The case of James Hardie has illustrated an interaction between a company and its society when the company’s activities have caused serious negative impacts to its society. Society expects positive impacts from the companies in return for the opportunity given to the companies to exploit economic resources of society. Society also expects companies to minimize negative impacts caused by their operation. Moreover, companies should acknowledge moral liability to its society when companies’ activities have generated severe negative effects. In relation to the moral liability, companies are expected to react appropriately and to take full responsibility for any unfavorable consequences from their operations.
Since 1960’s, asbestos has been widely known as the cause of several fatal diseases, such as: mesothelioma, asbestosis and other cancers. Having established in the late 19th century, James Hardie has evolved as the largest building materials manufacturer, especially asbestos-based products, throughout Australia. The James Hardie’s involvement in asbestos-related production was began in 1916. For several decades, asbestos have been widely used in Australia in many types of building products. Briton has estimated that asbestos-based products were used in constructing one out of three of all Australian homes which were built earlier than 1985. The exposures of asbestos in such long period and vast area of might result in many potential asbestos victims in the future.
In relation to the asbestos issue, O’Connel believes that James Hardie’s responses did not fulfill the society’s expectations. It was admitted that, in relation to the asbestos issue, James Hardie’s responses had not breach of the law and satisfied financial reporting standard. However, society considered that James Hardie, as represented by its director’s actions, has done several unethical decisions as response to the asbestos issue. The main ignorance of society’s expectation was James Hardie’s decision to continue mining and manufacturing asbestos products several decades after the dangers of asbestos has been acknowledged. Moreover, James Hardie mostly neglected the asbestos victims’ claims and, in the later progress, tried to avoid full responsibility by various corporate restructuring actions.
Even though James Hardie has already known the dangerousness of asbestos, it had made an unethical decision by continuing its asbestos production, mainly by reason of commercial profits and maximizing shareholders’ value but jeopardizing the health and lives of society. It is claimed that James Hardie has already realized the dangerous of asbestos early in 1964, which was evidenced by the existence of a warning memo from a safety officer of James Hardie to its senior management which stated that ‘asbestos dust is one of the most dangerous of all industrial poisons’. Asbestos mining and manufacturing was finally discontinued by James Hardie in 1987.
Along with the continuation of asbestos production, James Hardie’s main strategy of the asbestos liability was by denying and neglecting the asbestos claimants. James Hardie was reluctantly responsible for personal asbestos compensation claim and chose to deal with the asbestos victim out-of-the court in order to stay away from media publications.
Furthermore, James Hardie has created several corporate restructuring actions to isolate the future asbestos effects from their holding companies. The first attempt was by transferring main assets from its two asbestos-related companies to other companies in their holding company. The next step, James Hardie has merged its two asbestos-related companies into an independent Medical Compensation and Research Fund (MCRF) with an estimated of net assets at A$293m. The MRCF has been created to meet all future claims from asbestos victims, but with no more responsibility from James Hardie. Then, James Hardie relocated its main office to the Netherlands. Public disquiet has arisen to this decision since Netherlands is one out of two countries where Australian legal judgments could not be enforced.
As a result of James Hardie’s unethical decisions, serious consequences have arisen. The asbestos-caused diseases develop long years after its first exposure and a hurtful suffering and fatality arise at a later phase of the diseases. The death occurrence of a James Hardie employee because of asbestos was first documented about 1960. Australian Manufacturing Workers Union has predicted that by 2020, the number of asbestos victims will reach a number of 53,000.
Meanwhile, the corporate restructuring actions taken by James Hardie have made a possibility of an inadequate funding to fulfill compensation claims from the asbestos victims (Spander, 2003). As a result, the asbestos victims will receive nothing or heavily under-compensated. Then, the public concern is confirmed after Commissioner Jackson reported that the funds which were managed by MCRF would run out by 2007.
In response to the unethical actions taken by James Hardie, criticisms have arisen throughout asbestos victims, employees, government, media, and politicians. The New South Wales government has initiated a special inquiry conducted by Commissioner Jackson Q.C. to investigate the corporate restructuring actions taken by James Hardie and their effects to the possibility of insufficiently funded of MRCF to meet the asbestos future claimants. In addition, major Australian media had the same voice of the James Hardie issue: criticized it. The Australian government and employee unions had attempted to boycott in using all James Hardie’s building material products. This boycott efforts were then supported internationally United States.
Having faced the situation that could threat their ‘license to operate’, James Hardie ‘gave up’. James Hardie agreed to fully responsible of the asbestos victim by signing a compensation offer up to $1.9 billion to the asbestos victims for a period of 40 years by allocating up to 35% from their operating income. An almost happy ending situation for such a moral liability case.
How about Indonesia?
We could only dream that similar situation would happened in Indonesia. Countless of corporate responsibility issue in Indonesia (Sidoarjo mudflow, Newmont/ Freeport/other miner companies caused environmental damages, thousands cases of harmful elements in food) , were lacked of government concern, media coverage were limited, victims’ compensation were not clear-not to mention that there were no compensations, the cases were then abandoned, and finally we forgot. Indonesia is a heaven for corporate irresponsibility actions, they came, exploited the natural resources, made a huge profit, left the environmental and health damages, and goodbye…