12-01087 - Mai Nguyen Hoang Nam - MGT 642 - Final Paper
12-01087 - Mai Nguyen Hoang Nam - MGT 642 - Final Paper
12-01087 - Mai Nguyen Hoang Nam - MGT 642 - Final Paper
COURSE TITLE:
Business
Sustainability, Ethics
and Social
Responsibility
COURSE CODE
MGT 642
[Final Assignment]
UBIS
AUG, 2021
Executive Summary
For every business, it is very important to ensure business sustainability, ethics and social
responsibility. Although there are theories and specific guidelines for these problems,
however, sometimes the actual situations are much more difficult.
The situation of case 17: "Chiquita: An Excruciating Dilemma between Life and Law"
(Carroll, 2016) is one such case. It is difficult to answer the question: If you were the CEO of
Chiquita, how would you make decisions? Was Chiquita justified payments in making the
extortion to protect its employees?
This final paper will analyze the above problem through the issue/problem identification;
analysis/evaluation and recommendation. The knowledge of subject MGT 642 - Business
Sustainability, Ethics and Social Responsibility - will be applied to this analysis. Hopefully
after the analysis, we will have a clearer view and be better prepared for similar situations in
the future.
Acknowledgement
First of all, I would like to thank Dr. Pham Quang Vinh for enthusiastically guiding me on
how to do this analysis. Besides, I also want to thank the students who have been very
enthusiastic in exchanging and discussing with me. Thanks to everyone, this analysis became
clearer, allowing me to explore many deeper aspects. Sincere thanks everyone.
Sincerely,
Table of Contents
1.2 What are the major overriding issues in the case ............................................................. 6
2. Analysis/Evaluation ............................................................................................................. 8
2.3 Evaluation....................................................................................................................... 14
3. Recommendation ........................................................................................................ 15
4. Conclusion ................................................................................................................... 18
References ............................................................................................................................... 19
List of figures
Figure 1 The Stakeholder View of the case Chiquita .............................................................. 12
The key issues in this case include: law, social responsibility (which here is responsibility to
employees directly and indirectly) and business ethics.
As for the law: At first, Chiquita didn't know the AUC was a terrorist organization. They
argue that part of the cost of providing this AUC is simply the cost of doing business and
protecting its employees. However, even after the US government declared the AUC a
specially designated terrorist organization in 2002, Chiquita continued to pay these fees to the
AUC. If complying with the law here is the law of the United States, it may cause direct or
indirect harm to workers, workers who are not protected in time. If Chiquita were to fund the
AUC, it would be both illegal and potentially dangerous somewhere in the world.
For social responsibility: Failure to finance terrorist forces may result in the death of
employees. But if you finance terrorists, thousands of other people (not part of the Chiquita
company) are affected. After years of committing crimes with funding terrorist groups, they
have spent years working on social responsibility initiatives including the Better Banana
Project.
For business ethics: If Chiquita quit doing business in Colombia, the workers and many
people involved will lose their jobs.
Immediately after the AUC was listed as a terrorist by the United States, a member of
Chiquita informed his superiors. In 2003, Chiquita consulted, including with attorneys, to
learn that payments to fund this AUC were illegal. However, they continue to pay for the
AUC.
By turning herself in, Chiquita took the path of liability. In February 2003, Chiquita decided
to report this information to the US Department of Justice. The US government would not
have known these expenses had Chiquita not turned himself in. Paying terrorist groups gives
them more resources to harm others, so stopping all payments would limit that.
The US government considers these terrorist payments to be illegal. Thus, the Chiquita
company faces the ethical dilemma of whether it should protect its employees but provide
money to a terrorist organization, or not provide money to terrorists and have potentially put
their employees at risk. Regardless of their motives to keep their employees safe, it is illegal.
Another question this case addresses is the fact that other corporations and businesses are in
the same predicament as Chiquita, such as Coca-Cola or Nestle and nearly 50 others. But
why is only Chiquita condemned? Overall, this case calls into question Chiquita's ethics and
what else they could have done to avoid it.
Clearly, there is a gray area in the problem. The company could have informed the authorities
about the illegal and deadly cases they were dealing with, but they chose to wait and pay off
dangerous terrorist groups. This can make it more likely that the situation could be averted
immediately rather than getting further involved in it. The clearing of these terrorist groups
makes them a greater threat to harm or take over new businesses or people in the future. The
main question this case raises is where is the government in this area? Should Chiquita report
the threat sooner, and possibly put employees at risk if no one addresses it or stays the same?
Everything has its two sides.
It is clear that the Colombian authorities have not done enough to stop these terrorist
organizations. Armed conflict in Colombia has dragged on since the 1970s. Rich drug cartels
have helped Colombia balance the trade by generating a large and steady stream of foreign
currency, mainly US dollars. On the other hand, drug leaders also destabilize the government.
These criminal groups have only begun to show signs of diminishing in President Álvaro
Uribe. Therefore, the weak government in Columbia during this period allowing terrorist
groups to run rampant is also one of the reasons for the above consequences.
In addition, the US government did not know these payments until Chiquita announced them.
And also did not see any documents guaranteeing that the US government will protect
companies after declaring AUC as a terrorist organization. So part of the US government's
responsibility is to take action to protect companies from these terrorist groups.
Another issue is that in June 2007, a group of Colombians filed a lawsuit against Chiquita
under the Alien Tort Claims Act and Torture Victims Protection Act in US federal court. The
plaintiffs allege that the money Chiquita paid to Colombian paramilitary organizations during
this period made the company complicit in extrajudicial killings, torture, forced
disappearances, and crimes against species people and war crimes in the Chiquita banana
growing region of Colombia. The court said it had no authority to review the claims because
all of the acts involved took place outside of the United States and Chiquita's mere presence
in the United States did not confer jurisdiction. (Stempel, 2014).
2. Analysis/Evaluation
As for Chiquita itself, the organization has invested a lot of money in Colombia over the
years. Furthermore, they have built a support network of ordinary workers, carriers and
suppliers that cannot be easily left out. So for these situations to happen, the company is
under a lot of pressure to maintain its operations while providing protection to members of
staff. Paying paramilitary organizations helps to ensure the safety of employees, keeps
production operations uninterrupted, thereby generating more revenue and stability. This
decision seems unfair, as protecting some comes at the cost of growing hostility towards
others. Those who worked on the plantations were largely, but not completely, protected,
while those outside the plantations were now in even more danger because paramilitary
organizations had more resources than before. In the end, Chiquita sold the banana
production facilities in Colombia in June 2004 at a loss of $9 million, as well as paying a fine
of $25 million to the US justice department to settle the matter and get itself out of the way
out of a difficult situation (Carroll, 2016).
Chiquita employees at both management and customer service levels are key stakeholders
because they are directly impacted by any move Chiquita makes. The employees and their
families played an important role in the fact that their lives were at the forefront of these
negotiations. Examples include the murder of 28 innocent workers on their way to work, or
the case of two workers being murdered in front of their colleagues (Carroll, 2016). This
hurts employees, affects their work productivity and morale. Continuous threats have forced
the company to take countermeasures. Hiring paramilitary forces to protect employees is, in
business terms, an effective way to help overcome the security challenges of doing business
in volatile areas like Colombia. This helps build trust in the workforce that the organization
cares about their safety and well-being. Furthermore, it will be an indication of their
importance and value to the company's operations.
Chiquita's board of directors - one of the parties involved - handled the case in a non-
proactive manner. Once they become aware of AUC payments, they should take immediate
action. They learned that the AUC was designated a terrorist organization in 2002. They
waited for the following year until a board member objected to the payment of a terrorist
group. Then they did what they should have done in the first place and confessed. Continuing
to give money to the AUC after the US government announced the list of terrorist
organizations encouraged these terrorist organizations to continue to threaten Chiquita. As
CEO, Fernando Aguirre did the right thing, but it was not enough. Despite admitting
wrongdoing, Aguirre insists that the company cannot give up its workforce especially when
they are faced with such serious problems. That way, he builds the case for payments
systematically and convincingly. Aguirre's public statements make readers sympathetic to
this organization. But everything should have been made public by him sooner, and thanks to
the legal intervention to help the company save a lot of money.
One of the most affected stakeholders is the local community (Colombian people) as they are
the indirect beneficiaries of the payments Chiquita makes to the paramilitary army. On the
plus side, the benefits that rural communities receive from improvements in agriculture, more
jobs created, and Chiquita's spending on taxes and other local related activities are very big.
If Chiquita leaves the market, they will lose the above. In addition, Chiquita has improved
water quality, established recycling and safe waste disposal programs, significantly reduced
chemical use, and improved the quality of life of workers at all sites camp (Alliance, 2016).
This helps the agricultural sector in the region to transform in a more positive way –
something very important for the top exporting countries of bananas. New and modern
agricultural tools have improved the quality of life of workers.
However, aside from those positives, the people of Columbia are the ones paying the heaviest
price in this negotiation. Chiquita indirectly assisted the AUC in expelling thousands of
Colombians from their homes. In turn, they are a big threat to Chiquita because they need
someone to be held accountable for what they've been through. Victims and their families
have the right to demand justice. The victims and their families in the terrorist acts of the
FARC and AUC subsequently went on to sue Chiquita. They strive to bring justice to those
responsible for their suffering and loss. The challenge here is that Chiquita is the party that
indirectly (rather than directly) causes that pain with the Chiquita company's money to pay
for terrorism.
Groups like AUC, FARC are the main stakeholders because they are the ones who pose
threats to Chiquita employees and also get money back from the company. Not only with
Chiquita, but these paramilitary groups also collect money from many other companies for
their activities. It can be seen that the political situation in Colombia during this period made
paramilitary groups grow strong and uncontrollable, threatening the interests of many
companies. And it is the funding that has helped these organizations grow stronger, more
difficult to control. The AUC significantly increased its numbers and firepower, raised its
political profile, and infiltrated Colombian institutions. The employees’ complaint suggests to
Chiquita's connection to the FARC may have been more proactive than just paying for
protection, and alleges that Chiquita used its network of local transportation contractors to
ship weapons to customers group (Carroll, 2016).
The US justice system is also another major stakeholder. The US courts appear to be in a
dilemma as these payments are supposed to protect the lives of Chiquita employees.
However, the decisions made show that their view is that funding a terrorist organization can
never be seen as a cost of doing business, that's a completely different category - they are
crimes. That seems to be a warning to other businesses, even if such behavior occurs outside
of the United States. Court fines should come at a premium to prevent any repetition, but
should not be exorbitant as it could lead to the company filing for bankruptcy. Such
developments are counterproductive. However, the local people's movement to hold the
company accountable in relation to FARC was then not allowed to proceed because it was
not within the control of the group's activities. These gang members have their own command
structure responsible for kidnappings and other evils. Therefore, Chiquita, being a victim of
the cult's coercion, should not be seen as an accomplice to such acts of terror. In addition, the
Justice Department prosecutor stated that it was unethical to pay terrorist groups, which
increased competition between Chiquita and contemporary brands.
The Columbia government is the stakeholder responsible for the expansion of terrorist
groups. The hostility present in Colombia endangers the lives of both natives and foreigners,
thus making these payments necessary. Some members of the Colombian security forces,
including senior officers, cooperated with the AUC, while many others simply turned a blind
eye to its atrocities (FOIA, 2018).
Social groups like the Rainforest Alliance are stakeholders because they chose to work with
Chiquita even though they did not know Chiquita could indirectly cause so many innocent
deaths. They can be a threat as they can impact other stakeholders such as customers in
different schemes.
Chiquita's investors certainly do not want this. Making payments to terrorist groups without
notifying government officials has exacerbated the complexity of the Chiquita case in
Colombia. This raises doubts in the minds of investors about expanding their business in
Chiquita.
And it is clear that Chiquita's consumers are also involved because they have been blindly
following the company without knowing what's going on and what deals are being made
behind closed doors. The Better Banana project offers consumers a strong choice.
They also have a legal responsibility to report threats from terrorist organizations. After
learning that AUC was on the list of terrorist groups, Chiquita continued to pay this
Chiquita also has a responsibility to the communities in which it does its work. They achieve
this by responsible sourcing, employee training programs and volunteer opportunities. The
company has also spent considerable time and money on training programs for workers,
housing, schools, kindergartens, and health and safety for employees and their children
(Alliance, 2016).
Through the Better Banana Project, Chiquita Farms adheres to strong environmental and
social standards, having a positive impact on rural communities and tropical landscapes. The
area's water quality has also been improved by Chiquita, while establishing safe waste and
recycling programs, dramatically reducing chemical use and improving the quality of life of
workers at all sites. All farms are owned by the company. 100% of Chiquita's farms in
Columbia are Rainforest Alliance certified. 90% of Chiquita bananas are sold in Europe and
two-thirds of the company's bananas in the US market are certified by the Rainforest Alliance
as meeting standards for rainforest conservation, wildlife protection, and conservation. land,
waste management, and workers' rights. Chiquita has also invested tens of millions of dollars
to implement recycling programs and afforestation projects, and to establish measures to
conserve soil, protect rivers by establishing water purification systems, design safer and more
comfortable packing plants (Alliance, 2016).
In 1995, the Better Banana Project received the Peter F. Drucker Prize for Nonprofit
Innovation.
2.3 Evaluation
The allegations that Chiquita provided material support to a terrorist organization exposed a
grim underworld of corporate protection money given to Colombian armed groups accused of
kidnapping, murder and displacement innocent civilians.
I think Chiquita did the right thing, even if they paid the terrorist before. The company's main
priority is to ensure the safety of its employees. I was convinced by the company's claims that
it was trying to regulate whether it violated US law so that it could save the lives of its
employees. The company feels that they must protect their workers even if their actions are
against the law and then they are willing to confess what they have done.
Selling its farms at a loss of $9 million was the best thing to do as it minimized the risk of
employees and helped them avoid unnecessary expenses. As a result, employees in other
areas of Chiquita are more engaged and committed to the company's vision. Chiquita's sale of
farms at a loss is a move that benefits the company's reputation. It helps Chiquita look
transparent and innocent.
The company had to make a difficult choice, and many would argue that they made the
wrong choice. However, I believe that the company's motivation is to protect its workers, and
while I disagree with the methods they have taken to achieve this, I cannot blame them for
wanting to do so protect innocent lives.
However, in the first place, they should have had better handling and other measures to deal
with this payment problem. Management should have stopped the payments and moved
operations as soon as they heard about it. Chiquita's board of directors is not interested in
finding a permanent legal solution to the problem affecting the corporation. By not taking any
action after the board members have been briefed on the payments, they are complicit in an
illegal act.
Chiquita is a socially responsible company, but once they get into this situation, they have to
take on the image and personality of a large corporation to survive. They are all human and
they made a mistake with a decision that was too big for them to handle on their own.
Chiquita is indeed a company that forms regular partnerships with active teams and is good at
keeping their stakeholders engaged, but ultimately leaves them out and needs to make
decisions they were not prepared to make.
3. Recommendation
- Chiquita needs to withdraw from Colombia and the surrounding area immediately to
cut off communication. The crux of this is that it is likely this will not stop terrorist
threats and could even make them angrier.
- The company must issue an apology to the public for the actions they covered up.
Chiquita is not justified in making blackmail to protect its employees. All they have to
do is solicit support from their protected employees and everyone else to sympathize
with their behavior. The advantage of this is that this is seen as doing damage control,
regaining the favor of being a good business, getting sympathy from the public, but
the difficulty is that they will have to be transparent about all the details minutiae no
matter how bad it makes them look.
- At the same time, they need to apologize to any groups they have collaborated with.
This is a professional act by large corporations, showing that they will take
responsibility for what has been done, but the difficult thing is that they can lose their
partnership with these groups.
- In the short term, Chiquita should agree on how to respond to the media crisis. The
company needs to inform shareholders that the company's situation may be bad in the
near future, but it will be over quickly. At the same time, the company needs to have a
scenario for situations that may arise. This helps the company respond to the crisis
better, stabilize inside the business to focus on responding to external influences.
- In the long term, the company should develop a criterion when investing abroad and
ways to deal with similar situations in the future. This helps Chiquita quickly respond
from the beginning, avoiding a crisis by learning from the past or minimizing risks.
- The government should urge companies also in Chiquita's position to come forward
and acknowledge being threatened. Chiquita isn't the only company where the lives of
employees are threatened in the region. While this can put employees' lives in
jeopardy, ultimately it is up to the government and the law to decide how to handle
these situations, and they say compliance with terrorist threats father is unacceptable.
The advantage of this is that it helps businesses trust the law, trust the government
more (if the government handles it properly) and will be easier to open up if there are
similar cases. At the same time, prevent more innocent people from being injured and
ensure that businesses follow the law to avoid complying with terrorists. The problem
is that many businesses may end up with a tarnished reputation, and will also fear
retribution from terrorist groups.
At the same time, Chiquita should provide information related to AUC organizations such as
payment methods, locations, forms, etc. all information useful to the US government to
destroy these terrorist organizations. These actions should be kept private instead of public
because they can make terrorist organizations angry and retaliate.
The $26.7 million the company paid for terrorism and fines could have been saved and used
to fund another production site that promotes safety for anyone who wants it participation. If
Chiquita really wanted to protect their employees, the $1.7 million given to terrorists could
have been used to hire security companies to escort employees between the agency and their
homes, as well as protect them protect their factory. However, this is just a personal
perspective. We really do not know how complicated the situation in Columbia is like
Chiquita faced.
Chiquita could conversely demand that the US and Colombian governments protect their
employees from terrorists if they stop paying these costs. This shows that their situation is a
dilemma. If the governments of the United States and Colombia do not guarantee Chiquita
employees, their payments cannot be considered illegal. If the government can ensure the
well-being of Chiquita employees, they can continue to do business and not need to sell these
farms at a loss.
Chiquita could also quietly withdraw from Colombia without notice of payments to the US
government. If they are truly repentant and socially responsible, this could save them a $25
million penalty fee. Since this huge fine does not seem to help Chiquita solve the problem,
the US government does not use this money to support the victims (document not found). If
they did not publish the above information, they would probably still retain the image of a
typical socially responsible business. However, there is a risk that if this information is
disclosed, it will greatly affect the business many times over.
4. Conclusion
From the above case, it should be remembered that it is not possible to negotiate with terrorist
groups. This only encourages additional terrorist activity, which is undesirable from an
economic, legal and ethical perspective.
When a person sets up a company in any country, they are obligated to follow the laws of that
country. This is despite the circumstances they face when undertaking their ventures. At the
same time, the state also has a duty to protect businesses from terrorists.
The consequences of our actions are unpredictable. Decisions often have to be made with
incomplete information. The predictability of the utility may ultimately ignore the primal
considerations of the situation.
References
Cohen, S. (2015, April 10). The Supreme Court Needs to Decide: Can Victims Sue Chiquita
For Sponsoring Terrorism? Retrieved from https://newrepublic.com/:
https://newrepublic.com/article/121506/supreme-court-should-take-chiquitas-
terrorism-sponsorship-case
FOIA. (2018, December 21). https://nsarchive.gwu.edu/. Retrieved from The Chiquita 13:
Profiles of Banana Officials Accused of Crimes Against Humanity:
https://nsarchive.gwu.edu/briefing-book/colombia-chiquita-papers/2018-12-
21/chiquita-13-profiles-banana-officials-accused-crimes-against-humanity
Jansen, B. (2013, July 25). https://www.burojansen.nl. Retrieved from Chiquita & Myth of
Corporate Social Responsibility: https://www.burojansen.nl/observant/chiquita-myth-
of-corporate-social-responsibility/
Rivera, E. d. (2010, Set 23). History of the paramilitarismo in Colombia. Retrieved from
https://www.scielo.br/:
https://www.scielo.br/j/his/a/tg74msZHyzjy6BMnmVCfjhn/?lang=es#