Ethical Dilemma Facing Bp Commerce Essay


In general, ethics is a concept of dealing with values concerned to people's behavior when it comes to the rightness and wrongness of their action, and the consequences come after the actions. (Florida International University, 2011) Wiley (1995, cited in Nicholas, Samuel & Anthony 1999, p.22) states that ethics is related with moral duty, responsibility and social justice where it reflects both the character of the individual and the business firm. It is to do with a code of conduct which clarifies one's obligation towards others, even ahead of what is required by law. (Harris 1995, cited in Nicholas, Samuel & Anthony 1999, p.22)

While business ethic is a set of moral principles whereby one's actions are judged for make a decision within the values of the organization. (Charles Holme, 2008)

Being ethical in business is important as it can benefit organization in term of efficiency in daily operation, employee commitment, investor willingness to entrust funds, customer trust and satisfaction, and financial performance as well. (Ferrell, Fraedrich, Ferrell, 2011)

1.1: Background of Company

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The British Petroleum Company plc (BP) is the largest corporation in United Kingdom which ranked top five largest oil companies and is the pioneer of the Middle Eastern oil industry. BP first discovered oil in Iran before World War I and today become involved in all aspect from exploration to marketing in oil industry. (Britannic House, n.d)

BP operates in more than 80 countries and has approximately 21800 service stations worldwide. Its origin can be traced back to 1909 when the subsidiary of Burmah Oil Company, named as Anglo-Persian Oil Company was established to exploit oil discoveries in Iran. In 1935, it changed its name became the Anglo-Iranian Oil Company and changed again to became British Petroleum in 1954. The company started to expand its business in 1935 beyond the Middle East to Alaska and became the first company to strike oil in the North Sea in 1965. In 1978, BP acquired the majority control of Standard Oil of Ohio and merged with Amoco in 1998. Two years later, it acquired ARCO and Burmah Castrol. (BP, 2012)

Over the years, BP has been required to responsible on several major environmental and safety incidents such as the Texas City refinery explosion in 2005 and Deepwater Horizon oil spill in 2010 which was said as the world's largest accidental leakage of oil into marine waters.

2.0: Ethical Dilemma Facing BP

In March 2005, Texas City Refinery (BPTCR) owned by BP was exploded causing 15 contractors were killed and another 180 workers were injured. Moreover, 43,000 people in the nearby area were advised to stay indoors after the incidents. (CSB, 2007) According to the U.S. Chemical Safety and Hazard Investigation Board (CBS) (2007), the incident was caused by the leakage of chemical gases which result from the overzealous cost-cutting on safety, excessive production pressures, old equipment and exhausted employees

CBS reported that the organizational and safety deficiencies at all stages of the corporations were the main factor that caused the disaster to happen. The explosion happened due to the broken gauge and escaping of volatile vapors caused by overflowing of flammable hydrocarbons from an octane processing tower, led to the explosion ignited by the backfire of a nearby truck.

The unethical practices of BP when dealing with safety management in Texas City Refinery can be identified through the three elements in stakeholder analysis that is shareholders, employees and government.

2.1- Shareholders

Since 1999, Texas City refinery had been operating under tighten budget after BP took over from Amoco. (Abrahm Lustgarten, 2010) The report issued by CBS (2007) has mentioned that the corporate ignored the safety of their employees and contractors as warning signs were present for several years before the explosion by the workers including the plant's manager.

Besides, the damage of a piece of equipment called "blow-down drum" which use to catch overflowing fuel had make BP to consider to replacing them out in 2002 but the action could not able to carry out because of the $150,000 cost. The management of BP said that the capital expenditure is very tight and decided to bank the cost in savings rather than to replace the equipment. (Abrahm Lustgarten, 2010)

Due to the negligence of BP toward the safety management, the corporate has facing a huge financial loss after the explosion in Texas City Refinery which estimated cost about $1.5 million. (CBS, 2007) Furthermore, the incident also caused damage on the reputation and image of the company in the industry.

2.2: Employees

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Several years before the explosion, the employees of BP had clearly warned the management that they were lack of equipment and resources to prevent a fatal explosion. (Abrahm Lustgarten, 2010) Furthermore, claimed from a rig worker that BP knew that equipment was malfunctioning weeks before the blowout. (Mount Royal University, 2010)

However, BP tends to ignore the warning signs that could have stopped the tragedy from occurring. BP's action put their employees in the critical stage and finally caused the disaster happened where 15 contractors were killed and another 180 workers were injured in the incident. In addition, Steven Greenhouse (2009) states that BP was exploiting employees whereby some had worked 12 hours per day for the 29 straight days.

2.3- Communities

Explosion in Texas City caused the death and injury on BP's employees as well as other individuals. Criticisms critic BP for puts the profits before safety. They criticized BP for spending millions of dollars to "green washing" their image to public. (Fernando & Purkayastha, 2007) Yet, they were unable to ensure the basic operational safety issues. Also, the incident makes the life of residents surrounding the refinery miserable and inconvenient due to the escape of chemical gas from the refinery. BP has polluted the air quality and caused people to expose to harmful gases which will affect their health.

Moreover, the death of the 15 workers and injury of another 180 people in the incident had caused the sadness and worries to victim's families. BP is considered as the "killer" and has to take all the responsibility.

3.0: Ways to Dealt With Dilemmas

3.1- Shareholders

Explosion in Texas City has badly ruined the image of BP. Therefore, it is a must for BP to rebuild it reputation. The first step been taken by BP is when its CEO, Lord Robert Browne (Browne) announced that he would resign earlier by end of July 2007, instead of planned retirement in 2008. (Petroleum News, 2007)

Next, BP has invested more than $1 billion in order to upgrade its production and improve its safety. Consequence from the incident, BP had implemented a program called Future programme in year 2006 which included upgrading, modernizing and installing of its safety management system. Also, a programme of major accident risk (MAR) assessments have been carried out to review on its safety management in order to reduce accidents by reconstructing the refinery and re-engineering the equipments. (BP sustainability Report, 2006)

3.2: Employees

.Result from the explosion, BP has appointed a new site manager in May 2005 and has replaced the blow-down stacks. Besides, BP has removed all occupied trailers and installing modern process control systems on major units which functioning to monitor the operation in the sites. Furthermore, BP enhanced its training programme toward employees and introducing reform maintenance management system. (BP Sustainability Report, 2006)

In addition, BP started to involve contractors and union personnel in safety management where they can contribute their concerns or opinion through a contractor safety council and a contractor company leaders' meeting. At the same time, instead of sharing offices, many contractors have been allocated to the new Texas City office building and a new process has been implemented to monitor the activities undertaken in the refinery which aimed to assess contractors' competencies and the amount of training. (BP Sustainability Report, 2006)

3.3: Communities

Six month after the incident, BP have an agreement with the Occupational Safety and Health Administration (OSHA) to pay a $21.3 million fine. In the agreement, BP promised to correct the potential hazards in the refinery. (Steven Greenhouse, 2009) However, BP was failed to do so over the four year period and thus OSHA issued a penalties cost $56.7 million to the corporate. In addition, additional fines $30.7 million was issued to BP for the new indentified violations of safety control at the refinery. (OSHA, 2012)

On the other hand, The New York Times (2009) reported that BP has been charged for violation on Clean Air Act and been issued criminal fine $50 million. Besides, BP paid more than $1.6 billion to settle more than 4000 civil claims in order to compensate victims. (BP, 2012)

3.4- Theory

The theory of Utilitarianism provides a clear view to BP's practises. Crane and Matten (2007) defined the theory is morally right if it creates the greatest amount of happiness to the most. Therefore, BP could be argued that is not making any wrongness when it adopt high risk strategies that would brings bigger profits; save safety expenditure; and exploit small minorities as it could benefit most to the customers and shareholders. Result, they could enjoy increasing in investment and higher revenues. Thus, BP can invest more to improving alternative energy sources to enhance its sustainability. In this situation, all other dilemmas such as exploitation and accidents of employees, issue on environment and local communities, even calculated fatalities can be said as not a problem. That is why Utilitarianism is also known as a cost-benefit analysis to decision making.

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Arguably, some minor suffering is acceptable if the intended aim of a company is to create a sustainable environment. However, in most people point of view, it is unethical to destruct the environment and cause human deaths. This 'Rule Utilitarianism' against the rights of the employees. Therefore, to understand the objectives of short-term operational decisions, 'Act Utilitarianism' perspective is more appropriate. In the view from this perspective, 'calculated fatalities' do not provide the greatest happiness where it shows that BP is unethical and ruthless to gain profits. BP is unethical as some of its decision cause suffering and negative impacts to the employees, environment and local communities.

By applying this theory, BP should not act selfishly to maximise profits by reduce the safety and view the employees or environment as factors of production. This is unethically and irresponsibly as they fail to consider all stakeholders. Yet, they intentionally exploit many in order to increase efficiency and save budgets on safety.

4.0: Organizational Best Practices and Values

BP biggest problem is its negligence on worker's working condition. It does not have proper safety management and consistent monitoring on their refinery and employees condition. In term of employee's safety, Coca-Cola Company act well in protecting their employees' health and safety where it monitors employees' health and safety performance constantly to ensure continuous improvement. They work on identify safety issues in the workplace continually to reduce the possibility of accident happen. Coca-cola Company has health and safety employee representatives in all its operation sites which helping to monitor and advise on occupational health and safety programmes. (Coca-Cola, 2012)

Besides that, Coco cola Company do not exploit its employees like BP. It cares about employees by provide a benefits included healthcare, dental care, childcare and additional holiday and insurance. In order to help employees achieve a goof work-life balance, Coca-Cola Great gives initiative to employees for taking a longer weekend during summer where they can work a four and a half day per week during the three summer months of the year. Also, employees were given the right to request for flexible working times, reduced working hours and extended leave policies. (Coca-Cola, 2012)

4.1- Theory

From the above practices implemented by Coco cola Company toward its employees, it can be said that it is running its operation by applying feminist ethics. Crane and Matten (2007) demonstrates feminist ethic is an approach that emphasized empathy, harmonious and healthy social relationship where it care about others and avoidance to against above abstract principles. And obviously, BP is not adopted this ethic completely. In the refinery, BP has their code of conduct for operating in the operation. BP cannot said to ignore their employees' safety at all. However, the main problem of BP is it did not consistently improving its safety management according to the changes in the refinery. Also, BP did not frequently checking and upgrading the equipments in the refinery to ensure them working well. It did not take this as an important step to prevent any accident happen in the refinery.

On the other hand, BP did not consider about the consequence of its decision toward the local communities. Instead, they just think of their benefits to not installing new equipment in the refinery. BP as a company which produced oil and gases should suppose to understand well the harmful of the chemical or gases to the public if there is any leakage happens. Unfortunately, BP did not really take serious on what would happen to the nearer residents and communities if accident happens.

A part of that, BP did not emphasized much on caring their employees since there is a report mentioned that it was exploiting its employees. Unlikely to Coco Cola Company which wishes their workers to achieve good work life balance, BP seem to be cruel to it workers when it required workers to work overtime continually for one month time.

All practices of BP on safety management toward its employees is against the feminist ethic as it do not really creates harmonious working place and caring it employee. Instead, BP put it employees in high risk and make them suffering in both mentally and physically.

5.0: Conclusion

Today, competitive environment in global stage makes managers must struggle in making decision, considering the rightness and wrongness in cultural and legal context. ((Akhter, 2004; Dyer and Chu, 2000; Myers, 1999). Ethics is important in business as it is engage with many parties and could impact on each and other. Charles Holme (2008) demonstrated that business ethics about individual's personal behaviour and standards, and is important to support the business strategy. Different individual can make different decision on same cases. It is depend on the individual's moral perspective and consideration. It is difficult to judge on someone's behaviour in business industry. In personal side, it is consider right if decision make could bring profits to the business. But in moral side, it might right or might wrong, depend on the moral context and thinking of others.

In some situation, there would need some scarification to make decision in order to grab the greatest benefits. In BP case, it is not wrong at all when it refuse to replace the old equipment due to the high budget as it need to consider for its own interest and their shareholders as well. Rather than invest in the upgrading of equipment which would bring back profit after a long time, why not they invest in somewhere else that would bring them profit is shorter time and bigger benefits? Of course, it is unethical practices since it risks the safety of workers. However, it is nothing wrong with their behaviour as they make decision based on their final goal - maximize their profit.

Therefore, one's is unable to judge either is ethical or unethical by using laws or moral contexts as it is a subjective opinion.