Ethics and Governance: Leadership

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Laudable decisions

Laudable decisions in the company can be seen through aspects such as accepting the responsibility for the incident, “settling with many victims”. Such decision might not be seen from an ethical perspective, as falls more within the legal framework, but nevertheless, the decision to accept responsibility, and show respect to the victim can be considered as laudable.

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Another decision can be seen through the speech of Tony Hayward, BP’s global head of exploration and production, which is aimed at criticizing the cost-cutting initiatives and the culture of the organization. Although timing might have a context in this case, it is nevertheless, a laudable decision to point to existing faults within the system.

Promoting a new head of US operations to sort out safety and environmental troubles can be seen as a laudable decision aswell. The changes in the safety culture in an organization should start with changes in the leadership. Accompanying changes in safety compliance regime provide a context for general changes in the culture of the organization. As stated by one analyst, “For 10 years, the US has had very weak central leadership. Browne is trying to remedy that with Malone’s appointment”. Leadership role in an organization and its corporate culture is at the heart of ethical issues (Jennings, 2008).

Culpable decisions

Cutting costs and capital spending of the company can be seen among the culpable decisions the company made, and which can be ranked the highest in this case. “A cut of 25% in fixed cost ordered by Browne, after the Amoco takeover, played a role in making Texas City “vulnerable to catastrophe”. The context of the decision plays a major role, as it is argued that such decision was taken notwithstanding internal audits, documents and reports that cited flaws in the safety of the company. In that regard, facing a financial crisis in the refineries, the management of the company decided to fix such problems through budget cuts at the expense of safety practices; “Production targets, operational goals and budgets were the priority at BP’s US refineries, not safety”. If the safety state of the refinery was not known to the management, it can be argued that the cuts might have been deemed less culpable in this case. However, considering that “A website set up by lawyers [was] publishing more damaging documents [showing] that Browne knew of the poor safety record at the refinery” indicates that it is not the case.

The failure to respond can be seen as another culpable decision, which might be represented through a series of small operational aspects regarding the safety in the refineries. One of which is taking the personal injury rate as an indicator of safety. Another decision can be seen through cultivating a can-do culture, rather than of compliance, scheduling, and planning.

Another culpable decision can be seen through the decision of Browne to step form its position in the company. “Days before Baker’s report, he [Browne] announced that he will retire sooner than planned”. The context of the decision plays a major role in this case, specifically its timing. It can be assumed that such decision came along with the intention to put the blame on one single person in the company and escape responsibility. The least significant culpable decisions in the context of this case are the operational mistakes made by BP’s operators. Although part of the blame can be put on them, organizational issues are more responsible to the damages done in BP’s oil refineries.

Outcome-related Blame (ORB)

CSB report was disappointed about the corporate cost cutting and the corporate culture that the company cultivated in the workplace, both of which led to the catastrophe that occurred. The blame was put on the processes, rather than persons, and considering the corporate nature of the organization, it is difficult to identify a single culprit. The defensive utterance of the BP in that matter can be seen in the following:

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– Concession –With the harm present and the role of BP being obvious, the company attempted to settle with the victims. The statement regarding Eva Rowe – one of the victim s can be seen as an example of concession; “We are deeply sorry she had to go through an ordeal like this and truly regret her loss”. An apology that was issued by Browne can characterize the defensive line of the organization, in cases when the outcome is evident and the connection of the organization cannot be argued, “I’m absolutely the first to apologize for any distress caused”.

– Refusal – The refusal response is in the case when the role of the company and the harm are not apparently linked. The example of the latter can be seen through the way BP respondent to the content of the CSB report, where “The BP Texas City fatal investigation team [did not identify previous budget decisions or lack of expenditure as a critical factor or immediate cause”.

– Excuse –when the harm is apparent, while the involvement of the company is yet to be proved, BP implemented the search for an excuse to defend itself against the blame. The excuse, in that regard, can be seen through pointing toward the unique case of Texas among others, i.e. stating that the unique characteristics of the refineries in Texas contribute to the blame, rather than the corporation. Such line of defence is especially obvious through the response of the company in early reports, where BP that this was a one-off [and] that Texas City was unique in these problems”.

Person/relationship-related Blame (PRB)

Such standard way of placing blame can be specifically evident through the company’s own line of attack –BP’s. In that regard, such way of placing blame can be evident through the company’s disappointment in employees’ mistakes, managers, and the working environment in Texas. Such line of attack can be seen as a way to put unique characteristic to Texas and Texas refineries rather than corporate culture and corporate failure. Another evidence of such way of placing blame can be seen also from the company, placing the blame on Browne. The latter can be seen through the argument that Browne is being lined up to take the rap, where “it is convenient to have [him] around for six months to take the blame”. The line of attack of BP’s critics and the victims can be seen through the following:

– The eliminating the agency fromm Browne to the corporation, where the resignation of Browne will allow him to “testify about how much he knew of safety concerns and cut-backs at Texas City”.

– eliminating the focus on operational mistakes toward corporate and organizational; “: “Simply targeting the mistakes of BP’s operators and supervisors misses underlying and significant cultural and organisational causes of the disaster, factors that have a greater preventative impact [than identifying operational mistakes]”.

ORB-PRB

This way of placing blame combines process and persons, and can be found through the conclusions of Wilhelm Bonse-Geuking, BP’s European refining group vice-president, in his self-named. The report was disappointed about culture that “seemed to ignore risk, tolerated non-compliance and accepted incompetence”, and accordingly led to the explosion. Additionally, the report was disappointed in Manzoni who failed to act on “serious warning signals”. The defence of the company can be seen as a refusal, where the decision to step down was “completely unconnected to Texas City”.

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Ethical Standards and Business Conduct

PRC amoral view

As a business entity, BP was responsible for giving returns to its investors, period. And as such, the strategy that the managers would use to achieve that goal was followed without considering consequences. In order to cut expenses, the company subcontracted most of its duties and fired some if its reliable engineers to who could have played a big role in the safety.

The BP oil company was working hard but it was single minded to making profits and overlooking the safety of workers (Berk et al, 2009, p. 102).Environmental stewardship was to be observed so that the company could protect the environment but this did not happen (Johnson et al, 2008, p. 101) though Hayward insisted that he was working too hard to ensure safety of the workers and the environment.

In its sustainability report of 2009, BP pointed that it contributes to the sustainability of the environment and to the people in communities in which they work as part of the definition of mandate as a company. However the reports of investigations and interviews did not depict such effort. BP’s operations were usurped by non-negotiable egoism of its management (Berk et al, 2009, p. 102).

POC – Normative Views

Businesses are corporate entities and they have a responsibility just like people to preserve the environment in which they exist (Beauchamp et al, 2009, p. 123). However, BP oil disregarded its consequentialist moral responsibility of doing everything the company could to ensure that it protected the environment. From a utilitarian moral perspective, BP should have stopped the drilling and repaired the blowout preventer before proceeding with the drilling even when it could have lost money because morally right thing to do would necessitate foregoing self interests (Fisher & Lovell, 2009, p. 134).

Deontological ethics allegations stated that the company was mainly concerned about its welfare of cost-cutting and maximising the profits at the expense of the environmental state. BP was exercising duty-based ethics by saving overheads and maximising its profits. BP did not consider repairing the well before proceeding with the drilling. The problems that were being experienced by BP were not anomalies per se, but a sign that BP failed to protect workers by focusing more on profits strategies and pursuit for expansion thus taking too many risks at once and sluggish response to problems according to investigation reports, former workers and its competitors (Fisher & Lovell, 2009, p. 134).

Complementary

BP accepted the responsibility of cleaning the environment where leakage had caused damage and declared it would compensate injured people, business losses and damaged properties as well. However, BP still maintained that it did not cause the accident though it accepted responsibility of the spill. The Chemical Safety and Hazard Investigations were comprehensive and the report given indicated that BP Company had numerous safety and environmental deficiencies throughout its system (Fisher & Lovell, 2009, p. 137). BP company admitted having failed to take precautions and had hence violated the Clean Air Act. It also failed to invest adequately in safe drilling processes hence contractors used cheap materials as they were unsupervised by the company (Fisher & Lovell, 2009, p. 139).

Investigation by OSHA also revealed that the company had over 670 safety violations and the company was fined 87 million dollars (Jennings, 2008, p. 410). This contradicted the claims by BP that its safety measures had attained a great deal of improvement with significant reduction in the number of injuries being reported and minimum cases of equipment breakdown.

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Normative Protection

Former workers claimed that BP was notified of the malfunctioning equipment several weeks before the disaster but did not take definitive action even though they had the capacity to do so. The company often postponed safety issues into following year’s budget hence causing more risk (Jennings, 2008, p. 410).

The similar case of Chevron was due to the gross violation of safety, work and environmental ethics; it’s evident that ethical constraints are not effective in disaster prevention as firm notifications of problems (Jennings, 2008, p. 410). This means that external governance could be the better way of addressing the problem.

Deficiency of External Protection

The role of oversight was vested in the Minerals Management Service agency, and this body also regulates offshore drilling. Rather than conducting an effective study of the best safety strategies, the MMS chose to adopt the standards provided by the industry. There was no push for new technology or safety drilling practises by the oversight agency. Furthermore the fine charged for violation were very low – $35,000.

Government has taken regulation as its duty but this has compromised the efficiency and the overall role of regulation because the government’s control bases its principle on the ethical issues and free market issues alone. This can compromise efficiency because the government wants to benefit from the company as the company benefits from the government as well (Kalantarnia et al, 2010, p. 196). Things like incentives, tax cuts and state capitalism can make companies to want to cost cut so that they can have better reports for the government and hence put profits ahead of people’s safety. This is why it took only a disaster that revealed that MMS was policing the oil exploitation and also partnering in the drilling (Steffy, 2010, p. 103).

Potential external Constraints

Private regulation will be more effective that government or ethical constraints in protective victims. The process of regulation should begin by requiring that companies pay verifiable fee that will cover full cost of any damage that could be as a result of accident, dishonesty, poor management or expertise and ineptness. This should be an obligation to obtaining a business permit. The industry then creates an association that would do jobs like accreditation, issue of permits, assess compliance to industry standards and insurance (Reed & Fitzgerald, 2010, p. 80). Business should be given permit to work when they are accredited by the association, when they are members and when they are insured. Because the penalty will affect the entire industry in case of misconduct, there will be peer pressure for compliance by any company.

This strategy will more effective than government and ethical constraints because it will eliminate government from regulation to the role of an independent mediator in case of contract disputes (Steffy, 2010, p. 103). The strategy offers incentives for all businesses to carry out their business in safest, meticulous, and most ethical manner as individual companies are responsible to the association. The companies benefit from integrity of other member firms and also penalised for their misconduct. The potential government corruption is eliminated and the affectation that state regulation means its responsibility in the event of a regulatory letdown like medical associations. So, if BP was mandated to place money in escrow equivalent to total clean-up cost; or had been mandated to be a member of oil exploitation association before starting to drill, the Texas disaster could not have happened.

Reference List

Beauchamp, T, Bowie N & Arnold, D., 2009, Ethical Theory and Business (8th Ed). Upper Saddle River, NJ: Prentice Hall.

Berk, J., DeMarzo, P., & Harford, J., 2009, Fundamentals of Corporate Finance Harlow: Pearson.

Brooks, R., 2009, Financial Management Core Concepts. Harlow: Pearson.

Cherry, M. A., & Sneirson, J. F., 2010. Beyond Profit: Rethinking Corporate Social Responsibility And Greenwashing After The BP Oil Disaster. Tulane Law Review, Vol. 85, No. 4, pp. 2011.

Fisher, C., & Lovell, A., 2009, Business Ethics and Values (3rd Ed). Upper Saddle River, NJ: Prentice Hall.

Freudenburg, W., & Gramling, R., 2010, Blowout in the Gulf: The BP Oil Spill Disaster and the Future of Energy in America. Cambridge, Mass: MIT Press.

Jennings, M. M., 2008, Business Ethics: Case Studies and Selected Readings, Boston, Mass: Cengage Learning.

Johnson, G., Scholes, K., & Whittington, R., 2008, Exploring Corporate Strategy, 8th Ed. Harlow: Financial Times, Prentice Hall.

Kalantarnia, M., Khan, F., & Hawboldt, K., 2010. Modelling Of BP Texas City Refinery Accident Using Dynamic Risk Assessment Approach. Process Safety and Environmental Protection, Vol. 88, No. 3, pp. 191-199.

Reed, S., & Fitzgerald, A., 2010, In Too Deep: BP and the Drilling Race That Took It Down. New Jersey: John Wiley Publishers.

Steffy, L. S., 2010, Drowning In Oil: BP & the Reckless Pursuit of Profit. New York: McGraw-Hill Professional.

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