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Georgia-Pacific and Koch Company Analysis Case Study


Introduction and situational analysis

The transformation of an “acquired firm” into a “working” company can be a dilemma given the kind of challenges that are likely to prevent the realization of the initiative. An ethical dilemma refers to a situation in which two options present themselves and one has to choose either of them. In an ethical dilemma, the merits and demerits of each alternative are evaluated and one should choose the favorable option. The Georgia-Pacific scenario is not only challenging but also interesting. The interesting part of this study is how a private industry going by the name Koch managed to obtain a public company such as Georgia-Pacific.

It is difficult to conceive how fast Koch transferred its distinctive ethical culture to Georgia-Pacific. In 2005, Georgia-Pacific was procured and the acquisition was facilitated by Tom Butz who was a company executive sent by Koch to oversee the execution of the deal. It was ironical or a dilemma when Butz later claimed that he was not part of the transition and so was his expert team. It was hard to understand why he chose to lie considering the fact that he was practically involved in the deal. It was possible that he concealed the details to protect himself or the company but nobody could tell the exact reason but himself.

It was unethical when Butz argued that the initiative was a leadership commitment throughout the company which fell under the Commitment and Obligation Act. Georgia-Pacific as a company was created by Owen Robertson Cheat man in the year 1957. This foundation was established in Augusta, Georgia, commonly referred to as Georgia Hardwood Lumber Company. Georgia-Pacific dealt with tissue, chemicals, and building equipment. The company employed many people in its various branches across the globe, especially in Europe. Eight years later, the company changed its name to Georgia-Pacific Corporation. The name changing phenomena and rebranding system was linked to an ethical dilemma. The stakeholders had to choose between rebranding the product with a change of name. They were to consider maintaining the name with a change of products’ quality and structure.

The two options raised different challenges. The announcement that Georgia-Pacific would be procured by Koch industries on November 13, 2005, was not a surprise for many people but what really amazed people was the speed with which the transfer was done. The transition according to Butz was a contrast to many companies’ practices and culture. It first considered the guidelines, building and training tools alongside related requirements for ethical compliance programs.

Georgia-Pacific instead prioritized the need to build an understanding and commitment regarding the vision and culture of ethics and compliances. Even though many corporate entities and observers did not expect this dimensional change, the company had to engage ethical options at its disposal. The first option considered guidelines and plans that would correspond with the compliance and ethics programs and the second option formed a framework for an understanding to achieve compliance and ethical accreditation. The second option appeared favorable in as much as there were a lot of political, environmental, physical and cultural factors involved.

Pressure from the managerial and entrepreneurial perspectives played a crucial role in the ethical dilemma. External pressure enhanced the removal of Georgia-Pacific from NYSE with the shareholders selling their shares for 48 dollars for each. In 1995; Georgia-Pacific was recorded to have persuaded the judiciary committee of the US Senate to append an amendment which derailed the issuance an environmental license from EPA (Environmental Protection Agency) and consequently, investigations on Waterhouse Company, Georgia-Pacific and Louisiana-Pacific Corporation. EPA submitted that Georgia-Pacific was partially using modern standards to avoid certain environmental regulations. EPA pressured Georgia-Pacific to report in public the number of chemicals it released into water, land, and air.

This was an ethical dilemma that Georgia-Pacific was facing and it had to comply or else face criminal charges. On the other side, the publicity of the pollution menace would jeopardize the company’s reputation, business, and market framework. The pressure increased, and in 2007, an agreement was reached involving the EPA, Georgia-Pacific, Michigan, and Millennium Holdings. The accord required the firms to clean up an approximated 21 million dollars worth of environmental destruction in the plain wood impoundment zone. Another additional 15 million US dollars were invested on the Kalamazoo River Superfund zone.

Stakeholders’ analysis

Stakeholders refer to corporate bodies, groups, community and other members who have an interest in an organization. Stakeholders derive their passion from the organization and once the organization is affected, they too become affected. The term stakeholders can also refer to a condition; for instance, the environment. The Georgia-Pacific ethical dilemma affected many stakeholders and a section of them include Koch industries, NYSE, Georgia-Pacific Tower, Orient Strand Board (OSB), Domtar, the US government, and the Canadian government, RPA, Michigan and Millennium Holdings.

The Koch industries as a major stakeholder were immensely affected by the dilemma ethically, environmentally, socially and structurally. The independent operation of Georgia-Pacific proved to be a challenge not only for the stakeholders but also the management. On one side, the acquisition provided the opportunity for companies to expand their corporate programs but on the other side, it marked an increase in responsibility and cost which would present the future.

This fact would amount to a difficult task for the Koch Company considering the vastness of Georgia-Pacific and the reputation it had in the global market. The removal of Georgia Pacific from NYSE presented a challenge for the NYSE. First, the move meant that the stakeholders would surrender their shares for 48 US dollars for each share. Georgia-Pacific had traded with the GP symbol as its trademark. In this case, the company faced two challenges simultaneously. The first challenge was that the withdrawal from NYSE by the Georgia Pacific meant the abandonment of the GP title. This challenge was apparently a salient advantage. It meant independence and self-reliance of the company; with the shareholders selling their shares and the company title. The second challenge did not seem favorable for the company for it related to the dependence, especially on GP.

The Georgia-Pacific Tower found in Atlanta was a major stakeholder housing the Georgia-Pacific headquarters; anything that affected the company had to pass through the tower with major decisions being made in it. The changes in names accompanied by other responsibilities forced the tower to consider a number of factors. The Georgia-Pacific Tower had to accept the ethical changes and conform to the transition process or choose to withdraw from the challenge and maintain its ethical standards and structure. Maintenance of the structure meant that production would remain as it had been with the same paper quality, material performance, pricing systems, and workforce and marketing procedures.

The particular structure did not stimulate growth or economic empowerment. It did not improve the living standards of the people but maintained consistency of production irrespective of changes in the economic, social, political and cultural settings. The OSB as a stakeholder was influenced by the dilemma through the act signed at Engelhard by Pacific-Georgia. This fact followed Georgia-Pacific’s quest to acquire the products from the Grant Forest. The mechanism placed OSB in a challenging situation and it had to choose between giving assent to the agreement or withdrawal from the Act. Neither of the options was easy for OSB. Ontario alongside OSB facilities, North and South Carolina, Clarendon and Allendale appended to the acquaintance of the forest resources worth 400 million US dollars.

This deal was expected to be made following the Canadian and the US court’s regulatory approval. Both the US and Canadian governments had to choose between complying with the ethical procedures of the activities involving the procurement of OSB and deviating from the course. Deviating from the imposed regulations did not present a good choice for both states considering the economic benefits attached to the deal. Domtar, a Canadian papermaker reached an agreement with Georgia-Pacific in which the former obtained four uncoated paper mills, assets and linked businesses amounting to 1.65 billion US dollars.

The agreement was signed in haste and it thus put Domtar in an ethical dilemma. The Canadian papermaker had to make money but the procurement of assets and business from Georgia-Pacific was not easy for the industry considering the price attached and the risks involved like insurance policies, marketing competition, and labor demand. The industry did not turn down the offer because it would not have been a favorable option considering the need and urgency to grow and the zeal to make more money. EPA’s investigative nature proved to be a challenge to many firms.EPA had to stretch its legislature on environmental ethics and exert harsh penalties on environmental damage of which the paper company had to comply.

The investigation on Weyerhauser Company, Georgia-Pacific and Louisiana-Pacific Company was contested by the three firms arguing that EPA was using overrated standards and outdated procedures. EPA had to choose between two options. The first option was to stand by its legislation and insist on the regulation on environmental conservation. The second option appeared easy but tricky because it involved a retreat from the pursuit. EPA had to assert the fact that the firms released emissions in the environment which would have impacted adversely on the environment exposing communities to constant epidemics and attacks (Westcott, 2003).

The Michigan and Millennium Holdings, on the other hand, were required to meet the cleanup cost set at 21 million US dollars in 2007. On one hand, the legal directive did not present an easy task for the two organizations considering the economic repercussions the decision would have on the company. On the other hand, the signing of the contract was a developmental move towards environmental and ethical compliance. Analysis based on ethical theories Cultural relations Culture according to the sociological perspective is usually referred to as a way of life. Every society and organization has its own culture and way of doing things.

The readiness to conform to a particular cultural belief is dependent on the level of trust created by the involved parties. During the transition phase, the new leadership of the Georgia-Pacific was obliged to work with fewer executives, managers, and employees. Its actions were deliberately inconsistent and did not match with the philosophy and principles of the company. Certain employees of Georgia Pacific were dismissed due to noncompliance with the issues raised by EPA but a number of employees of the company complained that the reasons given for their dismissal by the company were not sufficient to warrant their sacking. The employees were thus questioning the ethical principles used by the company in sacking them.

A communication team constituted by the company to reply to the employees’ claims held that the right legal procedures were followed in dismissing them. Butz, scheduled a number of meetings with the leaders of the company to deliberate on the need to integrate a fair and acceptable corporate culture. While addressing the team, Butz employed real-life examples to explain the guiding principles, situation and behavior outcomes. He argued that bad decisions were generated from gaps in skills, knowledge, values, and beliefs. According to him; based on values and belief gaps, the employees could be dismissed irrespective of their performance.

Ethical and compliance theories

Georgia-Pacific expected its employees to comply with the law, ethical standards and performance contracts. The leaders of the company were expected to lead by actions and by oral directives. They were expected to develop a compliance vision and an ethical framework to develop the right culture despite the gaps (Michael et al, 2006). The Georgia-Pacific handbook contained the code of conduct.

The leaders and the employees were expected to comply with ethical standards in order to attain better results. The compliance standards were translated into various languages to reach many employees in the world. The standards set focused on commercial, health, safety, and environmental sectors. Every standard had a specific expert responsible for periodic risks analysis, trafficking, implementation, audits, delivery and training within the functional and business units. The compliance system and program were believed to be an operation tool in reinforcing the culture and supporting Georgia-Pacific’s functional units. With a comprehensive plan on strategic communication, the movement towards compliance for companies and ethical efforts was seen to be achievable.

Conclusions and recommendations

The integration of the acquired firm into a working company proved Georgia-Pacific to be one of the best and dependable organizations of building materials, paper materials, and related chemicals. The company had to make difficult decisions including sacking its employees. This meant that the company was prepared for challenging times ahead. The occurrence of the dilemma motivated the Koch industries to always aim for the best decisions irrespective of the challenges linked to them. The Compliance and Ethics Act involving EPA and other regulatory bodies happened to be a necessary force in stimulating environmental and ethical culture. The compliance move was a sure way of assessing the company with respect to economic, cultural, ethical and environmental diversity (Lum, 2011).

I would like to recommend the management to come up with policies that safeguard the company in terms of economic crisis or a compulsory compliance program like that of EPA. My recommendation goes to all the stakeholders to adopt mechanisms of taking huge challenges irrespective of the pressure and opposition from external sources.

References

Lum, G. (2011).The negotiation field book. Simple strategies to help one negotiate everything. New York City, United States: McGraw-Hill companies Inc. Web.

Michael et al. (2006). Advertising and promotion: An integrated marketing communications perspective, 7/e. New York City, United States: McGraw-Hill/Irwin. Web.

Westcott, R. (2003). Stepping up to ISO 9004: 2000: A practical guide for creating a world-class organization. California, USA: Paton Press. Web.

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