Post on 18-Dec-2014
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BUSINESS ETHICS CASE STUDY
THE GULF COAST AND THE BP OIL
SPILL
Group 9
1. Ngô Thị Xuân Hường 3. Nguyễn Thị Thùy Dung
2. Trần Thị Thanh Tú 4. Thái Mạnh Cường
OUTLINE
CONTEXT OF THE CASE STUDY
DILEMAS FOR THE ISSUE
THEORIES AND ARGUMENTS
RECOMMENDATIONS
CONTEXT OF THE CASE STUDY
1. CONTEXT OF THE CASE STUDY
1.1. Background of BP Oil and Gas Group
• Founded in 1908• Bristish Petroleum• Headquarter: UK• 2010 - 2nd largest
oil company in the world
• More than 92,000 employees
BP’s Products
1. CONTEXT OF THE CASE STUDY
1.1. Background of BP Oil and Gas Group
1. CONTEXT OF THE CASE STUDY
Deepwater Horizon- owned and operated by
offshore-oil-drilling company Transocean and leased by oil company BP
- situated in the Macondo oil well in the Mississipi Canyon
1.2. Disaster Deepwater Horizon
1. CONTEXT OF THE CASE STUDY
Deepwater Horizon oil spill (BP oil spill)
- Occurred in 20/4/2010- Crude oil spilled into the ocean through 3 major cracks
1.2. Disaster Deepwater Horizon
1. CONTEXT OF THE CASE STUDY
Gulf of Mexico
1. CONTEXT OF THE CASE STUDY
1.2. Disaster Deepwater Horizon
1. CONTEXT OF THE CASE STUDY
1.2. Disaster Deepwater Horizon
Already, this oil spill is the worst environmental disaster America has ever faced. And unlike an earthquake or a hurricane, it's not a single event that does its damage in a matter of minutes or days. The millions of gallons of oil that have spilled into the Gulf of Mexico are more like an epidemic, one that we will be fighting for months and even years.
“
”
1. CONTEXT OF THE CASE STUDY
1.2. Disaster Deepwater Horizon
Apr. 29, 2010: Louisiana Gov. Bobby Jindal declared a state of emergency
today because of the spill
Apr. 30, 2010: Floria’s Governor Crist issued the first state of emergency following the Deepwater Horizon oil spill crisis.
1. CONTEXT OF THE CASE STUDY
• BBC News, 2013, BP: Gulf of Mexico oil spill “shared responsibility”• BBC News, 2011, BP oil spill: The environmental impact one
year on• National Graphic, Gulf Oil Spill• New York Times, 2011, BP Shortcuts Led to Gulf Oil Spill, Report Says• New York Times, 2010, Tracking the Oil Spill in the Gulf• Wikipedia, Deepwater Horizon Oil Spill• Vietnamplus, 2010, Công bố nguyên nhân vụ tràn dầu vịnh Mexico
1.3. Source of information
DILEMMA FORTHE ISSUE
2. DILEMMA FOR THE ISSUE
• How would BP react to
the oil spill?
• Decision makers: BP’s
Board of Management.
2.1. Ethical issue
CONFLICT OF INTEREST
*Conflict of interests:
In Causes of Deepwater horizon oil spill
PRODUCTION
PROFITS PROTECTION
SAFETY
2. DILEMMA FOR THE ISSUE
2.1. Ethical issue
PERSONEL, EQUIPTMENT, NATURAL RESOURCES AND THE ENVIRONMENT
2. DILEMMA FOR THE ISSUE
- violate 7 federal
regulations at that time
- only one cement barrier- ignorance of negative tests,
limitations of control machines
- no or little training about the rare dangerous case- failure to observe and respond to critical indicators- inadequate well control response- insufficient emergency bridge response
- no precaution for em-ployees or state regulators
- lack of compliance to safety standards or
accepted industry practice- failure to take timely and
aggressive well-control actions
2.1. Ethical issue
Causes of Oil Spill
Failure to notify federal regulators of changes in drilling plans.
Conscious disre-
gard of known riskViolation of la
w
Poo
r m
anag
emen
t,
lack
of k
now
ledg
e D
eviation from the
standard of care
No notification of changing
2. DILEMA FOR THE ISSUE
*Conflict of interests
Reaction to the disaster
2.1. Ethical issue
PROFITBENEFIT OF DIRECTORS v
s
COMPENSATION/LOSSES OF THE AFFECTED COMMUNITIES
CLEANUP COST/DITERIORA-TION OF ENVIRONMENT, ECOSYSTEMS
IMAGE OF THE COMPANY
RELEVENT INFORMATION
2. DILEMMA FOR THE ISSUE
Available relevant information - Facts
Tourism and fishing industry forced to stop. Residents’ life seriously affected. Substantial damage to environment.
2
1 The worst oil spill in the history
Key stakeholders: employees, gulf/coastal residents, environment (water, animals), stockholders, govern-ment
3
Clear causes not available => BP believed that they were just merely negligent4
2.1. Ethical issue
2. DILEMMA FOR THE ISSUE
Available relevant information
Estimation of government authorities
deep underwater plumes of dis-solved oil and gas would likely re-main confined to the northern Gulf of Mexico
68,000 square miles of di-rect impact by leaked oil (SkyTruth)
491 miles (790 km) of coastline in Louisiana, Mis-sissippi, Alabama and Flor-ida might be contaminated by oil (Bloomberge)
4.2m barrels – 176m gal-lons
(666m liters) spilled (Guardian)
62,000 barrels per day en-tered
the Gulf waters while BP esti-mates were only 1,000 –
5,000 barrels per day (BBC, NYT)
2.1. Ethical issue
2. DILEMMA FOR THE ISSUE
Tracking the oil spill
New York Times
2. DILEMMA FOR THE ISSUE
Naturally seeping oil in the ocean.
Woods Hole Oceano-graphic Institution
2. DILEMMA FOR THE ISSUE
Claims arising from the spill
Fines from government
Cost to clean up the water, treat the oil in the deep and middle water, upgrade the quality of the environment
Badly damaged reputation
Cancellation or Loss of contract in the future
Available relevant information
Expected Consequences
2.1. Ethical issue
STAKEHOLDERS
2. DILEMMA FOR THE ISSUE
STAKEHOLD-ERS
Environ-ment
Govern-ment
Residents
Company BPInvestor
2.1. Ethical issue
Employees
2. DILEMMA FOR THE ISSUE
• PAHs indicators were 40 times more than before => reduce ma-rine oxygen levels => create “dead zones”
Stakeholder
ENVIRONMENT2.1. Ethical issue
• Heart and other organs would be
expected to be fatal or at least life-shortening
• Oil was found in many animals
=> matuted fish (change of the nucleotide sequence of the genome)
2. DILEMMA FOR THE ISSUE
• Dead dolphins, dead birds, dead tur-tles, dead fish
• Death of a Gulf coral community• Tar balls found along the coast,
coastal islands, marshes (where rivers enter the ocean) => death of tree and marsh grass (National Graphic, The Atlantic)
• Oil fell to the ocean floor => remain in the food chain for the long term
Stakeholder
ENVIRONMENT2.1. Ethical issue
2. DILEMMA FOR THE ISSUE
• 11 employees dead• 108 workers affected by the toxic from oil and dispersant (to sepa-
rate oil into droplets) in the clean-up effort
Stakeholder
EMPLOYEES2.1. Ethical issue
2. DILEMMA FOR THE ISSUE
• physical health symptoms among their children who lived in less than 10 miles from the coastline (NOAA)
• commercial and recreational fish-ing in affected federal waters is closed (225,290 km2) (NOAA)
• fish, crab and other animals found dead => decrease in the quan-tity => fishermen got much smaller amount of fish
Stakeholder
RESIDENTS2.1. Ethical issue
2. DILEMMA FOR THE ISSUE
• seafood from the Gulf is not trusted by consumers though samples passed the test of contamination
• many of the Gulf fisheries have col-lapsed => it is very hard to recover
• many people canceled their trip due to the spills => much lower revenue despite lower hotel rates, free service, changed cancellation policy from the hotels
Stakeholder
RESIDENTS2.1. Ethical issue
2. DILEMMA FOR THE ISSUE
• the real estate prices and a number of transactions in the Gulf of Mexico area decreased signifi-cantly
• many people lost jobs and wages after the spill
Stakeholder
RESIDENTS2.1. Ethical issue
2. DILEMMA FOR THE ISSUE
• the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs
• badly damaged image• BP's stock fell by 52% in 50 days on
the New York Stock Exchange• 10 – 40% drop on sales
Stakeholder
BP COMPANY2.1. Ethical issue
2. DILEMA FOR THE ISSUE
• Investors saw their holdings in BP shrink to $27.02, a nearly 54% loss of value in 2010 (New York Post)
Stakeholder
INVESTORS2.1. Ethical issue
2. DILEMA FOR THE ISSUE
• 3 years to investigate and then rule the case Deepwater Ho-rion oil spill
• Ban of offshore drilling in state waters• Law amendment
Stakeholder
GOVERNMENT2.1. Ethical issue
SUGGESTED SOLUTIONS
2. DILEMMA FOR THE ISSUE
Solution 1
BP might consider the oil spill was only an accident, prove a
gross negligence in the case and refuse the re-sponsibility for compensation and cost to clean up waters and recover the ecosystem
2.1. Suggested solution to react the oil blowout
2. DILEMMA FOR THE ISSUE
It is not our fault. The wrong
thing is our heavy cost-cut-
ting
2. DILEMMA FOR THE ISSUE
Solution 2
BP might not admit their faults and shift the blame to other parties. The company could conduct some methods to collect and dissolve only the surface oil and pledge to compensate the affected people with the view to show their CSR and improve the image of company. Then they can cook the report relating to the environmental issue to reduce the impact of the oil spill to undermine the claims and avoid paying compensation.
2.1. Suggested solution to react the oil blowout
Not our fault.
Transocean messed
up.
It is Hal-liburtons’
fault.
2. DILEMMA FOR THE ISSUE
2. DILEMMA FOR THE ISSUE
2. DILEMMA FOR THE ISSUE
Solution 3The BP should react immediately by working with the officials to seek effective methods to collect the spilled oil, close the oil well and reduce the impact of the oil in the column of water on the surround-ing ecosystem. Doing research to develop method for ocean life recovery should be included in the long-term plan to improve the water quality affected by the accident. In addition, the company should build a channel to receive all the claims of the resident, verify and make full payment for those really affected. In the long term, moreover, the company should support the residents living along the coastline in advertising the safe seafood and promoting the tourism.
2.1. Suggested solution to react the oil blowout
THEORIES AND ARGUMENTS
3. THEORIES AND ARGUMENTS
3.1. Utilitarianism- “The greatest good for the greatest number.”- “The most good” & “The least harm”.
Analysis for 3 solutions:- S1 and S2: BP and other companies ignored their responsibilities,
it was an accident.Þ violates this theory because they were irresponsible for the
consequences of their actions.- S2 is better when BP did a little effort to resolve the visible prob-
lems. However, it is only the tip of iceberg.
3. THEORIES AND ARGUMENTS
3.1. Utilitarianism Analysis for 3 solutions:- S3 is the best one because:
solve environmental issues immediately => minimize the nega-tive impacts for environment and local resident.
treat affected people well => reduce the sadness, suffering and economic losses of people; give chances for their future careers
have the suitable improvement for the sea and surrounded envi-ronment, for local tourism and the company itself in the long term=> sustainable development
3. THEORIES AND ARGUMENTS
3.2. Kant’s theoryLet’s consider 2 most important groups of stakeholders BP and related companies: have their own rights to do business
legally, gain profits and protect themselves from negative impacts- S1: ignore their responsibilities, it was an accidents.- S2: force them to pay a certain amount of money to resolve the
problem immediately but it could bring a good image for com-panies because people think that they do CSR well.
Þ this action could protect companies.- S3: the most costly and might lead companies to a difficult time. - cannot protect the rights mentioned above
3. THEORIES AND ARGUMENTS
3.2. Kant’s theory Affected people (have rights to live in a clean environment, work in safe
working condition, and take advantages of natural environment to make profits)
- S1: can not protect their rights - S2: do for short term but in the long term, when the environment is
destroyed seriously, those people will lose their rights for living and working.
- S3: protect their rights Þ conflict between the rights of BP and the rights of affected people.
3. THEORIES AND ARGUMENTS
3.2. Kant’s theory• According to the formula of humanity as end, a business organiza-
tion and their actions should be arranged so that they contribute to the development of human.
Þ the rights of people who are affected should be taken the priority.• the first formulation of the categorical imperative – that of making a
maxim into a universal law. This would forbid much of the exploita-tion and pollution of the natural world, and required recovery and improvement after harming environment
⇒ the third solution is the most moral one
RECOMMENDATIONS
4. RECOMMENDATIONS
4.1. Short-term
• Collecting the spilled oil as soon as possible
• Asking experts to give the best solution.
• Ensure that BP would take responsibility for the consequences
• Give the full infor-mation about the spill
• Accept the inspection from the government
4. RECOMMENDATIONS
• Ensure that the company would recover from this disaster as soon as
possible.
• Compensate by money and im-prove their fam-ily’s spirits.
• Create a group of staff to solve the problems.
• Continue to do business
4.1. Short-term
Find out and sign new contracts.Do business to help BP escape
from the issue as soon as possible
Introduce them to new jobs Recover promotion for
tourism.
Pay fully finesEnhance the secu-
rity system
Recover and Im-prove the ecosystem
Environment
Resident
Sto
ckhold
ers
Government
Plans
Employe
es Test and enhance the system and standards for safety
BP itself
Give training coursesGive the full safety
facilities in working
4.1. Long-term
4. RECOMMENDATIONS
THANK YOU FOR YOUR ATTENTION