Critical Report For Responsible Management Business Essay

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INTRODUCTION

In this report the author will present a critical report on responsible management first it will discuss the background to responsible management and PRME and then divided in to three parts first part will discuss the backgrounds of oil industry and Royal Dutch Shell Plc. Second part will discuss about the company and its activities, corporate social responsibility and the related issues of the company will be present and the third part will present the assessment of success and limitations of the company in meetings PRME criteria will critically analyse at the end of the report conclusion and implications for the future will be drawn.

RESPONSIBLE MANAGEMENT AND PRME

The Principles of Responsible Management Education propose a shift in the way we look at businesses and their managers, their role in society, and the values that ought to drive their behaviour. This transformation cannot be introduced in a vacuum, but needs to be sustained by robust, respected and influential research paradigms that address problems and aspects of management that have so far being either neglected or at best not sufficiently well addressed.

This transformation would be necessary, if nothing else, to keep up with the world of professional practice. The past fifteen years have witnessed an important change in the way managers address the social and environmental impact of their companies. In the 1990s not many executives would accept the responsibility for the social and environmental imapct of their companies beyond legal compliance or avoiding adverse effects on their own value chain. Today this has changed dramatically for many industries in many parts of the world. Thousands of companies publish annual reports detailing their social and environment contributions, and tens of thousands of firms have subscribed or been certified as compliant with a range of independent voluntary standards, including the UN Global Compact (Visser,Matten,Pohl, & Tolhurst, 2007).

Simon Zadek (2004) of Accountability (an NGO promoting business accountability for sustainable development) has documented how companies often move in stages from initially ignoring and denying their social and environmental responsibilities, to a phase of reputation management which sees social and environmental matters in terms of costs and risks to a third stage, where engaging with stakeholders on social and environmental issues is regarded as a mechanism for business innovation, to a final stage where executives recognize the limits to voluntary action, and actively engage with other organizations, including governments and competitors, to influence the overall business environment in order to make responsible conduct more financially viable and achieve better collective outcomes.

It is not clear whether current management frameworks and tools are of much help to companies through this transition or whether it is through trial and error that companies progress through the different stages and adopt different attitudes towards managerial responsibility. What is clear however is the growing need among business leaders for frameworks and tools that will help them address the new objectives of social and environmental stewardship in a more systematic and effective way.

It is therefore important both from the standpoint of securing the support from the academic field towards the Principles for Responsible Management Education as well as to serve the current needs of managers, that we consider ways to foster a new line of academic research around corporate citizenship that is credible with deans, faculty, students and accrediting organizations and that is relevant and useful to practitioners.

THE COMPANY

The Anglo-Dutch oil company Royal Dutch Shell was formed in 1907 through the merger of Royal Dutch Petroleum Company (60 percent) and Shell Transport and Trading Company (40 percent). More precisely, their activities were joined through the creation of jointly held companies, but, for tactical and fiscal reasons, the parent companies remained two separate entities until 2005. The combined enterprise was often called Royal Dutch Shell, or the Royal Dutch Shell Group of companies, or simply "Shell" or the "Group." Foreign subsidiaries had their own names or were called by variations of the Shell name (SLUYTERMAN, 2010). Royal Dutch Shell plc (the Company) is a public limited company registered in England andWales and headquartered in The Hague, the Netherlands. Currently they are a global group of energy and petrochemicals companies with around 101,000 employees in more than 90 countries and territories.

Activities

Shell is one of the world's largest independent oil and gas companies in terms of market capitalisation, operating cash flow and oil and gas production. Our oil and gas producing heartlands are the core countries that have the available infrastructure, expertise and remaining growth potential for Shell to sustain strong operational performance and support continued investment. They are Australia, Brunei, Canada, Denmark, Malaysia, the Netherlands, Nigeria, Norway, Oman, the UK and the USA. Russia represents a new heartland with Sakhalin II on-stream in 2009, and they expect Qatar to become a heartland in the coming years.(Annual report,2009)

PRODUCTS

Royal Dutch Shell plc also markets its products under the Shell V-Power and Shell Fuel Save brand names. Further, the company offers lubricant products to the transport sector customers, such as passenger cars, trucks, and coaches, as well as for the manufacturing, mining, power generation, agriculture, and construction industries. In addition, it sells fuels and specialty products and services to a range of commercial customers; provides fuels, lubricants, and related technical services to the marine industry; provides liquefied petroleum gas and related services to domestic, commercial, and industrial customers; provides transport, industrial, and heating fuels and related services to approximately 200,000 customers; and supplies approximately 11,000 tonnes of bitumen products (Businessweek,

CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility is becoming a key initiative and an essential tool in the growth of multinational corporations and the development of third world countries throughout the globe. The two concepts can work hand in hand to provide benefits for all; However difficulties in regulating an implementing corporate social responsibility need to be overcome before effective changes can be made. Definitions of corporate social responsibility can be somewhat varied depending on the perception and perspective an individual or group has towards the situation; the definition has also varied through time. In general terms, Manakkalathll & Rudolf (1995) define corporate social responsibility (CSR) as "the duty of organisations to conduct their business in a manner that respects the rights of individuals and promotes human welfare." In contrast to this, Christian Aid (2004, as cited in Pendleton 2004) defines CSR as "an entirely voluntary, corporate driven initiative to promote self regulation as a substitute for regulation at either a national or international level." Blowfield (1995) indicates that through time, the definitions and explanations of CSR have become more positive, with increasing understanding of the benefits that can be obtained through successful implementation.

Pendleton (2004) suggests that the first CSR initiatives were a response to public pressure and media exposes of poor company behaviour. The aim of CSR was to show these people that companies were capable of cleaning up their act. Pendleton (2004) suggests that "contemporary CSR was christened by Shell in it's response to its annus horribilis of 1995." Monshipouri, Welch & Kennedy (2003) also outline this issue as a key turning point in which Royal Dutch/Shell in a completely socially irresponsible act, spilt hundreds of thousands of gallons of oil in a remote under-developed area in Nigeria; where the locals are still suffering from their ordeal to this date.

Today, manager's sensitivity to the issue is a result of pressures from the public, from interest groups, legal and governmental concerns and from media coverage (Deresky 2006). There is much debate as to what is considered socially responsible, and it is difficult to conclude where to draw the line in regards to where a company's responsibilities begin and end. This 'grey area' can be attributed in part to the lack of a moral standard that can be accepted across all cultures. One side of this debate presents ethics and ethical standards as providing the basis for the adoption of CSR codes by multinational companies. Levit (2006) describes company's CSR codes as "self regulatory instruments that address the issue of their social, environmental and human rights externalities." These codes are generally developed in cohesion with a company's culture and what they deem as ethical. Manakkalathil & Rudolf (1995) define ethics as "the clarification of what constitutes human welfare and the conduct necessary to promote it." The issue with ethics and CSR in the global marketplace is the ambiguity and difficulty defining a widely accepted mode of conduct or moral universalism. Differences in the societal values across the globe make it difficult to create a universally accepted code of ethical standards to abide by.

It is for reasons mentioned above, alongside other criticisms, that there is a lot of ambiguity, debate and criticism as to how as multinational corporation (MNC) should go about implementing a CSR code or plan both in their home country and overseas. Or even; if they should bother with such an effort. CSR however is an essential issue in this day and age for companies to place considerable emphasis on. Not only does CSR benefit development particularly that of third world or developing countries, but it can raise the profile and bottom line of and organisation if implemented and adhered to sufficiently. Bennett (2002) suggests that international company operations "can help provide stability by addressing the concerns of those who are neglected and excluded from the benefits of the operations." This can be done through poverty reduction plans, revenue-sharing schemes whish fund for foundations that support social development and environmental remediation which can make a world of difference. "CSR is now intertwined with international development and the related goals of poverty alleviation and sustainability," (Blowfield, 2005). There are many benefits for a company who develops a high CSR profile. Although the costs of implementing a CSR strategy can be high, the overall outcome can prove most beneficial for both the bottom line and reputation of the company; as well as the development of third world countries and as stated above, the alleviation of poverty.

ENVIRONMENTAL IMPACTS AND HUMAN RIGHTS

According to the UNDP, more than 400,000 tonnes of oil have spilled into the creeks and soils of the Niger Delta over the past 30 years, the vast majority of these spills resulting from ageing facilities, inadequate maintenance, and human error. The oil spills "have destroyed natural resources central to local livelihoods". A June 2009 report by Amnesty International (AI) describes the numerous human rights and environmental problems related to oil spills and documents several examples of specific spills, noting, "People living in the Niger Delta have to drink, cook with and wash in polluted water. They eat fish contaminated with oil and other toxins - if they are lucky enough to be able to still find fish. The land they farm on is being destroyed. After oil spills the air they breathe smells of oil, gas and other pollutants. People complain of breathing problems and skin lesions - and yet neither the government nor the oil companies monitor the human impacts of oil pollution" (Mnaby, 2010).

According to Royal dutch shell "overview of controversial business practices" 2009 In Nigeria, Shell operates through three separate joint ventures, the largest of which is the Shell Petroleum Development Company of Nigeria Ltd (SPDC). SPDC is also Nigeria's largest oil and gas joint venture. Most of its oil production takes place onshore in the Niger Delta. In the period 2003-2007 Shell Nigeria experienced an average of 250 oil spills per year, leading to 13 million litres of oil being leaked into the wetlands and creeks of the Niger Delta. In 2008, the volume of oil spilled spiked to nine million litres in that one year alone. Information on the volume of oil spills in 2009 is not yet publicly available. SPDC claims that two-thirds of the leakages from its installations are due to sabotage by third parties.

In its 2009 report, AI sharply criticized Shell, noting, "Despite its public claims to be a socially and environmentally responsible corporation, Shell continues to directly harm human rights through its failure to adequately prevent and mitigate pollution and environmental damage in the Niger Delta". Shell responded to the AI report, stating: "We hope people recognise that the employees and contractor staff of [SPDC}…have to carry out their work against a backdrop of crime, violence, threats of kidnap and community actions." The company continued, noting that "By far the most significant cause of oil spills and pollution today is the activities of heavily-armed militant groups who attack and blow-up the SPDC joint venture's wells and pipelines and criminal gangs who tap into oil pipelines to steal crude oil" (Shell overview, 2009).

Manby (2010) During the height of the Ogoni crisis, MOSOP and other local activists regularly made allegations that Shell colluded with the military, even after the company ceased production in Ogoniland. A document alleged to be a leaked internal government memorandum from May 1994 stated that "ruthless military operations" were needed for oil production to resume, and that the oil companies should be pressured to be contribute toward the cost. The government claimed that this document was a forgery; Shell also raised questions about its authenticity and disassociated itself from the contents. The head of the Rivers State Internal Security Task Force several times publicly claimed to be acting so that Shell's oil production could resume, complaining to three detained environmental activists that he had been "risking his life and that of his soldiers to protect Shell installations." Community members reported that the Task Force coerced individuals to sign statements "inviting" Shell to return. Former Ogoni members of the Shell "supernumerary police" (members of the Nigerian police force permanently attached to Shell facilities and paid for by Shell, under a system common to all the oil companies) claimed that they were involved in deliberately creating conflict between different groups of people, and in intimidating and harassing protesters during the height of the MOSOP protests in 1993 and 1994; Ogoni detainees also alleged that they were detained and beaten by Shell police during the same period.

Shell denied all such allegations, and distanced itself from statements by government or security officials calling for repressive responses to protests, while stating: "Our Chief Executive in Nigeria has repeatedly-both publicly and privately-expressed our concerns over the violence and heavy handedness both sides on the Ogoni issue have displayed from time to time, and is doing what he can to counsel the authorities not to do anything which will tend to increase the likelihood of violence either to persons or property." Shell also denied any collusion with the authorities. However, Shell later admitted having made direct payments to the Nigerian security forces, on at least one occasion in 1993. Local groups alleged that such payments were-and remain- a routine practice among oil companies in Nigeria. The company made no public protests in relation to individual cases in which security forces carried out human rights violations at Shell facilities.

At the 1997 shareholders meetings of the Dutch and British parent companies of the Royal Dutch/Shell group, the company published the first annual report on the operations of SPDC looking at issues of environmental standards and human rights, and the first group-wide report on health, safety, and the environment. The group's management also said that it agreed in principle with a policy of external verification of environmental information but rejected this approach for the time being. At the same time Shell took steps to integrate its commitment to "express support for fundamental human rights" into its internal management procedures, requiring directors of Shell group companies to make annual statements to Shell headquarters indicating that they have complied with the requirements of the Statement of General Business Principles, in the same way that they have to make statements of compliance with financial and other standards. Shell also produced a "management primer" on human rights issues for distribution throughout the group.(Manby, 2010)

CRITICAL ANALYSIS

This could have clarified many allegations and suspicions "level of secrecy" that the world and Ogoni people had over Shell's unethical tie-ups with the Government and even instilled a sense of confidence from the victims. Shell being the leading operator in Nigerian Oil and representing democratic countries had the competence in terms of know-how as well as resource wise; the Military government's faith on Shell could have leveraged this for an amicable negotiation. After that Shell could have influenced the amendments in Government policies for imparting civil rights. This could prove to be a win-win and a safe-landing for all the three parties concerned.

Shell's new management, had committed internal reforms to abide by the international covenants on Human rights and environment concerns. It was to carry out internal restructuring and man power development to comply with these issues. A slow but sure footed approach, a change from within is definitely sustainable. The commitments had triggered immediate hope on Ogoni's and well as Shell's shareholders for a change. There were high expectations from this move.

An independent external body to monitor the performance Human rights issues from both the Government and the Shell can cultivate an atmosphere of transparency- reflecting the ground realities and would bear the best results, owing to continual scanning and taking stock of the situation. Protests were the manifestations for not meeting expectations as per their fundamental rights -both from the government and the Shell. Monitoring of human rights violation would take care of safety of protestors and because of these sooner or later the demands would be fulfilled.

Human rights violation was for protecting huge-revenue generating Shell and the government itself. Indeed the protests erupted out of Lack of opportunities (e.g. Employment), economic depravity (e.g. negligible revenues pumped into communities, no social or physical development) and environment degradation (e.g. Oil spillage permanently impairing soil, leakage not cleared).Further, Ogoni's were barred from Shell's activities, not paid commensurate compensation for environment damage etc. Shell being heavily dependent on Ogoni's oil reserves, should reasonably compensate for the environment damages and offer employments to Ogoni's in its operations and projects like Liquidified Gas plant. In fact, oil spillage clearance could best be done through right monetary benefits by Ogoni themselves. All these will instill a sense of ownership on Ogoni and perceive Shells as a friend than hostility or an ally of suppression. This could have a multiplier effect on Ogoni-Government-Shell inter-dependency.

CONCLUSION

In this report the critical analysis on responsible management as a example of royal dutch shell is presented in great details to meet the PRME criteria and critically analysed as the company face many problems for its environmental impact and human rights issues. However Shell's new management had committed internal reforms to abide by the international covenants on Human rights and environment concerns. One thing has been identified that Shell always comes up with new ideas and innovation. However Shell bitterly failed to comply with western standards for protection of human rights and the environment and refrained from social obligations at Ogoni. Shell, a direct beneficiary of Nigerian oil, had no right to suppress protests but owed obligations to boldly stop it. In fact, human rights violation was ignited, fuelled and culminated by Shell itself. Shell had to protect its employees & properties, but not at the cost of human rights violations. Shell had a duty to avoid both complicity in and advantage from human rights abuses, and as it failed to speak out when authorities responding to its requests for security protection commit human rights abuses is complicit in those abuses.

To clear-up its tarnished image, Shell should consider different alternatives.

1. Take the responsibilities for economic advancement, political and social justice and the full spectrum enforcement of human rights at Ogoni. Mare presence in the locality and revenues to the Government would not enhance respect for rights as there is no guarantee of it being pumped back.

2. Abide by all international & national environmental standards and provide compensation in accordance with the law for damage resulting from oil exploration and production.

REFRENCES

Annual report (2009). Royal Dutch Shell Plc.

Bennett, J (2002). Multinational corporations: Social responsibility and conflict. Journal of International Affairs, vol 55, no. 2, pp.393-410

Blowfield, M. (2005), Corporate social responsibility: Reinventing the meaning of development? International Affairs, vol 81, no.3, pp.515-524

Deresky, H (2006). International Management, Managing Across Borders and Cultures (5th eds). Pearson Prentice Hall: New Jersey, USA

Visser, W., Matten, D., Pohl, M. & Tolhurst, N. (2007). The A to Z of CSR: A Complete Reference Guide to Concepts, Codes and Organisations. Wiley, UK

Zadek, S. (2004). The path to corporate responsibility. Harvard Business Review, December.

Royal Dutch Shell Overview of controversial business practices in 2010. SOMO: Stichting Onderzoek Multinationale Ondernemingen Centre for Research on Multinational Corporations

Sluyterman, K.(2010). Royal Dutch Shell: Company Strategies for

Dealing with Environmental Issues. Business History Review 84 (2010): 203-226.

Royal dutch shell detail. Businessweek[online]

http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=RDSB:LN [accessed on 8 dec 2010]

Levit, J. (2006). Adoption of corporate social responsibility codes by multinational companies. Journal of Asian Economics, vol 17. pp.50-55

Manakkalathil, J. & Rudolf, E. (1995). Corporate social responsibility in a globalising market. Advanced Management Journal, pp29-33

Monshipouri, M., Welch, C.E. Jr & Kennedy, E.T. (2003). Multinational corporations and the ethics of global responsibility: Problems and possibilities, Human Rights Quarterly, vol.25, no.4, pp.965-989

Pendleton, A. (2004). The real face of corporate social responsibility, Consumer Policy Review, vol.14, no.3, pp.77-82

Manby, B.(2010). Shell in Nigeria: Corporate Social Responsibility and the Ogoni Crisis

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