De Beers Diamond Company
Social Performance of Organizations

Business 475
August 4, 2014

De Beers Diamond Company De Beers is a multinational privately owned diamond mining company established in 1888 by Cecil Rhodes. The company specializes in trading and manufacturing diamonds. Rhodes invested capital made from renting water pumps to miners and started buying mining claims. Rhodes knew the acquirement was on an untapped market. He purchased diamond fields owned by two brothers named “De Beer.” He even began purchasing from his rival Barney Barnato. The Rothchild family, Ernest Oppenheimer and JP Morgan were some of the companies first financial partners, their investments helped expand the business. By 1902 De Beers controlled 90% of the world’s diamond production.

Ernest Oppenheimer, a rival diamond producer, owned the production company (Anglo American Corporation). Oppenheimer essentially bought his way onto the De Beers board of directors. In 1927, he became the chairman. Under his leadership, De Beers began making exclusive deals with its suppliers and buyers; this strategy made it impossible to have transactions with other companies and quickly became monopolized. De Beers is known for maintaining a strong hold on the industry and for absorbing its competitors by using it’s dominate position in the diamond industry. De Beers has been implicated in multiple scandals that involve price fixing and antitrust behaviors.

There have been revolts against De Beers in Israel and Zaire. De Beers released stockpiles of diamonds similar to that of the country, which eventually drives down demand and stops the revolt. Other countries such as Russia have stockpiles resembling De Beers, Canada and Australia have resisted the manipulation of the single channel system. Due to recent financial downturns resulting in decreased price returns, smaller profits and market changes, De Beers has begun concentrating its efforts on its brand name and retail stores. After changing the strategy its stores have gone from one to thirty nine from 2001-2008. These changes increased profits by 74% within a year.

Another controversial problem De Beers has faced is within its African mining locations. Diamonds are mined and being sold as weaponry, or for insurgencies led by militias and other illegal cartels in specific areas. They are referred to as “blood diamonds” this is due to the bloodshed that occurs while mining for these precious gems.

One of the company’s salient stakeholders is the Government of the Republic of Botswana, which owns 15% of the company’s shareholdings. Botswana is located in Africa housing over two million people. Debswana, located in Botswana, is the largest diamond mining company. Debswana is primarily owned by the Government of the Republic of Botswana. Botswana is a member of the African Union and is classified as the second highest Human Development Index in Africa due to its strong democratic background. The relationship with De Beers is considered the most successful public-private partnerships in the world, providing at least 40% of all governments’ revenue. In 1966, it was considered one of the poorest countries. Botwana’s relationship with De Beers has allowed it to transform into one of the fastest growing countries in the world. This relationship has greatly increased the standard of living in this area. Due to the government relying so heavily on the mining industry there are concerns that one day there will be a loss of resources, upon the diamond mines running dry. This is expected to occur around the year 2032.

Another salient stakeholder is Anglo American, started by Oppenheimer. This company produces 40% of the world’s platinum along with copper, iron ore, coal and nickel. This allows De Beers to have a ready supply of stone setting materials available at a very low cost. This also allows lower prices increasing the products movement into the market, which benefits all companies involved. Anglo American’s shareholdings increased from 45% to nearly 85% as a result of this relationship. Mining is at the heart of what De Beers does. They have over 120 years of experience in the industry and the largest resource in the world along with the best mining assets available. Both companies participate in corporate social responsibility programs that strengthen the accountability and actions involved in the mining process. This influences De Beers business practices and demands more social responsibility in the excavation of the corporations product.

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References
Doughty, O. (1963). Early Diamond Days: The Opening of the Diamond Fields of South Africa. London: Longmans, Green and Co Ltd. Eisner, R. (2002).
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Lawrence, A. T., & Weber, J. (2014). Business & society: Stakeholders, ethics, public policy (14th ed.). New York, NY: McGraw-Hill Irwin.
Khan, A., Muttakin, M., & Siddiqui, J. (2013). Corporate governance and corporate social responsibility disclosures: Evidence from an emerging economy. Journal of Business Ethics, 114(2), 207-223.
Cadieux, D. (n.d.). De Beers and the Global Diamond Industry. Moodle Article. Retrieved August 1, 2014, from http://wiuworld.org/mod/resource/view.php?id=134150 “Exploration and Mining” (http://www.debeersgroup.com/en/Exploration-and-mining/). The De Beers Group. Retrieved August 1, 2014.
”Mutiple Stakeholder Initiatives” (http://www.debeersgroup.com%2FSustainability%2FOur-approach%2FWorking-in-Partnership%2FMulti-Stakeholder-Initiatives%2F). Retrieved August 1, 2014