The Case
The Deepwater Horizon was a rig that was leased by BP but was owned and operated by the offshore-oil-drilling company. It was located in the Macondo oil prospect in the Mississippi Canyon valley in the continental shelf. The oil well was one and a half kilometer below the seabed which further extended around half a kilometer into the seabed. (Pallardy 2018)
On April 20, 2010, it was blasted and then drowned into the sea killing 11 workers and injuring further 17. Due to the systematic failure, oil started discharging into the sea and it was estimated to be peaked at 60 thousand barrels a day.
BP has tried to prevent the oil leakage and “attempted to activate the rig’s blowout preventer (BOP), a fail-safe mechanism designed to close the channel through which oil was drawn, the device malfunctioned. Forensic analysis of the BOP completed the following year determined that a set of massive blades known as blind shear rams—designed to slice through the pipe carrying oil—had malfunctioned because the pipe had bent under the pressure of the rising gas and oil.”
It is not the first time that a BP-operated rig has blasted and drowned and cause the oil spill. A similar incident also happened in in the Caspian Sea in September 2008. So it could be the case that BP was also negligent in this case.
A special report evaluating the reasons of the blow out is of the view that BP and its partners become complacent due to numerous successful wells and thought their systems were robust enough to prevent the catastrophe, while it was clearly not the case. Then, the regulation for the safety was also not appropriate because the agency which was supposed to be monitoring the safety was the agency who was responsible for generating revenues and the national policy was to maximize revenues so its focus was not right. (Hoffman 2010)
The culture of BP also contributed to the accident as it does not give that much importance to the safety and it was involved in willful safety violations. Apparently, BP was taking too much risk for sake of revenues.” The company had long grown used to operating at the margins of safety. It regarded red flags as normal, and those red flags cropped up repeatedly on the Macondo well, with the frequency accelerating in the four days before the blowout.” (Hoffman 2010)
Objectives
The possible three CSR/Ethical objectives for the CEO of BP here are to prevent the atmosphere and safety of the crew, to increase revenue for the company and the government which the government can use for more investment in the social sector while the company can support more jobs and not accepting the risky contract even if the risk occurrence chance is very low because it is ethically wrong.
In this regard, the CSR objective of preventing the atmosphere and the safety of the crew is better than the other two CSR/ Ethical objectives for the CEO to pursue. This is because it would ensure that no leakage occurs and the RIG is not drowned. As a result, not only that the crew would have remained safe but the atmosphere would have not contaminated as well. So, the company would not have suffered any penalties and costs for contamination and suffering of the employees. It would have also helped in the achievement of other CSR objectives as well. This is because it would not have impacted the governments and company’s revenues and so the government would have more money to invest for the social welfare. The company would also have more money to conduct more business and thus support more jobs.
The ethical objective is although very good in itself as it would have prevented the deaths and suffering of the injured employees and their families and also prevented the atmosphere from the resultant damage, it would have also resulted in the loss of revenue for both government and the company. As a result, not only that the company would have been at a loss but the community would have been at a loss as well due to having less money for social welfare.
Obstacles
A. Environmental
There are certain environmental obstacles that prevented the achievement of above mentioned CSR objective. These are the obstacles which are largely uncontrollable and the company has invested huge sums of money to control the effects of these obstacles. Deep sea drilling is a very challenging job and it was a Deep sea drilling rig. It is a very risky work but then the risks are much lower than the return and so the CEO had to go for the job. The Deep working environment not only made it difficult to drill but when the leakage happened, it made it difficult to stop the leakage and prevent the people and the atmosphere. The multiple systems installed to prevent the catastrophe were failed due to being highly complex as the environment needed. Had the environment not that challenging, the prevention of oil spill would have easily prevented, as in case what happens on the drills on land where no such incident is reported.
B. Organizational
There are certain organizational obstacles that prevented the achievement of above mentioned CSR objective. As explained above, BP has a high-risk culture and safety is not a priority when it comes to revenue. That is why there are a lot of incidents of undermining safety for efficiency and or cost-cutting. So the CEO was pressurized by the organizational culture for the alignment. He has to take risks for sake of higher profitability. Had he not complied to the organizational culture, he may have lost his job. So these are the organizational norms and pressures that forced him to undertake such risky endeavor. Moreover, the organization had become complacent with regard to safety and so multiple system failures happened because either the safety mechanism was not checked and maintained and or the material used was not of the required quality.
C. Individual
There are certain individual obstacles as well that prevented the achievement of above mentioned CSR objective. These individual obstacles forced the CEO of the company to take the decision he took. Most importantly, he succumbed to organizational pressures of compliance with its high risk and low safety-focused culture. So individually, he has failed to take steps to ensure the company gives priority to the safety of not only its people but also to the environment. As the reports afterward also confirmed, the company opted for more profitability and compromised safety due to which this accident happened. Had the CEO individually took some bold decision and strived to change the organizational culture, particularly making it not compromising the safety for sake of profitability, this incident might not have happened in the first place.
Macro Ethics/ CSR Lead Strategies
The three most appropriate Ethics/ CSR strategies, in this case, our vision and values, top-down power and whistleblowing.
In these three strategies, vision and values would be the best-suited strategy as it would deal the root cause of the problem, the organizational culture that focuses on profitability and risks rather than safety and compliance with the regulation. Under this strategy, the CEO will ask the board to re-articulate mission and vision of the company focusing on safety and security of the people and environment as well. Then the people would be hired and the existing people would be trained according to the new vision and mission of the company. The performance appraisal, auditing and compensations systems of the organization would also be developed in accordance with the new mission and vision. The promotion would be awarded to the people complying with the new organizational values and mission and vision. The organization would also develop the vision and mission-based ethics hot-lines and internal justice systems.
This method is pretty much similar to the top-down power where the top management would be made to change their approach. However, the management again needs to do it by changing the vision and values of the organization. Similarly, whistleblowing will inform the external regulators to handle the situation which would again be done through bringing and organizational change through changing its culture. This is because organizational culture is the main culprit that also forces new members of the organization to abide by its norms and so the new individual also starts focusing on revenue-generating activities giving less importance to safety.
Alternative Institution Building
If the CSR plan to implement the objective through changing the values and mission of the organization fails, it would be because the people at the top of the organization does not do enough to make it a success. This is because they are the people, like the CEO and the board who has to ensure that the employees are properly trained according to the new mission and values and they are properly communicated to everyone. This is because the whole plan is based on changing the approach and culture of the company. The current culture makes people ignoring safety and for that matter, everything else including the regulation for sakes of higher revenue and decreased costs. So the management, under the pressures to keep the profitability up, may not want to change the culture that has kept the company profits high for so long. Changing the culture may result in compromising profitability of the company that would also compromise their own compensation, particularly the performance-based bonuses and other compensation like shares.
Contingency Plan
In case the plan of changing the organizational culture with the help of changing organizational values and mission fails, the CEO should voice his concerns in the board meeting. He should force the board to make policies that would ensure new mission and values are compiled by everyone and the CEO is supported for extensive training of the existing employees in accordance with the new mission and values and the organizational culture is changed for the better. However, if the board does not listen to him, then he should seek alternative options like whistleblowing. He should inform the regulators what is going on within the company so that the regulators can ensure that the company is run in the best interests of the shareholders and everyone involved and not just for the selfish interests of the board. The regulators then would act to ensure that the corporate governance practices abide by the company and thus the company’s culture would be changed for the good.
Alternatively, the regulators can enact new regulations that would force the company taking certain actions to ensure safety is their priority. It can be done by introducing a higher level of penalties for corporate governance as well as legal violations.
References
Pallardy, R.(2018). Deepwater Horizon oil spill of 2010 | Summary & Facts. Encyclopedia Britannica. Retrieved 22 July 2018, from https://www.britannica.com/event/Deepwater-Horizon-oil-spill-of-2010
Hoffman, C. (2010). Special Report: Why the BP Oil Rig Blowout Happened. Popular Mechanics. Retrieved from: https://www.popularmechanics.com/science/energy/a6065/how-the-bp-oil-rig-blowout-happened/
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