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Abstract
This historical study examines the actions of the Australian former asbestos company, James Hardie, when faced with a potentially ruinous corporate scandal between 2001 and 2007. The company became vilified as public awareness grew of the damage to public health its use of asbestos had caused. In response, it set-up a knowingly underfunded compensation fund supported by a strategy of misinformation and denial. Its actions are analysed using Oliver’s typology of strategic responses and theories of crisis management and crisis communications, providing insights into the company’s motivations for adopting strategies that took it to the brink of financial collapse.
Acknowledgements
We thank Laurie Webb for his contributions in the early stages of this project and the help and guidance of the journal’s anonymous reviewers who have helped us develop this article.
Notes
1. Tweedale and Hansen, “Protecting the Workers.”
2. ASCC, “Asbestos Management.”
3. See, for example, Jeremy, “Corporate Responses“; Warren, “The Enforcement”; Tweedale and Hansen, “Protecting the Workers”; Tweedale and Warren, ”A Case in Point”; Tweedale and Jeremy, “Compensating the Workers.”
4. Tweedale and Hansen, “Protecting the Workers.”
5. Tweedale and Jeremy, “Compensating the Workers,” 113–114.
6. Moerman and van der Laan, “Accounting”; Moerman, van der Laan, and Campbell, “A Tale.”
7. Moerman et al., “A Tale,” 983.
8. Oliver, “Strategic Responses.”
9. For example, Guerreiro, Rodrigues, and Craig, “Voluntary Adoption.”
10. Ribeiro and Scapens, “Institutional Theories,” 96.
11. In contrast, many former asbestos manufacturers including the US companies Johns Manville and Federal-Mogul (who had acquired the UK asbestos company Turner & Newel) had initially sought to remove themselves from liability to claimants through the mechanism of strategic bankruptcy.
12. The Special Commission of Inquiry into James Hardie Group was a judicial inquiry commissioned on the 12th February 2004 by the New South Wales State Government.
13. See, for example, Samkin and Schneider, “Accountability.”
14. For example, Oliver, “Strategic Responses”; Arroyo, “Management Accounting.”
15. Oliver, “Strategic Responses.”
16. Modell, Jacobs, and Wiesel, “A Process,” 455.
17. For example, Livesey, “Eco-identity”; Cornelissen, Bekkum, and Ruler, “Corporate Communication.”
18. Moerman and van der Laan, “Pursuing Shareholder Value,” “Strategic Bankruptcy,” “Accounting in Organizations” and Accounting.
19. Moerman et al, “A Tale.”
20. Ville and Merrett, “The Development.”
21. Higgins, “Hardie Boss.”
22. Sexton and Stephens, “Lives in the Dust.”
23. Asbestos Diseases Society of Australia, Asbestos.
24. Haigh, Asbestos House.
25. The case was brought on behalf of an employee who had worked for six months during 1960 in JH’s Brooklyn, Victoria factory, where it had started production of asbestos cement building products in the 1920s (Asbestos Diseases Society of Australia, Asbestos; Allens Arthur Robinson, “Special Commission”).
26. Oliver, “Strategic Responses.”
27. Oliver, “Strategic Responses,” 154–155.
28. Merritt and Priest, “Dust-up.”
29. James Hardie, “Possible Asbestos Funding Shortfall.”
30. In 2001, Amaca Pty. Ltd. was adopted as the new name of the entity, James Hardie and Coy Pty. Ltd. This was the former operating entity of the Group during its asbestos manufacturing era and a subsidiary of the listed company, James Hardie Industries Ltd. The MRCF held 50% of the shares in this entity with balance held by MRCF Investments Pty. Ltd.
31. Priest, “NSW Government.”
32. Special Commission of Inquiry, Witness Transcript Reference 3261–3282.
33. Special Commission of Inquiry, Report, 57.
34. MacDonald, “Asbestos Compensation,” 67.
35. Macdonald, “James Hardie.”
36. Special Commission of Inquiry, Witness Transcript Reference 2280–2664.
37. Special Commission of Inquiry, Report, 358.
38. James Hardie, 2001 Annual Report, 30.
39. Merkl-Davies and Brennan, “Discretionary Disclosure Strategies.”
40. While the needs and expectations of diverse stakeholders such as the unions and shareholders may vary on matters such as wages and conditions of employment, it became clear that as the JH saga developed there was increasing agreement amongst most, if not all, of these groups that JH’s efforts to quarantine itself from the asbestos legacy were unacceptable and needed to change. It follows that the institutional expectations were highly aligned on this key issue.
41. Oliver, “Strategic Responses,” 156.
42. Merritt, “Nothing to be Ashamed of.”
43. Macdonald, “James Hardie.”
44. James Hardie, “Regarding Special Commission Report”.
45. Oliver, “Strategic Responses,” 157.
46. Special Commission of Inquiry, Witness Transcript Reference 79–190.
47. Special Commission of Inquiry, Exhibits 13–15.
48. See, for example, Suchman, “Managing Legitimacy”; Ogden and Clarke, “Customer Disclosures.”
49. Suchman, “Managing Legitimacy,” 598.
50. Ogden and Clarke, “Customer Disclosures.”
51. Oliver, “Strategic Responses,” 154.
52. Priest, “James Hardie's Secret Plan.”
53. Special Commission of Inquiry, Witness Transcript Reference 2280–2664.
54. Special Commission of Inquiry, Witness Transcript Reference 2095–2116.
55. See, for example, Brown and Deegan, “The Public Disclosure.”
56. For example, Neu, Warsame, and Pedwell, “Managing Public Impressions”; Ogden and Clarke, “Customer Disclosures.”
57. James Hardie, Citation2006 Annual Report, 105.
58. Coombs, “Conceptualizing Crisis Communication.”
59. Special Commission of Inquiry, Report, 366.
60. Priest, “Hardie Backdown,” 6.
61. James Hardie, “New Chairman Appointed.”
62. O’Donovan, “Managing Legitimacy.”
63. ABC, “TV Program Transcript.”
64. Buffini and Pretty, “Hardie's New Tactic.”
65. ABC, “TV Program Transcript.”
66. Buffini, “Hellicar Vows.”
67. Buffini and Stafford, “New Hardie Offer.”
68. Buffini and Stafford, “New Hardie Offer.”
69. Combet, “James Hardie Media Conference.”
70. Buffini and Stafford, “New Hardie Offer.”
71. ABN 60 was formerly known as James Hardie Industries Ltd. Amaca was known as James Hardie and Coy Pty. Ltd.. Amaba Pty. Ltd. was known as Jsekarb Pty. Ltd.. The names of these three entities were all changed in February 2001. Together these entities housed the asbestos obligations of the Group.
72. James Hardie, 2005 Annual Report, F-26.
73. James Hardie, Explanatory Memorandum, 2.
74. James Hardie, Explanatory Memorandum, 2.
75. Oliver, “Strategic Responses,” 154.
76. Oliver, “Strategic Responses,” 154.
77. Hellicar had resigned as Chairman in 2007.
78. Coombes, “Protecting Organization Reputations.”
79. Benoit, Accounts, Excuses, and Apologies.
80. Coombes, “Protecting Organization Reputations.”
81. De Maria, “After the Scandal.”
82. Benoit, Accounts, Excuses, and Apologies; Coombs, “Protecting Organization Reputations”; De Maria, “After the Scandal”; Grebe, “Things Can Get Worse.”
83. Coombs, “Conceptualizing Crisis Communication,” 105.
84. Allen and Callouet, “Legitimation Endeavors.”
85. Coombs, “Protecting Organization Reputations” and “Conceptualizing Crisis Communication.”
86. Oliver, “Strategic Responses.”
87. Oliver, “Strategic Responses,” 159–172.
88. Oliver, “Strategic Responses,” 160.
89. Oliver, “Strategic Responses,” 160-161.
90. Oliver, “Strategic Responses,” 162.
91. Oliver, “Strategic Responses,” 164.
92. Oliver, “Strategic Responses,” 170.
93. DiMaggio and Powell, “The Iron Cage Revisited”; Scott, “The Adolescence”; Bealing, Dirsmith, and Fogarty, “Early Regulatory Actions.”
94. Kondra and Hinings, “Organizational Diversity.”
95. Pfeffer and Salancik, “External Control,” 44
96. Moerman et al., “A Tale.”
97. For example, Coombs and Holladay, “Helping Crisis Managers”; Grebe, “Things Can Get Worse.”
98. Derry and Waikar, “Frames and Filters.”
99. Black, The Essentials.
100. Suchman, “Managing Legitimacy,” 598.
101. Livesey, “Eco-identity,” 59.