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Firestone: Crises Across the Decades “Do I think they have blood…
Firestone: Crises Across the Decades
“Do I think they have blood on their hands? Yes. They facilitated a warlord in his insurrection and the atrocities he created. Sometimes people make decisions they regret. I don’t know if Firestone regrets their decisions in Liberia during the insurrection. You may want to ask them that question.”
Gerald S. Rose, deputy chief of mission (1991-93) for the U.S. Embassy in Liberia1
Firestone’s decision to remain in Liberia was very costly for the company. The company continues to rebuild, but along with its Liberian employees Firestone was able to preserve an important economic asset for Liberia, and we are proud of that.
Firestone press release2
Emma Sanchezi could not help but smile as she pushed a recent copy of The Wall Street Journal to the corner of her desk. As president and managing director of Firestone Liberia, Sanchez was extremely proud of Firestone’s success in keeping its employees and their families healthy during the Ebola crisis. The Wall Street Journal lavished praise on Sanchez and the company with its article “Liberian Rubber Farm Becomes Sanctuary Against Ebola”3 and kudos from NGOs and governments around the world began to pour in. Firestone Liberia was a leading employer in the West African nation, supplying comparatively well-paying jobs, housing, education, and healthcare to thousands of people near the country’s capital, Monrovia.4 Sanchez, along with her management team, had developed a multi-faceted approach to preventing and treating the disease as well as educating Firestone employees and all those living on its grounds about the epidemic. Compared to other private organizations in the region and West African governments, Firestone’s approach was extremely successful.
Sanchez glanced down at her desk at the newspaper clippings, reports, and memos until one headline from The New York Times caught her eye: “Bodies Pile Up, but Business Goes On.”5 Sanchez scanned the article. This was not a grim take on Firestone’s handling of the Ebola crisis. Instead it was an article on a subject Firestone executives thought they had long moved past: Charles Taylor.
Although relatively new to the company, Sanchez knew that Firestone had a long and complicated history in Liberia, including the demands of warlord Taylor. The New York Times article was written in response to a new documentary set to air in the United States on PBS: “Firestone and the Warlord.” New evidence had come out directly linking company payments to the National Patriotic Reconstruction Assembly Government (NPRAG) led by Taylor. The documentary examined a trove of recently uncovered documents, including correspondence from Firestone managers and the diary of a key manager.6
Sanchez viewed the documentary’s allegations and learned that the documents revealed that, in 1991, Firestone struck a deal with Taylor under which it would make a significant capital investment to restore its operations and $2.3 million in “tax payments” to NPRAG in exchange for being able to rebuild and restart the rubber business operations. That money, in Taylor’s own words, provided the “financial assistance that we needed for the revolution.” This money was used as start-up capital to attack Monrovia.7
As she viewed the documentary, Sanchez’s phone rang. On the other end was an official from Liberian President Ellen Johnson Sirleaf’s office. Sirleaf wanted a meeting with Sanchez the next day to discuss Firestone’s planned response to the report. Over the years Firestone had forged a close relationship with Liberian government officials; a meeting with the president was inevitable. She agreed to the meeting and immediately dialed Porter Smithii, CEO and president of Bridgestone Americas, Inc., to discuss the company’s next steps. (Bridgestone had purchased Firestone in 1988.)
Sanchez knew that demands for reparations were likely, but she also knew that the Liberian president was well aware of the unimaginable decisions required of management and world leaders at the time. The president was also aware of the $1 billion Firestone had invested in Liberia since its recent civil wars. Sanchez believed Firestone did the right thing in trying to maintain the operation and care for their workers and their families during Liberia’s civil wars. Given this report, would there be claims of Firestone’s complicity in the war damage? What was Firestone’s responsibility now? Would the allegations sidetrack the company from the crisis at hand preventing the spread of Ebola among its workers?
With only 24 hours before her meeting with Sirleaf, Sanchez waited with bated breath for Smith to pick up the phone.
Company Background
Business was booming for the Firestone Rubber Company of Akron, Ohio, in the 1920s. The auto industry was taking the U.S. by storm, and it needed tires Americans were consuming almost 70% of the world’s rubber supply. Most of the rubber was imported from British colonies in the Far East. Harvey Firestone decided to capitalize on the growing demand and find his own source of rubber. He set up operations in Liberia, in an equatorial region where rubber plants thrive. The country was a U.S. ally and had a large untapped labor pool and vast expanses of land for planting rubber trees.8 Additionally, the country was in debt, setting the stage for foreign investment by Firestone.9
On Oct. 14, 1923, Firestone announced the completion of an agreement with the Liberian government by which the Firestone Plantation Company would obtain a 99-year lease for one million acres10 (roughly 10% of Liberia’s arable land).11 The Liberian government offered Firestone the land for a mere 6 cents an acre. The deal also included a $5-million loan from Firestone to the Liberian government. The government used the funds to eliminate its public debt.12 Firestone Liberia soon became the world’s largest rubber farm and the largest corporate employer in Liberia.13
Firestone’s business steadily grew, and by 1951 Firestone’s profits after taxes amounted to three times the government’s total revenue. The company helped the country’s elites become rubber farmers, providing free saplings and agricultural advice as well as purchasing the rubber they produced.14 From 1951 to 1977, direct taxes paid by Firestone to the Liberian government averaged about $4 million per year. During the period from 1926 to 1977, Firestone made between $410 million and $415 million in profits. Firestone’s success was due to its low labor costs, efficient production, and a high price for natural rubber on the international market.15
Lead-Up to Liberian Civil War
Firestone’s vast operation was a crucial revenue stream for the Liberian government when Samuel Doe took control of the country by means of a violent military coup in 1980. Soon after, Firestone sent Don Weihe, its executive in charge of overseas rubber operations, to meet with the new dictator. Weihe explained, “When you’re the big frog in the pond, you’re sort of wondering who is in charge of the pond.”16 In 1982, world rubber prices dropped, and Firestone dismissed 5,000 workers.17 Doe lavished generous tax exemptions on Firestone. In a speech to Firestone’s executives he said, “Firestone and Liberia have enjoyed a long and unique historical relationship … We therefore consider this relationship as a contract of survival.”18
Doe’s coup was just the beginning of a violent and chaotic era in Liberian history. Doe was undeniably corrupt, violent, and prejudiced against citizens outside his own tribe, yet he paled in comparison to his sociopathic successor. As Doe systematically eliminated his political opponents, the American-educated Taylor began assembling civilian soldiers in the northern part of Liberia in preparation for an uprising. He promised the return of order and justice under his rule, but a new era of evil began as the Taylor occupation started Christmas Eve, 1989.19 Taylor’s army was largely comprised of young men and boys, some as young as 8 years old, who would torture and kill at random while wearing fright masks and wigs, women’s dresses and witchcraft talismans, which the fighters believed would make them bulletproof.20 Some blamed this bizarre behavior on an influx of recreational drugs in the area, but one thing was certain: Taylor oversaw the mass mutilation, rape, and murder of thousands of Liberians.21
War Comes to Firestone
Despite widespread bedlam, business continued as usual on the Firestone farm until June 1990. In fact, business picked up as AIDS spread throughout the world, driving up demand for rubber-sourced latex.22 At this time, roughly two dozen American expats lived in mansions on the compound to oversee work on the enormous rubber farm. The managers continued their golf games as troubling reports of Taylor’s forces ransacking villages poured in. The U.S. Embassy in Liberia encouraged Firestone to leave Liberia, but Firestone executives hoped that Taylor’s army would leave the farm intact due to the company’s importance to the Liberian economy. But to Taylor, the Firestone farm was a well-stocked resource, a desirable place to base his operations.23
The Firestone operation was consequently not immune to the atrocities committed by Taylor’s army. Taylor had control of most of the country. Hundreds of Firestone employees sought refuge at the largest mansion on the farm, but managers felt powerless to protect them, even though they knew returning to the village meant certain death for workers of targeted ethnicities. Instead of sanctuary, the terrified families were given rice.24 On June 17, 1990, Firestone abandoned the farm as violence escalated.25
To Return or Not to Return
Business Concerns
In the late 1980s, 40% of the latex used in the U.S. came from Firestone’s plantation in Liberia. Firestone had some of the highest quality latex in the world.26 In May 1988, the Japanese tire conglomerate Bridgestone acquired Firestone for $2.65 billion. The deal was a disaster; the company’s balance sheet was awash in red ink. Between 1990 and 1992, the new U.S. subsidiary, Bridgestone/Firestone, lost $1 billion. In 1989, as the civil war was beginning, Firestone’s Liberian operation generated only about $104 million in revenue and $15.6 million in profits for Bridgestone. But that margin was crucial for the company as it tried to integrate post-acquisition. At Firestone headquarters in Akron, top managers were under pressure to get the Liberia operation back up and running.27
The company was able to source rubber from Asia in the interim, albeit of a lesser quality. But the company could not recoup the $200 million it had locked up in Liberia in the form of land, rubber trees, factories, buildings, vehicles, and equipment if it pulled out of Liberia. Firestone had no assurance that either of the country’s competing governments would allow it back. The company’s farm was on land now under the control of Taylor he called it “Taylorland” but Firestone needed to ship its products out of the main port in Monrovia, which was still controlled by the former government.28
Firestone feared there was no time to waste in making a decision. The company had received word that Liberians had descended on the farm and were “slaughter tapping” the trees extracting so much sap that the tree dies.29 Rubber trees require five to seven years to become productive. If Firestone waited too long, all could be lost. According to Brad Pettit, the farm’s controller at the time, “Firestone’s intent was to make money. Always has and always will … We wanted to get the investment earning money again.”30
Concerns Over Employee Welfare
According to Firestone’s Liberian lawyer at the time, Gerald Padmore, much of Firestone’s determination to return to Liberia was driven by concern for its Liberian workforce. Though rubber tapping is arduous labor, most workers made only a few dollars a day. Nevertheless, this was a relatively high wage in the low- income country. Firestone also provided workers and their families with access to healthcare, schools, food, and shelter. The amenities were basic, and most of the housing did not have running water or electricity, and bathrooms were outhouses. After leaving Liberia in 1990, Firestone was no longer able to make rice shipments to the farm, leaving workers and their families to survive on sugar cane and rotting bananas. The company’s medical director was recording 10 to 15 deaths a day.31
In addition to starvation and malnutrition, employees were victims of violence by Taylor’s regime.32 The former head of the Coca-Cola bottling operation (also then run by Firestone) claimed that around 17% of his more than 300 employees were killed by rebels. He recalled, “The story that bothered me the most was my driver because … first time he was beaten; second time they cut the soles off his feet. Third time they shot him.”33
The Decision to Return
In Ohio, Firestone executives continued to discuss what to do. Initially, they decided to wait to see if the conflict would resolve itself. But as those hopes faded, Firestone decided it would go back to Liberia and try to make a deal with the new man in charge.
According to Padmore, “The meetings actually took place in Akron in 1990, at the old, big Firestone headquarters, the big building there in Akron. The discussions focused on what to do next. Would you have to deal with Charles Taylor? Could you do that? There was tremendous worry about the safety of their employees, most particularly the 8,000, 9,000, 10,000 Liberians that they employed. So how can we help these people? What do we do next? It was a real dilemma for the company, and a lot of, I would say, soul- searching and really tough, tough decision-making that had to be done.”34
Making a Deal with the Warlord
In February 1991, Donald Ensminger, then president of Firestone Liberia, flew to Liberia to reach out to Taylor.35 With Firestone’s top managers gone, Taylor and his forces had assumed control of the farm and made it their base of operations.36 Rebels had looted and destroyed much of the plant’s infrastructure including the hospital, factory, housing, and schools. Most of the inventory, supplies, and equipment were also looted including, rice, fuel, vehicles, and machinery.37
U.S. Ambassador to Liberia Peter Jon de Vos secured a meeting with Taylor in April 1991 and he invited Ensminger along, unbeknownst to Taylor. The meeting was recorded, and video of the event captured the following introductions:
De Vos: “This is Mr. Ensminger, the director general of Firestone.”
Taylor: “Oh, he works for the embassy now?”
De Vos: “No, America works for him.”
Taylor turned to De Vos at one point during the meeting and said: “My biggest problem with Firestone is that instead of trying to play economic games, they’ve been trying to play political games.” The meeting quickly disintegrated and Taylor openly criticized Firestone for leaving Liberia during the war. “There’s a little war, and then you run off, and there’s no food, no medicine, complete breakdown,” he later told one Firestone executive. “That’s inexcusable.”38
The meeting with Ensminger did not yield any results for Firestone, so in June the company flew John Schremp, a top Firestone executive, from Akron to Liberia. Schremp met with Taylor. Taylor indicated he would allow Firestone to resume operations under one condition that Ensminger be fired. Ensminger flew back to Akron to voice his concerns over the new direction: “I stated the position that we had had, and we should continue to have,” he said. “We should not recognize Taylor and his people as the legitimate government for the country of Liberia.”39 In October 1991, Ensminger was let go, and in January 1992, the company reached a deal with Taylor. See Exhibit 1 for responses to Firestone’s decision.
In October 1992, Taylor’s forces launched Operation Octopus in an attempt to capture Monrovia. The Firestone operation was devastated in the process. One of the company’s medical centers was struck, and the rubber processing plant was damaged. Firestone was forced to stop operations. Management had to evacuate again this time to Cote de Ivoire (Ivory Coast).40
The Second Civil War
By the end of 1996, conditions settled down enough for Firestone to begin repairing its facilities. In February 1997, Firestone started limited operations. In July 1997, Taylor was elected president.41 At that time, the farm was operating at one-third of its capacity prior to the civil war, with 3,000 workers. But
Firestone faced a series of violent protests as employees demanded better working conditions, better pay, and resettlement benefits. In addition, former employees demanded to be rehired.42 Firestone continued to gradually rebuild, and by 2002 the plantation reached almost 90% of its 1989 capacity and employed over 6,000 people.43 At the time, Liberia’s unemployment rate hovered at 75% to 80% and international investment had slowed down dramatically due to the fighting.44
Large-scale fighting broke out again in 1999. In the end, Taylor was unable to seize Monrovia, but his forces laid waste to the country in its second civil war before he was formally ousted from power in 2003.45 An estimated 500,000 people were victims of killings, systematic mutilation, and other atrocities in the civil war that lasted from 1991 until 2002.46
Exhibit 1
Responses to Firestone’s Decision
Ensminger and Schremp were not the only ones divided over Firestone’s decision to strike a deal with Taylor. Inside and outside the company, stakeholders fell on both sides of the fence.
“They had a choice. They had a choice. I don’t understand this notion of not having choice over the corpses of Liberians. What is that supposed to mean? Choice to become a launch pad to rain war on Liberians? I don’t accept it.” Amos Sawyer, interim president of Liberia, 1990-94
“It’s about making money. It’s not about the people who help to create the wealth. It’s not about a country. It’s profit, profit, and profit.” Edwin Cisco, Firestone Workers Union
“In the end, we had no viable choice but to accede to the preconditions set by the NPRAG (National Patriotic Reconstruction Assembly Government) for our return to the plantation. Our choices were stark, either generate some income or abandon our employees and mothball the plantation.” Firestone executive John Schremp
“You can’t close down a plantation. You can’t wrap up, you know, five million trees and take them away. So you want to preserve what you can, and so you have to make deals.” Herman J. Cohen, U.S. ambassador to Gambia and Senegal, 1977-80
“The easy answer for Firestone, in my opinion, would have been to just say, ‘We’re out of here. It’s risky. It’s scary. Economically, it doesn’t make any sense. So we’re just going to shut it down and walk away.’ But if you felt a sense of responsibility to Liberia, and most importantly to the workers, the people you’ve worked with for years, it had no other choice. The decision was to stay.” Gerald Padmore, Firestone attorney
Firestone After the Wars
After the fighting dropped off, Firestone was the only major source of employment in a war-torn and poverty-stricken Liberia.47 Firestone signed a new concession agreement with the Liberian government in 2005,48 and an amended agreement in 2008.49 Under the amended agreement, which runs through 2041, Firestone committed to continue its replanting efforts, to complete a rubber wood factory that will directly add a minimum of 500 new jobs, to grow its support for small Liberian rubber farms, and to undertake additional social and educational projects.50 The agreement permits an increase in the income tax rate payable by Firestone from 25% to 30%, establishes new transfer pricing provisions for dry rubber and latex based on international indexes, and makes a number of other changes that allow the Liberian government to exercise more flexibility in applying its revenue laws.51
The amended agreement demonstrated Firestone’s renewed commitment to Liberia’s natural rubber industry. In partnership with the government, Firestone signaled that Liberia was again open for business.52
As a result of these agreements, as of 2014 Firestone had spent more than $147 million on infrastructure projects, which in addition to new housing for employees, new schools, and a new generation of rubber trees on its property, included rebuilding the medical center, rehabilitation of roads, and the donation of more than 4.7 million high-grade rubber tree seedlings to independent farmers to ensure the future of the rubber industry in Liberia. Firestone also provided the Roberts International Airport with electricity. Through tax payments and other investments, Firestone estimated its contribution to the Liberian economy since the wars to be upwards of $1 billion.53
Moving Ahead
Bridgestone was still the market leader (Exhibit 2), but since 2008 the world market price for rubber had declined substantially. Rubber demand is highly linked to the health of the automotive industry, and the global financial crisis sent the industry on a downward spiral that reached all the way to Liberia.54 Liberia’s natural rubber was also still recovering from the war. There was not much management could do to speed up the production of the trees. Tapping of rubber trees can start in the fifth to seventh year after planting and then continues for 25 to 30 years.55
On the environmental front, Firestone was constructing a new wastewater treatment plant to ensure that any water discharged from the company’s operations would be re-routed away from the Farmington River.56 This project was in direct response to community allegations of water pollution.57 The project exceeded most of the requirements of the Liberian government as well as a number of international standards for safety and quality.58
Firestone Liberia offered among the best wages and benefits in the region to its employees. Even Firestone Liberia’s lowest-earning workers received more than three times the monthly average wage of other Liberian workers. Employees were paid regularly in U.S. dollars, and received benefits in housing, subsidized food, vacation, pensions, and healthcare. Working conditions at Firestone Liberia had been negotiated directly with the Firestone Agricultural Workers Union of Liberia. The company operated 27 schools that employees’ dependents could attend at no cost. Firestone’s medical facilities, including Firestone Medical Center at the rubber farm and a number of smaller clinics, were available to treat workers and their families as part of the company’s free healthcare programs. According to former factory supervisor Justin Knuckles:
“I can say you considered yourself blessed if you were in Liberia working for Firestone because Firestone have a good educational program. They give you food. They give you water. You didn’t make much money, but for a man to live, you got to have certain, certain things, and Firestone provides those things.”59
To address complaints about its use of child labor, Firestone Liberia developed a zero-tolerance policy. Firestone’s new policy of hiring only workers at least 18 years of age exceeded the Liberian labor law requirements by two years.60
Firestone additionally invested in public health in Liberia. The Firestone Medical Center that had been struck during the war now hosted a team of surgeons and nurses from Children’s Surgeries International a non-profit volunteer organization serving the underprivileged of the world by providing specialized medical and surgical services to perform more than 100 free surgeries annually.61 Firestone had a working relationship with the Liberian Ministry of Health to help control the spread of HIV/AIDS, tuberculosis, and malaria, and partnered with UNICEF and the Ministry of Health to offer immunization programs. Bridgestone Americas donated $1 million to Samaritan’s Purse an international relief organization and UNICEF to help combat Ebola in Liberia.62
Conclusion
Firestone’s first Ebola case arrived on March 30, 2014, when an employee’s wife arrived from northern Liberia. Since then Firestone had built its own treatment center and set up a comprehensive response to prevent transmission. The head of the U.S. Centers for Disease Control and Prevention’s team in Liberia applauded Firestone’s efforts as “resourceful, innovative and effective.”63
When the Ebola case was diagnosed, Firestone management went into crisis mode, according to Sanchez. Firestone’s management team first tried to find a hospital in Monrovia to care for the infected woman, but no facility could accommodate her. Sanchez and a medical team from the company hospital spent the next day setting up an Ebola ward and quickly placed the woman in isolation.64
Sanchez and her team lacked experience and relied on the Internet for information on how to treat Ebola. They used hazmat suits designed for dealing with chemical spills at the rubber factory to protect hospital staff. It turned out that the suits worked just as well for Ebola cases.65
Firestone’s isolation ward soon expanded to 23 beds and an annex was built. Containing Ebola had become the company’s top priority.66 The Centers for Disease Control attributed the success of Firestone’s approach to elements including voluntary quarantines, health education, screening protocols, and survivor reintegration.67
After struggling through Liberia’s civil wars, Firestone had remained committed to the country. Firestone Liberia was working to improve its financial, environmental, and social performance, even as the Ebola crisis threatened the viability of the company’s operation. Could Firestone Liberia survive having the details of its past with Taylor made public?
Sanchez was not working for Firestone Liberia during the civil war. The company she was currently running was providing jobs, education, shelter, and now protection from Ebola to its employees. How should she respond to the allegations that Firestone’s tax payments to NPRAG financed the second half of a bloody civil war? Was she now responsible for deciding how the company should handle claims arising from its past decisions? Should she focus on the past, or focus her efforts on the current Ebola crisis and on building the company’s future in Liberia?
Analyze at least two ways in which Firestone acted ethically over the years in its dealings with Liberia.
Analyze at least two ways in which its actions were unethical.
Analyze whether Firestone’s positive actions outweighed the negatives or if Firestone should do more.
make at least two recommendations for what Firestone could do to better ensure its practices and policies are held to a high ethical standard.
Implementing a Socially Responsible Strategy
Explain how the practices and policies related to corporate social responsibility and positive social change are a reflection o Firestone’s ethics.
Analyze the potential benefits and risks of having CSR and/or positive social change as part of Firestone’s business strategy.
Propose at least two ways that Firestone can better incorporate CSR and/or positive social change initiatives into its business strategy.
Provide two additional recommendations for how Firestone could continue to repair any damage to its reputation and move forward in a productive manner, including which business departments/units will be most effective in helping to carry out these recommendations.
