Essay

MGIM 4878 –FALL 2010 Case study – BP Oil Spill 2010 Summary The largest accidental marine oil in the Gulf of Mexico. The spill started from a sea-floor oil gusher that resulted from the April 20, 2010 Deepwater Horizon drilling rig explosion. The explosion killed 11 platform workers and injured 17 others. The spill has caused extensive damage to marine and wildlife habitats as well as the Gulf's fishing and tourism industries. The U.S. Government has named BP as the responsible party, and officials have committed to holding the company accountable for all cleanup costs and other damage. After its own internal probe, BP admitted that it made mistakes which led to the Gulf of Mexico oil spill. Consequences Ecology – threatens environmental disaster because of petroleum toxicity, oxygen depletion & the use of corexit dispersant – 8 US national parks are threatened – Death of many species: 13, 4,678 dead animals collected, 400 species including endangered ones are at death risk – The sea contaminated with toxic chemicals – dead zones created because of oxygen depletion – Oil drops enter food chain Tourism – Revenue remains lower compared to 2009 – According to The U.S. Travel Association estimates, that the economic impact of the oil spill on tourism across the Gulf Coast over a three-year period could exceed approximately $23 billion Other economic affects – BP’s own expenditure reached $3.12 billion – BP’s market value reached a 52 –week low (lowest price at which a stock has traded in the past 12 months, or 52 weeks) – Total value lost since April 20 : $105 billion – Sales off 10- 40% due to backlash against the company Solution As an international manager, what we should do/consider in the context of international CSR: Anticipate risks assessment of overseas operation. Estimate the risks possibility and the cost of the risks arise Invest in high tech equipment Be proactive Constant care, ensure safety working environment (Team’s suggestions including : Minh Chau, Minh Khue, Hong Nhung, Ngoc Hanh, Phuoc Vinh, Khoi Nguyen, The Gia, Ha Liem, Khanh Son, Tuong Linh, Bao Quynh, Uyen Thao) Page 1 of 6 MGIM 4878 –FALL 2010 Case study – Nike Summary A sweatshop - working environment considered by many people to be dangerous and difficult. Workers can be exposed to hazardous materials, harmful situations, extreme temperatures, and abuse from employers. Sweatshop workers often work long days, sometimes exceeding 14 hours, and earn pay far below a livable wage Controversy – Nike is one of a few shoe companies that have taken responsibility for sweatshop labor. However, Nike is the most criticized because of its size and wealth. No improvement to its factories despite large profit. – Local people in the third world countries like Nike factories because Nike creates jobs, better conditions, better wage than others in the same locations Groups against Nike – Jim Keady – Team Sweat – Phil Knight – Chairman of Nike – Jonah Peretti – customer of Nike Nike’s reactions – Improvements in production, manufacturing systems : develop a control team monitoring factories to meet global standards – Allow the Fair Labor Association monitor labor conditions randomly – Close factory if it does not improve working conditions, systems through grading system from A-D – Lower wages still exist Solution As an international manager, what we should do/consider in the context of international CSR Reshape relationship between customers, suppliers, investors & regulators, better operation - better profits higher wages Improve leadership skills – “ leadership beyond borders” Apply strict global & local labor standards , improve working conditions, manufacturing systems, process, labor rights (Team’s suggestions including : Minh Cuong, Duy Loc, Tuan Anh, Doan Trang, Nhu My, Ngoc Ha) Page 2 of 6 MGIM 4878 –FALL 2010 Case study - Coca Cola Summary 1. Labor practices in Colombia Problems – conflicts with union – Murders – Kidnap – Threaten – Separation with employees Effects – violate human rights Solutions – no evidence by Court & Attorney 2. Trade practices in Mexico - monopolistic Problem – force retailers to buy Effect : – retailer’s complaints  huge fine – Coca cola boycott – customers shift to Big Cola Solution: – Comply Mexico competition law – Against monopolistic 3. Environmental and product issues in India Problems: water pollution, pesticide in products Effects: cancer Solutions : NORI research, Protection from Council Assurance ◊ no evidence to show Coca Cola violate the law 4. Coca Cola Boycott Problem: the boycott by student activists & trade unions Effects: negative influence on brand image Solution: political issue, negotiation, improve unpleasant workplace Team’s suggestions including: Bich Hao, Bao An, Le Dung, Hong Van, Huy Khoa, Minh Chau Page 3 of 6 MGIM 4878 –FALL 2010 Case Study – Vedan Summary Vedan had polluted the river for 14 years with up to 105.6 million liters of untreated wastewater per month. An earlier investigation by the ministry and the Environment Police Department said the company had discharged 45,000 cu.m of post-fermentation molasses waste into the river. The firm had built a sub-merged pipeline to discharge effluent into the river the estimate was markedly raised. To avoid detection, the company stored the post-fermentation molasses waste from monosodium glutamate and lysine factories into containers and buried them. The containers were connected by a system of pipelines and the waste pumped into the middle of the river some eight meters below the surface. The effects of Vedan’s pollution The toxic water killed farmers’ fish and shrimp and ruined farmland along the river’s banks Pigment levels in the Thi Vai River were 3,675 times higher than permitted levels, while COD levels were 2,957 times, BOD5 levels 1,057 times higher, and TSS and ammonia more than 100 times higher Local citizen’s health are damaged In Dong Nai, a total of 10,454 hectares of aquatic breeding ponds and lakes in Nhon Trach and Long Thanh districts were harmed by untreated waste water from Vedan. Nearly 45.7 billion dong ($2.4 million) in damages for 839 households engaged in fishing and aquaculture in Can Gio District’s Can Thanh Commune Vedan takes responsibility for 77 percent of extremely polluted areas, 26.3 percent of seriously polluted areas and 8.75 percent for polluted areas Source : vietnamnet.net & VIR Government’s reactions MoNRE suspended the plant’s wastewater discharge license and fined the company 267.5 million dong The ministry also demanded another 127 billion dong ($7.14 million) from the company in overdue environmental fees The company paid the fine and the fees in three installments. However, Vedan has not yet compensated affected farmers, they are still in the negotiation process to reach the finalization. Source : VIR Public’s reaction : boycott by consumers : From Saigon Co-op, Sales will not resume until Vedan solves the pollution problem and satisfactorily compensates local farmers French retailer Big C also stopped distributing the products in its outlets throughout the country and placed its stock in storage. It did not say when the products would be returned to the shelves again. Page 4 of 6 MGIM 4878 –FALL 2010 Citimart - the chain stopped selling Vedan many weeks ago as consumers boycotted the polluter The boycott by consumers and the retailers sends a message to businesses that Vedanwill fail if they violate the environment Solution As an international manager, what we should do/consider in the context of international CSR Planet : Build the drainage recycle system Profit: accept trade –offs in lowering profits for long – term development strategies in host country People – in short – term pay a satisfactory amount to cover local citizen’s affected health – Long – term : protect the environment, ensure safety working & living conditions (Team’s suggestions including: Truong Hai, Cam Tu, Thuy Nga, Nguyen Khang, Hoang Nhan, Duc Huu) INSIGHTS 1. Criticisms which have been levied against MNCs in the past regarding their activities in less-developed countries MNCs have been criticized for disrupting the social, technological, and political climates in host nations. Governments often have a “love-hate” relationship with MNCs because they want the economic advantages produced by the presence of MNCs, but they regret the negative impacts MNCs often have on the political and social environments. MNCs can defend themselves by pointing out that, without their presence, host nations would not have as many jobs or trade opportunities, as well as opportunities to appropriate technology. MNCs have also been accused of destroying local culture through globalization. While MNCs have increased the degree of globalization, and in some cases made some aspects of local culture disappear, differences in culture remain strong and deep 2. The role of MNCs toward human rights issues in other developing countries MNCs must be very careful not to become instruments of political change or policy making, because they are economic institutions. However, where MNCs can unite with the international community in opposing human rights violations, the legitimate policies of sovereign states can be benefited through MNC cooperation. Current issues will vary from class to class. At the time this book was being developed, Amnesty International had accused the United States of violating human rights by having a repressive and racist prison policy. The U.S. has also come under attack for its treatment of prisoners at the military facility in Cuba. Students will vary broadly in their prescriptions for corporate involvement. A corporate code of conduct can be beneficial in guiding multinational managers in these difficult areas. The code of conduct can act as a guide to corporate values concerning human rights issues and reduce much of the ambiguity and uncertainty found in this area. Page 5 of 6 MGIM 4878 –FALL 2010 3. Managing interdependence Since multinational firms represent global interdependency, managers at all levels must recognize that what they do in the aggregate has long-term implications for the socioeconomic interdependence of nations. Host country governments tend to have a “love-hate” relationship with MNCs because they want the economic benefits (jobs and technology) provided by MNCs, but do not want the social and political disruptions that often accompany the presence of MNC business activity. 4. Brand name vs. CSR : As global population increases, so does the pressure on limited natural resources required to meet rising consumer demand (Grace and Cohen 2005, 147). Industrialization, in many developing countries, is booming as a result of both technology and globalization. Consumers are becoming more aware of the environmental and social implications of their day-to-day consumer decisions and are therefore beginning to make purchasing decisions related to their environmental and ethical concerns. 1 Consumer perceptions and concerns can change and a firm can find itself dealing with a successful PR campaign directed towards its practices. Consumer “rewarding” can change and make such companies vulnerable due to their foreign employment practices. CSR can play a role in building customer loyalty based on distinctive ethical values. Ex : Boycott of Vedan, Coca – Cola , Nike, BP 5. Risk management Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks 2 6. Laws and regulation Another driver of CSR is the role of independent mediators, particularly the government, in ensuring that corporations are prevented from harming the broader social good, including people and the environment. CSR critics such as Robert Reich argue that governments should set the agenda for social responsibility by the way of laws and regulation that will allow a business to conduct themselves responsibly. 1 http://en.wikipedia.org/wiki/Corporate_social_responsibility#Globalization_and_market _forces 2 http://en.wikipedia.org/wiki/Corporate_social_responsibility#Globalization_and_market _forces Page 6 of 6