How to Maintain Business Profits While Overcoming Ethical Dilemmas
It is no surprise that in today’s market, business profits sometimes have a natural tendency to take priority over making ethical decisions - How to Maintain Business Profits While Overcoming Ethical Dilemmas introduction. The scope of running and maintaining a business is all about ensuring that the amount of money or assets placed into a business should result in a large profit margin. Often companies come face to face with ethical situations which call for them to revaluate their approach to their specific business model.
In the case of Sanderson Farms, I shall evaluate why their particular model functions the way it does, the legality of its actions, how respective stakeholders are impacted, and what some long/short term benefits of the model are. In addition, I will be personalizing this situation to determine if I would be loyal to the Sanderson Farms, examining if major poultry companies are justifying their unethical behavior, and providing a recommendation to the Board of Directors of Sanderson Farms.
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It is apparent that Sanderson Farm, and other major poultry companies, is setting up their business model this way as a strategic and financial move. As a business model, Sanderson Farm has evolved into a complex production line with ownership responsibilities being placed on the shoulders of their individual contract growers. The business is divided into three key grower divisions: pullet or hen growers, egg producers, and broiler farms. As each division contains its own key responsibility it turns the process into an organized assembly line.
The Sanderson company can then identify any weaknesses in each division and rectify the situation. As each grower division has its own particular advertisements associated with it the company can allure in new family-operated farmers. It allows prospective entrepreneurs to see this as a close-knit family and idolizes the idea of individual investment and ownership. The business model enforces the idea that the contracting family must apply for a loan to set up individual chicken barns on their own land so that the Sanderson Farms company does not need to obtain its own load and farms.
It also allows the family, which a company could not obtain, to easily qualify for a $500,000 to $900,000 loan “because the loan was insured through the Farm Service Agency, a division of the U. S. Department of Agriculture that assists low-income farmers in obtaining agricultural loans. ” This loan is not under the ownership or responsibility of Sanderson Farm so it is not their financial concern if the family defaults on the loan which allows the Sanderson company to focus on selling the resulting chickens and not on depreciating assets, machinery problems, labor issues, or real-estate concerns.
The business model and contract also makes it clear that all farming guidelines set by Sanderson Farm must be adhered to, Sanderson Farm could cancel the contract at any time, the payment schedule could be modified from time to time, and that the contracting grower family could not sue Sanderson Farms. This business model takes much of the responsibility and ownership off Sanderson Farms and allows them to focus on the business of selling chickens. In terms of the legality of this situation, the contract growers’ condition might appear to be a non-issue at first glance.
These family-run growers are entrepreneurs who decide to take on a contract which specifies that this expenses and income are all projections. As projections there is no certainty behind them. Nevertheless, the legality can be in question because the company was not upfront about ‘water’ costs, how annual incomes decreased for many other farmers over the years, and that the growers would be directly competing with their neighbor farmers to see who got paid the most. Per the article, “essentially the company has a fixed pool of wages and employs a ranking system to determine who gets how much money.
Farmers are ranked according to who grows the biggest birds (or the most eggs) with the least feed. Farmers at the top of the rankings receive more money; those at the bottom receive less. ” There is a subjective structure behind the payment practices, and farmers could receive poor quality chickens from the ‘assembly’-line structure which would not be addressed. In addition, labor conditions are unclean, dangerous, and prone to injury. Sanderson Farm does not provide medical insurance or workers compensation when their individual contract farmers require it by OSHA requirements and conditions found in other companies.
Lastly, the issue of arsenic in the chicken protein feed is a truly concerning one. While not illegal, the chicken feed Roxarsone containing this arsenic can be hazardous to human health and must be carefully monitored. While all the above does not specifically link to illegalities it does tie into ethical concerns which must be addressed. Proponents of the poultry business might emphasize that this contract growers could have interviewed or researched with individual farmers before signing any contracts with Sanderson Farms.
In general, these can lead to litigation by growers and suppliers of the chicken because it brings up the questions: Is it truly ““100 percent chicken. Naturally. ”? And should entrepreneurial workers be granted the same workers protection that those in corporate receive? When comprehending who is impacted in the business arena it is vital to understand who are the stakeholders and how they are impacted by the business model. In the case of Sanderson Farms, the stakeholders are the 3 divisions of growers, the banks and lenders, the officials for supermarket chains, and the consumer.
Stakeholders have are directly impacted by how Sanderson Farms business model and actions are conducted. The industry business model has a diverse affect upon each of these stakeholders. First and foremost, the 3 divisions of growers are the most adversely affected. They suffer ‘indentured servitude’, high level of employee injuries , inability to sue Sanderson Farms, the subjectivity associated with their income from corporate, the threat of the banks foreclosing on their farms, the direct competitive nature of their neighbors, and the fear that each rule or regulation could be changed at a moment’s notice by Sanderson Farm.
On the other hand, the banks and lenders are positively affected by the business model. The banks and lenders need not fear if the individual growers reap a profit or not because they can foreclose on the farm, and the loan is insured through the Farm Service Agency so the banks and lenders receive their money no matter what. Per the article written by Mark O’Connor, “The reason bankers are willing to make these loans is because their repayment is not related to the viability of the business venture. This is because the Farmers Home Administration (FmHA) will uarantee up to 90% of the note. With that federal loan guarantee, the bankers couldn’t care less if contract growing is profitable or not. If the farm goes under, they get their money from the government plus all the interest they’ve made and they couldn’t be happier. ” (http://www. rtis. com/reg/bcs/pol/touchstone/Sum95/sand. htm) Similarly the official for supermarket chains are positively impacted because they can purchase chickens in bulk and at lower prices because the cost that Sanderson Farms placing into the chickens is not as high as other poultry companies.
Lastly, the consumer is both positively and negatively impacted by this business model. They can purchase chickens cheap, but the fear of arsenic might drive down the demand. Demand in truth is a strong driver of short-term and long-term benefits to the Sanderson Farms business model. Short-term these independent contractors might be faced with a lot of injustices and unethical behavior by the Sanderson company. They will be forced to retaliate by finding litigation which supports their cause and invoking their individual state representatives to speak out on their behalf.
The business model in this case will allow Sanderson Farms to encourage more independent growers in the short-term who are unaware of these circumstances. They can continue to sell their chicken cheap and not worry much about political repercussions as long as they can comply with OSHA regulations. In the long term, more stringent measures will be put into place as these situations are brought before a Supreme Court to determine the legality of these work conditions, banking and lending practices, and unethical contracts.
Per the article by Jim Cullen “poultry growers had been working to obtain legislative relief since 1994”, and this is a matter which is still being worked strongly on. (http://www. populist. com/4. 96. Poultry. html) Disturbingly the Sanderson Farms Company is referring to the chicken growers using the term, “independent contractors. ” On the other hand, the chicken growers are using terms such as “sharecroppers,” “serfdom”, and “indentured labor” to elaborate verbally on their situation. Per the text, this is obviously a matter of justifying unethical behavior using the disregard or distortion justification in order to get away with it.
The company steadfastly emphasizes that this is a contractual relationship between themselves and their independent farmers. They are disregarding how the contract has been set up and how farmers have no ability to defend themselves against the situation using facts. The company unethically promotes stringent competition between the farmers’ income and strictly abides by its rights to change pay schedule and subjectively decide who receives between chickens/eggs/etc.. This distortion also reflects in the contract which does not enable the chicken growers to even sue the company!
Advertisements falsely indicate that the income projections tend to sky-rocket over time; whereas that is plainly not the truth. This is plainly unethical behavior and defenseless families fall prey to false advertisements, threats that they lose their land, fears that they receive poor chickens or eggs, and binding contracts. The article by Mark O’Connor also points out several key subjective situation faced by the independent contractor including that there is “no way to verify the weights of the chickens or feed that his income is based on,…the costs of feeds etc.. hat the company charges against earnings…figures used to rate growers…provisions in the contracts for payment if a large portion of the flock is lost to disease, even though it may be the company’s responsibility for delivering sick chicks in the first place…. ” (http://www. rtis. com/reg/bcs/pol/touchstone/Sum95/sand. htm) These unethical behaviors would make any ethically driven Supervisor of Sanderson Farms feel embarrassed to state that they work for such a conniving company. As a supervisor it is his or her job to defend the company they work for.
In spite of this unethical behavior, a supervisor might already be well-aware that such situations exist around him or her. It would be difficult to defend the company, but the supervisor’s chief argument might be that that the contractual agreement is laid out for the independent contractors to decide to sign or not and that Sanderson Farms is simply applying its right to make a business profit as would any company. It is up to governing bodies to determine the legality of the situation, but until then Sanderson Farms has the legal right to operate under these conditions.
Ethical behaviors of business are a driving factor behind why people have a tendency to evaluate their priorities and responsibilities towards the company that they might work for. Had I been a supervisor I might have to weigh my obligations and decide if ethically I should continue to stand behind the company. Sometimes, ethics and morals are difficult to adhere too. In today’s poor economic environment, one has to decide if paying a mortgage and financial responsibilities takes a back seat to ethical responsibilities or not. In many cases, unfortunately it is the world we live in and it is that worlds’ rules we live by.
Until the legality situation is cleared up, the ethical situation is still open for discussion. Assuming that I were the V. P. of Marketing for Sanderson Farms, I would have the company respond to the media coverage by pointing out the success stories from independent farmers. These success stories would illustrate that not all growers are dissatisfied with the company and the business model. Another alterative response would that the poultry market that we say today is a state of change as the interview between Thorton and Dr. Paul Aho reflects. Dr Aho believes that there will be “two kinds of poultry companies in the future. There will be a few very large companies of the type we see developing today and also a number of smaller players that may be very different from today’s poultry companies” hence, Sanderson Farms needs to keep its lead as a large company. (http://www. wattpoultry. com/PoultryUSA/Article. aspx? id=9218). This directly benefits the lenders and farmers, but is a disadvantage to any independent grower.
Another alternative would be to stipulate in the contract that the independent contractors have more right to sue the company if they are not satisfied. This would alleviate some doubts that the media is presenting that the company falsifies information to prospective growers and is knowingly harming consumers by not identifying chemicals used in the chicken feed and causing health problems with their employees. All in all, by removing this clause from the contract the media might feel that Sanderson Farms is not unethically protecting itself from being sued because it is aware of unethical practices. Finally, as a V. P. of Marketing, I would advise the board of directors that more rules and regulations should be put into an employee manual so that all growers would know what rules are in place which provide them with their pay. This written down procedures would eliminate much doubt and feeling of subjective paying practices. All in all, these changes would be in the best interests of Sanderson Farms and help the company overcome accusations of unethical behavior. As proactive change is good, this would clear up any misconceptions, media projections of unethical behavior, and concerns from consumers about poor grower treatment.