MGMT 8615M Week 11 Final Position Paper Example

Two Cocoa Commitments Funded, Two Left for Others to Pay: A Final Position Paper Pricing a Chocolate Maker's Four Sourcing Pledges, Testing the Prices Before Arguing From Them and Answering the Case That Stakeholder Pledges Go Unhonored

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Walden University

MGMT 8615M: Financial Corporate Social Responsibility and Ethics

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Month Day, Year

Two Cocoa Commitments Funded, Two Left for Others to Pay: A Final Position Paper Pricing a Chocolate Maker's Four Sourcing Pledges, Testing the Prices Before Arguing From Them and Answering the Case That Stakeholder Pledges Go Unhonored

Introduction and Thesis

Ashcombe Confectionery, a composite U.S. chocolate maker with annual sales of about $4.8 billion, publishes four commitments on how it sources cocoa: fully verified cocoa by 2027, an end to child labor in its supply chain by 2030, a living income for the farmers who supply it by 2030 and zero deforestation by 2026. This paper argues that two of these commitments, verification and deforestation, are funded at the level their targets require, while the other two, child labor and living income, leave most of their cost for others to meet. The paper's central table prices each commitment, shows the share Ashcombe currently funds according to its own reports, and names who carries the rest.

Literature: The Corporate Objective

The debate over what a company owes beyond its shareholders frames the analysis. Friedman (2007) held that a firm's one social obligation is to earn as much as it can while keeping to the law and to fair, open competition, and that managers who divert company funds to social causes are spending owners' money without a mandate. Jensen (2002) accepted that stakeholders matter but argued that a company must maximize long-run value to give managers a single measurable objective. Hart and Zingales (2017) argued that the proper target is owners' overall welfare, since owners also value ethical outcomes, and companies can sometimes serve those preferences more efficiently than shareholders can alone.

This paper relies on one claim from that debate: once a company publishes a commitment, it has made a promise that shareholders, customers and the people affected may reasonably rely on, so its cost should be measured against what the company actually funds. That claim does not require choosing between Friedman and Hart and Zingales; it requires only that published promises be honest.

Method

Each commitment was priced from inputs with named publishers. Ashcombe's 2025 cocoa sustainability report supplies its cocoa volume, about 210,000 metric tons a year, and its own spending on each program. Sector-wide figures come from published research: the most widely cited survey of child labor in cocoa found about 1.56 million children in child labor in cocoa-growing households across the two largest producing countries, Côte d'Ivoire and Ghana, during the 2018 to 2019 harvest (NORC at the University of Chicago, 2020). Where a figure is the writer's estimate, the table says so.

Findings: The Price Table

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Costs for verification and deforestation come from Ashcombe's report. Costs for child labor and living income are the writer's estimates, explained below.

The verification and deforestation commitments are close to fully funded. Ashcombe pays premiums to certified cooperatives and funds satellite monitoring of supplying farms, and its report shows spending at the levels its targets require. These are also the commitments most tied to market access: European rules on deforestation-free products make the second a condition of selling in that market.

The child labor commitment is funded at about a quarter of what reaching the 2030 target would plausibly cost. Ashcombe funds monitoring and remediation systems covering about 40 percent of its supplying communities. Extending coverage to all of them and funding remediation, such as school access and income support for families, would cost an estimated $95 million a year, based on Ashcombe's own reported cost per covered household.

The living income commitment is funded at about a tenth. Ashcombe pays a premium on part of its volume, but closing the gap between typical farm incomes and living income benchmarks across its roughly 180,000 supplying households would cost an estimated $210 million a year.

Table 1

Ashcombe's Four Cocoa Commitments, Priced

Counter-Position: Pledges Go Unhonored

Bebchuk and Tallarita (2020) argued that commitments by corporate leaders to groups other than shareholders are largely illusory, because leaders' incentives push toward shareholder value and they have little reason to honor such pledges when they are costly. The Ashcombe pattern partly supports them: the two underfunded commitments are the two with no market-access penalty. But it also complicates their argument. Ashcombe did fund two commitments fully, and the two it underfunds are the ones that cost most. The pattern is consistent with a company honoring pledges where the cost is moderate or enforced, and deferring them where the cost is large and voluntary.

Discussion: The Price of the Paper's Position

The paper proposes that Ashcombe either fund the child labor commitment fully, adding about $71 million a year, or restate the living income commitment as a funded share with a timeline. Fully funding both would cost about $260 million a year beyond current spending, roughly 40 percent of Ashcombe's 2025 operating income of about $650 million, which would likely require price increases. Funding child labor fully and restating the living income target would cost about $71 million a year, about 11 percent of operating income.

Limitations

The child labor and living income estimates rely on Ashcombe's per-household costs and on benchmarks that vary by region. Ashcombe's share of any supplying household's income is partial, since farmers sell to several buyers.

Conclusion

Ashcombe's four commitments are not equally real. Two are paid for; two are, at present, promises others will mostly keep.

References

Bebchuk, L. A., & Tallarita, R. (2020). The illusory promise of stakeholder governance [Working paper]. SSRN. https://doi.org/10.2139/ssrn.3544978

Friedman, M. (2007). The social responsibility of business is to increase its profits. In W. C. Zimmerli, M. Holzinger, & K. Richter (Eds.), Corporate ethics and corporate governance (pp. 173-178). Springer. https://doi.org/10.1007/978-3-540-70818-6_14

Hart, O., & Zingales, L. (2017). Companies should maximize shareholder welfare not market value. Journal of Law, Finance, and Accounting, 2(2), 247-275. https://doi.org/10.1561/108.00000022

Jensen, M. C. (2002). Value maximization, stakeholder theory, and the corporate objective function. Business Ethics Quarterly, 12(2), 235-256. https://doi.org/10.2307/3857812

NORC at the University of Chicago. (2020). Assessing progress in reducing child labor in cocoa producing areas of Côte d'Ivoire and Ghana. https://www.norc.org/