Chiquita Brands International is the leading banana distributor in the United States, which in 2003 was accused of funding the AUC terrorist organization in Colombia. Doing business in Colombia is risky due to the difficult political situation, and the company was forced to send money to the AUC to protect its assets and employees. The decisions made by Chiquita when the case was considered by the officials violated the basic ethical principles and resulted in the company’s withdrawal from the Columbian market and the uncertainty of its current position.
State of Banana Industry in Colombia and Current Concerns
The banana business is dominated by transnational companies, the largest of which are Chiquita, Dole, and Del Monte. The industry requires careful control of the production and distribution processes, which results in a highly vertically integrated value chain and high capital investments required to enter the market (Schotter & Teagarden, 2010). In the 2000s, the situation began to change as supermarkets and retail chains started to play more powerful roles, and the corporations shifted their management attention to the marketing side of the business.
In Colombia, the banana production is attended with multiple risks. The country is engaged in the illegal drug trade, and the large parts of its territory are controlled by guerilla military groups (Wesche, 2019). The biggest of them is the AUC, which asserts itself as a regional and national counter-insurgency agency. For large companies to do business in Colombia, they have to find a way how to approach the influential guerilla groups.
The political situation in the country creates multiple ethical concerns, which are not always successfully addressed by the banana producers. Since most guerilla groups are listed as terrorist organizations, doing business with them is considered a criminal offense and is punishable by law. On the other hand, the companies are often forced to give money to the guerilla organizations under the risk of losing their business and endangering their employees.
Chiquita’s Ethical Dilemma
Chiquita has been giving money to the AUC for several decades to protect its assets and employees. In 2003, the company was officially requested to stop supporting terrorists. The debates between Chiquita and government organizations lasted for several months, but no decision was reached, and the corporation continued sending funds to the AUC. The management claimed that by stopping the payments they would endanger their employees, and pulling out of Colombia would have serious consequences for both the company and the country.
Finally, in 2004, the battle between the Justice Department and the U.S. Attorney’s office resulted in the decision to officially investigate the company and serve subpoenas on its directors (Schotter & Teagarden, 2010). In June 2004, after a few months of legal negotiations, Chiquita sold its Colombian banana holdings and withdrew from the Colombian market.
While the problem was considered by the government, Chiquita had several choices. They could either stop the payments, demonstratively continue the payments, take actions to find a compromise with the government, or leave the Colombian market altogether.
The dilemma that the company faced was both legal and ethical in nature. By sending money to the AUC, Chiquita was literally funding terrorists responsible for thousands of deaths. Ceasing payments meant putting their assets and employees in danger (Zabyelina, 2019). Leaving the Colombian market was connected with significant financial losses. For a long time, Chiquita failed to acknowledge the payments and comply with the legal requirements. Eventually, it decided to take a middle position, acknowledging that the payments were illegal and trying to strike a deal with the government without stopping the payments.
This course of actions was partially consistent with the company’s basic duties of protecting its employees but violated the ethical principles of honesty, law abidance, and trustworthiness. The company’s decision was made in accordance with the utilitarian ethical theory, which is based on one’s ability to predict the consequences of an action (Marcus & Hargrave, 2019). Chiquita’s management studied the possible consequences of ceasing the payments and decided that the risks were greater than those of their continuation.
The theory that the company should have used is the virtue theory, which, in its application to business, claims that business interests and activities should support rather than undermine human life (Crance et al., 2019). According to this theory, funding a terrorist organization is not regarded as the behavior that serves to advance the common good and should be stopped.
If I was in charge of Chiquita at the time of the investigation, I would have chosen a different strategy to communicate with the government officials while searching for a way to leave the Colombian market. I think that less aggressive behavior would have helped to reach a compromise and save the company’s reputation. Under the circumstances, leaving the Colombian market was the only possible option of resolving the issue in compliance with the ethical principles.
Currently, the company is dealing with the consequences of its association with terrorists. The possible strategy for its further development could be shifting its focus onto other products and markets, while trying to restore its reputation through advertising and marketing campaigns. Although the Colombian market is now unavailable, the company can start to look for new opportunities in other countries and pay more attention to distribution rather than production of bananas.
The crisis that Chiquita is currently facing is the result of a negative conjunction of circumstances and the wrong strategy selected by the company to address the problem. Chiquita has violated the ethical principles both when doing business with terrorists and when trying to mitigate the situation. It will now take great effort and marketing wisdom to solve this crisis and restore the company’s reputation.
Crance, A., Matten, D., Glozer, S., & Spence, L. (2019). Business ethics: Managing corporate citizenship and sustainability in the age of globalization (5th ed.). Oxford University Press.
Marcus, A., & Hargrave, T. (2019). Managing business ethics: Making ethical decisions. SAGE Publications.
Schotter, A., & Teagarden, M. (2010). Blood bananas: Chiquita in Colombia. Thunderbird.
Wesche, P. (2019). Business actors, paramilitaries and transitional criminal justice in Colombia. International Journal of Transitional Justice, 13(3), 478-503. Web.
Zabyelina, Y. (2019). The “Capone Discovery”: Extortion as a method of terrorism financing. Studies in Conflicts & Terrorism. Web.