The basic purpose behind this essay is to evaluate complex ethical issue in a current business. This essay will review an organisation to find out whether decisions made by them during crisis were ethical. Although business ethics are subject to personal views, still finding possible solutions for issues becomes important while keeping in mind about various factors like social, environment, culture and ethical theories. Out of all factors, ethical theories are the most important to judge business actions as definition of ethics under various theories proves to be most effective. In literature, there are many ethical theories that have helped companies overcome ethical dilemmas. Therefore, to understand the concept of ethical issues and stakeholders perspectives towards decision made by organisation at the time of crisis, this essay will review the case of oil spill in the Gulf of Mexico (Rowell).
BP is one of the biggest multinational corporations engaged in gas and oil industry whose headquarters is situated in London. This company stands fourth largest in the world while measuring revenue of around $246,138 million until 2009. BP operates in more than 80 countries and employees more than 80,300 people while providing nations with energy for heat, fuel for transport and other petrochemical products. Besides producing its own products, BP also engages itself in exploring alternative methods of fuel like solar, hydrogen, wind and other low carbon generating energies. However, the company has been recognising many ethical dilemmas that relates to safety, environment and political issues that requires to be studied to find out alternative solution for it (Rowell).
The accident that took place on 20th April 2010 where Deepwater Horizon oil rig exploded proved to be one of the biggest disasters in humankind where 11 workers were killed on spot while injuring around 17 others. The after effects of the incidents are still been suffered by surrounding areas. Fire broke out in the oil rig deepwater Horizon following which the shares of the company dropped alarmingly around 7%, which was the lowest since 14 years (Bryant, 2013). Reputation of the company was also damaged particularly in U.S.A. In the reputation ranking, BP gained the lowest grade E and according to a survey conducted, it showed that public feels that BP has not made efforts to stop the leakage even after such a traumatic event. Remarkable calls for boycotting BP’s products were seen during mid June in the same year by a group called Boycott BP and even the company has to face many lawsuits and claims from other people in surrounding areas and many NGO’s like Animal Welfare Institute. BP made many efforts by making huge expenditure to overcome the situation, still critiques and crisis experts’ opinions differ from each other regarding whether the company managed the crisis successfully or not. Ethical theories and models can provide a sound framework to access BP’s ethical management of Deepwater Horizon catastrophe (Winston, 2010).
Besides environmental issue, BP oil spill also shows engineering default in the company due to which human rights violation and security issues have developed with the explosion on the rig. According to an investigation team, the quality of installation of drilling which BP used was cheaper than anticipated and considered it to be ‘risky’. There were undoubtedly many parties and stakeholders affected by this disaster particularly those who worked in seafood and Tourism Company. Pollution created, affected the environment that killed large quantity of fish, birds and other marine creatures. This affected overall economic system of the country by making thousands of people jobless (The Telegraph, 2018).
According to Kant’s philosophy, action can be guided by universally applicable principles. Regardless of the cost of the actions performed they can be carried as a responsibility while expecting not for any reward. But, this theory was not applied in case of BP oil spill in response to their paying claims to people affected by the accident. BP while paying claims in terms of compensation to calm down public anger and re-establish its reputation was an unethical move. This action undertaken by BP has no moral rights as this action of compensation was taken only for self interest instead of duty towards stakeholders. On the other hand, theory of moral rights and duties was used by BP for their act of paying claims (Seagul). Right can be defined as privilege to act in a certain manner. Duties and rights can be interconnected by a person from another person or company to imply certain obligations. In BP’s case, government and public affected have the right in asking for claims and charge BP for the disaster occurred in their premises. Under the Oil Pollution Act (1990), company has to take the liability of removing the residues along with bearing costs of damages resulted by incidents associated with it. Therefore, BP was responsible for covering all damages occurred due to the oil spill and the actions of paying claims by it can be viewed as an ethical move according to rights and duties theory (WOLF, 2013).
During the time of crisis, companies shall interact with its stakeholders as soon as possible so that relationship with them is maintained along with showing corporate social responsibility. Being transparent at the time of ethical dilemmas has always helped corporate getting response from the stakeholders in positive way. Even the stakeholders, who are kept informed, feel safe and connected with the company (Brennan, 2013). But, the case of BP oil spill shows that nothing had been followed from stakeholder’s perspectives. From the beginning, the company has always seen denying undertaking the whole responsibility. Under the CSR policy, companies shall learn from its crisis and be prepared for avoiding similar hazards along with making recoveries (Rubio, 2012). In order to rescue the situation, BP gave insurance to its shareholders and investors to reassure their part of investments rather than reassuring entire stakeholders. The only support for the company in repairing its public image was by appointing American CEO, Robert Dudley in place of a non American CEO.
Other possible decisions that could have helped company to overcome the issue are application of Utilitarianism theory. This theory states that holding of actions are in proportion to right and wrongs as both are promoted while applying certain actions. The principle of happiness is foundation of legislation and morals that determine whether the action performed are wrong or right. Cleaning activity of oil from sea and coastal areas have not been done up to the mark that has resulted in loss of livestock and people to a great degree (Hollingsworth, 1991). Thus under this theory, cleaning of oil will prove a right way by safeguarding environment and repairing of damages made to people involved with activities related fishing and tourism. Disadvantage seen here is that burning of oil can create air pollution and using of oil dispersants which can affect the environment, public life as well as aquatic animals. This theory can be applied here since it provides happiness to greater number of people regardless complete ethical stance.
Compensation theory is also applicable for BP oil spill case as the company has broken its promise for safeguarding its people and environment. Rights and duties act has not been completely adopted by the company although BP is supposed to. According to a survey, BP compensated for only land owners in 12 metres range while its pipelines were spread on more than the size of compensated land. Workers working for the company also deserved a fair compensation along with getting comfortable working condition. These comprise of basic duties that requires to be followed by BP so that its workers becomes safe and contended and at times of disaster, they will not fail to support the company (Hollingsworth, 1991). Therefore it can be said that application of Rights and Duties theory will help company gain ethical support regardless its other ethical stance where stakeholders like investors might feel overburdened.
After making a review of the BP oil spill case, Kohlberg’s theory is what recommended that can prove beneficial for the company. According to his theory, issues can be divided into three levels; making punishments and rewards, pre-conventional thinking and conventional level during the times of ethical dilemmas (FEAK, 1979). According to him individuals or leaders faced with an ethical dilemma relies on sources outside to his thinking and when contingencies are made in the form of rewards and punishments, they continue to find reason behind it. Conventional thinkers will always find ways through which their image is secure. This theory of moral development leads to more mature and balanced solutions as compared to others. Recognising engineering and tragic disaster in Gulf of Mexico does not defend evading ethical responsibility. Applying Kohlberg’s theory to the situation could benefit the company by recognising their fault at early stage. At the pre-conventional stage after the company has known about its faults, it can make decision regarding moral actions to protect individual rights that have been critically examined by society. Whereas at the end stage after the laws has been applied, the reasons for the change will be anticipated by people. Moral actions defined in accordance to ethical principles of justice will bring human dignity along with repairing damages done to company’s reputation. Making decisions suitable for company’s reputation and environmental security will also provide BP with future sustainability in positive way (McMahon, 2000).
All the above mentioned theories have always supported companies during the times of ethical dilemmas but undertaking them has been recognised by very few. After making a study of BP oil spill case, getting knowledge about ethical theories and models has become significant to understand for solving business problems in critical way.
References:
Brennan, K. (2013). A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to Minimize Damage. Retrieved from https://www.usf.edu/business/documents/undergraduate/honors/thesis-brennan-katelyn.pdf
Bryant, B. (2013). BP Oil Spill. Retrieved from https://www.theguardian.com/environment/2011/apr/20/deepwater-horizon-key-questions-answered
FEAK, M. D. (1979). Moral Development and its explanation Kohlberg’s Structuralism. Retrieved from https://macsphere.mcmaster.ca/bitstream/11375/7668/1/fulltext.pdf
Hollingsworth, J. (1991). Utilitarianism: an ethical framework for compensation decision making. Retrieved from https://www.freepatentsonline.com/article/Review-Business/12139257.html
McMahon, J. (2000). The Effects of Cognitive Moral Development and Reinforcement Contingencies on Ethical Decision Making. Retrieved from https://vtechworks.lib.vt.edu/bitstream/handle/10919/32898/JoanThesis.pdf?sequence=1&isAllowed=y
Rowell, A. (n.d.). Hundreds of Offshore Fracking Wells Dump Billions of Gallons of Oil Waste Into Gulf. Retrieved from https://www.ecowatch.com/offshore-fracking-wells-gulf-1915520170.html
Rubio, S. (2012). The Deepwater Horizon Spill: an Ethical Nightmare . Retrieved from https://bizgovsoc4.wordpress.com/2012/11/11/the-deepwater-horizon-spill-an-ethical-nightmare/
Seagul, D. (n.d.). BP ethical issues. Retrieved from https://www.academia.edu/7563817/BP_ethical_issues
The Telegraph. (2018). How can an ethical fund hold BP. Retrieved from https://www.telegraph.co.uk/finance/personalfinance/investing/7803994/How-can-an-ethical-fundhold-BP.html
Winston, A. (2010). Five Lessons From The BP Oil Spill. Retrieved from https://hbr.org/2010/06/the-bp-oil-spill-top-5-lessons.html
WOLF, D. D. (2013). Crisis Management: Lessons Learnt from the BP Deepwater Horizon Spill Oil. Retrieved from https://pdfs.semanticscholar.org/310d/3d57a5b089560602a430c1dbddca01fb62eb.pdf
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