Case Study #4 – A South African Investment Organizational Ethics May 9, 2011 Case Study #4 – A South African Investment 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 were involved? The general reason businesses seek to conduct business in other countries is for increased profit margins or some other type of tax break. Caltex was no different. Depending on what perspective one chooses to examine, whether Caltex’s utilitarian benefit is more important than violations of moral rights and justices is subjective.

From a profit standpoint, Caltex’s building and expanding made sense because their existence as a business alone would not politically change apartheid laws that had been in place since 1948. Twenty five percent of the South Africa’s economy relied on the energy sector. Foreign dollars is what the government of South America wanted for its economic stability and in exchange Caltex would be able to conduct business with an attractive profit margin. Apartheid as a political institution inflicted great distress on blacks (80% of the South African population) and violated their human rights.

However, Caltex wasn’t conducting business in the name of apartheid, but was going to be partaking in that political institution by its mere existence in South Africa. Not building in the name of abolishing apartheid to give blacks freedom wasn’t going to instantly change the minds of the government and make them stop immediately as the roots of racial inequality ran very deep and long: therefore, not doing business in South Africa would not have politically given blacks any more freedoms than they had before.

I am not convinced that Caltex’s direct goal for building in South Africa was to even approach these political issues. However, I do think though, that from a utilitarian perspective, to conduct business in South Africa, with all of its enormous issues, Caltex’s decision to build would benefit all over the harm it would cause, in the long run. Caltex could stand to benefit by mere expansion, yielding high profits while giving foreign dollars for the South African’s government’s goal while increasing capital into country in high inflation.

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Caltex building in South Africa would help the black majority afford more of everyday costs due to additional jobs it created for them. As a matter of fact, Caltex added 60,000 jobs by 1977. In general, because Caltex was going to follow the Sullivan code of conduct, Caltex would assist blacks in obtaining a “beginning” in the road to political freedoms and fair treatment. Caltex had insisted on equal pay for equal work, and the advancement of some into higher level jobs furthering equality for blacks and getting the South African government to give in to the furtherance of the human rights of blacks.

Additionally, foreign aid allowed for less retaliation on blacks. Conversely, from a moral standpoint alone, not expanding its productions to South Africa would not advance the objectives of apartheid, but it would contribute to the regimes cause. Whenever the government didn’t get what they wanted, blacks were retaliated against. Caltex, by not building, would have not given the government or South Africa’s military foreign aid, thereby enabling the oppression of apartheid laws to continue, and mostly likely, the victims would be the blacks of the nation.

This factor alone would make it immoral. Additionally, the whites would have lost revenue as well. What must be understood is that apartheid in and of itself was a violation of rights: apartheid unfairly apportioned burdens to blacks and gives benefits to the whites. In order for Caltex to morally justify doing business in South Africa, it need to insist that fairness be exercised in apportioning equality between the races.

Additionally, if Caltex were to build or not to build, there would still be violations of justice – blacks would still not be given freedoms and be disrespected as human beings. In my opinion, from a strategic perspective, it would be more important for Caltex to count up the costs against the violations and determine the benefits in the long run for all concerned. When and if management would assess this issue from a utilitarian perspective, negotiation could take place in such a way that there is an exchange for the betterment of all, hereby giving blacks more rights, more justices, more opportunities and all the while benefiting the South African government to make money (which is what they wanted), in turn giving unto the white population as well, the wealth and power it seeks. Management knows that it cannot solve the problems of apartheid that is so deep-seeded and engrained in a society. Its job is not political but rather business. Yet, it can begin to peaceably assist in giving the government what it wants and in exchange advancing the cause of blacks to human rights and justice.

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)? What kind of responses should the managers of Texaco and SoCal have made to each of the three resolutions? When a company comes into a country to do business, it cannot insist that everything go its way or else as this generally is not enough to force the hand of the government to make drastic changes, if any at all. Each side needs to bring something to the deal for it to be amicable. In this vein, regarding Caltex terminating operations, I would have voted from a purely moral perspective, to conduct business in this country is immoral because its government is immoral. However, I know that my company alone and its business performance thereof would not have stopped apartheid.

What it could do is assist in supporting the wishes of the black population in an attempt to get equality and acknowledgment of rights. Caltex could bring to the table foreign aid, the necessary oil energy South Africa needed, and continued growth, thereby furthering the South African economic issues. In turn, the South African government could allow Caltex to pay equally for equal work, allow the education of it black citizens, and lift certain laws that inhibited rights of blacks. With all of this in mind, I would not vote for Caltex to pull out, as the future benefits to all would be positive.

Managers should have voted to stay in the building process with concessions that certain humane treatment of its employees be a condition of business, keeping those profitable figures in the government’s eyes as they were purely motivated by greed. * In regards to Caltex implementing the Tutu principles, I would have voted yes to implement Tutu’s principles. Caltex being such a large part of the South African business that I believe South Africa would not have allowed this revenue stream to go away so quick. And with it, would have been other countries, I believe, pulling out of South Africa for better conditions for blacks.

It was in Caltex best interest to assist in humanitarian efforts of its people. Further, in order for management to further its goal of shareholder profits, management needed the South African government to understand that dignity and respect were part of the Caltex culture and goal towards its employees. The Tutu principles would give Caltex’s employees greater motivation to produce as they would feel that they were gaining ground, thereby increasing profits for all. In regards to Caltex selling to the military or police, selling to the military furthers the cause of the apartheid regime and the countries military goals.

However, by not fueling its energy needs would in no way abolish apartheid. Therefore from a moral perspective, Caltex should not do business with South Africa to further the apartheid way. What leadership should do of Texaco/SoCal is to engage in a peaceable discussion that Mr. Tutu would have loved, to negotiate conditions of doing business with the military or police and that entity to stop torturing its black citizens. I think negotiating for the cause would assist in starting a better pulse in the country for all.

Management would pursue profits and bring about a work standard, though against the law, would cause the South African government, in the name of revenue, consider humoring Catlex’s need for human rights. In your judgment, does the management of a company have any responsibilities (i. e. , duties) beyond ensuring a high return for its stockholders? Generally a manager’s allegiance is to its shareholders, not the political ideals of a foreign country. However, it must be aware of the impact of a foreign governments political goals and how they will impact business if it were to be conducted in that country.

A business is generally in business to make money. As a multinational company, doing business in a foreign country comes with its own rules and conduct, whether moral or not, a business would have to accept, or not go in business in that country. I do believe that a business needs to uphold a certain ethical treatment of people in the name of profit. If not, dehumanization and sweat shops would be operating at a much higher rate than even it is today. Therefore, managers need to ensure that business is conducted with fair practices and in a humane manner while obtaining profits for shareholders.

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? Business managers do business in the interest of profits, but at what cost? Businesses are not in business to solve all of the social problems of the world, however, in the name of business, I don’t believe it is ethical to further the cause of an inhumane, degrading policy in the name of profit and not take some type of action to begin to change the course of how business will be conducted in such a situation as Caltex.

Managers have to look to the law as not to jeopardize its business in a legal way, but not in such a way that companies don’t do any good will actions to absolve issues. Doing business with blinders on because the rate of return is so good that the business will ignore the injustices and violations of rights is wrong as well. Therefore, I believe that a business venture, especially in the 21st century, needs to assess ethical and moral issues as well in the name of business.

The world right now is more socially aware of inhumanity, thereby, a successful business needs s to demonstrate its ethical position in the name of profits for all to see. Obeying the law is critical to business success, and profits are key to successful business, but not to the overall demise of a society. It is critical to consider all of the costs, not just the law and monetary gain. References Velasquez, M. (2002). Business ethics: concepts and cases. Upper Saddle River: Prentice Hall


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