Analysis Of James Hardie - Social Contract Analysis Essay

Question:

Describe the Analysis of James Hardie for Social Contract Analysis .

Answer:

1 – Stakeholder’s Analysis:

Stakeholder Group of James Hardie

Corporate governance responsibilities owed

Shareholders

This is basically the main reason for any company to exist. There is a considerable amount of money that is invested by the investors and a company must return that investment with a considerable dividend linked with it. The Corporate governance is critical because based on that the shareholders and investors can make a sane decisions towards investments (Howell, 2012)

Employees

Employees are the one who contribute towards the growth of the company and they work towards the stakeholder’s dividends. They are very important part of Corporate Governance as they need to know where their hard work is heading towards and what is the current as – is state of the company (Botha, 2015).

Investors

They are the most important reason that the company is always up and running and is able to be operational even in crunch situations. The investors always need to the governance and compliance standards of the company and hence they can make a rational choice towards investments to be made (Ayuso, 2007)

Public & Society

This is seldom ignored by the company but ultimately all the resources that are used by the companies have come from the society and hence they are liable to show the correct level of governance and standards to the general public and hence a clear image (Hayes, 2012)

Directors & Senior Management

Many have an opinion that they are an internal stakeholder of the company and hence the governance clause is not applicable but they have the responsibility to check the correctness and see the operational wellbeing of the tasks related to the regulation and compliance (Mckinsey, 2010).

Mine Workers / Factory Workers

In this case there is strong responsibility towards the mine workers so that they are properly aware of the fact that what are the risks that the job officers to them and based on that they are able to make a better and more detailed choice. If that is not in place then it needs a lot of restructuring (Kramer, 2013)

Law & Governance

The Law and Governance is there to define the standards of the work to be followed with respect to the regulatory compliance that has to be in place. If these are not in place then overall the company is not complying with main law and hence they are misguiding the people at large (LawQuest, 2015)

Subsidiaries

The subsidiaries working and operations are the responsibility of the main company and hence an important stakeholder in this assessment. This have a very long impact on relations and image.

2: Key Corporate Governance Issues:

ASX Principle

Key corporate governance issue corresponding to that ASX Principle

Lay solid foundations for management and oversight (ASX_Corporate_Governance_Council, 2012)

This is a huge principle lapse as the company’s performance and image is more dependent on the performance showcased by the top management people. Like in the earlier days when it was known to the management that Asbestos is not something that is good for the health of the people not just inside the company but outside as well. There is a need for the alarm to be raised by the management people and immediately stop the production and operations related to Asbestos but since the company continue to do the same and hence it is a lapse of the given ASX principle and that will have a huge repercussion for the company.

Promote ethical and responsible decision-making (Beck, 2014)

This is another lapse since there is no way can the decision of producing asbestos be deemed as ethical either from the business ethics point of view or the moral ethics point of view. The detailed discussions about the same will be done in the coming sections. But the ethics are considered either from utilitarian or deontological point of view. But there is no such point of view shown by the company by which they are trying to be ethical about their deeds throughout. This is a very serious violation and hence it is required to be very strictly executed so that things are managed properly without any lapses.

Make timely and balanced disclosure (James, 2010)

This is a lapse that is shown by the company when they didn’t disclosed the critical things and information related to their subsidiaries and other sister concerns. This lapse is both from the financial and operational working perspective, which is just not able to manage the burden of the losses incurred. The forged figures were just not correct to be able to cover the wrong deeds of the company and further manipulation turned things to be even worse. This violation is an extremely critical one and needs through attention by the company of they want to score in compliance points. The management is very important as it will improve the image of the company

Recognise and manage risk (ASX_Contracts, 2012)

The risk was recognized long back, what is leading to the issue is that the company was unable to curtail the effects effectively and worst is that even after knowing the issues they continued it. This is a very serious violation of the ASX Principle and hence needed to be managed properly and very effectively. This is not just a single law breach, but a bundle of breaches. Since the ban of some element is there as it can cause harms. If that element is still in use, then it is posing issues for the company and also health issues and risk for the users and hence that is something that needs some thorough introspection at the beginning itself so that it does not pile up at any point of time.

3: Compliance to Corporate Governance Issues:

ASX Principle

Actions company should have taken to comply with the ASX guideline

Lay solid foundations for management and oversight (ASX_Corporate_Governance_Council, 2012)

The management could have taken some serious steps towards a few things. The first one is the direct ban on the use and production of Asbestos and the second one is to invest some good amount of money towards the research and development of the material that is suitable as an substitute to Asbestos. In this manner it will be lay a solid foundation for the management and it will also generate a through confidence in the company that will ensure that the things are going on in the proper supervision of the management people and hence this supervision will also ensure that the things are followed in compliance to the actual requirement of the statutory and law.

Promote ethical and responsible decision-making

The ethics in every aspect of decision making is very important. Starting with the regular moral ethics that is the ethics of Utilitarianism is to be implemented that raises the bar of ethics in the company and some strong of code of conduct rules are to be involved in the decision making from business ethical stand point. The management must be able to bring the choice on the table about what is the best way to go ahead in every situation.

Make timely and balanced disclosure

This disclosure and correct information sharing is something that will not just keep them active in the compliance category but also for the betterment of the image of the company both internally and externally. If the company is able to show the correct information with the stakeholders, then the confidence in the company increases and hence that will lead to better management in place. This is the foremost and the easiest step that can be taken by the company to be assured that the things will fall in place correctly.

Recognise and manage risk

The risk management and recognition is again a leadership level trait that is to be followed properly. If the risk recognition happens at an early stage, then that is not enough, the management must be able to take necessary steps to ensure that it does not pose any risk to the operations or working in the company.

4 – Long term interest of the Stakeholders:

Stakeholder Group of James Hardie

How long term interests of stakeholder groups were affected or exacerbated

Shareholders

The interest of the shareholders were not affected much as the company is continue to produce the cost effective product in the unethical manner. This may not be good for the society overall. But for the shareholders the money was flowing in uninterrupted. This is the big advantage that the shareholder will experience throughout (Tony, 2014).

Employees

For the employees working in the offshore were not affected much. The impact was more on technical people and that will be discussed later on. The only impact would be that they have to be associated with a company that may tarnish their image in outside world that may have an impact on the career.

Investors

For investors the impact is huge as in the long term when the company has accumulated so much of liability for them in the form of NGOs and support companies, the money will be flowing there and that is going to impact their returns and hence it can be deciphered that their money is not getting utilized in the intended manner (OECD, 2013).

Public & Society

They are the big losers as even after giving so much to the society they are getting a very return in the form of health hazards and that to the impact is seen at a very long term and hence a huge dangerous to the society overall. This a huge loss for the society.

Directors & Senior Management

They are also a huge losers, may not be in the short term but in the long term and the major loss is due to the tarnishing of the image that is caused by their act of supporting the misdeeds of the company and that is what will lead to huge long term loss for them.

Mine Workers / Factory Workers

The major loss bearers who are not even educated nor informed about the risk they are exposed to and how much it is hurting their health and wellness.This is long term health hazard that they are directly exposed to and this is a huge breach of social contract and corporate social ethics.

Law & Governance

They are not at loss but then there is an administration loss that is faced by them when it comes to the management of the overall industry. If one industry breaches the law for such a long time it encourages other companies to do the same thing and get away (IFC, 2015).

Subsidiaries

The subsidiaries are at loss because they are not being used for the purpose that they were built for and it tarnishes the image of the parent company and the concept of NGO as such and this is every means is not an ethical thing to practice or exercise and makes a bad impression on the society.

5: Ethical Decision making in the mid-60s:

The decision taken by the management to go ahead with the production of Asbestos is by every means an unethical decision both from the purview of business ethics and moral ethics. The reason is to understand the difference between the two and then demonstrating that the decision taken by the management is fitting in none of the definitions. The moral ethics is relied on the concept of utilitarianism and hence the decision has be taken from the point of view that it brings maximum benefit for almost every stakeholder (Swinton, 2012). Now as per the decision taken by the management only their interests are being met and the interest of the society and many other stakeholders is not met and it is about tarnishing the moral duties and responsibilities that relies on the big companies to comply with (Clara, 2012). The decision of breaking the law and not following the right thing that is to stop the production of Asbestos is by every means an unethical thing from the point of view of moral ethical situation. Coming to the business ethics, which is a bit complicated concept and people faces the cognitive dissonance as the business ethics principle is based on the concept of deontological ethics, which is the ethics of duty. Now from the point of view of the business management people, they are there to keep the business profitable and also ensure that money is flowing in timely and in cost effective manner (Gibson, 2012). This may not have been achieved if they think too much about the society, but the duty is not just to maintain the profit, there is a legal obligation to maintain a good decorum in the society at large and work for the society as they take a lot of resources from them. This is the very reason it is mentioned that they face cognitive dissonance and that leads to moral dilemma. Keeping in point both the facts of profit and society, the decision taken was thoroughly incorrect and need changes as it is not the sole way of surviving profitably and there is a need to build other competencies to be more profitable and also ethical for the society and hence even that decision cannot be treated as ethical in any terms. So the overall analysis from the point of view of business or moral ethics it is established that in any mode the decision was not at all ethical and hence the decision cannot be deemed as rational or ethical in any circumstances of business or moral ethics (Siddle, 2010).

6: Threats for sustainability:

Specific Stakeholder Group

How did actions threaten James Hardie’s corporate sustainability

Investors

The Investors are the one who have invested the real money in the company and they expect some good results from the company’s performance. There are chances that they might not care about the ethical righteousness of the company of the company at all and they pushes the management to keep on following the most operationally efficient and profitable way of business. Through this line of thought and the importance that investors hold in the company, it can be rightly assumed that they will pose a great deal of risk for the corporate sustainability of the company and will be focussed more towards just the monetary returns of the company (Eliot Metzger, 2013).

Shareholders

The shareholders are the second main stakeholder who needs the company to be performing at a profit and will not care much about the sustainability part of the business. Under that circumstance it is important that the company is able to give them good dividends to be ascertain about the cash flow and ensure that they always remain a loyal stakeholder of the company. The use of Asbestos is something that has the capability of making company profitable at the cost of sustainability parse. This is an important point that pushes most to the companies towards the unethical behaviour that they put in front of the society.

Management

The management is someone who is holding the saddle of the company and their actions will decide the future of the company. In the similar lines they have the responsibility of taking care of the investors and the shareholders and for that purpose there are loads of responsibilities on them (Woodward, 2012). Due to this they have to take some decisions that may not be in the best interest of the company but are definitely profitable and hence stint by stint they keep on piling up the wrong act and slowly it becomes the culture of the company, this leads to the flaw in implementation of the sustainability program.

Subsidiaries

The functions of subsidiaries usually have a vested interest of the company attached with it and hence that is something usually used by the companies in a very different format and manner. This is usually to hide some vested incomes and some other interests that are good for the business financials but not for the business sustainability and functions (Ctaeges, 2013). This finally creates a situation that the companies starts to project the subsidiary as a method to cover the wrong that they have done but after experiencing the benefits of the subsidiaries they ignore everything and become full-fledged vested interest mode. Hence regarded as one of the stakeholder that will not let the sustainability to pile on.

References:

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