Chain of Thought

Even Corporate Citizens Must Own Up to Liability

You can tell a lot about a company by how it acts, not only as a service provider, but as a citizen. Corporations are the public face of the executives behind them, so CEOs do all they can to shape their companies’ appearance. It’s up to the customer to determine if what they’re seeing is a face or a mask.

I got to thinking about corporate appearances the other day after hearing about the release of CSX Corporation’s 2012 Corporate Social Responsibility (CSR) report. This document details the company’s environmental, social, governance and financial performance, and quotes the company’s president and CEO, Michael J. Ward. 

“At CSX, we are committed to the relentless pursuit of excellence,” he said. “Operating a sustainable, transparent company is an important element of this commitment, and our CSR report demonstrates how we put these values into practice.”

Companies tend to have varying degrees of transparency at various levels of their organization. This report aims to offer a clear view of CSX’s approach to sustainability, highlighting how it gauges its own performance. Here are some of the key environmental achievements they cite from last year:

  • Progressing toward the company’s goal to reduce GHG emissions intensity between 6 and 8 percent from 2011 levels by 2020;
  • Continuing to invest in technologies to improve fuel efficiency and reduce emissions from locomotives;
  • Training nearly 30,000 employees in environmental stewardship programs.

The report also offers transparency into how CSX sustains customer relationships. It used an independent firm to measure this performance via a customer satisfaction assessment program. CSX bases satisfaction on speed and consistency of service, problem resolution and ease of order placement. Customers were surveyed about three main areas:

  • Planning (account management, rate inquiry and order management);
  • Service (shipping instructions, local service, order fulfillment and equipment quality); and
  • Customer Assistance (damage prevention, tracking information, customer service and financial settlement).

The CSX CSR report states that in 2012 the company received its highest score ever from customers, thanks particularly to local service delivery.

What’s not transparent in this report are the limits to their liabilities for damage. To be fair, that's not the kind of thing you're likely to find in a social responsibility report. But that lack of transparency can get companies into trouble if it characterizes its legal responsibility report--otherwise known as a contract.

Around the same time I heard about the release of CSX’s CSR I received another release about CSX. This one was from a law firm specializing in corporate risk management. It was actually a blog written by Andrew Spector and Robert Borak, partners in the law firm of Arnall Golden Gregory LLP. They summarized a suit brought against CSX by ABB, vendors of power and automation technologies. Apparently a $1.3 million transformer CSX was transporting for ABB via rail from St. Louis to Pittsburgh was damaged in transit and ABB held CSX liable for $550,000.

Accidents happen, and I have no interest in criticizing CSX about that. My only purpose in contrasting these two reports on this rail carrier was to highlight a business truism: good contracts make good business relationships.

In this case, CSX claimed its liability was limited to $25,000 based on terms included in its “Price List.” As Spector and Borak point out, that price list failed to provide different rates with different corresponding liabilities.

“In order to receive full coverage, a shipper must make a specific request,” these attorneys state. However, “the record revealed that ABB attempted to request rate information but was unable to do so.” And according to legal precedent established by the Carmack Amendment, written agreements must establish clear limits of liability.

Bottom line, ABB apparently wasn’t given the chance to select a liability level.  And because the bill of lading didn’t reference the CSX Price List, there was no clear statement of liability limits. So CSX is on the hook for over a half-million dollars.

Corporate citizenship is important on both sides of a supply chain partnership. But the warm fuzzy feelings emanating from that relationship must be enveloped in cold hard facts.

 

 

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