Challenges for Companies with Respect to Apartheid-Affected Society - Essay Example

?Case Study #4: A South African Investment Paper Table of Contents Table of Contents 2 I.Introduction 3 II.Benefits or Violation of Moral Rights and Justice 3 III.Response to the Resolutions 4 IV.Stockholders’ Returns or Social Responsibility 5 V.Conclusion 6 Reference 7 Bibliography 7 I. Introduction The Apartheid policies of South African Government in 1970s and 1980s provoked social unrest and brought the crisis situation for oil industry especially Caltex. The Caltex was a joint subsidiary of Texaco and SoCal (now Chevron), which operated oil refineries in South Africa and its assets were worth $100m in 1977. The value of Caltex tripled in the subsequent eight years. During its operations in South Africa, it faced three major resolutions by a section of its stockholders, to whom the issue concerned were rights and justice for non-white community in South Africa. The resolution ranged from closing operations in South Africa to making positive contribution to the economic and social uplifting of the Apartheid affected society in the country through four Tutu’s principles. Although, the resolutions were never passed but presented Caltex and other foreign multinational companies with challenges of adhering to the South African laws, provide returns to the stockholders and contribute to the society. This essay discusses the challenges faced by the non-white community and the multinational companies in South Africa, if a better decision could have been made by Texaco and SoCal with respect to the Apartheid affected society. II. Benefits or Violation of Moral Rights and Justice When Texaco and SoCal entered the South African market through a joint venture Caltex, being for-profit organizations, their motive in South Africa was profit-making. However, the question arises whether the utilitarian benefits of operations in South Africa should have been derived at the cost of violation of moral justice and rights of society. There are certain principles which guide the ethical decision making. The long-term self-interest principle prohibits action which may not be in the long-term interest of the organization. The principle of utilitarian benefits asserts that an action should never be taken, if it does not transform into greater good for society. The principle of government obligations states that an action should not be taken if it violates the applicable law. The law here represents moral standards of society (Williams, 2006, pp.110-111). These principles, as can be seen, contradict in the situation of South Africa. Caltex, as a steward of society, is responsible for the greater good of its stakeholders i.e. shareholders, employees, suppliers, customers and society as a whole. The appropriate action, which Caltex could have taken, is to refrain from building the plant until the South African Government has made amendments in its policies towards the non-white community which formed a major section of the company’s workforce. The reason is, even if the company remains operational in the conflicting situation, the profits will eventually diminish as they cannot sustain in the long run. III. Response to the Resolutions The first resolution in 1977 demanded Texaco and SoCal to terminate their operations as quickly as possible until and unless the South African Government ends its apartheid policies and takes steps towards full legal, political and social rights for the majority population. The vote of a stockholder ought to have been in favor of this resolution, because the government policies are likely to affect the profitability of the companies in the long run from their operations in the country. The increasing unrest, if prudently analyzed, will affect the profitability of Caltex. The second resolution in 1983 demanded Caltex to stop selling petroleum products to the military or police of South Africa. As a stockholder, the vote should have been in favor of the resolution even if it demands an outright violation of National Supplies Procurement Act, recently enacted and Price Control Act, 1964. The way South African Government had responded to the vulnerability of its oil supplies through the Act, the government could have, in subsequent years, introduced other forms of restrictive laws for the companies resulting in negative effects on these companies’ operations in the long run. The third resolution, in 1984 and 1985, required the companies to implement Tutu’s four principles or withdraw from the country if government does not restrict its apartheid policies. The vote should have been in favor the resolution as the companies’ decision in implementing Tutu’s principles because these principles were quite aligned with the 1977 Sullivan principles and the companies’ little efforts in the development of its nonwhite workforce. IV. Stockholders’ Returns or Social Responsibility From the stockholders’ perspective, the primary objective of management is to increase stockholders’ return (Morschett, Schramm-Klein & Zentes, 2010, p.423). The stakeholder perspective states that the management must consider the interests of its other stakeholders as well. Taking these two views, the management must balance the stockholders’ return against the interests of its stakeholders (Hitt, Black & Porter, 2009, p.32). Texaco and SoCal faced this conflicting situation, which could only be solved from analyzing if greater social responsibility leads to more profits for the companies. The response towards the resolutions should not have been outright rejection but they management should have considered the demands of its South African non-white stockholders and balanced the two perspectives- Stockholders’ returns and other stakeholders’ interests. This might have lead to rejecting certain aspects of the resolutions but some aspects could have been accepted by the management leading to contribution towards the society at large. The management of a company has historically emphasized on the law and rate of return as major criteria for deciding investments. However, many investors look to invest in corporations which are ethically sound. A recent concept of triple bottom-line, which takes the stakeholder perspectives, assumes the profitability of a firm from three perspectives economic, social and environmental. The goal of this approach is corporate sustainability by creating long-term value for shareholders from the advantageous opportunities and risk management in environmental, economic and social developments (Carroll & Buchholtz, 2011, p.57). Sustainable business development can be achieved if supplemented with appropriate legal framework, unlike the situation in South Africa. V. Conclusion From the discussions of challenges faced by Texaco and SoCal with respect to the non-white South African community and the Government, it can be inferred that the situation could have been handled with a balanced approach of ethically responsible profit-making. This could have resulted in management of conflicting interests of the companies’ stakeholders without affecting the long run profitability. Reference Carroll, A.B. & Buchholtz, A.K. (2011). Business and Society: Ethics and Stakeholder Management (8th ed.). Mason, OH: Cengage Learning. Hitt, M.A., Black, J.S. & Porter, L.W. (2009). Management (2nd ed.). India: Pearson Education India. Morschett, D., Schramm-Klein, H. & Zentes, J. (2010). Strategic International Management: Text and Cases (2nd ed.). Netherlands: Gabler Verlag. Williams, C. (2006). Management (4th ed.). Canada: Cengage Learning. Bibliography Altman, M. (2006). Handbook of contemporary behavioral economics: foundations and developments. Armonk, NY: M.E. Sharpe. Read More