The Social Responsibility of the Largest Corporations - Case Study Example

Case 3 Enron was the 7th largest corporation in America during the winter of 2001. Everyone was shocked and surprised when it suddenly collapsed and went bankrupt. Enrons stock dropped from nearly $90 per share to less than a dollar. Many people lost their pensions and life savings. Who was to blame for this companys failure? The answer is many different groups of people were to blame. First were the accountants hired by Enron. The accounting firm was called Andersen. They were receiving as much as $25 million each year from Enron form accounting and consulting fees. They were hired to be the outside as well as the inside auditors of the company. Usually two different firms are hired, or the corporation has their own internal auditors. These different jobs given to Andersen meant that they often were to be watching over their own work, or reporting misdeed done by accountants from their own company. As a result, the accountants became a part of the bad business practices at Enron instead of reporting them. Another source of blame can be given to the stock analysts. Normally these professionals are good at seeing through the type of lies that Enron was telling with its false accounting practices. But these analysts seemed to feel that there was no limit to the value of Enron stock. Even though the company was heavily in debt, they were still telling people to buy Enron stock. Some of this was because they were getting lots of money in fees from investment bankers. These investment bankers were the third group to help Enron go bankrupt. They were continually taking risks on Enron stock because the more they risked, the more money they made. They were caught in a downward cycle of dishonesty with the accountants and the analysts. Because of a web of conflicts of interest, any one of these parties would have lost money by telling the truth. Because none of them spoke up in time, the entire company was destroyed, along with the savings of many Enron employees. Case 1 Cultures across the globe differ in many ways. One way they differ is their value systems. What is important in one culture may be less important in another. This can cause problems for companies that want to operate globally. For example, different cultures place a different emphasis on obeying some laws. One example given is the pirating of computer software. In some Asian cultures, pirating software is not regarded as a crime because great emphasis is places on sharing discoveries freely with others. In many western cultures, ownership is most important. Which culture is right? This is a question that has been asked for many ages. There are two competing philosophies when attempting to compare and understand different cultures. One philosophy is called cultural relativism and the other is cultural absolutism. Cultural relativism says, "When in Rome, do as the Romans." This belief says that no culture is better than another so there really is no right or wrong when considering cultural values. This is a great philosophy because in theory it eliminates conflict. There are real problems associated with it though. The example given in the article is of the European firms that hired West Africans to dispose of toxic waste because they did not have laws banning the dumping or handling of the waste. The culture of the West African nations did not emphasize environmental protection, but what the Europeans did was wrong. It caused harm to individuals and communities. The second philosophy is cultural absolutism. This says that there is one culture that is correct and all other cultures must be a specific way or they are wrong. The article gave the example of the sexual harassment exercise in Saudi Arabia that included drinking with female coworkers in a bar. Culturally, this would never happen in Saudi Arabia. We must recognize core human values if we are to overcome cultural differences. Case 2 This article charts the rise and fall of Enron Corporation. It shows how the company was started in 1985, how it grew for fifteen years and then suddenly collapsed when dishonest accounting practices were revealed. Kenneth Lay was the founder of Enron in 1985. He was an executive and government bureaucrat with experience in the natural gas pipeline business. He merged two traditional gas pipeline companies to form Enron. Early deals that made Enron successful included selling natural gas to electrical generating companies. This was a very traditional, steady may to make money for a gas company. Enron then expanded rapidly overseas. They started to develop pipeline capacity in India, Bolivia and the United Kingdom. They were still focused primarily at this point on a traditional business model for a natural gas supplier. But this soon changed. De regulation of the energy industry provided opportunity for Enron to start a trading sector in its business model. They did not just need to supply the gas for generating companies. Now they could rent line capacity and trade electricity and energy futures. These eventually became very complex transactions involving derivities of various sorts. Enron continued to pursue a course of developing hard assets, such as pipelines, and expanding the trading aspect of their business. This required a lot of capital, so lots of pressure was placed on keeping the stock prices high and maintaining a good bond rating. Enron did this by keeping some losses from the trading and “shadow companies” they had developed off of their books. The accounting firm Arthur Andersen helped them to hide these losses. Everything fell apart when the accounting scandal was revealed. The investigation revealed many accounting irregularities and conflicts of interest. Enron’s once positive corporate image had become associated with loss, dishonesty and failure. Case 4 This article was about Ben and Jerry’s Ice Cream. It tells of the beginnings of the company and how the original owners tried to stay true to their vision they had when first establishing the company. Ben Cohen and Jerry Greenfield grew up in the 1960”s. They were friends that wanted to start a different type of business. They wanted a business that was more compassionate and cared about the workers in ways that most corporations were not doing at the time. They moved to Vermont and started an ice cream business that was very successful from the start. A key part of the early business was the establishment of a 5 to 1 salary ratio. In other words, the highest paid worker at Ben and Jerry’s would only make 5 times the lowest paid worker. This was established to send the message to all employees that their work was valuable. This was only one of the social innovations at Ben and Jerry’s. They offered free services and counseling to their employees and provided day care years before other corporations offered this benefit to working parents. Problems started as the business became more complex. To offer guidance, they established a mission plan that gave equal weight to keeping the company strong financially and fighting for social change. Still there were problems. The ice cream business was growing increasingly competitive. Ben and Jerry’s was forces to partner with companies that did not share their social concerns to remain viable. They were also having a hard time recruiting upper level management because of the constraints of the 5 to 1 salary ratio. Executives were not willing to work for so low a salary. In the end, Ben and Jerry’s changed. They had to modify the 5 to 1 salary ratio. While they kept their interest in social concerns, they did begin to operate more like other corporations. Case 5 This article is on the Timberland company, famous for fashionable and sturdy leather boots and outdoors gear. Two guiding principles, commerce and justice, have guided this company since its start. As a result, the family that owns the company has become leaders among the class of executives now known as social entrepreneurs. Timberland boots evolved out of a company started by Nathan Swartz. He and his son, Sid, were successful at handcrafting and selling leather boots and shoes in Massachusettes. With the invention of injection molding, Timberland boots were born and the company’s profits grew at an amazing rate. Sid Swartz’s son, Jeffery, eventually became CEO of the company. He had an Ivy League education in business and was well equipped to handle the company. He became involved in a program called City Year that encouraged young people to give a year of their lives to community service. Jeffrey Swartz donated 75 pairs of boots for the volunteers to wear. This began his long association with this and other community service oriented groups. Timberland also decided that a corporate program could be started to encourage employees to get involved in the service projects of their choice. He allowed employees to take off 16 hours each year to participate in worthwhile projects in the community. The program was so successful that he doubled it to 32 hours the next year. Jeffery Swartz realized that helping the community had become an important part of the corporate culture at Timberland. During the mid 1990’s, Timberland lost money for the first time. Jeffery Swartz was advised to scale back his social projects until the company returned to profitability. He decided that this would be the wrong thing to do. He continued to be engage Timberland in helping the homeless, unemployed and hungry. Timberland returned to profitability a few years later and showed that there is a place in the corporate world for social entrepenuers. Case 6 This article highlights Starbucks Coffee’s efforts to conduct business in a socially reosponsable way. This includes their commitment to paying fair prices all the way down the chaing of production and distribution. It also documents their efforts to lessen the impact the procurement of their raw materials has on the environment. One way Starbucks worked to achieve this was to team with an environmental group called Conservation International. This group was founded in Washington D.C. in 1987. Their goal is to preserve the earth’s natural environments and heritage. A partnership was worked out between these two organizations to encourage the growing of shaded coffee beans in Chiapas state in Mexico. By growing shaded beans, coffee harvesting is less damaging to the environment. More diversity is preserved and the land is not degraded. Starbucks and Conservation International invested much time and effort into making the Chiapas experiment work. They conducted many hours of training of local farmers. They had difficulties in showing the farmers how to harvest only the ripest beans. Quality control became a serious issue because most of the farmers knew nothing about roasting or consuming coffee. Many of the difficulties were worked out but the project was disappointing to some involved because of the low tonnage produced in the shade grown areas. Starbucks decided to take a different approach after the Chiapas experiment. They started to deal with Fair Trade certified growers and brokers. The Fair Trade movement began in the Netherlands during the 1980’s. Its purpose is to organize local farmers into cooperative units so they can demand better prices for their products. Starbucks wanted to be seen as a positive force for social and environmental concerns, so they partnered with an organization called TransFair that certified fair-trade growers. Though well intentioned, TransFair failed to deliver the high quality beans Starbucks demanded to the venture was not as successful as hoped. Case 7 This article is about climate change and how it can affect businesses now and in the future. Costs from increased regulations on emissions will affect businesses in the near future. Also, costs associated with shifting weather patterns and availability of natural resoueces such as fresh water will begin to be more important. The article stresses an “inside out” and an “outside in” approach to dealing with these changing costs. An example of an “inside out” approach is to look at what the company can do within itself to address these costs. This may, for example, include reexamining the logistics of distribution centers or shipping route for a corporation like Wal-Mart. Much of their emissions come from logistics and distribution. Saving on emissions now will result in less costs if emission based fines are imposed in the future. An “outside in” view of climate change requires anticipating changes that will cost businesses money. Increased costs associated with higher average temperatures can be offset by the proactive business through investments in new technology. By taking a varied look at the inside and outside costs of climate change, companies can be prepared for the future. Case 8 This is an article on ethics in finance. The need for ethics is shown in the case of WorldCom. This company used false information and manipulation of losses in the accounts to prop up their stock price for a long time. When the truth came out, the company failed to the tune of 11 billion dollars. The article explains that ethics is important in all levels of finance for several reasons. First is the fact that unethical actions are not sustainable. Eventually they will catch up with a company and result in a loss of trust at the very least, or in the case of WorldCom, bankruptcy. Second, ethical behavior is the only behavior that builds teams and excellence. Teamwork is impossible when team mates can not be trusted. Excellence is not possible when unethical means are used to achieve the goal. The article asks employees what they can do to promote ethics in the work place. Establishing a code of ethics for the company and exercising ethics in personal decision making are both offered as suggestions. Case 9 This article highlights the socially responsible owner of the Body Shop franchises, Anita Roddick. Founded in 1976, the Body Shop has grown to an international success story with over 550 retail franchises. This success has allowed Anita Roddick to forward her belief that successful businesses must be a force for positive social change. Antia Roddick used the funds generated fro her company’s success to launch a series of environmental initiatiove with partners such as Greenpeace. She also established a program termed Trade not Aide that focused on providing working opportunities for individuals in developing societies and depressed areas within the United Kingdom. She also worked to establish a Soapworks factory in a depressed corner of the United Kingdom. This factory was committed to employing the chronically unemployed and to paying them a living wage. The Body Shop also began to engage in seeking social and environmental change through the political process. Money was set aside for lobbying efforts that would pass stricter environmental laws. Though the company had always made sure their raw materials did not harm the native environments, Anita Roddick felt more could be done. Anita Roddicks philosophy is that you must make a profit to survive, but that prifit must be made with higher principles in mind. Read More