ABSTRACT corporations across the world. The notion of firms

ABSTRACT

 

In March 2000, Coca Cola, under its
Indian subsidiary Hindustan Coca Cola Beverages Private Limited (HCCBPL),
commenced operations at its bottling plant at Plachimada, in the southern state
of Kerala. Over the next few years, the area surrounding the plant began to
feel the plant’s hazardous effects, as groundwater was contaminated and toxic
waste released. What followed was a long struggle by the people of Plachimada,
interest groups, and NGOs, leading to the eventual shutdown of operations at
the plant.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

This report is a reflective writing and
will attempt to outline the events that transpired during the course of the struggle
at Plachimada, which took place at two levels: the grassroots and the
judiciary. It shall then further attempt to answer questions pertaining to the
ethical responsibilities of the firm to the community around it and to the
society at large.

 

INTRODUCTION

 

Milton Friedman said “there
is one and only one social responsibility of business – to use its resources
and engage in activities designed to increase its profits so long as it stays
within the rules of the game, which is to say, engages in open and free
competition without deception or fraud”

 

The above-mentioned
statement, for a long time, had been the steadfast belief of the corporations
across the world. The notion of firms as economic entities with sole objective
of profit maximization has been prevalent for as long as one can remember.

 

Viewed this way there are
no “responsibilities” for the firm except to produce economic value for its
shareholders. Therefore, it must lead us to believe that a firm certainly has
no ethical responsibilities but only legal obligations. His argument elaborated
on the basic idea that being mere agents of shareholders, managers have the
sole duty to increase their wealth.

 

This argument has been
attacked by many scholars on different counts. Firstly, it seeks to completely
ignore any ethical obligations. In other words, so long as they stay within law
they need not worry about any other impact their actions may have on their
stake holders other than the shareholders.

 

Second it is not cleat
that the shareholders have in fact given such a mandate to the management. They
might have invested purely with a speculative motive. In fact, some surveys
carried out on shareholders in US revealed that the majority did not want pure
maximization of profits by the firms to the exclusion of all other
considerations.

 

Thirdly, if it is
accepted that maximizing shareholder value is the mandate, then this has to be
a long-term initiative. This is achieved only by adopting sustainable proactive
and developing a long-term relationship with stakeholders and the community.

The case of Plachimada vs
Coca Cola showcases this belief. It further goes and examines about the
repercussions of not taking into account the well being of the community in
which it thrives.

 

CONTEXT

 

Plachimada is a small hamlet in the
Palakkad District of Kerala. The majority of the population consists of Adivasis (indigenous
people) whose primary occupation is agriculture. About 80% of the villagers are
engaged in agricultural labour, with 20% engaged in other labour activities.

 

In 1998, HCCBPL acquired 34.4 acres of
land (mostly paddy fields) in order to set up a bottling plant at Plachimada.
On January 25, 2000, the Perumatty Panchayat (whose constituency includes
Plachimada) granted permission to build the plant and operations began in March.
The Kerala State Pollution Control Board granted a permit to produce 561,000
litres of beverage per day, with an average requirement of 3.8 litres of water
for every litre of beverage. The source of water was primarily groundwater from
6 bore wells and two open ponds, and about 2 million litres of water per day
was extracted.

 

In six months of commencement of
operations at the plant, the villagers complained that the water was unsuitable
for drinking or cooking. In the subsequent months, several villagers complained
of unusual stomach-aches. The farmers complained of wells emptying unusually
fast and crop yields decreasing. A public interest group by the name of
Corpwatch India, found that there were high levels of calcium and magnesium in
the water, caused by excessive extraction of water.

 

The bottle washing taking place at the
plant involved chemicals, and the resulting sludge was taken out of the plant.
Initially the sludge was sold as fertilizer to unsuspecting farmers, following
which it was given free, and with increasing resentment among villagers, it was
merely dumped on the roadside. In the few months since commencement, more than
1000 families in the surrounding villages had been affected.

 

REPERCUSSIONS

 

As per the agreement struck by the company
with the Kerala State Pollution Control Board (KSPCB), up to 1.5 million litres
of water was drawn commercially from 6 bore-wells situated inside the factory
compound. The permit granted Coca-Cola the right to extract ground water to
meet its production demands of 3.8 litres of water for every litre of Cola.

 

As a result, the water table receded, as
did the quality of groundwater. Detailed sampling of the water collected from
the region revealed high concentration of calcium, and magnesium ions.
Moreover, the colloidal slurry that was generated as a by-product was initially
sold to villagers as fertilizer

 

In 2003, the BBC, in its Face the Facts
programme, declared that samples of slurry that was being deployed as
fertilizer were found to contain dangerous levels of toxic metals and the known
carcinogen, cadmium

 

“The area’s farming industry has been
devastated and jobs, as well as the health of the local people, have been put
at risk,” said John Waite, the show’s presenter, as he read out the
verdict of scientists from the University of Exeter, where samples collected
from Plachimada were sent for analysis

The events mentioned above are of serious concern
as it stands proof of how corporations would overlook community wellbeing for
profit maximization. It is apparent that Coca-Cola did not think it important
to hold meaningful dialogue with the community it was operating within.

 

True to the Friedman’s notion of a firm having no
ethical responsibility but only legal obligation, Coca-Cola perhaps thought of
what was within its legal rights and did not bother to take into consideration
that the community might retaliate. The events that followed shows us why it is
essential for a firm to positively interact with its community.

 

The Anti-Coke Struggle

 

On April 22, 2002, the ‘Coca Cola Virudha
Janakeeya Samara Samithy’ (Anti-Coca Cola Peoples’ Struggle Committee –
henceforth Samithy) began its protest against the plant, with over
1500 people, mostly adivasis, demanding the immediate shutdown of
the plant owing to the severe hazard it was causing to their daily lives.

 

The Committee was responsible for a
series of protests, anti-coke rallies and other disruptions to the operations
of the Coca-Cola Plant. Several street corner meetings and intense campaigns
followed. On June 9, 2002, a rally and public meeting was organised by People’s
Union for Civil Liberties and National Alliance for Peoples Movements in
solidarity with the Samithy. Meanwhile, beginning in April 2003,
the struggle against the cola giant took a decisive legal turn.

 

The Battle at the Judiciary

 

On April 7, the Perumatty Panchayat
decided not to renew the license of HCCBPL. The secretary of the Panchayat
cancelled the license, stating the following reasons: excessive exploitation of
the groundwater by the company, environmental problems due to presence of
hazardous and toxic substances in wastes emitted by the company, and a scarcity
in drinking water. This was challenged by the company at the Kerala High Court,
which directed the company to approach the Local Self-Government Department
(LSD) who stayed the cancelation issued by the Panchayat, stating that it had
exceeded its powers.

 

BBC Radio 4 programme ‘Face the Facts’
reported the presence of carcinogens in the waste deposited by the plant. This
waste had been dumped in the adjoining areas on the pretext of providing
fertilizer to the farmers. On August 5, 2003, the Centre for Science and
Environment, based in Delhi, came out with a report that showed that 12 soft
drinks had significant amount of pesticides in them. On August 7, 2003, KSPCB
confirmed the BBC report, and ordered Coke to stop supplying waste to the
adjoining areas and to immediately recover all waste and store it in safe
containment within the premises of the plant. On March 8, 2004 the Kerala Government
ordered the cessation of the plants operations till June 15, 2004.

 

A number of newspapers such as The
Guardian, The Times and the Financial Times of the UK, The New York Times of
the USA, Le Monde of France and Asahi Shimbun of Japan covered the events and
happens of Plachimada. On the whole, Coca-Cola seemed to come out in a poor
light over the episode. Not only the plant but the company too suffered a major
hit. The Plachimada plant has not reopened till date.

 

 

STAKEHOLDERS THEORY

 

Business these days are shifting from
merely being agency for shareholders. They are being replaced by a stakeholder
model which has many other groups, including the community that the company is
located in an and the broader society which may be affected by the way that the
firm’s business functions.

 

Any business, even the most prosperous ones, cannot exist in a vacuum. They
require the investors to give them money, customers to buy their
goods/services, employees to serve the customers, suppliers to sell them the
goods that they will sell, and a community within which they can thrive. The
business cannot be successful in the absence of any of these
groups. Of course, these groups might interact in a hostile way. However, the
interests of all involved would be better represented if everyone’s preferences
could be satisfied. This approach to business is known as the Stakeholders
Model.

It can be easily argued that to a large extent the Stakeholder Theory is
a better representation of the network of relationships that exist in any
business’ interactions. After all it most certainly involves more
responsibilities than the Shareholder theory. Therefore, it encompasses more
groups than just the Shareholders. Any business that follows the Stakeholder
Theory is responsible for taking into account the needs and wishes of a great
many people.

CONCLUSION

 

The struggle at Plachimada continues to
this day as villagers seek to recover the loss of livelihood and counter the
extreme damage to the water resources in the area. The struggle represents the
efforts of villagers and activists to wage a battle against a multi-national
company both at the level of the grassroots and the judiciary. It is also a
testament to the ability of local self-governance bodies to effectively
determine the nature of development in their respective areas, and their right
to prevent undue extraction of their resources.

 

Every firm exists within a community
and it is expected to play a positive role in improving the quality of life of
its community.  It certainly has an
obligation to see that this community is at least not worse off with the firm
as a part of it. As seen in case of Coca-Cola, the consequences of acting
carelessly towards a community and by extension to the society is bound to
harsh and detrimental.

 

The firm has an obligation not to
damage its environment, air, water, grazing lands etc on which the community
depends for its existence or quality of life. Polluting water sources or the
air infringes on the rights of others to have access to these resources and
hence is clearly unethical. This is especially since the executives of the firm
may not live in that area and hence may not be affected by them.

 

The interaction of the firm with the
community starts right at the time land is to be acquired. IT is essential to
establish communication at the different stages of the process and find common
grounds that will be satisfactory to everyone.

 

Therefore, even though a corporation
draws is capital resources from its shareholder, it also draws resources from
other stake holders including its employees, the government, the community and
society. It is hence essential to find the optimum balance among all these
stakeholders.

 

 

 

BIBLIOGRAPHY

 

·        
Surendranath
C, “Coke vs
People : The Heat is on in Plachimada”, in India Resource Centre,
April 14, 2004

·        
Bijoy,
C.R., “Adivasis groups
vs. Coca Cola”,
in Ghadar, Vol. 10, November 2006

·        
Peoples
Union for Civil Liberties, “The Struggle
against Coca Cola in Kerala », PUCL Bulletin, Nov 2002

D. V. MURALEEDHARANNAIR “A Study of the
Struggle for Water at. Plachimada, Kerala”