JULY 1981 - VOLUME 2 - NUMBER 7
Blemishes on the Top Banana
A Critical Look at Castle & Cookeby Ian Lind
The small planes which ferry passengers and vital supplies to the small Hawaiian island of Lanai touch down at an airport nestled in the midst of 13,000 acres of pineapples. A large but faded sign at the terminal announces that the plantation is operated by Dole, a subsidiary of Castle & Cooke, and proudly explains that it is "the world's largest pineapple plantation." But this claim is no longer true. Dole has transferred production and jobs to areas in the Third World, in search of higher profits.
Like other plantation communities in Hawaii and around the world, Lanai is strictly a company town. Castle & Cooke owns approximately 88,700 acres, over 96% of the entire island. During the peak summer months, nearly half of Lanai's 2,000 residents are at work harvesting pineapples and preparing them for shipment to Honolulu. They are joined by about 500 workers recruited on other islands and on the U.S. mainland.
In recent years it has been increasingly difficult to recruit workers, who reject the isolation and regimentation of plantation life. The work is difficult and monotonous. Harvesting gangs walk through the fields, the pace of picking set by a tractor-mounted conveyor belt which moves ahead and carries the cut fruit to a waiting bin. Despite the tropical heat, workers wear heavy clothing to protect themselves from the sharp leaves and the insects which infest the fields. After two harvests, the soil is prepared and chemically treated, then other work gangs replant the fields by hand, inserting pineapple crowns which have been remove from the ripe fruit in the Dole processing plant.
One of the chemicals used in the fields is the controversial pesticide DBCP, which the U.S. Environmen tal Protection Agency (EPA) has banned from all use except in Hawaii's pineapple industry. DBCP was originally developed by pineapple industry researchers and was used to treat a variety of fruit crops until it was found to cause cancers in laboratory animals. DBCP also has been found to lower sperm counts in men and to contaminate water supplies. A special EPA exemption was granted for use of DBCP in Hawaii, after pineapple industry officials claimed that it is essential to the continued economic viability of the industry and that the manner of use in Hawaii makes dangerous exposures highly unlikely. The National Institute of Occupational Safety and Health (NIOSH) is now conducting a study of the effects of DBCP in Hawaii, prompted by a request filed by three Dole workers on Lanai. In a move they claim was unrelated, Dole suspended its normal use of DBCP on Lanai just prior to the beginning of the NIOSH study.
There is a considerable wage differential between union and nonunion pineapple workers. Seasonal workers hired only for the summer are excluded from the union and paid the U.S. minimum wage, with possible bonuses for high production. But year-round employees, represented by the International Longshoremen's and Warehousemens' Union, have achieved the highest agricultural wages in the world. The minimum hourly wage for unionized pineapple workers is now $5.98.
According to ILWU Regional Director Tommy Trask, "tellers in some (of Hawaii's) financial institutions make about $600 a month, while janitors in the pineapple industry will make $1,036 a month." Yet despite its ability to win higher wages, the ILWU has been unable to prevent Castle & Cooke from gradually moving its plantation to "lower cost"-and, hence, more profitable-areas in the Third World. In a process which began 20 years ago, Castle & Cooke has been transformed from a small Hawaii company into a giant transnational corporation.
Diversification and Growth
Castle & Cooke was formed in 1851 as the business partnership of two former Congregational missionaries. The company grew rapidly, becoming the agent for some of Hawaii's fledgling sugar plantations. For nearly 100 years, Castle & Cooke and four other companies have dominated the economy and politics of Hawaii. The plantation elite ruled island society, and vast corporate and personal fortunes were made. Following World War II, however, unions gained a strong foothold in the islands. As the dominance of the plantation corporations eroded and wages began rising, Castle & Cooke moved to reduce its reliance on these unionized industries by expanding outside of Hawaii.
Using cash generated by its profitable sugar and pineapple plantations in Hawaii and from the sale of non-agricultural operations, Castle & Cooke negotiated a series of corporate purchases, diversifying its line of food products, extending its global reach and fattening its profits. The company gained 100% control of Dole in 1961. Then it bought control of Bumble Bee Seafoods in 1961, Standard Fruit and Steamship Company (bananas) in 1964, West Foods (mushrooms) in 1973, Pan-Alaska fisheries in 1975, and Bud Antle (lettuce, celery and other vegetables) in 1978.
Castle & Cooke is now the leading supplier of bananas, pineapples, canned salmon, lettuce, crabs, and shrimp to consumers in the United States, and is also a major supplier of tuna and mushrooms. Its products are leading items in Japan and Western Europe. Among its most important brand names are Dole, Bumble Bee, Royal Alaskan, and Bud.
At the time Castle & Cooke gained full control of Dole, all of the company's pineapples were grown in Hawaii. Then new pineapple plantations were started in Honduras, the Philippines and Thailand. In the last 10 years, Dole's pineapple acreage in Hawaii dropped from 38,200 to 18,300, and employment fell from 11,569 to 5,700. Today less than 37% of Dole's pineapples are grown in Hawaii.
Wages in many of Castle & Cooke's Third World operations are only about 5% of what is paid in Hawaii. In the Philippines, Dole has an 18,400-acre pineapple plantation employing over 9,000 workers whose wages average less than 30 cents an hour. In Thailand Dole has more than 6,000 acres and approximately 3,000 employees. Three-quarters of these workers are in the lowest wage categories, making only 25 cents an hour or less than $50 per month.
But despite the overseas shifts in production, Castle & Cooke remains a major force in Hawaiian society. The company owns approximately 149,000 acres of land and is the largest corporate land-owner on the island of Oahu, where the state's capital is located. The Dole pineapple cannery remains Hawaii's largest single private employer, and Oceanic Properties (the company's real estate subsidiary) is the state's largest home builder. Interlocking directorships with dozens of island financial institutions, corporations, utilities, and foundations provide an important source of power, as do the company's close relations with local political leaders. This continued control over land, jobs, and social influence gives the company considerable political power in Hawaii.
The "Other" Banana Company
During the period of its aggressive expansion, Castle & Cooke has repeatedly been criticized by union officials, church groups and human rights organizations for using its economic and political power to squee4e extra profits from its operations, often at the expense of workers and communities. Some of the most serious charges have been leveled against one subsidiary, Standard Fruit and Steamship Company, the world's second largest banana producer and the market leader in North America and Japan. Castle & Cooke first gained control of Standard Fruit when it purchased 55% of the stock in 1964, and it bought the remaining stock in 1968. This acquisition, made at a cost of somewhat over $26 million, instantly transformed Castle & Cooke into a major banana producer and a large land-owner in Central America.
The company owns approximately 148,000 acres in Honduras, of which about 7,800 acres are currently planted in bananas, 6,000 acres in pineapple and 3,800 acres in coconut, citrus, and bamboo. Experimental vegetable crops are grown on a few hundred acres, while the rest of the land-almost 90% of it-is. currently unused. Under the terms of an agreement made this spring, Standard will sell back $120,000 acres of unused land to the government of Honduras, which had previously purchased Standard's railroad and docks. A few years ago, much of Standard's land in Costa Rica was similarly transferred to local producers. The company now owns only 4,800 acres in Costa Rica out of some 31,000 acres it formerly held.
While shifting away from direct ownership of land, Castle & Cooke is increasing its reliance on "independent growers" or "associate producers" who contract to sell their crops to the company. More than half of Standard's bananas are now grown under such arrangements, as are many of Dole's pineapples in Thailand and Bud Antle's vegetables in the U.S. One-quarter of Dole's pineapples in the Philippines are grown under contract on land leased from small farmers. According to one company official, Castle & Cooke is "becoming more of a marketing than a farming company."
In Honduras, Standard has 8,800 acres of bananas controlled through "associate producer" arrangements, while in the other countries it relies almost totally on "associate producers": in Nicaragua [6-7,000 acres], Costa Rica [15-17,000 acres], Ecuador and Columbia (acreage unkown), as well as the Philippines [18,000 acres]. Although the company describes these arrangements in glowing terms, arguing that they encourage small farms and promote economic development, they actually extend the corporations's political control in a new form.
Under a typical contract, local landowners cultivate cash crops for Castle & Cooke and sell them exclusively to the company at an agreed-upon price. Castle & Cooke acts as a supplier to these "associate producers" providing credit, technical advice, seeds, -fertilizer, farm machinery, fungicides and other chemicals, aerial spraying of pesticides, irrigation equipment, plastic wrapping, and cardboard packing boxes to the grower. The grower is guaranteed a certain percentage of the purchase price as "cash flow," usually less than 25010 out of which he or she must pay labor costs, taxes, and other expenses.
In many, and perhaps most cases, the amount deducted by the company does not actually cover all of the expenses, and excess costs are recorded on the company books as a debt. The situation is further complicated by the fact that the company often advances its payments to "associate producers" in the form of special loans, which add to their overall debt burden. Thus, while "associate producers" always have some cash coming in from sales of their crops, most find themselves falling further and further into debt to the company.
Virtually all of Standard Fruit's "independent growers" in the Philippines are in debt to the company. In the Davao area of Mindanao, 97% of the 295 growers owe the company an average of 8,418 pesos (U.S.$1,122) per hectare according to a 1981 study, commissioned by the U.N. Center on Transnational Corporations.
A similar situation exists in Thailand. A report by the Commission on Justice and Peace in Thailand note that about 600 small farmers decided to uproot their existing crops and plant pineapples after Dole came to the area and offered to buy fruit at good prices. Dole now pays much less, but it is too expensive to switch back to other crops. Indebtedness to the company forces many small farmers to sell their land, and the Far Eastern Economic Review noted last year that remaining "associate producers" are often left "perpetually in bondage" to Castle & Cooke.
The system of "associate producers" serves three functions. First, it puts considerable land under company control without the expenses and political problems associated with direct foreign ownership. Secondly "associate producers" are used as a buffer between Castle & Cooke and uncontrollable changes in market conditions. The company agrees to buy all fruit which meet a certain quality standard. When market conditions turn bad, the company can simply raise the quality standards and purchase a smaller amount of fruit, and the losses are taken by the small "associate producers".
Third, these contract arrangements create a group of people who, whether they like it or not, are dependent on the good will of the company. Finding themselves in debt, "associate producers" have little choice but to continue selling to the company and to hope for better times. It is not difficult to see that their economic dependence translates easily into political dependence as well.
Castle & Cooke views itself as "a dynamic, liberal, internationalist, free-market force", according to R.P. Pagan, public relations officer for Castle & Cooke. The company points with pride to its contributions to the communities in which it operates. A booklet distributed to stockholders in 1979 describes the company's role in providing employee housing and health care, recreational facilities, utilities, education, and similar benefits at the same time that it "creates wealth" around the world.
[Critics say] that these benefits are part of a paternalistic system intended to provide control over workers. Plantation benefits are distributed in a discriminatory manner. Managerial staff live in luxurious surrounding's, often with swimming pools, tennis courts, and golf courses. The bulk of all workers, however, are provided only the most basic facilities. ,And workers who live in company housing or who are dependent on the company for education or health care quickly find that benefits are easily withdrawn from those who press for higher wages or better working conditions. In Hawaii, the elimination of such paternalism on plantations was one of the first union demands, and was seen as necessary to free workers from company control.
In addition, of course, the benefits provided must be seen in the context of the profits which are made by the company. A United Nations study of the banana industry, for example, found that only 26% of the final retail value of bananas remains in the producing countries. Like other commodities, however, bananas are a volatile crop, and Standard Fruit has produced both handsome profits and spectacular losses for Castle & Cooke. Standard reported earnings of $8 million in 1976 and over $7 million in 1977, but suffered major losses in 1978 and 1979 before returning to profitability in 1980.
It is difficult, however, to determine the actual profit picture due to Castle & Cooke's extensive intra-corporate transfers. For example, all of Standard Fruit's bananas are transported to market on refrigerated ships which are owned or chartered by the company. Castle & Cooke now owns 13 ships which are registered to its Liberian subsidiary, Intercontinental Transportation Services (ITS).
Shipping adds 44% to the initial costs of banana production, the U.N. study noted. Yet this "expense" can be an extremely profitable activity for ITS, which has made substantial profits for Castle & Cooke. Although the profits of ITS are shown on the books as "shipping operations", they are more properly seen as a segment of the banana production process. If these profits were routinely included in Standard Fruit's total, the true profitability of the banana industry would be easier to determine. What does seem clear, however, is that a substantial portion of the income from bananas goes unreported through this and similar "transfers" of profits within Castle & Cooke.
Transfer pricing has been used in the Philippines, according to the local press; bananas and pineapples have been sold to Castle & Cooke's international marketing division at reduced prices. When the fruit is sold to retailers, the profit is recouped, but effectively shifted onto the books of the marketing agency. This reduces the visible profile of the company in the Philippines, where nationalist sentiment runs high. Castle & Cooke's R.P. Pagan has insisted that "transfer pricing is not questionable," and defended it as being a common practice among multinational corporations.
While Castle & Cooke views itself as a "progressive" corporation interested in the well-being of its employees, its actions show that the bottom line is still "profit". In 1974, the company led the opposition to a new tax on bananas in Central America by imposing a boycott 'and threatening to pull out of those countries which persisted in efforts to implement the tax.
These tactics were used once again in late 1980, when Standard Fruit began a boycott of Nicaraguan bananas in response to pressure from the government on Standard to improve the living and working conditions of the 5,000 banana workers, many of whom live in extreme poverty. Standard normally buys about $24 million worth of fruit from "associate producers" in Nicaragua each year-the nations entire export crop. High-level negotiations between govern ment officials and Castle & 'Cooke resulted in a new 5-year marketing agreement which sets terms for the Nicaraguan government's gradual purchase of the firm's plantations and other installations. (See MM February 1981).
Castle & Cooke has also been accused of "union busting" in Honduras. In February 1977, leaders of a banana producing cooperative made up of former Standard Fruit workers were arrested by the Honduran army. A few months later, the Army moved against union militants on Standard's own 'plantation, arresting hundreds. Standard Fruit had made secret payments to the Army officers in charge of the operation, prompting widespread speculation that the company was actually behind the raids. "The company paid people, paid activists and the fruit company invested money so that the union would be what it is in fact now, that is, it doesn't have an honest leadership, the leadership was imposed by military force," said Nepolean Acevedo, former president of Suitrasfco, the union of Standard Fruit in Honduras.
Less startling, but in the long run as important, are charges concerning poor working conditions, low pay in many countries, discrimination in benefits and services provided in plantation areas, sex discrimination, and similar policies designed to keep costs, low. Shareholder requests in 1977 by the Disciples of Christ, and in 1978 by the United Church of Christ, and the Passionist Fathers and the Disciples of Christ to have management report on some of these conditions failed in the face of management opposition.
Internal Power Struggles
Despite this record, Castle & Cooke has demonstrated that it can operate in less destructive ways. Pay and working conditions depend in part on the attitudes of the "host" government. In those areas where the local government is relatively democratic and the rights of labor are protected, conditions tend to be relatively good. In other areas, Castle & Cooke is apparently willing to take advantage of the weakness or even greed of local governments and, in such cases, conditions are worse.
Differences have also been noted between parts of the company. In the Philippines, for example, conditions at Dole's pineapple plantation are reportedly much better than in the area where Standard Fruit grows bananas. Indeed, these differences seem to reflect a serious power struggle within Castle & Cooke's management. A hard-line faction is associated with company president Don Kirchhoff and other "banana boys" from Standard Fruit. They are extremely hostile to critics of corporate policies and seem to tolerate more repressive management policies in local plantation operations. Kirchhoff was widely quoted a few years ago when he urged corporate leaders to "take the offensive" in a "guerrilla war" against opponents of business. Another more "moderate" faction is led by Castle & Cooke Board Chairman Henry Clark and is associated with Dole's style of more benign paternalism. Clark has advocated discussions with critics and added a consultant on "corporate responsibility" to the company's staff.
Ian Lind was director of the Hawaiian area office of the American Friends Service Committee from 1974 to February, 1981.