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Chiquita Case Study

Introduction

The focus on Corporate Control or CC for the past few years has undergone a lot of shifts. Not long ago, major emphasis was put on the CC’s key characteristics and reason behind an organization’s interest in putting in effort in ‘the business case for CC’ zone. Ever since this establishment of reasoning, many organizations have convinced themselves of the fact that it is vital to consider CC and take it strategically. Boardroom agreement is less in respect to the establishment of steps for obtaining an organization’s optimal level of CC-development. In fact, a key question has arisen recently – How to go about implementing CC in a more effective and proficient way? The answer to this key question is given in a rather practice-oriented manner through this particular article. The article in section 2 – after describing the key factors of success that needs to be implemented for CC – defines a model for CC implementation, along with practical steps that Section 3 can consider. It further explains the implementation-model through the CC implementing experiences at Chiquita.

Background of Chiquita

Chiquita Brands International, Inc. Chiquita is a global producer, distributor, as well as, marketer of processed and fresh foods. More than $2 million revenue comes from bananas. The division of bananas comprises of 20000 employees that operates primarily in 127 farms originating from 5 Latin American countries – Honduras, Guatemala, Costa Rica, Columbia and Panama. 50% bananas that Chiquita sells, originates from its own farms (Altschuller, 2008). The rest of is via third party suppliers. The exports of the organization are often vital parts of the Latin American countries’ foreign trade that it runs. There is a sure-fire and fierce competition in the banana industry. In fact, in the recent years only the industry experienced a plunging pressure for bananas’ market prices. Having said all, Chiquita had surely experienced some tough financial times, which lead to a major restructuring in the financial aspect, thereby forming a new senior management by 2002 in March (Werre, 2003).

Success factors for CC implementation 

CC implementation is viewable as a specific case of a change process in an organization. Thus, through vast knowledge in literature and experience, we can determine the general organizational change for the deciphering the critical aspects of the implementation and building a model, by taking these aspects into account. The 3 aspects mentioned below are relevant equally for CC implementation:

  1. Sensitivity to the environment of the organization
  2. Value awareness
  3. Leadership clarity

Sensitivity to the environment of the organization

Organizations that lack sensitivity towards environmental development and fail to adapt according the developments are ones that will experience eventual death (De Geus, 1997). It is critical for companies to monitor different trends present in the outside world and become capable of taking the necessary actions and in the process enabling the concerning organizations to adapt to these trends. The sheer ability to recognize vital signals is determined largely by the current beliefs and values in existing with the top-management. These filter from the incoming signs and signals (Paine, 1994).

Value Awareness

Values are basically general moralities that are vital for expressing behavior. They assist people in the process of situation analysis and assessment, for ultimately making appropriate decisions. Therefore, in every organization, values heavily influence the behavior. Furthermore, in most organizations, this becomes a part of a major unconscious process because values aren’t clear.  Examples of values are respect, profit, sustainability and personal growth (Mayer, 2007).

The organization and its top management’s central values, help in the determination of change and its motives to a great extent, which results to the perception of change. This is the perception of the manner and desired situation, through which there will be a successful implementation of change:

Successful implementation of change is something that suits the management and employee values and has a clear awareness of the same.

Top level managers will go ahead with the process of CC implementation only on the basis of its strategic theme and after the analysis of its importance. The motive for starting CC will come in loggerheads with the top-management values (Diperna, 2008). Furthermore, specific types of CC, suitable for a particular organization will also vary as per dominant values; for example, complete switch to a renewable source of energy – a costly resource – will come to the forefront when there are environmental issues. If premier motive is profit, waste-prevention scheme, will result out of direct operating cost reduction. In order to acquire a smooth CC implementation in the organization, you should start from the people. Alignment of actions with values will only cause resistance (Barker, 2009).

Leadership Clarity

In this context, leadership can be described as the sole ability to:

  • Create future vision that in alignment with environmental demands
  • Communicate the vision, with the sole purpose to inspire others to act as per the vision

Leadership is an incorporation of effective handling of the 2 aspects that are mentioned above.  Furthermore, it also requires the ability of communication for paper transformation and action analysis.

These 3 aspects of sensitivity to the environment of the organization,   value awareness and leadership clarity   are important especially during the commencement stage of CC implementation that within an organization. These aspects remain relevant in order to maintain a focused energy for the complete implementation process (Srivastva, 1988).

The Chiquita case – Anchoring the change

CC Incorporation that into a business strategy – Chiquita, in 2001   integrated its CC core values and vision into its five-year business-strategy, thereby, making CC as one of the 5 premier long-term goals and objectives of the company. The strategic business decision now needs evaluation in terms of the CC criteria.  For example, the decision for the acquirement of  a new farm will only take place with prior investigation only and when it is proven that the farm is in compliance that with  the  Code of  Conduct or with a reasonable effort (Srivastva, 1988).

Internal Audits: In order to assess and analyze compliance with the social responsibilities and core values in Code of Conduct (SA800) the internal audits of 2000 that were performed in the Latin American division. 25% approximately all farm audits were undertaken and delivered by internal audit teams that consisted of senior managers hailing from different disciplines and areas of the company and they were trained externally in auditing skills. One-day audit of each farm involved local management meetings, local stakeholder interviews and extensive interviews with managers and farm workers. The compliance level, with Core Values was analyzed and assessed through the performance of value surveys, through which, workers were given ranks as per their performance in different farms. The Rank consisted of 4-point scale – Good, Very Good, Bad, Very Bad. The results were summarized from the audits and shown in the 2000 Corporate Responsibility Report (Cahn, 2008).



External Audits and Certifications: Chiquita, in 2000 achieved a major milestone, which was, the certification of 127 of its banana farms that against the Rainforest Alliance’s Better Banana Project’s standards. Out of the total banana purchases Chiquita makes, 30% comes from farms that are certified by the Better Banana Project. SA8000 Certification is not acquired; however, the goal is to achieve it by 2002.

Plan of Corrective Action: In the year 2000 and 2001 – based on the audit results – each of the local management team had created and implemented corrective action plan, in order to enhance performance and make sure there is compliance with the Code of Conduct and Core Values. Through this, the real change is created and generated via the change in action and attitude of the local management team. Therefore, it is completely clear that by showing a CC record of positive order, it portrays a serious level of commitment. Guatemala’s local manager was replaced due to his weak performance, as shown by the 2000 audit results (McFall, 1987).

The Effects

CC Implementation’s real test is on its deliverance and creating a positive impact on environmental, social and economic zones. It is currently not easy for Chiquita to provide an overall analysis and assessment of the CC Implementation’s impact. The second CC Report’s publication – scheduled for 2002 – will help in giving a more comprehensive view of the CC implementation effects. CC is in fact, creating value for the company and its stakeholders. The following are some of the examples of its positive effects:

Social Effects

The internal audit, in Guatemala made the indication that many temporary workers were employed on a permanent basis, but did not receive complete compensation and full benefits. Once the audit was completed, these workers in question were provided with a correct status of employment (Barker, 2009).

There was also a huge reduction in the rate of accidents taking place in farms because of the new and enhanced Occupational Health and Environment Management System. The installation of the new system was done after the internal audits. For example, the number of accidents in Costa Rica reduced by 40%.

Economic Effects

Many premier European retailers of Chiquita opted for the company as their banana supplier because they were influenced positively by the CC commitments of Chiquita. Increased focus in health and safety of workers led to the reduction of health insurance costs due to the reduction in accident rates (Barker, 2009).

Conclusion

Chiquita, in the last two years, received a lot of applause for its endeavors in the area of social and environmental responsibility. Its efforts made a major positive transformation in the banana industry, thereby creating a better world for employees, consumers and citizens and also making an effective business sense altogether. The article is directed to other organizations, which will benefit from the values and avail guidance towards building a responsible future in their respective organizations.

 

References

Audi, R. and P. E. Murphy: 2006, The Many Faces of Integrity’, Business Ethics Quarterly 16(1), 3-21.

Barker, H, H., W. H. Camp and C. Hasler: February 2009, ‘Report of the Special Litigation Committee of Chiquita Brands International, Inc., In Re: Chiquita Brands International Inc. Alien Tort Statute and Shareholder Derivative Action, Doc 202 Case No.: ?8-01916-MD, United State District Court for the Southern District of Florida.

Cahn, N. and A. Gambino: 2008, Towards of Typology of Corporate Responsibility in Different Governance Contexts: What to Do in the Absence of Responsible Country Governance?’, Georgetown Journal of International Law 39(4), 655-678.

Diperna, T. A.: 2008, ‘Small Arms and Light Weapons: Complicity “With a View” Toward Extended State Responsibility’, Florida Journal of International Law 20(1), 25-77.

Mayer, D.: 2007, ‘Corporate Citizenship and Trustworthy Capitalism: Cocreating a More Peaceful Planet’, American Business Law Journal 44(2), 237-286.

McFall, L.: 1987, ‘Integrity’, Ethics 98, 5-20.

Paine, L. S.: 1994, ‘Managing for Organizational Integ rity’, Harvard Business Review March-April, pp. 106 117.

Srivastva, S. and Associates (eds): 1988, Executive Integrity: The Search for High Human Values in Organizational Life (Jossey-Bass, San Francisco, CA/London).

Werre, M.: 2003, ‘Implementing Corporate Responsibility – The Chiquita, of Business Ethics 44, 247-260.


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