bienniale boycott blue’, Monash University, 24 March 2014, viewed 31 May 2014, . Kenny, C. 2014 ‘Biennale boycott is no more than commercial bullying in the name of the arts’, The Australian, 15 March 2014, viewed 31 May 2014, . Kiem, M. 2014 ‘An art educator’s open letter to colleagues about detention profits and the Sydney Biennale’, Operational Matters, web blog, 4 February 2014, viewed 31 May 2014 . Lentin, A. and de Costa, J. 2014, ‘Sydney Biennale boycott victory shows that divestment works’, The Guardian, 11 March 2014, viewed 31 May 2014, . Leydesdorff, L. 2000, ‘Luhmann, Habermas, and the Theory of Communication’, Systems Research and Behavioral Science, vol. 17, no. 3, pp. 273-288. Luhmann, N. 1983, ‘Insistence on Systems Theory: Perspectives from Germany – An Essay’, Social Forces, vol. 61, no. 4, pp. 987-998. Luhmann, N. 1989, ‘Law as a Social System’, Northwestern University Law Review, vol. 83, no. 1/2, pp. 136-150. Nicholson, A. 2014, ‘Sydney Biennale sponsor sickened by accusations Transfield runs “concentration camps”’, ABC News, 12 March 2014, viewed 31 May 2014, . Porter, M. and Kramer, M. 2011, ‘Creating Shared Value: how to reinvent capitalism and unleash a wave of innovation and growth’, Harvard Business Review, January-February. Safi, M. and Farrell, P. 2014, ‘Sydney Biennale chairman quits over company's links to detention centres’, The Guardian, 7 March 2014, viewed 31 May 2014, . Stichweh, R. 2000, ‘Systems Theory as an Alternative to Action Theory? The Rise of Communication as a Theoretical Option’, Acta Sociologica, vol. 43, pp. 5-13. Stokes, P. 2014, ‘The Biennale, Transfield, and the value of boycott’, The Conversation, 9 March 2014, viewed 31 May 2014, . Stone, D. 2014, ‘Is Transfield Holdings culpable?’ ArtsHub Australia, viewed 31 May 2014, . Taylor, A. and Gruber, F. 2014, ‘Biennale boycott is the latest in long line of political protests by artists’, Sydney Morning Herald, 15 March 2014, viewed 31 May 2014, . Wooley, A. 2014, Contemporary Asylum Narratives, Palgrave MacMillan, London. Read More