Reference no: EM133424711
Case Study: Kativo Chemical Industries, the wholly owned foreign subsidiary of H. B. Fuller, sells a solvent-based adhesive (glue) in several countries in Latin America. The brand name of the glue is Resistol. It came to H. B. Fuller's attention that large numbers of street children in the Central American country of Honduras were sniffing glue and that Resistol was among the glues being abused. Indeed all these children who sniff glue are being referred to as Resistoleros.
Resistol has a number of industrial uses, although one of its primary uses is in small shoe repair shops. The glue has properties that are not possible to attain with a water-based formula. These properties include rapid set, strong adhesion, and water resistance. Resistol is similar to airplane glue.
Widespread inhalant abuse among street children in Honduras can be attributed to the depth of poverty there. Hundreds is one of the poorest countries in Latin America. The unemployment rate is high. Infant and child mortality rates are high, life expectancy for adults is 64 years, and the adult literacy rate is estimated to be about 60%. Its exports, bananas and coffee, are commodities that are subject to the vagaries of the weather and the volatility of commodity markets. Government deficits caused in part by mismanagement and corruption have prevented desirable spending on public services.
Migrants to the urban areas typically move first to cuarterias (rows) of connected rooms. The rooms are generally constructed of wood with dirt floors, and they are usually windowless. The average household contains about seven persons who live together in a single room. For those living in rooms facing an alley, the narrow way between buildings serves both as a sewage and waste disposal area and as a courtyard for as many as 150 persons.
That the name of a Fuller product should be identified with a social problem was a matter of great concern to the H. B. Fuller Company. H. B. Fuller was widely known as a socially responsible corporation. Among its achievement were an enlightened employee relations policy that included giving each employee a day off on his or her birthday and, on the 10th anniversary of employment, bonus vacation time and a substantial check so that employees could travel and see the world. H. B. Fuller contributes 5% of its pretax profits to charity and continually wins awards for its responsibility to the environment. A portion of its corporate mission statement reads as follow:
B Fuller Company is committed to its responsibilities, in order of priority, to its customers, employees and shareholders. H. B. Fuller will conduct business legally and ethically, support the activities of its employees in their communities, and be a responsible corporate citizen.
The issue of the abuse of glue by Honduran street children received attention in the Hunduran press.
The man on the spot at Kativo was Vise-President Humberto Larach (Beto) who headed Kativo's North Adhesives Division. Beto had proved his courage and his business creativity when he was among 105 taken hostage in the Chamber of the Commerce building in the downtown San Pedro Sula by Honduran guerrillas from the Communist Popular Liberation Front. Despite firefights between the guerrillas and government troops, threats of the execuation, and being used as human shield, Beto had convinced two fellow hostages to buy from Kativo rather than from a competitor. Not surprisingly, Beto had a reputation for emphasizing the importance of making the bottom line that was an important part of the Kativo corporate culture.
Initial responses to the problem were handled by officials of Kativo. These responses included requests to the press not to use "Resistolero" as a synonym for a street child glue sniffer and attempts to persuade the Honduran legislature not to require the addition of oil of mustard to its glue. Beto had requested H. B. Fuller's US headquarters to look into the viability of oil of mustard as an addictive to the glue. H. B. Fuller's corporate industrial hygiene staff found evidence that indicated that the oil of mustard was a carcinogen and hence was potentially dangerous to employees and consumers. Kativo officials believed that glue sniffing was a social problem and that Kativo was limited in what it could do about the problem. The solution was education.
Initially officials at H. B. Fuller headquarters in St. Paul MN, were only dimly aware of the problem. While some of these officials assisted their Kativo subsidiary by providing information on the dangers of oil of mustard, the traditional policy of H. B. Fuller was to give great autonomy to foreign-owned subsidiaries.
However, Elmer Anderson, H. B. Fuller's chairman of the board, received a letter from a stockholder who pointedly steak it pointedly asked how a company with its enlightened business philosophy could be responsible for selling a product that was causing harm to the children of Honduras. Three years later, Vise-President for Corporate Relations Dick Johnson received a call from a stockholder whose daughter was in the Peace Corps in Honduras. The stockholder's question was how can a company like H. B. Fuller claim to have a social conscience and continue to sell Resistol which is "literally burning out the brains" of children in Latin America. Johnson knew that headquarters should become actively involved in addressing the problem. But given the nature of the problem and H. B. Fuller's policy of local responsibility, what should headquarters do?
Discussion Questions
- To what extent can Honduran children who obtain an H. B. Fuller product legitimately be considered stakeholders? If they are stakeholders, how can their interests be represented? Explain.
- What obligations does a company have to solve social problems? Explain.
- If there is a corporate responsibility to address the issue, does the responsibility for solving this problem rest with the local subsidiary, Kativo, or with H. B. Fuller headquarters? Explain.
- To what extent should officials at H. B. Fuller headquarters be concerned about potential criticisms that they are meddling in a problem where they don't understand the culture? Explain.