Research Assignment
Genre: General Awareness

The case of James Hardie Industries (JHI) clearly speaks about the requirement of ethical behavior towards the stakeholders while the organizations make decisions and take actions. By acting unethically, the organizations think of gaining short term benefits but it only results in long term losses in terms of credibility, reputation and profitability. The facts of the case make it very clear that both JHI and the actuaries didn’t fulfill their ethical responsibility towards the stakeholders. Following is the research based on the facts of this case.

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Research Assignment

The company (JHI) was a major producer of asbestos products to be used in various other products. As the asbestos exposure causes diseases to the employees, the company evaluated claim liabilities of $45 million for the victims at the time of publishing of Exposure Draft 88 (ED88) which was found to be greatly underestimated. In 1998, the company also tried to get itself listed to the US exchange as it thought that entering US market will increase its profitability. However from the information provided by the company for getting listed, it was apparent that the organization was trying to hide important details about evaluation of its liabilities towards the victims of asbestos diseases. This act of playingwith the information came to the knowledge of US market and the bid to get listed in 1998 failed for the company.Realizing that the failure was due to higher asbestos claim liabilities the higher management of the company (includingPeter Macdonald and Peter Shafron) decided to start a project called ‘Project Green’. The project was basically for doing a corporate restructuring which could give the organization an escape from the liabilities and thus can get it listed at US. The project involved creating a separate and independent legal entity called Medical Research and Compensation Foundation (MRCF). MRCF was established in 2001 and its purpose was to entertain the claims from the asbestos victims who worked for JHI and to reduce its asbestos liabilities from financial statements by transferring the largest contributor subsidiaries for claims to MRCF (Gunz&van der Laan 2011, pp. 585-590). This was a shrewd strategy planned by the management to get rid of the issues which were being caused by its higher asbestos liabilities as by transferring the subsidiaries, it could impress the market with low liabilities and get itself listed in US market. Also the management of JIH wasn’t considerate about the claims of asbestos victims as it planned to give as low as possible fundsto MRCF.

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