A Case Study on a South African Investment - Essay Example

? A Case Study on a South African Investment A Case Study on a South African Investment The central concept of ethics focuses on the following ideas:right and wrong; good and bad; and permissible and impermissible, depending on what culture or society it is being applied on (Driver, 2007). There is also the dilemma of weighing in the values as well as the outcomes of different decisions before coming up with a conclusion. Such a process creates a situation for the decision-maker that he or she has never done before (Ferrell, Fraedrich & Ferrell, 2008). On the other hand, business ethics is defined as applied ethics, and is the application of the knowledge of understanding what is good and right in the context of business, transactions and other related situations (Velasquez, 2012). The beliefs, values and goals of a company reflect what the management understands about handling the business through moral perspectives. However, many companies and other businesses have been labeled negatively due to the rise of scandals involving unethical and illegal operations, which challenges the trust ratings of the public (Ferrell et al., 2008). Another is that not only do companies suffer but entities they are associated with also get negative publicity just by being tied to them. Thus is the strong need for the implementation of strong business ethics in large groups and companies. A case study involving a moral and social dilemma that needs well-thought actions but is at the mercy of the government is presented (Velasquez, 2012). In the 1970’s to the 1980’s turmoil has been brewing in South Africa regarding the apartheid system being practiced, as well as the oppression of the majority of the population (blacks) by the minority (whites). US oil companies Texaco, Inc. and Standard Oil Company of California (SoCal), joint owners of Caltex Petroleum Co. were pushed by the Interfaith Center on Corporate Responsibility, coordinated and lead by project director Tim Smith to pull out and terminate their operations in South Africa due to extreme and unfortunately legal racial discrimination among the black Africans by the whites. Such includes the complete segregation of blacks from whites, the deprivation of basic human rights such as voting rights, the right to claim a parcel of land, being underpaid, among others (ibid). Owners of Caltex insist that they were indeed committed to the improvement of their employees by increasing their wages and narrowing the gap between white and black Africans’ incomes (Nickel, 1968). If they withdraw from operating and expanding in South Africa, the results would greatly affect all employees of Caltex, both black and white South Africans. However there were still constraints that were beyond their control, and were implemented by the South African government. Among these are: the segregation of where the blacks live from the whites, the provision of strategic products to the government as per the law, and other forms of support of the apartheid law (Smith, 1971). The eventual imposition of martial law in South Africa in 1985 caused a severe recession of the economy, civil unrest, and an increase of unemployment by up to 35% (Velasquez, 2012). Western nations sanctioned the government by not allowing the renewal of loans of private companies, but this was met with retaliation by not repaying any of their foreign debt starting September of 1985 (ibid.). The possible utilitarian benefits of the Caltex 1977 expansion is not as important as the possible violations of moral rights and justice that could be involved with it. Yes, the expansion would have been beneficial to the employed citizens, and that it would put food on their tables, but it still does not give them any proper rights at all, and that no matter how much they get promoted, they were still lower-class citizens (Smith, 1971). Also, there would be the eventual unrest due to the people realizing that they are the true owners of their land, and that they have been treated unjustly for so long. There is also almost no recognition of the full capabilities of the majority because most of them were still holding lower job categories, and somewhat whites still dominate the top positions (Investor Responsibility Research Center, 1977). Another is that because Texaco and SoCal (Now Chevron) did not assert their needs and showing the government that they have the capacity and freedom of pulling out expansion plans. This gave the government even more time to change their laws and thus gained leverage since they could adjust their laws and other acts to ensure that the profits would still go to them, and that foreign investors would have no other choice to comply. This is exemplified by the formation of laws under the new South African government, which prevented investors and other companies in pulling out their investments quite easily, and that to be able to leave they must sell their properties to other foreign investors (Velasquez, 2012). If I was a stockholder of either Texaco or SoCal, I would firmly vote for: the termination of Caltex operations in South Africa; the prevention of Caltex in selling oil to the government, military and the police; and asking Caltex to implement the Tutu principles. First, if Caltex terminated its expansion, and pulled out its investments, and if other investors would follow suit, thus putting pressure on the government to decide on whether to change their laws or just let investors leave them totally. At least, this way there would have been a chance for a true change in leadership options in the country. Second, by selling oil and other petroleum products to the most powerful entities in the country would definitely keep the imbalance of power in the nation. This is because they would be the ones in control due to the amount of money that they would be holding. The additional reserves would also give them the capability of buying weaponry to further suppress the growth and the rights of the people. Lastly, the implementation of the Tutu principles is very relevant with regards to the growth and development of the black South African people. Aside from monetary reasons, the majority of blacks should also be given the chance to experience to become masters of their land, their choices and their thoughts. This would be a great empowerment for them, which would help them become even better citizens, since they would have other options to do aside from creating uprisings and unrest. Also, by allowing them to live as equal to the whites with regards to labor practices, the ones that are truly capable of higher positions would be able to climb the corporate ladder without, if not with lesser fears that their voices would not be heard at all. Hypothetically, if I was one of the managers of either Texaco or SoCal, I would respond to each of the resolutions in much as the same way as I would if I was a stockholder, with an even more conviction. This is due to the fact that there are other rights that are being held from the people, not just the right for food. Also, as an investor having a large company in South Africa, there may be other places or countries to do business, so I would very much rather bring my investments somewhere else that would let me, the other managers, and the company as a whole not just to bring work to the people, but create an impact that would also change their lives. This is the true meaning of sustainable growth (The United Nations Global Compact, 2007). Also, by making the government realize that the influence of large oil companies to other smaller investors could set a series of retractions of funds and other investments, which could very well pressure the government to redefine its laws to suit the investors’ ideals. Lastly, since there is also the mentioning of sustainable growth, corporate social responsibility is also involved. In performing business ethics, aside from just bringing in the money for them and their stockholders, there should also be the responsibilities of large companies and corporations with regards to the welfare of their employees. They should not look just at the ROI or the return of investment, but also to the conditions of their employees as well. Upholding human rights and labor standards, aside from ensuring that the environment is protected, corruption is prevented, and that there is the development of the society is not just the responsibility of a nation, but of larger companies as well (The United Nations Global Compact, 2007). The moral dilemma of choosing either a large income or a larger impact on societies involved with companies such as Texaco and SoCal is a long-standing issue. However, the end-results that happen within the countries that they deal with show how the impact of their choices are affecting their employees and the government’s actions, whether good or bad. Its investments should not only focus on monetary amount, but also to the social impact that they have, since this would have a far lasting impression to the people, compared to money. The choices of a company could greatly affect the lives of its employees. For this, business ethics should be their backbone in operations and management. Although there would still be the problems arising from incorrect decisions made, if ethics is involved in every decision-making, the resolutions would be well-thought of and would linger into the future. As shown by the case study regarding the expansion of Caltex, because of the lack of conviction of the larger companies, their social responsibility to the people of South Africa was just limited to them giving just wages, and not much with reshaping the apartheid society that has been lingering for so long. This caused the power imbalance to remain, and aside from preventing investors in leaving South Africa, political unrests also ensued because the black people finally realized that they were experiencing unfair practices compared to their white counterparts. Thus, the importance of corporate social responsibility should also be looked at, aside from return on investments of a company. References Driver, J. (2007). Ethics: the fundamentals. Oxford: Blackwell Publishing. Ferrell, O., Fraedrich, J., & Ferrell, L. (2008). Business ethics: ethical decision making and cases (7th ed.). Boston, MA: Houghton Mifflin Co. Investor Responsibility Research Center. (1977, April 7). Analysis E Supplement No. 9. New York: Investor Responsibility Research Center. Nickel, H. (1968, June 19). The Case for Doing Business in South Africa. Fortune, pp. 60-74. Smith, T. (1971). South africa: churches vs. the corporations. Business and society review, 54-56. The United Nations Global Compact. (2007). United nations global compact inspirational guide. United Nations Global Compact Office. Velasquez, M. (2012). Business ethics: concepts and cases (7th ed.). Upper Saddle River: Pearson Education. Read More