South African Investment - Violations of Rights and Justice - Essay Example

?Running head:  A South African Investment Paper Insert         Insert Grade Insert 23rd. January. South African Investment Case Study In your judgment, were the possible utilitarian benefits of building the Caltex plant in 1977 more important than the possible violations of moral rights and of justice that may be involved? Justify your answer fully by identifying the possible benefits and the possible violations of rights and justice that you believe may be associated with the building of the plant, and explaining which you think are more important. The Interfaith Centre, which was involved in corporate responsibility in South Africa, believed that Texaco and SoCal, the American owners of Caltex, supported the South Africa’s apartheid system that legalized racism and deprived the blacks, human rights such as restriction from voting, collective bargaining, entitlement to low wages and living in segregated areas away from their families. Therefore, the interfaith centre insisted that the companies should terminate their operations and leave South Africa, unless the then South African government ended apartheid, and enhanced human rights for the minority groups. This resolution occurred when Texaco and SoCal, the owners of Caltex, were planning to expand Caltex refinery plant in Milnerto, from 58,000 barrels per day to 108,000 barrels per day. This was an expansion that would cost Caltex $135 million, and as a result increasing the country’s refining capacity by 11%, (case study 4, N.d, p.9). Benefits The management was opposed to the interfaith centre resolution, which required them to abandon their business in South Africa due to ethical matters. Expansion of the Caltex firm would be associated with several economic advantages; first, the expansion plans would add up to 20% of annual returns on the initial investment, as a result, benefiting the country economically. The Caltex management also argued that with the expansion of the Caltex plant, the conditions of the blacks and the minority would be improved. The companies long adopted the 1977 Dr. Leon Sullivan principles, which included: i) Equal employment opportunities for all races ii) Equal pay for employees iii) Non- discrimination of races in terms of work facilities, and social life iv) Development of training programs that would prepare all workers for jobs v) The increasing of black workers in managerial positions vi) Improving the employee’s life quality, by fostering health facilities, transportation, school, and housing facilities, (case study 4, N.d, p10). Therefore, Caltex management believed that the expansion of the plant would bear more positive outcomes and foster equality and fairness within the organization. Despite the interfaith resolution, Caltex showed its commitment in improving its worker’s conditions, when it promoted 742 black employees into the former white-held jobs; 29 black employees were also moved into the white-collar job category. The management also advanced the worker’s wages by raising them above average, as it believed that the expansion of Caltex plant had all the interests of all the races considered. Needless say, if Caltex withdrew its operation from South Africa, many workers, regardless their race, would be left at a disadvantage, since their jobs would cease, hence becoming difficult for them to provide for their families. Therefore, the expansion of Caltex plant would be beneficial to the workers despite their race; however, the blacks would be mainly affected, because of the difficulties they face before attaining employment opportunities. Needless to say, the presence of these foreign companies had improved the wages of black workers, and therefore Caltex expansion is beneficial. Violation of Rights and Justice The expansion of the Caltex plant was faced with numerous critics from the Interfaith Center, who claimed that it violated the rights of blacks and other minority groups by abiding to the apartheid rules. Despite the companies abiding by the Sullivan principles, which were approved by the South African government, this can be termed hypocritical. The government approved the principles, as long as they would operate within the then existing south African laws. According to case study 4 (N.d, p.10), the South African laws required the implementation of separate facilities of blacks and whites. In addition, the laws prohibited the blacks from being apprentices. Moreover, the principle of equal pay for equal work would require adjustments, as blacks were not subjected to equal work with the whites. Needless to say, the Interfaith Center was aware of the progress the companies were making; however, its main concern lied in the hypocrisy associated with the Sullivan principles. First, they were only approved as long as they abided by the South African laws, which were of apartheid nature, and as a result, Caltex management would just polish the chains, rather than cut them loose. Therefore, human rights is the main concern. Should Caltex expansion given a go ahead, or would apartheid end? NO! The then South African government was firm on not granting the blacks their rights; therefore, with the presence of theses American companies, the white rule system would never end. The expansion of Caltex would just improve on the minor issues such as wages, equal pay, and social facilities, which are essential; however, the main cry of the blacks was the ‘cry of freedom in their own country,’ the freedom to vote, freedom to be with family, freedom of political parties, and collective bargaining. Unknowingly, the foreign companies continued to strengthen the status quo of the white leadership, through taxes and sales; they could only operate if they adhered to the government’s laws. If Caltex were to close its operation, South Africa would suffer a huge economic blow, however, if it continued its operations under the influence of the government, apartheid would exist accompanied with the unfair laws. Therefore, human rights of the blacks overweigh the Caltex expansion. If you were a stockholder in Texaco or Standard Oil (now named Chevron), how do you believe you ought to vote on the three kinds of stockholder's resolutions that were proposed (the first asking Caltex to terminate its operations, the second asking Caltex not to sell to the military or police of South Africa, and the third asking Caltex to implement the Tutu principles)? Justify each of your answers fully. According to ethical principles in business (N.d, p.75), during the apartheid regime, many shareholders of Texaco and Standard oil opposed their operations in South Africa, with the Interfaith Center proposing that Caltex terminate its operations. As a shareholder, I would regard human rights as a priority; therefore, Caltex should have terminated its operations in South Africa. This is because the then regime did not care about the welfare of the blacks and other minority groups. The blacks did not have a right to vote, would not form political parties, and could only live with family only if permitted by the government. The existence of the American companies only strengthened the status of the white leadership; this kind of government was not concerned with the welfare of citizens. Therefore, if the foreign companies would threaten to cease their operations, the regime government would be willing to compromise, and end apartheid. Therefore, as a stockholder, I would vote in support of the resolution. The second resolution required Caltex not to sell its products to the military or police officials of South Africa. However, the 1964 price control act, restricted the foreign companies from imposing restrictions on their goods, therefore breaking such a law would be considered a crime (case study 4, N.d, p13). As a result, this could compromise their business licenses, and many workers would loose their jobs, regardless their race. Therefore, as a stockholder, I would not support this resolution, as it would leave many blacks jobless. Thirdly, Bishop Desmond Tutu’s resolution emphasized that the foreign companies should inform the South African government that they would only remain in the country only if “the black workers could live with their families, recognize the black labor unions, oppose influx control over labor, and enforce fair labor practices and invest in black education” (case study 4, N.d, p13). Bearing in mind that Texaco Inc. is among the largest investors in the country, with 300million assets, an attempt to push the government to adhere to the above resolutions would be fruitful. The threat to exit the market if the government does not adhere would render the South African government to reconsider, as these companies exit would have cost the country’s economy. Therefore, as a shareholder, I would vote in support of Desmond Tutu’s resolution. What kind of responses should the managers of Texaco and SoCal have made to each of the three resolutions? Justify your answer fully. The resolutions passed by the Interfaith Center, which required foreign companies to exit South Africa by ceasing their operations, were faced with oppositions from the management of these companies. According to principles of business ethics (N.d, p.76), Caltex managers used utilitarian argument, whereby, they argued that their exit would compromise the black workers lives, for instance, if they lost their jobs, it would be hard to make ends meet. However, their argument was one-sided; at a time when the blacks were fighting to be free, these companies should have given the resolution a try, whereby, they could reach an agreement with the regime government and the citizens. The activist’s resolution, which required Caltex not to sell its products to the military or police officials of South Africa, was a challenging one. This is because the Price Control Act prohibited them form imposing rules on their products, and therefore, they were afraid of breaking the law. Their response was wise; according to case study 4 (N.d, p.13), the management read its verdict, which stated that they are required to abide by the law, and failure to do so, the government can demand the supply of such goods; therefore, they were powerless, considering this resolution. Desmond Tutu’s resolution required the American companies to improve economic and social opportunities for the blacks. The mangers response should have been that, they were going to look into these resolutions and negotiate with the government. However, they should have discouraged any form of unrests, which contributed to deaths over the years. Assuring the public that negotiations would take place would have been the best response in giving the blacks hope and also utilizing the 24 month period to reach an agreement. Does the management of a company have any responsibilities beyond ensuring a high return for its stockholders? Should the management of a company look primarily to the law and to the rate of return on its investment as the ultimate criteria for deciding what investments it should make? Why or why not? Profitability in a firm means high returns for its stockholders; however, the management has other duties that are geared towards the success of the business. Ethics are necessary among managers since they are regarded as leaders; they are expected to foster ethical business. Ethical investment is concerned with how profit is made and how much is made; therefore, social contexts are considered such as the operating environment, local community, political issues, well- being, and health of workers (Third way, 1987, p.4). Shareholders are literally the owners of a company; therefore, they play a role in electing the leaders of a company. As a result, these leaders are expected to run the company effectively. It is also their duty to balance the shareholder’s interest and profitability ethically. Therefore, a manager bears responsibility to employees, customers, shareholders, local community, and the country it operates in. According to Kandogan & Velthouse (N.d, p.3), managers should also emphasize on ethics in their practices. Managers should be influenced by the laws and business principles when conducting business practices. Ethics and profits should be the driving forces for management. As a result, a manager will not operate in an environment that ignores employee’s welfare, or foster environment pollution with an aim of making profits. Therefore, the management should consider the laws of a country and ethics before investing. Moreover, it should be well informed of the dos and don’ts, therefore basing investment on ethical basis. Nevertheless, it is important for a firm to remain profitable, indeed, abiding by the law and ethics enables a business to operate on the right track (Tiffany & Peterson, 2011). References Case study 4. (N.d). Personal and organizational ethics. Ashford University. (Attached document) Ethical principles in business. (N.d). (attached document) Kandogan, Y., & Velthouse B. (N.d). Ethics in Practice: What Are Managers Really Doing? Retrieved from http://som.umflint.edu/research/docs/20052006/200506_BV_YK_I.pdf. Tiffany, P., & Peterson, S. (2011). Business Plans for Dummies. Second edition. NY: John Wiley & Sons publisher. Third way. (1987). Fiji coups and crisis, vol10, no.12. Hymns ancient & modern ltd publishers. Read More