Business Ethics and Corporate Governance: Chiquita Case Study Analysis

This case study examines the ethical issues and corporate governance failures of Chiquita, focusing on the company's dealings with the United Self-Defense Forces of Columbia (AUC) and its impact on stakeholders. The assignment analyzes ethical dilemmas, including extortion payments, employee safety, and the conflict between legal and ethical responsibilities. It explores the perspectives of various stakeholders such as employees, customers, and government officials, and evaluates the opportunities and challenges faced by the organization. The study critiques the suitability of potential solutions, such as the partnership with Rainforest Alliance and the adoption of modern agricultural practices, while also considering the implications of illegal payments. The assignment concludes with specific recommendations for management to address the ethical issues and protect the well-being of employees, emphasizing the importance of proactive measures and transparent governance. The case highlights the complexities of balancing business interests with ethical obligations in a high-risk environment, providing valuable insights into the importance of ethical leadership and corporate social responsibility.

Running head: BUSINESS ETHICS AND CORPORATE GOVERNANCE
Business ethics and corporate governance- A case study of Chiquita
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Table of contents
1. Stakeholders and ethical issues....................................................................................................2
2. Opportunities and challenges of the organization.......................................................................3
3. Analyzing an ethical issue from the perspective of the stakeholders..........................................5
4. Critical evaluation of the suitability of the possible solutions to the ethical issue......................6
5. Specific recommendations for management of the issue............................................................8
References and bibliography.........................................................................................................11

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1. Stakeholders and ethical issues
The stakeholders of Chiquita are the employees, customers, suppliers, distributors and the
packagers for the food items. Along with this, the external stakeholders of the company are the
neighboring partners in the neighboring countries. The company specifically caters to the needs,
demands and requirements of the stakeholders, which reflects the adherence to the workplace
ethics (Crane and Matten 2016). One of the other stakeholders of the company is United Self-
Defense Forces of Columbia (AUC), to which Chiquita has been making the payments since the
era of 2001-2004. In 1990s, the company indulged in partnership with Rainforest Alliance
(Chiquita.com 2017). The main purpose of this partnership was to serve the customers and
clients in an efficient and effective manner. Threatening to kill the employees for not making the
timely payment for the extortion or killing the families of the employees contradicts the aspect of
ethics.
As a matter of specification, stakeholders and ethics are interrelated with each other.
Ethics enhances the reputation of the company. However, affirming with the demands of the
terrorists is a wise act for safeguarding the employees from encountering the tragic fate of death.
This response is apt in terms of enhancing the brand image (Chiquita.com 2017). If the company
makes the payment in fear that the employees would be killed, it represents the ethical
considerations of the company personnel in terms of catering to the needs of the stakeholders. On
the other hand, delaying the payment process aggravates the life risk of the employees, which
attaches an interrogative parameter to the role of the personnel in terms of ensuring the wellbeing
of the employees.

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Viewing it from the other perspectives, refusing to make payment as per the instructions
of the terrorist group reflects the lackadaisical attitude towards the wellbeing of the employees.
This mentality is against the essentials of ethics, which deprives the stakeholders of the company
from their basic needs (Ferrell and Fraedrich 2015). If the answer for the question is yes, then
they need to seek effective strategies for dealing with the terrorists. Herein lays the
appropriateness of the negotiation strategies in terms of practicing good business ethics. Delving
deep into the issue, affirmation in terms of providing the answer can be considered as an
affirmation with the demands of the terrorists group. On the other hand, rejection of the orders
and instructions of the terrorists reflects the matured behavior of the employees in terms of
looking after the needs of the stakeholders.
Taking into consideration the theories of stakeholder analysis helps the personnel to
achieve positive outcomes. Attachment of the terrorist aspect in this context needs effective
strategies, which would prove beneficial in terms of ensuring the protection of the employees
(Carroll and Buchholtz 2014). Designation of AUC as a famous terrorist group, interrogates the
act of making payments in case of the company. This creates a negative image in the minds of
the stakeholders, especially the customers in terms of having loyalty, trust and dependence for
the company.
2. Opportunities and challenges of the organization
Threats from the terrorist groups have adversely affected the security of the stakeholders.
Consistent threats have compelled the company to encounter instances of customer turnover and
employee turnover, pushing the productivity into utter loss. As a matter of specification, the
employees were encountering life risk, which reflects the immediacy in terms of making the
extortion payments (Mason and Simmons 2014). Paying the money to the terrorist groups raises

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the risks regarding making false cases against the company. Typical evidence for this fact lies in
the declaration of AUc being a reputed terrorist organization. In view of this declaration, the
payments provided become illegal, adding instability to the financial parameter of Chiquita.
The word “dilemma” in the title of the public statement reflects the approach of the
personnel in terms of dealing with the constant threats of the terrorists. Incapability of the
personnel to seek efficient solutions reflects their “dilemma in terms of preferring life or law”.
Preferring life means the negation of the rules and regulations, which contradicts the essence of
“governance” (Bowie 2017). On the other hand, if law is selected, it connotes lackadaisical
attitude towards the wellbeing of the employees. Countering this, if both are preferred, it reflects
the attempts of the employees to maintain the balance between the internal and external
environment. If the concept of terrorism is attached in this context, the intensity of the
word”dilemma” is intensified. In this situation, searching out effective ways and means for
utilizing the possessed lands for growing the banana plantation, acts as an opportunity for the
company personnel for enhancing the confidence towards neglecting the threats of the terrorists
(Hoffman, Frederick and Schwartz 2014).
Hiring the paramilitary forces for the protection of the employees was one of an effective
means, which helped to overcome the challenge of security. Making the payments for this
recruitment to the illegal paramilitary groups was illegal, which aggravated the complexities of
the personnel in terms of safeguarding the life of the employees. In other words, protection of the
workforce became one of the major issues. Although the time for this was 1990, the intensity of
the issue nullifies the time. Massacre regarding killing the employees increases the intensity of
the challenges (Chiquita.com 2017).

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Non-compliance to the rules and regulations while making the payments posed as a
challenge for Chiquita in terms of providing the required protection to the employees. Typical
examples in this direction are the killing of 28 innocent workers in the massacre. Along with this,
one of the striking instances is the murder of two workers in the front of their colleagues. This
traumatizes the employees, which affects their productivity. Most importantly, it reflects the
dilemma of the personnel in terms of preferring protecting the life of the employees or adhering
by the law (Chiquita.com 2017).
Making payments to the terrorist groups without the knowledge of the government
officials was also a challenge for the Chiquita in terms of stabilizing the financial parameter.
Under such circumstances, taking initiative to inform the government officials about the
payments acted as an opportunity for the company to add validity to the process of making
payments. One of the challenging moments for the company was when it was fined $25 million.
However, concern for the employees and their wellbeing enabled the personnel to make the first
installment payment of $5 million (Chiquita.com 2017). This effort was also negated by the
Department of Justice prosecutor as “morally unacceptable”, as it ignited a spark of revolution in
many parts of the United States.
3. Analyzing an ethical issue from the perspective of the stakeholders
In 1995, a massacre took place, where 28 employees of Chiquita were suddenly attacked
when they were going to the workplace on the bus. The effect of the killing has not yet
diminished that two more employees encountered the tragic fate of death while their colleagues
were forced to watch the horrifying scene. This type of pressurization is a kind of mental torture
of the employees, which compels them to undergo traumatic situations (Tricker and Tricker
2015). Making the payments to the terrorist groups without the information of the government

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officials aggravated the complexities of Chiquita in terms of financial crisis. This raised doubts
in the minds of the investors regarding expanding their business in Chiquita.
The stakeholders, especially, prosecutor of the Department of Justice, considered
payment to the terrorist groups unethical, especially the. This declaration intensified the
competition between Chiquita and the contemporary brands. Upon investigation, the Board of
Directors found that the payment process has many fissures. In 2000, the Board of Directors
excavated that no action was taken in spite of being aware of the faulty payment process. Two
years later, in 2002, one of the employees discovered the declaration of AUC being a terrorist
group. After this, the employee informed the government (Chiquita.com 2017). After this, the
Board of Directors started the investigation process and found that the payment was unethically
made to the terrorist groups. In the era of 2003, the company indulged in partnership with he
Washington attorney. The result of this partnership was rejection, which added instability to the
financial parameter of Chiquita.
After two months, it was discovered that consistency was maintained in making unethical
payments. Objection to this type of payment leaked the information to the Department of Justice.
This degraded the reputation of Chiquita among the stakeholders and shareholders (Chiquita.com
2017).
4. Critical evaluation of the suitability of the possible solutions to the ethical issue
Envisioning the enhancement of corporate social responsibility seems apt in terms of
restoring the lost honor and justice. However, the attempts in this direction added to the
peculiarity of the ethical issue. Maintaining the continuity with the aspect of stakeholder analysis
in the previous question, John Entine, one of the reviewers of the Chiquita case, can be

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considered as the stakeholder. This is because the intensity of the issue has compelled him to
take up the pen and reflect on the tragic fate of the company, especially the employees.
Transforming into a food distributor from a food company seemed to be fruitful as the
sales revenue was increased and much value was added to the profit margin. Teaming up wuth
Rainforest Alliance for completion of the Better Banana Project was a kind of taking extra
burden in spite of an intensified crisis (Chiquita.com 2017). As a matter of specification,
upgrading the farming practices of banana production can be considered as a matured step by the
personnel in terms of upgrading the infrastructure. Countering this, neglecting the issue of life
risk of the employees for upgrading the plantation practices is against the essence of the business
ethics. Supervision and guidance of Rainforest Alliance seemed beneficial in terms of upgrading
the standard and quality of the internal business activities. On the contrary, complying with the
legislation contradicts the aspect of executing unethical activities in the workplace (Chiquita.com
2017).
In view of the benefits, which the rural communities received by the improvements, the
approach of the personnel seemed right. As a matter of specification, the rural tribes have been
provided with fresh quality water. Not only this, the government officials have taken initiatives
for safe water disposal. Along with this, the utilization of the chemicals have been reduced
largely. This has extended the longevity of the bananas, keeping them fresh. At last, John brings
to the light the issue, which needs modification the most. Adopting latest and modern means of
agriculture increased the ease of the workers for executing the allocated duties and
responsibilities (Chiquita.com 2017). John says that the new and modern agricultural tools
improved the quality of life of the workers. Adoption of new and modern agricultural tools
helped the workers to expose their preconceived talents in the workplace activities.

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5. Specific recommendations for management of the issue
Protecting the life of the employees is an important issue, which the managers need to
take care. This is because employees are the asset of the companies and organizations. However,
the issue of threatening the life of the employees nullifies the tag of “asset”.
In case of Chiquita, initiating the investigation process after knowing about the faulty
payment process contradicts the governing functionalities of the personnel. Instead, if the
initiation process started much before, the life of the killed employees would have been saved.
Rather, the evaluation process seems appropriate in terms of ensuring the issues, which the
employees are undergoing (Daily and Dalton 2015). Chiquita managers took effective measures
however; lack of synchronization and oriental approach compelled the company personnel to
lose some employees. Forcing the employees to witness the killing of their colleagues generated
trauma and stress within the employees, adversely affecting their productivity.
The above situations reflect the chaotic situation through which Chiquita is going. The
main reason for this is the illegal tie up with the terrorist group. Speculating the predicament of
the personnel under the threat of the terrorists, this payment seems right in terms of morale and
ethics (Kolk 2016). On the contrary, indulging in something unethical degrades the reputation of
the company. This degradation attaches an interrogative parameter to the aspect of corporate
governance exposed by Chiquita personnel. In response to this, enhancing the parameter of
corporate social responsibility can be considered as an effort of the personnel to restore the lost
loyalty, dependence and trust from the stakeholders. Within this, publication of the reports
consisting of the draft for the undertaken activities seems a matured step in terms of averting
further illegal cases.

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Maintenance of consistency in sending the reports on the social responsibilities executed
helped the personnel to remain in the safe side in terms of the legal matters (Zheng, Luo and
Wang 2014). This consistency strengthened the bondage between the company and the
shareholders. Commitment to the corporate responsibility resulted in the radical transformation
of Chiquita. According to the confession of cEO, initiatives to disclose the details of the payment
transactions proved their willingness towards altering their fate from being just a mere puppet in
the hands of the terrorists. Here, eagerness, willingness and inner urge to enhance the
productivity is the major drive behind the achievement of success. Application of rationality in
this eagerness and willingness enhances the personality of the personnel in terms of ensuring the
wellbeing of the employees (Lawrence and Weber 2014). Theoretical consideration would seem
fruitful in terms of delving deep into the issue and coming up with appropriate solutions. As a
matter of specification, considering behavioral theory would prove apt in the process of
investigation.
Considering the issue of forcing the employees to witness the killing of their colleagues,
it generates trauma, depression and stress. It is at this stage that counseling is needed. Along with
this, various therapies can be applied for healing and soothing the disturbed minds of the
employees. In this situation, the employees need to rest, so that they can regain the mental,
emotional and physical strength (Ayuso et al. 2014). Apart from the counseling sessions and
therapies, the managers can organize one-to-one sessions. This would help the managers to
excavate the issues, which the employees are facing. The open forums provide an opportunity to
the victimized employees to voice out their opinions regarding the steps taken by the
management. Herein lays the appropriateness of evaluation, which would bring to the forefront
the major drawbacks. The previous sentence brings behavioral theory into the discussion. This is

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because it is the eagerness, willingness, which would instigate the personnel to take spontaneous
action for providing the employees with safe and comfortable workplace (Hartman, DesJardins
and MacDonald 2014).
Aligning with the case of Chiquita, threats from the terrorists compelled the personnel to
make the payments, in spite of knowing that it is illegal. In such cases, rationality gets less
importance as compared to spontaneity. Consultation with the army and governmental officials
would have guided Chiquita personnel to take the right steps. Along with this, increasing police
posting for the protection of the employees would have acted as a wise step of the personnel.
Exposing a strategic vision in this direction would have enabled the personnel to witness positive
outcomes in terms of creative contents from the employees (Nicolăescu 2013). This would have
upgraded the market position of the company in the competitive ambience.

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References and bibliography
Ayuso, S., Rodríguez, M.A., García-Castro, R. and Ariño, M.A., 2014. Maximizing
stakeholders’ interests: An empirical analysis of the stakeholder approach to corporate
governance. Business & society, 53(3), pp.414-439.
Bowie, N.E., 2017. Business ethics: A Kantian perspective. Cambridge University Press.
Carroll, A. and Buchholtz, A., 2014. Business and society: Ethics, sustainability, and stakeholder
management. Nelson Education.
Chan, M.C., Watson, J. and Woodliff, D., 2014. Corporate governance quality and CSR
disclosures. Journal of Business Ethics, 125(1), pp.59-73.
Chiquita.com (2017). We are bananas. Available at: http://www.chiquita.com/ [Accessed on 6th
November 2017]
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Daily, C.M. and Dalton, D.R., 2015. Corporate governance in the small firm: Prescriptions for
CEOs and directors. Journal of Small Business Strategy, 5(1), pp.57-68.
Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Nelson
Education.
García-Sánchez, I.M., Rodríguez-Domínguez, L. and Frías-Aceituno, J.V., 2015. Board of
directors and ethics codes in different corporate governance systems. Journal of Business
Ethics, 131(3), pp.681-698.