Ethical issues are an everyday occurrence in the corporate world
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|✅ Wordcount: 3270 words||✅ Published: 1st Jan 2015|
The purpose of writing this report is to evaluating whether the organization chosen is ethical in its business decisions and actions. It is very important evaluation for every organization especially for multinational corporations because it does jeopardize their organization images and reputations if the ethical audit report shows that they have been involved in ethical dilemmas. However, business ethics is a very subjective issue, pretty much depends on many factors, such as the social environment, the religious influence, traditional culture and ethical theories that applied by the organization. (http://www.corporatejourney2u.com/business/a-definition-for-business-ethics.html ) Ethical theory, one of the factors, is an important factor in judging the business actions whether ethical due to the definition of ethics is different for various ethical theories. There are many ethical theories to be used and applied in making moral judgment such as, Kant’s ethics, Utilitarianism, Egoism, Virtue theory, and Moral rights and duty. Thus, the organization is chosen to evaluate its business ethics by using various ethical theories in this ethical audit report is BP p.l.c which is one of the worlds’ largest corporations.
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BP P.L.C (Bp) is a multinational corporation which engaged in oil and gas industry and heartquartered London, United Kingdom. It is the fourth largest energy company in the world measured by revenues which is $246,138 million for year 2009. Bp is operating in more than 80 countries which have 80,300 employees and providing fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items to its customers. It produces around 3.8 million barrels of oil equivalent per day and has 22,400 service stations around the world. Besides oil and gas, Bp has also been investing a huge capital in researching alternative methods of fuel which including gas, hydrogen, solar and wind and the low-carbon energy has become one of the core businesses of Bp. However, Bp has also been involved in a number of ethical dilemmas which related to environmental, safety and political issues during it history. So, various ethical theories will be used and applied to examine the responses of organization to the ethical dilemmas involved.
In the Bp’s past history, they have received plenty of criticism for their unethical business actions and environmental practices such as oil spill, toxic spill of methanol, worker safety, and human right issues. In addition, Bp was added to the list of “ten worst corporations” by an investigative journal that “exposes the evils of the corporate world, the government, and the mainstream media” from Mother Jones Magazine in both 2001 and 2005 based on its environmental and human rights records.
However, oil spill is the most common and frequent environmental issue that Bp often involves in. hence, Bp is used to be fined many million dollars by government due to the oil spill from their oil exploration side. The most serious oil spill case for Bp will definitely the latest Gulf of Mexico Oil Spill which also the largest accidental marine oil spill in the history of the petroleum industry. On 20 April 2010, there was an explosion and subsequent fire on the Deepwater Horizon semi-submersible Mobile Offshore Drilling Unit (MODU) situated about 40 miles southeast of the Louisiana coast in the Macondo Prospect oil field which owned and operated by Transocean and it sank after two days later. According the report of Deepwater Horizon Investigation from Bp, the explosion was probably caused by few main factors that are well integrity was not established or failed, hydrocarbons entered the well undetected and well control was lost, hydrocarbons ignited on the Deepwater Horizon and blowout preventer did not seal the well (??). As a result of the explosion, it had killed 11 platform workers and injured 17 others and oil leaking was found from the rig at the rate of about 8000 barrels of crude oil per day on the morning of 22 of April 2010. (http://news.blogs.cnn.com/2010/04/22/coast-guard-oil-rig-that-exploded-has-sunk/) however, the oil spill rate was announced at august 2 2010 that was 62,000 barrels per day according the latest official estimation which provided by the Flow Rate Technical Group, in a collection of government and independent researchers and scientists. (http://www.nytimes.com/2010/05/28/us/28flow.html?_r=1) On the other hands, the spill has brought fatal havoc to marine and wildlife habitats, Gulf’s fishing and tourism industries and also some impacts on global economy and healthiness of cleanup workers as well as Bp itself. Bp was warned by White House that it face “many billions of dollars” in fines for the Gulf of Mexico oil spill disaster. Besides, ex-CEO of BP Plc, Tony Hayward told Reuters in an interview that they will take full responsibility for the spill and compensate all those affected by an oil-spill from one of its wells in the Gulf of Mexico. The table below shows the payments of Bp for the government fines, fund, and cost of cleaning up. Payments 1
Over $8 billion spent to date
$20 billion claims escrow fund
$100 million unemployed rig workers’ fund
$500 million establishing Gulf Coast Research Initiative
Besides, Bp stock price had fell by 55.32% on the New York Stock Exchange from 20 April 2010 to 25 June 2010 due to the Deepwater Horizon Oil Spill.
Besides oil spill environmental issues, Bp has also been received many criticism of human rights violation from journalists, human rights groups and politicians for the human rights consequences of its oil exploration activities and its security policies in Colombia since 1996. (http://www.platformlondon.org/carbonweb/documents/chapter11.pdf) Colombia government has been globally recognized that having a poor human right record and both police and army are held responsible for serious abuses of human rights. Moreover, operating in Colombia was fraught with danger and safety risk due to the presence of guerrillas and paramilitaries that have declared war against oil companies. Thus, Bp had hired Colombian army and police to patrol and protect its facilities in Colombia by paying many millions to the Colombia’s Defense Ministry. This move has been criticized heavily that Bp was indirectly funding right-wing Colombia paramilitary because the Colombian military has tied connections with the right-wing paramilitary and a bad reputation for serious human rights abuses too. This was a part of the story of human rights abuses of BP in Colombia. However, the most recent human rights issue for BP in Colombia is the labor and community mobilization against Bp, in Casanare, Colombia. On 22 January 2010, a small group of workers had broken the silence and gone for strike by blocked access roads to BP installations after BP refused their right to a union and a collective bargaining agreement. However, the actions of attacking workers by notorious Colombian riot police in order to end the protest had provoked the communities and local businesses and they joined the blockade as well. In addition, The Movement for the Dignity of Casanare (MIDC) was born. As a result of the strike and blockade, BP were forced to have a negotiation and agreed to participate in five commissions on labor, environment, human rights, public goods and social investment issues. After two months, however, a second strike began due to the renegade of BP to the agreement. (http://www.thepeoplesvoice.org/TPV3/Voices.php/2010/07/03/bp-workers-face-colombian-army-in-their-) The human rights issues in Colombia such as indirectly funding right-wing paramilitary and labor and community mobilizations are contradict to its human rights position which prominently shown on its website. Thus, this may be a tough challenge to BP who invests tremendously in enhancing its “green” image and reputation. http://www.newint.org/columns/currents/2010/07/01/bp-casanara-colombia-oil/
Both of The Gulf of Mexico oil spill and human rights abuse in Colombia issue have caused BP a huge loss in terms of finance, human and material resource, image and reputation. However, the loss caused by The Gulf of Mexico oil spill is relatively more serious than the human rights abuse issues in Colombia because BP has spent more than 30 billion for the government fines and fund, cost of cleaning up and the claims of public who affected by the oil spill. Besides, a huge capital is an essential requirement in enhancing a brand image and reputation for any organization. Thus, BP definitely has to invest another huge capital in order to improve its jeopardized image and reputation as a result of The Gulf of Mexico oil spill. On other hands, the human rights issues in Colombia do not cause BP being fined as much as the oil spill incident. Moreover, the mobilization of labor and community had merely set blockade and occupied the BP installations peacefully without damaging any facilities and machines, resulting in the particular installations are not operating. Thus, the cost of the mobilization of labor and community in Colombia is relatively lesser than The Gulf of Mexico oil spill.
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One of the responses of BP towards the Gulf of Mexico oil spill is paying claims to those who affected from the oil spill. On the June 16th 2010, BP and The Obama Administration agreed and announced the creation of the 20 billion dolar “Oil Spill Liability Trust Fund” which contributed by BP to provide a faster and fairer way to pay damage claims for individuals and businesses affected by the Gulf Oil Spill. BP will pay 5 billion per year to the fund until the 20 billion dollar is depleted, including 5 billion in 2010. http://www.thebpclaimsfund.com/ Besides, independent Gulf Coast Claims Facility (GCCF) has been created by Mr. Feinberg who is appointed to be the administrator of the BP Claims Fund. According to the GCCF, BP has paid the claims payment of approximately $400 million since 3 May 2010.
BP has not applied Kant’s ethics theory in their response of paying claims to those who affected from the oil spill. Kant’s ethical philosophy was that action only can be morally right when action is guided by universalisable principles that regardless of the consequences of the actions and also carried out as a duty, not in expectation of a reward. (Fisher. C and Lovell. A, pg109). According to the theory, paying claims by BP to those who affected is an unethical action because the ultimate purpose of BP paying the claims is to calm down the public anger, re-establish its image and reputation and increase their share prices. So, this action has no true moral worth because it has been implemented only out of its self-interest instead of its duty or good will.
On other hands, the moral rights and duties theory has been applied by BP for their action of paying claims. Generally, a right is defined as an entitlement to act, or have others to act in a certain way.(Shaw W.H, Barry .V and Sansbury .G, 2009) There is a connection between rights and duties that is the rights of one person imply the duties of another person. For example, Public who affected and government have the rights to ask for claims and fine BP regarding the Gulf of Mexico oil spill according to the Oil Pollution Act of 1990. The Oil Pollution Act of 1990 imposes the liability for removal costs and damages resulting from an incident in which oil is discharged into navigable waters or adjoining shorelines or the exclusive economic zone. Hence, BP, the responsibility party, has the primary responsibility and duty for cleaning up the oil spill and the claims for the cost of removal and damages which caused by the oil spill. The action of paying claims is viewed as ethical and morally right under the moral rights and duties theory. http://www.epa.gov/oem/content/lawsregs/opaover.htm
Besides that, cleaning up oil is another important step taken by BP as one of the responses of the Mexico oil spill. BP has launched its comprehensive, pre-approved oil spill response plan immediately following the April 22 sinking of the Transocean Deepwater Horizon by working in coordination with the U.S Coast Guard and other agencies. Three fundamental strategies have been implemented by using different techniques to clean up the oil; contain it on the surface, away from the most sensitive areas, to dilute and disperse it in less sensitive areas and to remove it from water. Thus, many miles of containment boom such as 100,000 feet, 220,000 feet and 300,000 feet have been deployed for the purpose of corral the oil, minimize the impact to sensitive areas and protect the coast and Mississippi River Delta area. In addition, a tremendous amount of oil dispersant has been used and sprayed on the surface and underwater of the sea in order to accelerate the oil dispersal process. Moreover, burning the oil is one of the approaches of oil removal plan. The plan of burning off up to 1000 barrels of oil each day was announced by US Coast Guard on 28 April 2010 and a small test about the environmental damage was carried out by burning 100 barrels of oil. However, bad weather had made the plans failed to carry on. http://www.washingtonpost.com/wp-dyn/content/article/2010/05/03/AR2010050302781.html?sid=ST2010050304543. On top of that, various of resources from different sectors also being deployed and employed for the purpose of cleaning up the oil such as aircrafts, skimmers, tugs, barges, commercial fishing boats, volunteers from public and even US military.
The ethics theory of Utilitarianism is being applied by BP for their anoher response of oil spill, cleaning up oil. According to the Colin Fisher and Alan Lovell, utilitarianism theory hold that actions are right in proportion as they promote happiness and wrong as they tend to promote the opposite of happiness. Thus, the principle of “The greatest happiness of the greatest number is the foundation of morals and legislation” by Jeremy Bentham constitutes the standard that determines whether an action is right or wrong. Thus, cleaning up oil is only right and ethical if it generates more benefits than losses and greater amount of people from various degrees beneficial from the activities of cleaning up oil. There are pros and cons being generated due to the cleaning up the oil. Numerous advantages are provided by cleaning up the oil spilled from the well; the damage to marine and wildlife habitats will be reduced, fishing and tourism industry can be opened and operated back, and job opportunities are provided to people who temporary lost their sources of income due to the oil spill. However, cleaning up oil has few disadvantages also due to the way of cleaning up oil. Burning off the oil has caused air pollution and using oil dispersants extensively has brought side effects for environment, aquatic life and public health which may cause genetic mutations and cancer. From the advantages and disadvantages analysis, the action of cleaning up oil can be concluded as an ethical action because it brings greater happiness to greater people.
For the human rights issues in Colombia, On 4 June, BP and the Colombian government pressured the National Oil Workers’ Union to call an end to the strike, promising that then they would restart negotiations. However, 200 workers involved in the mobilization were sacked just four days after the strike was called off. Besides that, BP has also renege the agreement about participation in five commissions on labour, environment, human rights, public goods and social investments issues. From these two actions, BP can be viewed as do not practice the ethical theory of Kant’s ethics, Utilitarianism, and rights and duties while dealing with this issue. Firstly, they do not follow the concept of categorical imperative which formulated from Kant’s ethics. It is a concept of universalisability which refers to a principle must be obeyed by all rational people around the world, with no exceptions. (colin fisher, alan lovell). Besides, the first formulation of the categorical imperative by Kant is “act only on the maxim through which you can at the same time will that it should become universal law”. Thus, breaking a promise like what BP done in their way to settle the problems in Colombia is definitely wrong according the formulation because BP do not will the maxim of their action to be a universal law. http://brindedcow.umd.edu/140/kant.html Besides, rights and duties theory has not been applied by BP too because duties which supposed to be done has not carried out properly by BP in order to respect the rights. For example, owners have the right to get compensation from BP for the land they will lose. However, BP compensated the stallholders for a corridor of just 12 meters across their land, but the actual size of land lost and occupied after the pipeline was built was much more than the size of land which compensated. (chapter 9) Besides, workers who working for BP should be entitled to the right of being paid and treat fairly and comfortable working conditions should be provided which are BP’s duties. These are the basic and universal rights for every workers and, but BP do not perform their duties well. Therefore, their action is wrong and unethical for rights and duties theory
On the 28 November 2005, BP announced that it plans to invest 8 billion in alternative and renewable energies over ten years to create a new low-carbon power business. The alternative and renewable energies has been invested by BP are solar power, wind power, hydrogen power and biofuels. BP believed that these alternative and renewable energies business have a growth potential to deliver revenues of around 6 billion a year within the next decade. Besides that, generating power by using these alternative and renewable energies is able to reduce the emission of man-made green house gas and consumers clean and safe electricity. http://www.bp.com/genericarticle.do?categoryId=9024973&contentId=7046913 . The investment is considered as ethical and right under the Utilitarianism theory which evaluates actions according to the consequences of action and how much happiness are produced. It is because more advantages are produced than disadvantages do from the investment such as carbon gas emissions reduced, clean and safe electricity provided lower cost in long run, and greater profit in future. Moreover, numerous people from different areas will be beneficial from the investment in alternative and renewable energies too instead of BP themselves only.
Shaw, WH, Barry, V and Sansbury, G 2009, Moral Issues in Business, First Asia-Pacific Edn, Cengage Learning Australia, South Melbourne, Australia.
Fisher, C. and Lovell, A. 2009, Business Ethics and Values: Individual, Corporate and International Perspectives, third edition, Pearson Education Limited, England.
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