The W. R. Grace Company was founded by, yes, a man named W. R. Grace. He was Iri

Question

The W. R. Grace Company was founded by, yes, a man named W. R. Grace. He was Irish and it was a shipping enterprise he brought to New York in 1865. Energetic and ambitious, while his company grew on one side, he was getting civically involved on the other. Fifteen years after arriving, he was elected Mayor of New York City. Five years after that, he personally accepted a gift from a delegation representing the people of France. It was the Statue of Liberty.

Grace was a legendary philanthropist. He provided massive food donations to his native Ireland to relieve famine. At home, his attention focused on his nonprofit Grace Institute, a tuition-free school for poor immigrant women. The classes offered there taught basic skills—stenography, typewriting, bookkeeping—that helped students enter the workforce. More than one hundred thousand young women have passed through the school, which survives to this day.

In 1945, grandson J. Peter Grace took control of the now worldwide shipping company. A decade later, it became a publicly traded corporation on the New York Stock Exchange. The business began shifting from shipping to chemical production.

By the 1980s, W. R. Grace had become a chemical and materials company, and it had come to light that one of its plants had been pouring toxins into the soil and water underneath the small town of Woburn, Massachusetts. The poisons worked their way into the town’s water supply and then into the townspeople. It caused leukemia in newborns. Lawsuits in civil court, and later investigations by the Environmental Protection Agency, cost the corporation millions.  

J. Peter Grace retired as CEO in 1992. After forty-eight years on the job, he’d become the longest-reigning CEO in the history of public companies. During that time, he also served as president of the Grace Institute. The nonfiction novel A Civil Action came out in 1996. The best-selling, award-winning chronicle of the Woburn disaster soon became a Hollywood movie. The movie, starring John Travolta, continues to appear on television with some regularity.

To honor the Grace Institute, October 28 was designated “Grace Day” by New York City in 2009. On that day, the institute defined its mission this way: “In the tradition of its founding family, Grace Institute is dedicated to the development of the personal and business skills necessary for self-sufficiency, employability, and an improved quality of life.”

Questions:

1. In what ways does the structure of a “C” corporation protect its owners from absorbing ethical responsibility for the company’s actions?   

2. The triple bottom line is a form of corporate social responsibility where leaders analyze bottom-line results. In addition, the company’s effects are evaluated in terms of the social realm as well as in terms of the environment. At the intersection of ethics and economics is sustainability, or the long-term maintenance of balance. In which way(s) did the W.R. Grace Company comply or violate:

                        a. Economic Sustainability

                        b. Social Sustainability

                        c. Environmental Sustainability

3. There are three approaches to Corporate Responsibility - Corporate Social Responsibility; The Triple Bottom Line; and Stakeholder Theory. What is the importance of balancing stakeholder interests and how did the implementation or lack of implementation affect the W.R. Grace Company?

4. Is the best method of managing Corporate Social Responsibility a governmental obligation, marketplace responsibility, or a hybrid of the two? Explain.

5. What are the benefits of an Environmental Impact Statement; what are opposing arguments?   

6. Do corporations have an ethical responsibility to finance environmental protections? Did the W.R. Grace Corporation have a financial responsibility to protect the environment? Explain

7. How does a Cost-Benefit Analysis align with Utilitarianism? How might a cost-benefit analysis pertain to the W.R. Grace Company?

8. Is the creation of “Grace Day” an ethical issue? Why or why not?

Explanation / Answer

1.

C-type corporations provide protection to owners against accountability claims. In most of the cases, the protection is in totality: entirely shielded from liability claims, stockholders might face loss of their investment if the corporation indulges in an unethical/illegal activity and gets litigated, but their personal assets are totally benign. A very important part is played by corporations in the field of business ethics.

2. a. Economic Sustainability: Violates. By dumping toxic substances in the soil and water, W.R. Grace might have increased its bottom-line profits in the short-term but in the long run, the company paid huge amounts for filing lawsuits. W.R. Grace saved money by not investing in proper waste disposal system but there is a large risk that company will have to drain millions on lawsuits in the long run.

2. b. Social Sustainability: Violates. W.R. Grace dumped toxins in the water and soil resulting in birth defects in newborns due to contaminated water supply. This reflects that W.R. Grace in no way values human lives and social sustainability.

2. c. Environmental Sustainability: Violates. W.R. Grace is not at all concerned about the conservation of natural resources. It does not realize that water, air, land are all limited resources which need to be conserved. Rather, W.R. Grace is involved in polluting the environment with toxic substances from its factories.

3. The workers, customers, suppliers, shareholders and the local community are the major stakeholders of a corporation. The importance of balancing stakeholder interests is that the overall bottom line is the sum total of company’s action on all the stakeholders. Hence ensuring transparency is important so that all the stakeholders know what is going on in the organization and how are those decisions going to impact them.

In the case of W.R. Grace, implementation of stakeholder theory would not have had a spontaneous approach because the stakeholders, at that time would not know the ultimate consequences of dumping of toxins in soil and water. The stakeholders would not know that the dumping would have caused defects to newborns in the future.

4. It is an obligation of the corporations to share the burden of problems of the society. Although, the ultimate motive of organizations is to make profits, but the organizations should also adhere to social responsibility while working towards their goal. Government too has to be involved in making regulations and having stringent implementation. Hence, a hybrid of the two – governmental obligation and marketplace responsibility – is the best method for managing CSR.

5. An EIS (Environmental Impact Statement) provides pros and cons of a proposed action on the environment. It also lists alternate actions than the ones described in the EIS. The main benefit of EIS is that it encourages corporations to assess the environmental costs of a project. The limitation of EIS is that it is hampered by the different motives and different perspectives. Moreover, the government is not likely to disclose the environmental impacts of their own agencies’ projects.

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