Archer Daniels Midland Company Price-Fixing
Legal and Ethical Environment of Management Decisions
Table of Contentss
Corporate Culture & A ; Structure
Facts in the Case
is one of the largest agriculture company non merely in the United States but besides in the whole universe. Archer Daniels Midland Company foremost was founded as Archer-Daniels Linseed Company in 1902 by George A. Archer and John W. Daniels, and subsequently on was formed into the Archer-Daniels-Midland Company after it was acquired by Midland Linseed Products Company in 1923 ( History ) . ADM Co. was non important before ill-famed Dwayne Andreas appointed as the president and CEO for the company in 1970. Dwayne Andreas spread ADM to supervise to new international markets which gave ADM chance to spread out their merchandise portfolio and cut down their costs. Aggressive growing scheme favored ADM by increasing its gross revenues to a high record from $ 320 million to $ 13.3 billion every bit good as increased ADM market value from $ 78 million to $ 11.8 billion ( Staff, 1996 ) . In 1995, ADM Co. accused of price-fixing over lysine and sentenced to pay a $ 100 million which changed the company history dramatically. Today ADM is still making operations on agriculture: milling, processing, forte provender ingredients, forte nutrient ingredients, chocolate, nutrition and more in worldwide 256 locations ( History ) .
Corporate Culture & A ; Structure
With Dwayne Andreas going the president and CEO, ADM’s grosss and net incomes rocketed sky which made investors and stockholder highly happy and satisfied. Stockholders believed in Mr. Andreas blindly and ne’er bother to inquiries his actions. Mr. Andreas had an huge power and control over the board of managers and stockholders. In one of the board meeting, Mr. Andreas even exploded over stockholders to implement his laterality to run ADM by his regulations. Mr. Andreas behaviors show that ADM was ruled under theocratic hegemony system where he sees himself as the God of the company and regulation in every division. Furthermore, Dwayne Andreas construct a system in the company that he had high secretiveness of his trades, disclosed and shared limited information with ADM investors. Additionally, there was a bulk presence of Andreas household in ADM board of managers which explains why ADM board members were uneffective to oppugn Mr. Andreas. On the other manus, it was non easy for household members to gain their topographic points in the direction. Dwayne Andreas pushed his boy Michael Andreas to his bounds and fundamentally Mike Andreas had to work his manner up to the top. Last, Dwayne Andreas had many politically powerful friends such as Mikhail Gorbachev ( the seventh and last unchallenged leader of the Soviet Union ) and Bob Dole ( Kansas State Senator from 1969 to 1995 ) which gave him mention, repute and assurance to his international enlargement run.
Facts in the Case
On October 15, ADM pleaded guilty over price-fixing charges and agreed to pay $ 100 million. Furthermore, ADM agreed to assist authorities to construct a instance against specific ADM executives such as Dwayne Andreas’ boy Michael D. Andreas.
Mark Whitacre, ADM executive, helped authorities by taping executive-room conversations specifically price-fixing related conversations to supply grounds for the case. Mr. Whitacre was a cardinal participant in this instance and helped authorities to register the biggest international trust instance for the history. Ironically, ADM fired Mr. Whitacre on August 1995 ; accused of embezzling ADM financess over $ 9 million while garnering price-fixing information for the authorities ( Staff, 1996 ) .
ADM and four other Asiatic organisations, two from Japan and two from South Korea, accepted the charges for price-fixing. Scott R. Lassar, a extremely reputable lawyer from Chicago, was appointed as the U.S. lawyer to prosecute Terrance S. Wilson, former frailty president, and Dwayne Andreas. On the other manus, Mr. Wilson and Mr. Andreas were represented by two celebrated white neckband attorneies. Mr. Lassar was successfully enforced some Asiatic executives to attest against Mr. Wilson and Mr. Andreas every bit good as he convinced Barrie R. Cox, president of ADM food-additives division, to give testimony about Mr. Wilson’s price-fixing actions for citric acid, a trade good other than lysine.
Section 1 of the Sherman Act:“ [ vitamin E ] really contract, combination in the signifier of trust or otherwise, or confederacy, in restraint of trade or commercialism among the several States, or with foreign states, is declared to be illegal” ( Bagley & A ; Savage, 2010, p. 644 ) . ADM and four other Asiatic companies violated Sherman Act Section 1 straight by organizing a trust and enforce lysine monetary values to increase and derive undue benefits by ruling the market. ADM’s lysine price-fixing is an illustration of a “horizontal price-fixing” which different retail merchants form a treaty and pull strings a product’s monetary value ( Bagley & A ; Savage, 2010, p. 649 ) .
ADM had to pay $ 70 million mulct for lysine and $ 30 million for citric acerb price-fixing punishment, totaled $ 100 million in 1996. This was recorded as the largest antimonopoly mulct in this U.S. history that should signal organisation as a good lesson. Additionally, Coca-Cola Co. , PepsiCo Inc. and other ADM clients filed cases individually and they won in 2004 which made Archer Daniels Midland Co. penalized to pay another $ 400 million in entire ( Manor, 2004 ) .
Internally, ADM board of managers approved new administration policies after Dwayne Andreas accepted the price-fixing. Furthermore, activist stockholders were non happy with their board of managers at that clip and decreased member figure from 17 to 12 and discharged board members who were besides in direction. Subsequently on, Mr. Andreas left his executive VP place, but surprisingly still worked as a adviser for the company.
Interestingly, in 1995, U.S. Justice Department revised its International Guidelines for antimonopoly Torahs. With the renewed guidelines, U.S. had enforced its antimonopoly Torahs to make exterritorial parts.
There are two side of this instance. On one manus, there are organisations have duties to their proprietors and stockholders and besides to stakeholders. Net income companies’ common end is to supply hard currency in return of investors’ money, and that makes avaricious executives to travel wild and aim illegal actions. Ideally, stockholders elect board of managers to forestall executives’ such actions to interrupt the jurisprudence. However, it is observed in ADM instance that an executive, who provides stable hard currency return, can take over control and have power over board of managers and even over stockholders. Who has the incrimination here?
On the other manus, authorities has a duty to forestall illegal actions. Unfortunately, history proves that the jurisprudence is non perfect and it has to be revised and renewed invariably. Right now, U.S. justness section have multiple subdivisions in its antimonopoly jurisprudence. Sherman Act subdivision 1 is against on trusts have more than one companies and can be done horizontal price-fixing or perpendicular price-fixing, subdivision 2 prevents monopolies to hold market power and monetary value dominancy, and so on. In short, these antimonopoly Torahs are in topographic point ; nevertheless, merely the jurisprudence itself is non plenty to descry these price-fixing operations. Unfortunately, the system requires an source or a whistleblower to alarm the authorities functionaries or even to roll up the grounds internally to hold adequate cogent evidence to prosecute the responsible people.
Bagley, C. E. , & A ; Savage, D. W. ( 2010 ) .Directors and the Legal Environment( 6 ed. ) . Mason, OH: South-Western Cengage Learning.
History. ( n.d. ) . Retrieved May 6, 2014, from Archer Daniels Midland Company: hypertext transfer protocol: //www.adm.com/en-US/company/history/Pages/default.aspx
Kilman, S. ( 1998, February 9 ) . In Archer-Daniels Saga, Now the Executives Face Trial.Wall Street Journal.
Manor, R. ( 2004, June 19 ) .ADM settles price-fixing charges for $ 400 million. Retrieved May 6, 2014, from chicagotribune.com: hypertext transfer protocol: //articles.chicagotribune.com/2004-06-19/business/0406190182_1_lysine-and-citric-acid-mark-whitacre-corn-syrup
Staff. ( 1996, November 18 ) . It Is n’t Dwayne ‘s World Anymore.Business Week, 82-83.
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