THE STRANGE CASE OF LAFARGE….

about 2 years ago
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By Ruma Dubey

Companies paying “protection money” in Naxal hit areas to enable continuation of work or those caught in war zones, paying money to the terrorists is not new. We all are well aware of the “hafta” practice which small vendors pay to ensure they can run their shops peacefully. We in India, always on the high moral ground, surely look down upon it. But because there has never been a proof so far or no expose on such kind of money exchanging hands, we pretend it does not exist in our country.

But a shocking story is unfolding in France and it has taken the corporate world there by storm. It has now come to light that Lafarge, which was operating a cement plant in Syria might have paid off money to the ISIS jihadists to ensure uninterrupted work of their factory while the rest of the country burns, putting the lives of their staff at very high risk. This is stated to have happened in 2013 and then in 2014, the Jabaliya plant was evacuated. In 2015, Lafarge merged with Holcim to become the largest cement maker in the world.

The allegations are shocking – Lafarge is said to have paid around $5 million to the armed ISIS group to keep the plant running. This was routed through a middleman — Mr Tlass, who was a minority shareholder in Lafarge Cement Syria and son of a former Syrian defence minister, with close ties to the Assad regime. It is also alleged that the company bought raw materials from suppliers connected to or in areas controlled by ISIS.

The French authorities are currently investigating whether payments were made and who knew about it. This brings to light a very important CSR seldom spoken in the corporate world – what are the responsibilities of a company when caught in war or troubled zones – should their concern be profitability, while sacrificing ethics? How can companies plead ignorance and take this exchange of money as one of the ways of doing business?

Thus when companies set shop abroad, do they fall in line and do what the country does – corruption, tax evasion and as in this case, maybe financing terrorism too. Indian companies too have been caught in conflict zones  in Egypt – Dabur, Asian Paints. And for MNCs when they set shop in emerging markets, these are risks that no one is prepared for. Or remember the case of GMR in Maldives, where it was facing charges of corruption and ultimately quit the country. Or take the case of Vodafone, which has been fighting the case of massive tax evasion in India.

It is a very thin line for companies to tread on – the prime objective is always to maximize profits and sometimes, to ensure that its investment does not go waste and result in losses, major unethical decisions are made. It would be very easy to say that companies avoid all conflict zones. Well, we know the conflict zones that exist today but did Lafarge know that Syria could blow up like a tinder box in 2012?

Making ethical decisions is very tricky when there is huge money involved. Every company, at one time or the other would have done something, which was unethical. Haven’t we all ourselves bought tickets in the black or paid money to get some paper work expedited in Govt agencies?

Let us look at things the other way – if we change the objective of the company from maximizing profits to leading an ethical existence, won’t the entire paradigm of how business is done change?  This does sound Utopian but shouldn’t there be such a fundamental shift in the way we do business if we want to avoid corruption and fund terrorism? Aren’t these bigger objectives than profits?

Indeed, the current case of Lafarge should make one introspect…..

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