James Hardie Industries and the Problem of Asbestos - Assignment Example

Codes of conduct Insert Name Tutor Course Date Q3. The conflicts of interest to Trowbridge and James Hardie Industries (JHI) are of wide scope varying from management codes of conduct and third liabilities due to exposure to asbestos. The responsibility bestowed on Trowbridge to establish the liability that James Hardie Group ought to pay to compensate victims of asbestos exposures due to JHI activities is the main conflict of interest between the two parties. James Hardie Group having been on the limelight due to reports on fiber’s toxicity was no doubt to be held accountable in relation to the health harm caused to third parties. Although the reports have been presented several for several decades, the long-term effects of the fiber’s toxicity did not cease immediately after measures to curb the exposure were put in place. Consequently, the James Hardie Group had to continue with liability responsibilities. In fact, the year 1999 was wake up call for the James Hardie Group and they did not have the capacity to handle the issue effectively. The James Hardie Group was undergoing internal management reorganization and the new management sought to address the issue to favor the costs (Gunz, & van der Laan et al. 2011). The board of James Hardie Group learned of the adverse effects of asbestos from review reports, the managers were up to formulae solution to the problem and address litigation appropriately. However, the main agenda was to minimize the liability of James Hardie Group. The approach used in addressing liabilities caused by the asbestos toxicity exposure was a campaign that aimed at influencing the legal, political class and the public perception of the issue. The James Hardie Group, top lawyer informed the board that political donations would come in and a review of the decisions made by the court would be revisited and commissioned to preferred qualified academic hence government would be lobbied (Michael 2002). Thus, the James Hardie group objective to minimize its liabilities is in compromise of the third party suffering health problems due to the exposure to asbestos. This would lead underestimates for money to fund the compensation of third parties who are legally liable to be compensated. In an attempt to justify its strategy, the James Hardie Group advocated for a different compensation plan. The period which it was meant to last, four and half years passed without much success being reported. The dissatisfaction of the public on how the matter was being handled heightened temperatures on this case and integrity concerns became apparent. There being no change on the compensation system for asbestos victims, James Hardie group had to act to pressure of raising an estimate of $800million to cater for liabilities. A special commission that was set to look into James Hardie Group move to allocate $300 million to fund asbestos victims’ liabilities. The efforts of this inquiry was enhanced by the new Medical Research and Compensation (MRC), which reported that the liability estimates for James Hardie Group were about $1.1billion. Therefore, liability information held by the James Hardie Group was a hindrance for the Trowbridge firm to bring to the table accurate figures without compromising the interest of James Hardie Group. Thus James Hardie Group sought to influence the report given by Trowbridge firm in an attempt to mask the actual figures that ought to be paid for compensation. In fact, the formation of the Medical Research Compensation (MRC) was closely followed by James Hardie Group decision to form the Project Green which was aimed at asbestos separation to retain investor confidence hence discount the asbestos liability claims. All through the interest of the James Hardie Group is to cut costs of its liability irrespective of the victims interests. The Jackson inquiry gave a report that James Hardie Group profits were capable of meeting the compensation, but had earlier planned an approach to cut liability costs when the legislation of the Medical Research Compensation thus implemented the Green Project to benefit its shareholders. Its noteworthy that James Hardie Group sought to keep the investors view and its management clean not to discourage investments due to the compensation liabilities. In other words, the James Hardie Group sought to keep the information about its liabilities compensation an internal affair to cuts costs and portray public image, attractive to investors (Raymond 2008). The James Hardie Group achieved this by greatly influencing and manipulating the proceedings of the Trowbridge firm, which was assigned the duty to estimate the compensation liabilities from data available in relation its profits. The interest of the Trowbridge was to fulfill its obligation to facilitate due compensation for the asbestos victims. The estimate established by Trowbridge was approximately $280million, but this was not made public a directive given by Michael Brown, a former finance director. Shafron, James Hardie Group, finance director asked the information be held since it was deemed actuarial advice for “consulting job in progress” thus it was bound to be confidential. Furthermore, it was related to court proceedings in which asbestos victims were suing James Hardie Group for liabilities. Shafron took the initiative to point out the authoritarian legal liability to Macdonald in regards to asbestos compensation that lay with subsidiary companies that is Amaba Pty Ltd and Amaca Pty Ltd responsible for asbestos processing for James Hardie Group. Strategically, James Hardie Group Exposure was tied to the assests made by Amaba and Amaca, which were at approximately$190 million. Shafron went ahead and informed these two parties, Amaca pty Ltd and Amaba Pty Ltd that Trowbridge does take into account the compensation liabilities linked to them. The legal position taken by James Hardie group was a great concern for the future victims who were to be compensated in future. It is clear without adequate funds. However, the public relations campaign launched to counter this was a great hindrance hence it created a bias against James Hardie as well as other asbestos byproduct manufacturers. This twist of events gave hope in achieving the victims’ interest especially when courts, governments and the juries became keen on making asbestos manufacturers accountable for the harm caused to victims who are exposed to asbestos. One landmark court finding in 1999 reported that James Hardie made huge profits from sales of vast quantities of asbestos goods heedless of the hazards to third party, which the James Hardie Group were aware to be caused by the exploitation of those products. The company shareholders take responsibility to use their profits or their capital risk capital to meet a loss unavoidably emanating from these businesses. Shafron directed that achieving change of the reimbursement system was unlikely even within medium term. Thus, there was need for unilateral action. In a February 2000, Shafron formulated 10 ways to gain a complete cease to asbestos litigation for James Hardie. The approach was to give the James Hardie Group a new corporate structure that entailed a new parent company to be incorporated for tax reasons. The main interest was to limit liability to a portion of Hardie James Group and not the entire of its assets. The legal liability was asbestos litigation. The quantum of resources was that the decision on which much the shareholders were to contribute in victim compensation asbestos when the booming fibre-cement. Shafron summed the law of James Hardie Group on April 2000 view about what assets would be left behind this way. Creditors included under the umbrella of the Corporations Law that made a conclusive tally of the individuals who had actual claims or were ill. However, it did not cater for people who were not unwell, but could have a solid ground to make claims sometime in future. The parent company also had an interest to be protected by the James Hardie Group in case the asbestos manufacturers bankrupt. These objectives were met by ensuring that the company did leave behind asbestos liabilities with an appropriate buffer to pay for the potential asbestos cases. The decision was halted but came to be implemented in eventuality. Consequently, the new trust chose a $90 million fund, which is precisely the most accurate estimate, which Trowbridge made (Raymond 2008). Q4. The Trowbridge report was in absolute violation of the codes of conduct. The Trowbridge firm failed to conduct professional report and instead greatly influenced by James Hardie Group management in the process of acquiring data and auditing the information, which was required for the sake of the public, third party asbestos victims. Thus, the entire process of collecting data, assessing James Hardie Group worth and the possible compensation liabilities was misleading In my opinion, the observance and implementation of the code of ethics would have much difference and serve the interest of various parties involved in this case as effectively as possible. In fact, the observance of the code of conduct would have delivered justice to the victims and made the investors in James Hardie Group accountable for the asbestos products that had adverse effects upon utilization. Through the influence of James Hardie Group management, the report made by Trowbridge remained a draft and was never made public simply because it would expose the company hence prompt accurate and adequate funding for liability claims. This was a major obstruction to justice hence the code of conduct was ignored. I am strong inclined to the idea that its observance would have to decline any orders or inappropriate requests from the James Hardie Group Management. However, this information got restrained and never became available to potential insurers. In addition, the report was intended to be expanded to give further estimates but it was restrained by the James Hardie Group top management hence the final results were not accurate either (Jean, J du Plessi, Ani & Mirko 2010). This strongly suggests that all auditing made by Trowbridge was not be relied upon although it was what was used at last. The firm could have evaded this by remained independent as mandated and made step further into James Hardie’s worth to establish accurate future liabilities estimates to cater for asbestos victims. Unfortunately, the firm failed to observe the code of conduct and even submitted report based on some irrelevant data from past years whereas the task required data for the present situation, which James Hardie Group withheld. It was unprofessional to overlook this and tabulate estimates without requested data, which they were fully aware to be important for effective estimation of liabilities for asbestos exposure (Dunn & Edwina et al. 2005). References Dunn, Edwina 2005, James Hardie: No Soul to be Damned and No Body to be Kicked [2005] SydLawRw 15; (2005) 27(2) Sydney Law Review 339. Gunz, S and van der Laan, S 2011, Conflicts of Interest and Professional Independence: The Case of James Hardie Industries Limited, Journal of Business Ethics, 98, pp.583-596. Hardie casts a long shadow April 24, 2004. Accessed on August 10, 2012.) retrieved from http://www.smh.com.au/articles/2004/04/23/1082719628753.html Jean, J du Plessis, Ani. H, Mirko, Bc 2010, Principles of Contemporary Corporate Governance, Cambridge University Press. Michael, D 2002, Profession, Code, and Ethics, Ashgate. Raymond, JW 2008, Regulating international business through codes of conduct, American Enterprise Institute for Public Policy Research. Victoria State Services Authority 2007, code of Conduct for Victorian Public Sector Employees of Special Bodies. SSA publishers. Read More