1. In your judgment, were the possible utilitarian benefits of building the Caltex plant in 1977 more important than the possible violations of moral rights and of justice that may be involved? Justify your answer fully by identifying the possible benefits and the possible violations of rights and justice that you believe may be associated with the building of the plant, and explaining which you think are more important.

In questions of ethics, it is always difficult to look at a difficult situation in the present and decide which course of action is best to take for the short, medium, and long term. It is also difficult to decide if the needs of the many outweigh the needs of the few, or if utilitarian principles are so overwhelming in one side or the other of the argument, that a moral choice must take precedence over any economic or developmental choice. In the case of the Caltex Plant in 1977, looking back from hindsight, one sees the following issues that the company needed to overcome:

  • Standard Oil and Texaco have a clear responsibility to develop income for their shareholders.
  • Standard Oil and Texaco, being large, multinational companies, also have a moral and ethnical responsibility to the greater good by setting a good example for other companies regarding fair working wages, treatment, etc.
  • The Interfaith Center on Corporate Responsibility does have a mandate to make companies aware of its position, the conditions that causes their view, as well as a proposed compromise and implementation plan. However, Standard Oil and Texaco are under no legal or even moral obligation to adhere to such guidelines.
  • If Standard and Texaco did not build the plant, someone else would – likely a company with less global standards or stake in moral and ethical dilemmas.
  • While most reasonable people, even in 1977, found apartheid to be cruel, unjust, and certainly immoral, one can postulate that it would be easier to change a situation from the inside out rather than the outside in.
  • Would Standard and Texaco have any possible reason to help change or modify the conditions in South Africa if they did not have a vested, economic interest in the country?
  • With their economic power, and the income and attention Standard and Texaco would bring, nationally and internationally, to South Africa, the benefits of slow change seem to point to a stronger argument for building the plant.

Thus, we must separate the argument into three major parts: 1)what are the ethical and moral standards that companies like Standard and Texaco need to take regarding political systems that are disagreeable to them; 2) What are the economic and social benefits that Standard and Texaco can bring to a country simply by establishing a presence in that country, and 3) What accomplishes the greater good for all – economic benefit for the shareholders, potential change and improvement for workers, and an establishment of worldwide attention to internal social issues in the country of choice.

There is a different standard of behavior for companies as large as Standard and Texaco. These companies are multi-national with billions of dollars in annual income. The position these types of companies take has importance for global stockmarkets, media, and references for other multinational companies. Particularly since the decades of the 1970s and 1980s were ones seeing the beginnings of globalization, choices made by Standard and Texaco have ramifications not only for South Africa, but for other multinationals going into developing countries with strong minority populations. The decisions that Standard and Texaco make, then, will have effects that will transcend the morality of the current plant situation.

Many of the conditions recommended in the charter letter are clearly a large step in the direction of greater equality for the Black workers of South Africa. If Standard and Texaco not only recognize trade unions, but recognize the rights of the laborers, invest in training and education, and agree to pay a fair wage, then the Caltex plant will have a greater chance of getting the “best” workers, and the jobs available will be coveted, almost indirectly forcing other companies to move forward with their own liberalization methods. Because of its importance to the South African economy, as well, it is unlikely that the White government will disallow any of the reforms Standard/Texaco believe to be important to its operation.

By taking the moral high ground and allowing the Caltex plant to move forward, Standard and Texaco establish a global benchmark that is likely to be implemented by numerous multinationals who are watching the way this type of corporation negotiates with a somewhat fascist regime. Multinational corporations do not necessarily have the right to establish their own system of government on other countries, simply because they disagree; however, if there are certain goods or services available in that country that are coveted by the developed world, then a slow, but steady, strategic and tactical plan to modernize, liberalize, and change the quality of life for its foreign workers is the moral thing to do – as well as the proper business decision.

References:

“To Whom Does an Ethnical Business Owe A Responsibility,” (2/24/04). Dispatches From

The Frozen North. Retrieved on March 21, 2009. Cited in:

Collier, J. and L. Wanderly. (2004). “Thinking for the future: global corporate responisbility

In the twenty-first century.” Science Direct. Retrieved on March 21, 2009. Cited in:

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2.If you were a stockholder in Texaco or Standard Oil (now named Chevron), how do you believe you ought to vote on the three kinds of stockholder's resolutions that were proposed (the first asking Caltex to terminate its operations, the second asking Caltex not to sell to the military or police of South Africa, and the third asking Caltex to implement the Tutu principles)? Justify each of your answers fully.

Once again, the moral argument settles with what a stockholder believes is best for their own ROI, the company’s ROI, and the overall moral responsiblility the company has. If we surmise for a moment that Standard and Texaco plan to take the moral high-ground and establish a better set of working conditions for the minority laborers in South Africa, and this plan is presented to the stockholders in an organized, well planned manner, and the information and strategic plans are there, then the stockholders would have a greater moral responsibility to the people of South Africa and the world to allow this plan to move forward. If Standard and Texaco did not wish to commit on such a plan, or were able to offer no assurances that such a plan would follow, then a resolution and moral responsibilityto act as a global leader should be heard.

First, terminating the operations solves nothing in the long term – it may have a one day news headline effect, but really only makes the situation of the minority worker worse. The White government then realizes it has the power to rule its own country, and no real impetus to change, since a move like this would heighten the isolationist feeling of not being part of the global economic system. Likewise, decided to whom and not to whom one sells based on their political and social views is, frankly, unnecessary for a multinational group such as Texaco and Standard. Do we then decide if imports are made to socialist countries? To countries without free elections? Or, do we take it a step further and decide which political parties in the United States can buy our products? Then, even further – which people? Instead, let the law of economic supply and demand, and the moral way of doing business, show the White government that change can be made from within and not negatively affect their own government.

As for the policies recommended by TuTu, as a stockholder, one can only say –“Why not?” Is there really anything listed that is so egregious or outlandish that it should not be a part of a strategic plan – and not just for South Africa. In fact, looking at the TuTu recommendations will likely make Texaco and Standard far stronger, most especially if they develop a way to include these into their larger, more multiple, chain of plans in other countries.

Thus, as a stockholder, it is incumbent upon one to give one’s opinion, to guide, to establish a benchmark of open communication; but ultimately, the decision in a captialistic economy rides with the fact that the companies are privately held – if a majority of stockholders believe a certain way, then it is likely that the company will at least entertain those views. But, the ultimate responsibility for profit and return on investment lies with the CEO, staff, and Board of Directors – and without an appropriate profit, there would be no company, serving no one.

References:

Klonski, R. (1986). “The moral responsibilities of stockholders.” Journal of Business Ethics,

5, 5: 385-90.

3.What kind of responses should the managers of Texaco and SoCal have made to each of the three resolutions? Justify your answer fully.

Corporate Response to resolutions:

  1. Texaco and Standard, as most of you know, are global leaders in the liberalization of the workplace, fair treatment of labor, and the establishment of reasonable and equitable labor issues that have resulted in over 100 years of solid growth for our employees, shareholders, and the organizations with whom we partner. While we are very cognizant that the current government of South Africa is not in the form many in the West would have it, we are confident that our two companies, working together, can slowly help improve the working situation for many South Africans, and together with the South African government, work to improve the working conditions for all Texaco/Standard interests.
  1. Texaco/Standard has never, and has no plans, to make moral judgements about its customers, neither domestically nor internationally. That is clearly not our purview or mandate – our responsibility is multifaceted: we have a responsibility to product a top-notch product and market it at a reasonable price; we have a responsibility to improve our technological methods to have a lesser negative impact on the environment; we have a responsibility to our employees to keep them actualized with a job, appropriate benefits, and a future; and, we have a responsibility to our many shareholders, many of whom count on our performance for their own livelihood. It is not within that purview to decide that we will not sell to a group because we disagree with them; the domino effect of such a policy would be staggering. It is, however, our moral responsibility to help change behaviors we find in need, with our positive pressure and diplomatic channels.
  1. The proposals outlined by Bishop TuTu and his group are both interesting and, quite frankly, commendable. We will commit to our shareholders and to the world that we will carefully study these proposals and do our utmost to integrate them, where appropriate, into our strategic plan for South Africa and indeed, our many global operations. We do believe that we can encourage positive change and the improvement of worker’s lifestyles by being proactive, respectful, and cognizant that change is rarely rapid.
  1. In your judgment, does the management of a company have any responsibilities (i.e., duties) beyond ensuring a high return for its stockholders? Should the management of a company look primarily to the law and to the rate of return on its investment as the ultimate criteria for deciding what investments it should make? Why or why not?

In the world of contemporary business, most especially in the era of globalization, corporate management, particularly management of large, multinational organizations, does have a dual role. They must balance the needs of the stockholders and profit with a more globalistic approach to moral and ethnical behavior – considering both human and natural resources. The first significant step is to establish a corporate mission statement and strategic plan that takes into consideration the many facets of modern life: responsibilities to employees, to stockholders, to the environment, to the communities in which the business is located, to customers, to the countries in which it has operations, and to the overall general welfare of the planet.

Will all of these needs always be the same – a decided no. However, the older paradigm of the capitalistic giants of the late 19th century is neither longer appropriate, nor long-term profitable. Resources are dwindling, and it is the intelligent use of those resources that will ensure the longevity of a modern corporation. Clearly, it is important that the company remain profitable – the work profit is not evil – it simply implies that there will be a company that will continue to employee workers, service clients, and be there the following year. However, it is also important to temper that with a profit versus an egregious profit. Does a company need to ignore the health and welfare of employees, polluting the environment, investing in technology, expanding to developing countries without a care to the mid- and long-term effects these actions may have. Certainly not – it is the temperance of profit and ethics that is the operative mindset for the modern executive. Too, the modern investor is looking for a more ethnical pattern of behavior, as well as a more global, and ecological, view of business.

References:

Batten, J., et.al. (1999). “Factors Affecting Ethical Management,” Journal of Business

Ethics. 19, 1: 51-9.

Carroll, A. (2000). “Ethnical Challenges For Businesses in the New Millennium:

Corporate Social Responsibility and Models of Management Morality.”

Business Ethics Quarterly, 10, 1: 33-42.