Walt Disney Company Scenario
Scene: Fiscal Karat (FK), host of TV's Let's Talk Money, is seated at the center of an oak conference table. Let's Talk Money is a weekly PBS talk show that interviews business leaders and often finds government officials to debate certain ideas and programs. Tonight's episode features Mr. Michael McDuck (MM), CEO of Walt Disney Company and Mr. Rigid B. Crat (RC), Senior Administrator for the U.S. Treasury's Anti-trust Division.
FK: Good evening and welcome to Let's Talk Money, your weekly adventure into provocative and interesting monetary topics ranging from mild to wild. Tonight, a special treat for the kid in us all -- Michael McDuck, CEO of Walt Disney goes head to head with the Administration's Senior Anti-Trust Maven, Rigid B. Crat. Welcome gentlemen!
First though, let's take a moment to establish a bit of background. The Walt Disney Company is a multinational mass media company posting 2011 revenues of almost $41 billion, making it the largest media conglomerate in the world in terms of revenue. Globally, Disney employees over 150,000 people and has assets approaching $75 billion. Disney now means motion pictures, the Disney Animation Studies, Theatrical Production, Disney India, Pixar, Marvel Entertainment, The Muppets Studio, ABC Inc., 80% of ESPN, 43% of A&E, Radio Disney, 27% of Hulu, and the UTV Software Communications Company (Walt Disney Company, 2012).
Most of us are familiar with the story of Disney, founded in 1923 by Disney Brothers Walt and Roy as a cartoon studio. In 1928 it launched the iconic Mickey Mouse and made history with the first feature length animated movie, Snow White in 1937. Using the profits from the movie, Disney constructed a huge studio in Burbank, California, where the company remains headquartered. From then on Disney produced such classics as Pinocchio, Fantasia, Dumbo, Bambi, and in the 1950s Cinderella, Alice in Wonderland, and Peter Pan. Teaming up with Coca Cola, Disney moved into television with Disneyland -- The Wonderful World of Color, becoming the longest running primetime series of all time (Watts, 2001). Of course, Disney went on to build Disneyland in Anaheim, California, then eventually Disneyworld in Florida. After Walt's death, Roy ran the company, successfully fighting off a hostile takeover in 1984, and then hiring Michael Eisner to expand the franchise. The 21st century was not kind to Disney, with 2003-2005 being one of infighting, the ouster of Eisner, and the realization that the company must diversify, modernize, and expand globally, especially into India and Asia (Frater, 2012).
FK: My first question goes to Mr. McDuck. Thank you for being with us tonight. We know that Disney is a huge iconic corporation -- who has not heard of Mickey Mouse, Donald Duck, and a host of other characters that have thrilled and entertained generations since the 1920s. However, I call your attention to a 2000 Study by the Hong Kong Christian Industrial Committee, also called the CIC, that did a detailed investigation into working conditions in over twelve Disney factories in China. These factories produced garments, watches, and accessories and employed workers that tended to be young, single, female, and from rural areas, many as young as 16. The study also found that workers were forced into extremely long hours, poverty wages, fines for mistakes, poor food and hygiene, overcrowded dormitories, workplace hazards, and an almost serf-life organization that controlled them (Center for Research on Multinational Corporations, 2002). Can you comment on this?
MM: Certainly, and thanks for inviting me onto your program. Disney has a Code of Conduct and independent monitoring system that we apply globally -- whether China, Europe or the United States. As one of our senior level managers noted, we take these claims very seriously and of course, were unaware about any violations that were mentioned in the factories. We investigated them diligently and found that although there were some managers who did not follow the Code, most were actually in compliance. We did not investigate in a vacuum either; we had the...
Please understand, a company like ours hires thousands upon thousands of contractors; it would be physically impossible to micromanage each one -- what we can, and will do, is continue to apply our Code of Conduct and insist that they follow protocol or face consequences from both the Chinese government and our own fiscal penalties (Disney Vows to Investigate Claims of ABuse at Factories, 2005).
FK: Mr. Crat, any comments?
RC: Yes, actually, I do. We certainly understand that companies like Disney must operate in different legal and moral environments, and we certainly cannot use foreign policy or governmental pressure to ensure that basic human rights are being followed. However, I must point out that the Chinese government has a vested interest in keeping Disney happy, and likely did whatever it could to "clean" the factories prior to inspection. We do have laws in place regarding hiring contractors overseas, but these generally apply only to governmental contracts. For instance, because ethics and morality are so closely linked under the rubric of International business, most countries believe that they are part of the social "requirement" of both national and international business. The United States Government, in fact, has a specific federal law, called the Foreign Corrupt Practices Act (1977) that focuses on accounting practices reported to the Securities and Exchange Commission (based on an earlier 1934 Act) and bribery of foreign officials (U.S. Department of Justice, 2009; Hearing: Are Government Contractors Exploiting Workers Overseas?, 2011).
FK: Mr. Crat, speaking of your position, will you give our audience a bit of background into anti-trust legislation.
RC: Yes, certainly. Anti-trust law is very complex, but has basically evolved into allowing the government to protect citizens by maintaining market competition, ensuring appropriate competition and ethical behavior of organizations, and eliminating collusion and monopoly pricing or unfair use of trademarks material. Anti-trust is global in scope, but of course, our authority is limited to American corporations, although we do cooperate with other legal systems (Areeda & Hovenkamp, 2011)
FK: In regard to that, Mr. Crat, what is your position on the Disney Company and issues of anti-trust?
RC: Well, without getting into too much criticism of Disney, it is well-known that Disney will do almost anything to protect its presumed copyrights. In the early days, of course, no one had an inkling about video, digital, CDs, home movies, etc. So many of the contracts written by Disney gave little or no fiscal settlement to the artists. However, Disney is eager to sue companies like Fox by accusing them of carrying cartoon programming that competes with Disney's syndication unit (Stevenson, 1990). In addition, most recently, we are concerned that in Disney's acquisition of Marvel and the Universal Studio's theme park's right to characters. We are concerned that Disney will now control much of Universal, making it monopolistic in terms of U.S. Theme Park and Cartoon Entertainment (McSweeney, 2010).
FK: Before we take our first break, would you care to comment on any of this, Mr. McDuck?
MM: Certainly, we can understand the government's concerns. However, we are a corporation with a Board of Directors and a number of stakeholders with whom we have a responsibility. For instance, we might enter into an arrangement with Pepsi-Co, Starbucks, or even Microsoft. We would offer only Pepsi products as sodas, Starbucks as coffee, use Microsoft to release games and platform issues, and even partner with the government on certain research projects or situations that require resorts of entertainment. This does not mean we are monopolistic, simply growing. We are not preventing anyone from competition with Disney just because we hold tight to our patent and copyright protections, and certainly see that the government does have an important role in a market economy. Disney now is not just about theme parks or cartoons, though, and in fact, the…
