Investment in South Africa in Your Judgment,

Investment in South Africa

In your judgment, were the possible utilitarian benefits of building the Caltex plant in 1977 more important than the possible violations of moral rights and of justice that may be involved? Justify your answer fully by identifying the possible benefits and the possible violations of rights and justice that you believe may be associated with the building of the plant, and explaining which you think are more important.

The possible utilitarian benefits of building the Caltex plant in 1977 were not more important than the possible -- or actual -- violations of moral rights and justice involved. The violations of moral rights and justices should have been prioritized. Looking back on the situation, of course, we have the benefit of knowing history, and the case of the South African apartheid is an exemplary case for the power of socially responsible investment movement.

In 1977, when the Caltex plant was built, the international action for socially responsible investment in South Africa had already begun (Magarell, 1979). The benefits to building the plant were several-fold: first, as its primary responsibility as a company, it could create more wealth for the stockholders; second, the by virtue of being an employer in a difficult economy, and employing blacks, the company could improve the lives of blacks in South Africa (Nickel, 1968). It could do improve the lives of black South Africans in two ways -- paying them fairly and treating them as equal to white employees. It could also provide a launching off point for black South Africans to mobilize against their government. The company could also be involved in politics and threaten to leave, using economic pressure to try to affect good in South African politics.

There were also several possible violations of rights and justice. The issue here was not the economic improvement of black South Africans, but black South Africans political power. The company staying in South Africa lent more power and credence to the South African government and their regime of apartheid.

If you were a stockholder in Texaco or Standard Oil (now named Chevron), how do you believe you ought to vote on the three kinds of stockholder's resolutions that were proposed (the first asking Caltex to terminate its operations, the second asking Caltex not to sell to the military or police of South Africa, and the third asking Caltex to implement the Tutu principles)? Justify each of your answers fully.

If I were a stockholder in either one of these companies, I would like to believe that I would have voted for the stockholder's resolution to terminate its operations in South Africa. Even though the company being there may have improved the wealth of individual black South Africans (Texaco, 1977), it also paid taxes to the South African government and sold to the military and police of South Africa. It would be ridiculous to ignore either effect -- the benefit to the individual or the boon to the systemic powers of oppression. The second resolution asked Caltex to not sell to the military or police of South Africa. This resolution may seem more complicated, as it seemed against the law of South Africa to follow such a resolution. However, this could have served as a good indicator into the kinds of moral compromises that were being made by remaining in South Africa. The third resolution asked Caltex to implement the Tutu principles, a set of ethical practices to alleviate the effect of apartheid (Investor Responsibility Research Center, 1986). Tutu believed that only international pressure could bring about change in South Africa. If, looking around at the other stockholders, I was convinced that the company would, in fact, stay in South Africa, I would certainly urge the adoption of the Tutu Principles.

What kind of responses should the managers of Texaco and SoCal have made to each of the three resolutions? Justify your answer fully.

The managers' responsibility, as outlined above, was two-fold. As cogs in the company machine, their obligation was to help improve company profits by carrying out the will of the stockholders. And as human beings, the managers also had an obligation to help end the human rights abuses in South Africa. If the managers had information that was unknown to the stockholders, especially with regard to on-the-ground information as to how bad the human rights abuses were in South Africa, the managers were obliged to tell the stockholders about them. Additionally, if the result of the resolutions was morally untenable to any of the managers, they could have threatened to leave. Doing so could shock stockholders into realizing how dire the situation was and changing their opinion, or simply made it more difficult for immoral acts to take place.

In your judgment, does the management of a company have any responsibilities (i.e., duties) beyond ensuring a high return for its stockholders?

Yes; the management of a company has ethical responsibilities beyond ensuring a high return for its stockholders. Management is made up of human beings, and they have ethical obligations by virtue of being human beings themselves. The Supreme Court recently voted on whether or not AT&T should have the right to privacy accorded to an individual, and they decided that, no, despite the fact that in other places in the law, corporations are treated as individuals, a corporations does not have all the same rights as an individual. The corporation, however, acts as a shield for individuals to keep them from taking too much risk on themselves, both in terms of legal and financial liability.

Should the management of a company look primarily to the law and to the rate of return on its investment as the ultimate criteria for deciding what investments it should make? Why or why not?