Ethics of Care Theory: Merger of Body Shop and L’Oreal
Category : Ethics Essays, Mergers & Acquisitions
Ethics of Care Theory: Merger of Body Shop and L’Oreal
Ethical care theory emerged to encompass business concerns over ethical issues and draw companies to consider the value of their relationships with employees and consumers in arriving at business decisions. The paper looks into the application of this theory to the decision of Body Shop to sell the company to L’Oreal amidst differences in the ethical values of these companies, particularly on animal testing.
The ethics of care theory provides a different perspective on business decision-making. This theory propounds that business firms in the process of deciding over a minor or major change in the business have the responsibility to consider both legal and ethical aspects. This is because the “preoccupation with impartiality, rules, and principles obscures the centrality of the responsive qualities of intimacy and care inherent in relationships (1982). This theory recognizes the importance of character traits valued by people in relationships such as friendship and sympathy ( 2005).
In business, a common ethical issue that arises in policy and decision-making is the prioritization of interests ( 1999). This supports the need for business firms to recognize the importance of considering employee and consumer feedback in decision-making. Thus, “balancing the interests of stakeholders” (2000), as propounded by the ethical care theory, is needed in arriving at policies and decisions that forward the interests of the firm and amenable to employees and consumers alike. Otherwise, the business firm could lose valuable employees or its consumers.
Consumers are evolving through their recognition that they can use their purchasing power to influence businesses to consider ethical issues such as environmental, health and community welfare consciousness. This trend finds expression in the emergence of the phrase ‘ethical consumerism’ in the late 1980s to capture the use of consumer mass actions to influence policy-making not only of governments but also of business firms on ‘green’ issues. Concerns towards global warming have influenced many companies to abandon the use of chlorofluorocarbons in their products. Animal rights activists have boycotted the cosmetics companies to stop animal testing and ended up swaying four major cosmetics companies operating in the United Kingdom to stop some forms of animal testing. (1999)
Throughout the history of ethical consumerism, this has influenced the cosmetics industry by influencing cosmetics companies to adhere to ‘green values’. Body Shop popularized as a ‘green’ company because of its concern for ethical issues so that most of its consumers are people advocating the total stop of animal testing and the use of natural ingredients in its body care products. (1999) However, at present some cosmetics companies, such as L’Oreal, still maintain some kinds of animal testing.
Application of Ethical Theory
Shareholder Decision to Merge Body Shop with L’Oreal
Body Shop is a British company that has positioned itself as an alternative to the large cosmetics and body care retailers while L’Oreal is a French cosmetics firm with global operations. Recently, the companies announced the acquisition of L’Oreal of Body Shop worth £652 million (2006). This has caused mixed public opinion because of the differences in the values and direction of these two companies. Body Shop emerged in the 1970s at the height of ‘green revolution’ so that as an alternative company, the firm offered products made of natural ingredients and refused to test their products on animals. L’Oreal came out in 1909 to develop into a large cosmetics company that does not condemn animal testing. (1999) In November 1996, Body Shop passed a petition to the European Union to ban animal testing ( 2007).
On one hand, consumers question the decision of Body Shop to sell the company to L’Oreal because of the stark differences in values that could affect the community support for the company. The merger was deemed unethical because the merger amounts to Body Shop destroying its core values since it was a strong advocate against animal testing that ended up collaborating with a company known to conduct some forms of animal testing. Moreover, even if the merger is only in terms of capital assets, this means that Body Shop would end up contributing capital towards the animal testing activities of L’Oreal. This was viewed as Body Shop’s betrayal of the values for which it was patronized by its customer base. Moreover, the merger also provided evidence to the claims of London Greenpeace (1998) on the hypocrisy of Body Shop in engaging in activities in discretely engaging in the activities that it openly protests.
On the other hand, stockholders of Body Shop see the merger as a rational move to enhance the competitiveness of the companies in the global market. However, the decision needs to consider the perceptions of consumers since competitiveness lies in the company maintaining or expanding its market. If consumers view the merge negatively, Body Shop could end up with additional capital but with a lesser customer base.
Amidst the differences in opinion, the ethics of care theory finds close links to the first perspective because this highlights the failure of Body Shop to consider the welfare of the employees and the immediate community that it serves.
Based on the history of Body Shop and its developed value system, ethics of care theory supports the conclusion that it was unethical for the shareholders of Body Shop to sell the company to L’Oreal. The issue raised by consumers is not the sale itself, but the characteristic values of the buyer that does not fit the value demands of consumers. Merging Body Shop with L’Oreal indicates a tainting of the value that propelled Body Shop’s popularity. Although, some may say that the merger supports the long-term financial viability of Body Shop and its quest to conquer global markets, it stands to lose its market base as the company adjusts to the values of the larger company. Even if L’Oreal stated that Body Shop maintains its own value system, its value system would be challenged by the market’s perspective of the value merger.
According to (2006), merging with an ethical business especially when the buying company has not been able to develop strong ethical values towards its market, need to consider other important factors apart from expected profit in the future because of the ethical contribution of the other company to its firm or brand value. L’Oreal explains, as the reason for the merger that it stands to gain a value, which it has not been able to establish on its own. However, the merger with Body Shop does not only involve mere gain issues. Retailing L’Oreal products in Body Shop stores would make Body Shop consumers doubt the persistence of its company value since it merged with a company with contrary values, which may result to the decline in its consumer base.
Without a consumer base, the company would not be able to survive without reinventing its value system to meet other market segments. This means that it will have to shift to a different market in its marketing strategy because of the need to accommodate the value system of L’Oreal. A merger involving the complete acquisition of L’Oreal of interests in Body Shop means that even if this does not violate any regulations on competitiveness and may not affect employees of both companies, consumers constitute the sector most affected by the acquisition. The unethical aspect of the decision of the shareholders of Body Shop lies in the fact that it took the huge risk of loosing its consumers in exchange for financial viability, increased competitiveness, and the chance to tap into other market segments or international markets.
Boycott against Animal Testing
(2006) reported that animal welfare activists have rallied its members and supporters to boycott Body Shop products after L’Oreal, a company known to conduct some forms of animal testing, acquired the company. Prior to the merger, animal rights groups considered Body Shop as a champion of ethical consumerism with its stand against animal testing. The boycott was based on the position that even if Body Shop developed as an advocate of animal rights, its funds and retail outlets following the merger may be used in the animal testing activities and product retailing of L’Oreal.
Animal rights advocacy is an international movement existing in various countries. Efforts has been forwarded by the World Society for the Protection of Animals (2007), comprised of organizations engaged in the advocacy for the respect of animal rights, to have more countries support the Universal Declaration on Animal Welfare to make this part of international law. Although a number of countries have pledged support for the declaration, other countries such as the United Kingdom, Australia and the United States have not given their commitment to support the ratification of the declaration. This means that although the concern for animal rights is a global phenomenon, the issue remains unimportant to most countries.
Nevertheless, despite the difficulty in having animal rights form part of international law, this constitutes an ethical issue that persists even outside of the legal realm. This means that as an ethical issue, there is no need for an international law to draw compliance, although an international law serves as an important influence on the actions of governments and business firms. As an ethical advocacy, animal rights groups express their respect for animal rights by only buying the products of companies that do not engage in animal testing and other forms of cruelty to animals.
Body Shop has found support from animal rights groups because of its stand against animal testing. It became popular because of its adherence to the green value or ethical consumerism. As an advocate of animal rights, there is an expectation that Body Shop would not engage in any business deals with companies engaged in animal testing. With its merger with L’Oreal, a company known to hold animal testing, animal rights activists were disappointed that the company shunned its value advocacy. The merger amounted to Body Shop moving away from its advocacy towards a greater acceptability of animal testing.
After the merger, customer relations officer of Body Shop in the UK issued a letter in response to an email from the (2007) explaining that the merger agreement involved the retention of Body Shop of its policies and the merger provides opportunity for Body Shop to influence L’Oreal. Based on the letter, it appears that Body Shop has ensured that it will be able to continue its advocacies amidst the merger. However, (2007) explains that these assurances are not viable. In relation to the independent management of Body Shop and L’Oreal, the former made no guaranties that it will stick to its anti-animal testing advocacy or refuse to support the animal testing activities of L’Oreal. With regard to the assurance on its influence to L’Oreal, this was deemed as impossible by Nature Watch because Body Shop’s shareholder representation ratio is merely 1 in 50. The boycott against Body Shop by advocate groups is its unethical action of entering a merger that amounts to the demise of its core values but also in covering-up its unethical action with unviable guarantees of continued ethical actions.
Although, the merger maintains the separation of Body Shop as a business entity despite full ownership by L’Oreal ( 2007), the finality of the merger indicates that Body Shop has accepted the values of L’Oreal. L’Oreal would not have agreed to the merger without expecting Body Shop to carry its brands so that the support of Body Shop in retailing the products of L’Oreal is inevitable. It was ethical for animal rights groups to boycott the products of Body Shop after the merger because of the recognition that it would be inevitable for Body Shop to support the products and campaigns of L’Oreal. Even if the support should happen in the future, this point will inevitably come, making Body Shop’s support for L’Oreal products and campaigns imminent.
The issue further extends to the consequences of the boycotts to Body Shop employees. On one hand, employees working for the company because of its green advocacies feel betrayed by the merger and end-up leaving the company resulting to negative effects on the community in general. On the other hand, the boycotts may also cause Body Shop outlets to close resulting to loss of employment for community members. Since the boycotts are justified, Body Shop may need to take responsibility for the consequences of its unethical action.
Ethics of care applies to the merger of Body Shop and L’Oreal by pointing out the failure of Body Shop to balance its financial interests with the interests of its employees who believe and support the advocacy of the company and its consumers who patronize its products as an ethical business. Although, it is yet too early to determine the impact of the merger to Body Shop as an ethical company, it is unavoidable for the company to shift its values towards a neutral or complacent position to accommodate the value-shifting implications of the merger.