Corporate Social Responsibility of Formosa Plastic Corporation - Report Example

FORMOSA PLASTICS CORPORATION Formosa Plastics Corporation by + s Title + Code Town/City Date of Submission Formosa Plastics Corporation was established in 1954. At start-up in 1957, its plant manufactured 4 MT/day of polyvinyl chloride (PVC) resin, the nominal PVC plant globally at that time. With such a small production quantity, product costs were reasonably high. As a result of the lack of a local downstream industrial base, sales remained stagnant, leading to stockpiling of finished products. To remodel this situation, it was decided to increase production volume to reduce unit costs. Concurrently, manufacturing plants were established to consume PVC resins, and the export of products was thus promoted. Founded in 1954 with a capitalization of NT$5 million, the corporation has grown over the years into the biggest private company in Taiwan, with over 47,000 workers. Furthermore, corporate social responsibility is the core practice that has enabled the company to stay on the course. While pursuing competitiveness and profits in the business, the corporation has established numerous that are aimed at assisting the community. These practices include programs geared towards sponsorship and partnership with the community (Formosa Plastics Corporation 2010). Management Strategies For several years, managers at Formosa Plastics Corporation used a management control system with an aspect that was somewhat exceptional for a large corporation – all workers are evaluated individually. In making their judgments, evaluators looked at objective performance measures; however, instinctively made many adjustments for factors they deemed to be beyond the employee’s control. One consequence of this system was that bottom-line profit is not even considered in the evaluations of some profit center managers: These managers are assessed only in terms of the controllable factors driving profit, like meeting production schedules, efficiency, cost control, and quality. The company through effective management has continued to make profits thus promoting its financial status as well as customer base. Organization and Operational Structure In order to pursue the rationalization of the management the corporation administrative office, which functions as a professional staff and service, was fashioned by the corporation to coordinate resources and undertake cooperate function. Further to pursuing management implementation as well as implementation, the office has the role of group-wide strategy, business auditing, computerized management systems, financing engineering construction, material procurement, legal affairs as well as public relations. Furthermore, In addition, each company has its own administration, accounting, warehousing and shipping, technical and labor safety and health departments (Formosa Plastics Corporation 2007). To develop efficiency, the following concepts have been implemented by the corporation: Management by Objective In order to determine the effectiveness of every department, the corporation places great significance on management of costs as well as performance. Therefore, through analyzing the difference between actual and objective performance, it can identify issues that causes the gap, organize improvement strategies as well as attain the goals of cost control as well as financial performance. The main emphasis depends on the cost analysis, where each aspect is deeply analyzed and cost objectives ascertained. Improvements are attained through finding solutions to the difference between objective costs and actual costs. Thus, once an improvement has been implemented, new objective cost is tailored, resulting to the most logical structure possible (Formosa Plastics Corporation 2010). Division System For the corporation to prevent the growth of the firms from inhibiting the efficiency of operations, the corporation realized the division system to match to the principles of generating and market unification, as well as responsible operations within the corporation. The corporation is composed of different divisions, with the role of arranging its own production and sales operations as well as set its own targets as per the needs of the corporation. These needs include product lines and manufacturing processes. Furthermore, the profit center idea is implemented throughout. Thus, through comparative analysis of financial reports, revenues and costs, areas for making improvement may be easily identified for further operational rationalization. These are the various divisions in the corporation: Polyvinyl Chloride Division; Tairylan Division; Calcium Carbide Division; Machinery Division; Polyolefin Division; Engineering Division; and Fiber Division (Formosa Plastics Corporation 2011). Individual Performance Reward System For the corporation to rationalize rewards for workers’ efforts and to make them feel that they are central to the corporations success, it implements an Individual Performance Reward System for all levels of workers. Bonuses are given as a reward to an employee based on proportion to performance. At the same time, performance is too used as a factor in each employees yearly assessment. This system is tailored to support employees work quality and production efficiency. To attain constant development as well as growth, the Formosa Plastics Corporation has diversified into several businesses. They understand that diversification will play a leading role towards profitability of the corporation. This has allowed the company to have high customer base, which in turn boosts its productivity in the industry. The diversification strategy allows the corporation to avert possible risks. In addition to efforts in research and development for offering products at realistic prices, all facets of management activities, like procurement, production, sales, engineering, finance, personnel, and performance assessment, have been computerized. The corporation realizes that only a sound management system can offer a company with a firm foundation for long-term growth (Formosa Plastics Corporation 2008). Financial Control System Within Formosa Plastics Corporation, divisions are measured based on a return-on-investment (ROI). The profit element of the ROI measure (the numerator) comprised allocations of all corporate costs including interest; however, profit is measured before taxes. The investment element of the ROI measure (the denominator) comprised only the investments, which could be traced to the divisions (e.g., equipment, buildings, inventory, and working capital). No corporate assets are allotted to the divisions, plants and product groups were considered as profit centers; distinctive production processes as well as group of machines are cost centers; and non-production-oriented units (for instance sales, technology, and management) are expense centers (Formosa Plastics Corporation 2010). The major element of corporation’s financial control system entails a detailed cost accounting as well as reporting system. Standard costs are set for each element of manufacturing (that is labor, raw material, packing, steam, and waste). The manufacturing processes tended to be stable, so the corporation has wide-ranging historical records, and the cost standards are greatly refined and precise. Indirect costs are allocated to entities as well as products using a variety of allocation bases (e.g., number of people and production quantity). Where required, transfer prices for products sold internally are set either at market price less costs not incurred on internal transfers (for instance, selling costs, duties), or at full standard cost (less costs not incurred) plus a markup (Formosa Plastics Corporation 2011). In addition, the cost standards are revised on time when conditions demands and they were used to inspire continuous improvement. For instance, if an investment project aimed at improving productivity is scheduled to be finished in July, the cost standards were changed in July. If the project was delayed or development is not as anticipated, the problem would show on an irregularities (variance) report. The firm produces an extensive set of performance reports on a monthly basis. These reports enable management to attack problems speedily. Corporate Social Responsibility (CSR) CSR plays a leading role for the company as they undertake their operations in the community. According to the management, CSR shouldered by the business to survive, is required by the community. Nonetheless, it also should have a positive contribution to the community. Thus, whilst pursuing profits and competitiveness in the market, the corporation has maintained high ethical standards, taking, as a starting point, actions that will eventually benefit the community. The management recognizes that they should serve as role models; however, also have to develop a good organization as well as wholesome system, which encourage workers to seek constant improvement. Thus, apart from seeking good performance in terms of business operations, the corporation further believes that the corporate social responsibility as well as competitiveness is complementary; therefore, they have continually strived for the materialization of social responsibility, carbon reduction energy conservation, and the reducing of greenhouse gas emissions. In terms of promotion of energy conservation as well as carbon reduction projects, we are in sync with international energy conservation and carbon reduction measures. In resonance with policies by the government, it have launched eight improvement projects categories comprising production energy conservation, environmental accounting, lighting energy conservation, green products, green purchasing, resource recycling, office environmental protection, and green architecture, hoping to contribute corporation’s strategies towards environmental development in the countries the corporation operates (Guo & Teng 2012). For instance, after half a century of devoted management and continuous refinement, the corporation has garnered significant technology as well as management capacities in different markets and has attained a decisive position in the international markets. Through the accumulation of experience, energy and water conservation improvement measures, the most modern and most eco-friendly (low pollution) production technology is introduced, whilst different work safety inspection measures, like carbon reduction and waste reduction are implemented to improve work safety management as well as environmental protection performance, finally attaining the ideal objective of Zero Disaster, Zero Pollution and Zero Work Safety Accidents (Formosa Plastics Corporation 2010). However, the road for the corporation has not been smooth because in some cases it has found itself in litigations for violating some regulations and rules. These regulations and rules deals with environment and the corporation have breached therefore attracting penalties. Formosa Plastics Corporation has been fined for alleged safety and health hazards at its dispersion PVC resin plant in Delaware City in US. For instance, on September 2012, the Occupational Safety and Health Administration (OSHA) pronounced $148,700 in proposed penalties for 16 supposed violations at the site that employs around 100 workers. Two of the violations are repeat offenses, which too were cited in a separate inquiry in early 2010. These replicate violations entail supposed failure to perform process equipment inspections as well as tests; failure to inspect critical valves as well as failure to make sure that PVC dust did not build up on surfaces and on the floor of a bagging region. The other violations comprise supposed electrical hazards, incomplete emergency shutdown procedures, lack of machine guarding, and among other claims, all of which are grouped as grave violations by OSHA. Furthermore, in late 2009, Formosa paid a civil penalty of approximately $3 million to resolve numerous supposed environmental violations at its plastics plants in Texas, Point Comfort, and Baton Rouge, La. At that time, the corporation as well agreed to spend over $10 million on pollution controls at those sites (Formosa Plastics Corporation 2010). List of References Cambie, S., & Ooi, Y.-M. 2009. “International communications strategy: Developments in cross-cultural communications, PR and social media”. London: Kogan Page. Formosa Plastics Corporation. 2007. “Annual Report”. Retrieved from www.corpasia.net/taiwan/6505/irwebsite/index.php?mod=annual‎ on April 17, 2014. Formosa Plastics Corporation. 2008. “Annual Report”. Retrieved from www.corpasia.net/.../annual/2008/.../2008%20Formosa%20Plastics%20G on April 17, 2014. Formosa Plastics Corporation. 2010. “Annual Report”. Retrieved from www.docstoc.com/.../2010-Formosa- Plastics-Group-Annual-Report---Co on April 17, 2014. Formosa Plastics Corporation. 2010. “Corporate Social Responsibility”. Retrieved from http://www.fpg.com.tw/html/eng/csr_imges/2012_csr_2.pdf on April 17, 2014. Formosa Plastics Corporation. 2011. “Annual report”. Retrieved from www.fpcusa.com/citizenship/environmental/EHSReport2011a.pdf on April 17, 2014. Guo, B., & Teng, C.-C. 2012. “Taiwan and the rise of China: Cross-strait relations in the twenty- first century”. Lanham: Lexington Books. Suder, G. G. S. 2008. “International business under adversity: A role in corporate responsibility, conflict prevention and peace”. Cheltenham, UK: Edward Elgar. Read More