What is the responsibility of a business or corporation? Is it to meet stakeholder expectations and follow legal guidelines, or is there a higher responsibility? While Milton Friedman asserted in his famous essay that “the social responsibility of a business is to increase profits,” it can be argued that companies also have higher moral responsibilities. The question in each ethical dilemma is, “To whom do we have a moral responsibility?”
In this module, we will analyze the Chiquita Banana terrorism case and apply legal, ethical, and international perspectives, as well as analyze the managerial and public policy implications of Chiquita’s actions.
•Background - Chiquita Banana Terrorism Case
•Managerial and Public Policy Implications
Background - Chiquita Banana Terrorism Case
Chiquita Brands International, the well-known banana supplier to the United States and abroad, had an incredibly profitable venture in Colombia since 1899. The company’s presence in Colombia contributed almost $70 million annually to the local economy, and had generated about 12,500 jobs.
However, the presence of long-standing civil war, unrest and drug-trafficking in the country led to the emergence of paramilitary groups—illegal armed groups whose stated purpose was to protect themselves and others from violence by guerilla groups. These groups often demanded extortion payments from multinational corporations.
In 1997, Chiquita’s South American subsidiary began funding Autodefensas Unidas de Colombia (AUC), a paramilitary group that made a deal with Chiquita to protect the company’s local employees from murder and violence in Colombia in exchange for “security payments.” The payments were not acknowledged on Chiquita’s books until September 2000, when an internal investigation by Chiquita of its South American arm revealed the payments to the company’s board of directors, who decided that since the extortion payments were legal in Colombia, they would continue to pay for the safety of their employees.
In September 2001, the U.S. government designated AUC as a “Foreign Terrorist Organization,” thereby making it illegal for the United States or any U.S.-based company to conduct business with the group. Chiquita, however, continued making security payments to the group.
It wasn’t until February 2003 that Chiquita came across AUC’s federal terrorist designation. Chiquita contacted outside legal counsel, who advised tham to stop payments immediately or report them to the Department of Justice. Chiquita contacted the DOJ in April 2003 and admitted that it had made illegal payments to the paramilitary group.
The Department of Justice listened to Chiquita’s concern for their employees, but ultimately ruled that “the payments were illegal and could not continue.”
Chiquita was conflicted by the ruling, recognizing that, though it would be breaking the law, employee lives were at stake. Chiquita ignored the DOJ’s ruling and continued to make payments.
There are several factors that need to be considered in the legal realm with regards to Chiquita’s continuing payments to the AUC after finding out that it had been deemed a blacklisted terrorist organization by the Department of Homeland Security. A good framework for the discussion of legal structure of this issue is to look into how the facts of the case relate to the four militating and two mitigating factors that are a part of the Federal Sentencing Guidelines for Organizations:
The four militating factors are:
•the involvement in or tolerance of criminal activity
•the prior history of the organization
•the violation of an order
•the obstruction of justice
The two mitigating factors are:
•the existence of an effective compliance and ethics program •self-reporting, cooperation, or acceptance of responsibility
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