What ethical theory or theories support the B-corp concept?

  

“Ethics, Corporate Governance, and Corporate Social Responsibility
(CSR)” Please respond to the following:
From the e-Activity, determine the ethical theory or theories (from Chapter
1 of the textbook) that best support(s) the B-corp concept. Support your
response.
Evaluate the likelihood of traditional corporations using social
responsibility as an effective competitive strategy. Specify at least one (1)
way that a company with which you are familiar can use (or has used) social
responsibility as a competitive strategy in the marketing of its products /
services, supply chain, charitable activities, strategic investments, or
operations.Attached is chapter 1 to help.
CHAPTER
1
Law, Ethics, Business
An Introduction
Law must be stable, and yet it cannot stand still.
ROSCOE POUND
Neither fire nor wind, birth nor death, can erase our good deeds.
BUDDHA
Business has become, in the last half century, the most powerful institution on the planet.
The dominant institution in any society needs to take responsibility for the whole. Every
decision that is made, every action that is taken, must be viewed in light of that kind of
responsibility.
DAVID KORTEN
Law is not a static phenomenon, yet in certain ways it appears bounded and clear cut.
Where it holds jurisdictional authority, law provides a set of rules for behavior. When
these rules are broken, behavior is punishable. If you have been driving carelessly and hit
another car, you might pay money damages. If you are caught stealing, you might go to
jail. If you are caught polluting, you may be forced to stop. The creation of law and the
delivery of sanctions for rule breaking are contested processes. How law is made, how it
is enforced, and how it is interpreted are always in dispute, constantly changing, and
responsive to the power relations that surround it. Still, we can identify its purposes: law
both sets behavioral standards and sets up a system for compliance with them. Within the
reach of a legal system, we are on notice that we must meet its standards or risk penalty.
Chances are we were not directly involved in the making of the ruleswe may even
disagree strongly with thembut we understand that the legal system shadows us
anyway. It may be the closest we can get to a shared reality.
Ethics, on the other hand, presents a menu of options, often disconnected from
official sanctions.1 While law concerns what we must do, ethics concerns what we should
do. Suppose you work for an advertising agency and have just been offered a chance to
work on a new ad campaign for a certain fast-food chain. Burgers, fries, and sodas are
legal products. Under the First Amendment of the U.S. Constitution, fast-food companies
We distinguish ethics from professional ethics, which are binding on those with professional licenses for
the practice of law or accounting, for example. Indeed, licensing authorities have enforcement powers not
unlike those of legal authorities to sanction those who violate their professional codes of ethics.
1
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have the legal right to get their messages out to consumers. But you may believe that their
ads are particularly attractive to children, who are at risk of becoming accustomed and
even addicted to the empty calories that make them fat and unhealthy. Although no law
requires it, you may feel you should decline to participate in the campaign. Or suppose a
company manufactures a pesticide that can no longer be sold in the United States because
the Environmental Protection Agency has banned its primary ingredient, but that can be
sold in places like India or Africa, where environmental regulations are far less stringent.
Legally, the company is free to sell its pesticide overseas; but should it?
Ethical preferences are not preselected for us by legislators or by judges; they involve
critical consciousness, engaging each of us in a process of bringing reason and emotion to
bear on a particular situation. The right way to behave is not necessarily a matter of
aligning our actions with the norma community or religious norm, for instance
although it may be.
The question of what should be done in a given situation, of the right way to live our
lives, is complicated by divergent and overlapping cultural inputs. Within the borders of
the United States, and globally, we are confronted with a kaleidoscopic array of ethical
traditions. Does this mean that there can be no such thing as consensus, no agreement
about what is good behavior? While there are differences among communities, we might
identify a core set of values rooted in the kind of beings we are: We are all self-conscious,
self-aware. We are all equipped to think rationally and to feel emotionally. And we are, by
nature, dependent upon one another.
Today, almost half of the 100 largest economies in the world are multinational
corporations. Comparing corporate revenues to the gross domestic product of nations,
Walmart, BP, Exxon Mobil, and Royal Dutch/Shell all generated more income than Saudi
Arabia, Norway, Denmark, Poland, South Africa, and Greece in 2005. The largest 200
companies in the world account for more than one-fourth of the worlds economic
activity. By 2002, they had twice the economic clout of the poorest four-fifths of
humanity. Business has powerful effects on our natural environment. It strongly affects
what we eat, how we transport ourselves, what our communities look like, and how we
take care of ourselves when we are sick. In many ways, the impact of global business has
been beneficial. Multinationals provide new jobs, pay taxes, and produce new or less
expensive goods and services. They introduce technology, capital, and skills to their host
countries and raise the standard of living. On the other hand, multinationals have been
blamed for hastening the collapse of traditional ways of life; for taking advantage of weak
and/or corrupt governments to exploit resources in developing countries; for implementing
questionable safety, environmental, and financial practices; and for profiting from
unsustainable technologies while blocking technologies antithetical to their interests.
Multinational corporations are implicated in some of the worlds most pressing problems
the growing disparities between rich and poor, for example, and global climate change.
As bearers of a diverse set of cultural achievements, we need to find points of
agreement, both in legal and ethical terms, as to how human societies can best flourish.
And as participants in the global economy, we need to discover ways of tempering the
tremendous power of the market so that the planet and its inhabitants will thrive.
In this chapter we introduce valuesand a tension between valuesthat will thread
throughout this book. On the one hand, the value of maximizing individual freedom of
choice, our right to think and act as we wish, as long as we dont infringe on someone
elses rights to do the same; on the other hand, the value of building community, our
duty as interdependent social beings to care about and for one another. We start with a
case that raises questions about the relationship between law and ethics. Then we look at
Law, Ethics, Business
the 2010 BP oil spill in the Gulf of Mexico through five different ethical lenses, introducing
the basic tools for ethical analysis that you will be using throughout this book. A brief
description of the legal structure of corporations is followed by a recent Supreme Court
decision establishing a corporate right to freedom of speech in the context of campaign
financing. Finally, we read about strategic corporate social responsibility and its
recognition of the mutually-advantageous linkages between business and society.
Freedom versus Responsibility: A Duty to Rescue?
In this first case, a man is sued for failing to do anything to rescue his drowning friend.
While we only know the story as told by the widowthe case is dismissed before the
facts can be fully investigated by both sides in a trial settingwe can see how, in this
kind of scenario, the law views the conflict between freedom and responsibility.
YANIA v. BIGAN
Supreme Court of Pennsylvania, 1959
155 A.2d 343
JONES, Benjamin R., Justice
On September 25, 1957 John E. Bigan was engaged in a coal strip-mining operation in
Shade Township, Somerset County. On the property being stripped were large cuts or
trenches created by Bigan when he removed the earthen overburden for the purpose of
removing the coal underneath. One cut contained water 8 to 10 feet in depth with side
walls or embankments 16 to 18 feet in height; at this cut Bigan had installed a pump to
remove the water.
At approximately 4 p.m. on that date, Joseph F. Yania, the operator of another coal
strip-mining operation, and one Boyd M. Ross, went upon Bigans property for the purpose
of discussing a business matter with Bigan, and, while there, [were] asked by Bigan to aid
him in starting the pump. Bigan entered the cut and stood at the point where the pump
was located. Yania stood at the top of one of the cuts side walls and then jumped from
the side walla height of 16 to 18 feetinto the water and was drowned.
Yanias widow [sued], contending Bigan was responsible for Yanias death.
She contends that Yanias descent from the high embankment into the water and the
resulting death were caused entirely by the spoken words of Bigan delivered at a distance from Yania. The complaint does not allege that Yania slipped or that he was pushed or
that Bigan made any physical impact upon Yania. On the contrary, the only inference deducible from the complaint is that Bigan caused such a mental impact on Yania that the
latter was deprived of his freedom of choice and placed under a compulsion to jump into
the water. Had Yania been a child of tender years or a person mentally deficient then it is
conceivable that taunting and enticement could constitute actionable negligence if it resulted
in harm. However, to contend that such conduct directed to an adult in full possession of all
his mental faculties constitutes actionable negligence is completely without merit.
[The widow then claims] that Bigan violated a duty owed to Yania in that his land
contained a dangerous condition, i.e., the water-filled cut or trench, and he failed to warn
Yania of such condition. Of this condition there was neither concealment nor failure to
warn, but, on the contrary, the complaint specifically avers that Bigan not only requested
Yania and Boyd to assist him in starting the pump to remove the water from the cut but
led them to the cut itself. If this cut possessed any potentiality of danger, such a
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condition was as obvious and apparent to Yania as to Bigan, both coal strip-mine operators. Under the circumstances herein depicted Bigan could not be held liable in this
respect.
Lastly, [the widow claims] that Bigan failed to take the necessary steps to rescue
Yania from the water. The mere fact that Bigan saw Yania in a position of peril in the
water imposed upon him no legal, although a moral, obligation or duty to go to his rescue
unless Bigan was legally responsible, in whole or in part, for placing Yania in the perilous
position. [The deceased] voluntarily placed himself in the way of danger, and his death
was the result of his own act. That his undertaking was an exceedingly reckless and
dangerous one, the event proves, but there was no one to blame for it but himself. He
had the right to try the experiment, obviously dangerous as it was, but then also upon
him rested the consequences of that experiment, and upon no one else; he may have
been, and probably was, ignorant of the risk which he was taking upon himself, or knowing it, and trusting to his own skill, he may have regarded it as easily superable. But in
either case, the result of his ignorance, or of his mistake, must rest with himself and cannot be charged to the defendants. The law imposes on Bigan no duty of rescue.
Order [dismissing the complaint] affirmed.
QUESTIONS
1. What happened in this case? If Yania couldnt swim, why did he jump?
2. Identify each of the arguments made by Yanias widow. For each, explain how the
judge dealt with it.
3. According to the judge, Bigan would have been liable in this case under certain circumstances that did not apply here. What are those circumstances?
4. Suppose you could revise the law of rescue. Would you hold people responsible for
doing something to help others in an emergency? If so, what circumstances would
trigger a duty to rescue? How much would be required of a rescuer?
n n n
Justifying the No Duty to Rescue Rule
The men who wrote the Bill of Rights were not concerned that government might do too
little for the people, but that it might do too much to them.
RICHARD POSNER2
The ruling in Yania v. Bigan is still valid. While there are some exceptions, in general, in the
U.S. legal system, we do not have a duty or responsibility to rescue those who are endangered.
There are both philosophical and practical reasons against imposing a duty to rescue. Traditionally, our society has tended to grant maximum leeway to individual freedom of choice. Requiring that people help one another in emergencies would infringe on
that freedom by forcing people to act when they might choose not to. Further, imposing
an affirmative duty to rescue presupposes that there is agreement that rendering assistance is always the right thing to do. Is there really such consensus? Beliefs and opinions
about the right way to behave in a given situation might vary widely across our diverse
societies. If we are to grant genuine respect to each persons freedom of conscience,
shouldnt we insist on legal enforcement of right behavior only when it is unavoidable?
2
Jackson v. City of Joliet, 715 F. 2d 1200, 1203 (7th Cir. 1983), in which Judge Richard Posner explains why
someone in need of emergency assistance has no constitutional right to it.
Law, Ethics, Business
Shouldnt we reserve punishment or liability for the times when people actively injure
others, and allow rescue to be a matter of personal choice? In a sense, those who do
not choose to rescue are not behaving badly; rather, they are merely doing nothing. As
U.S. Supreme Court Justice Oliver Wendell Holmes once said, While there is properly
in law a duty not to harm, there is not a negative duty not to allow harm to happen.
In the next excerpt, nineteenth-century philosopher John Stuart Mill describes the connection between individual freedom of choice and the law of the liberal democratic state.
ON LIBERTY
John Stuart Mill
Over himself, over his own body and mind, the individual is sovereign.
This, then, is the appropriate region of human liberty. It comprises, first, the
inward domain of consciousness; demanding liberty of conscience, in the most comprehensive sense; liberty of thought and feeling; absolute freedom of opinion and
sentiment on all subjects, practical or speculative, scientific, moral, or theological.
Secondly, the principle requires liberty of tastes and pursuits; of framing the plan of
our life to suit our own character; of doing as we like, subject to such consequences
as may follow; without impediment from our fellow-creatures, so long as what we do
does not harm them, even though they should think our conduct foolish, perverse, or
wrong. Thirdly, from this liberty of each individual, follows the liberty, within the
same limits, of combination among individuals; freedom to unite, for any purpose
not involving harm to others: the persons combining being supposed to be of full
age, and not forced or deceived.
No society in which these liberties are not, on the whole, respected, is free,
whatever may be its form of government; and none is completely free in which
they do not exist absolute and unqualified. The only freedom which deserves the
name is that of pursuing our own good in our own way, so long as we do not
attempt to deprive others of theirs, or impede their effort to obtain it. Each is the
proper guardian of his own health, whether bodily, or mental and spiritual. Mankind
are greater gainers by suffering each other to live as seems good to themselves,
than by compelling each to live as seems good to the rest.
Creating a legal duty to rescue would not only run into resistance on philosophical
grounds. There would also be practical objections. How would we enforce such a rule?
Where would we draw the line? Must a person attempt to rescue even if it would be
terribly dangerous? Should a rescuer be compensated by the victim for any injuries suffered? Who, in a crowd, are the potential rescuers: The closest witnesses? Anyone at the
scene? Anyone aware of the incident?
Radical Change?
Lawgivers make the citizens good by training them in habits of right. This is the aim of
all legislation, and if it fails to do this it is a failure.
ARISTOTLE, NICHOMACHEAN ETHICS
While the Anglo-American tradition emphasizing individual freedom of choice is a
major reason our legal system demands no duty to rescue, law professor Steven Heyman
argues that recognition of a duty to rescue is in line with that very tradition. His article
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appeared in a communitarian journal. Communitarians are concerned with reviving the
notion of shared responsibility and interconnectedness at a time when, they believe, too
many people view social change solely in terms of defining and enforcing an evergrowing number of personal rights.
He begins his essay by mentioning two famous examples in which bystanders chose
to ignore those who desperately needed help. The first incident happened one night in
March 1964. Twenty-eight-year-old Kitty Genovese was returning home to her apartment complex in a quiet, respectable neighborhood in Queens, New York. Manager of
a bar in another part of Queens, she was arriving late; it was 3:00 a.m. As she left her
red Fiat and began walking to her apartment, she saw a man walking towards her. He
chased her, caught up with her, and attacked her with a knife. She screamed, Oh my
God, he stabbed me! Please help me! Please help me! People opened windows, someone
called out, Let that girl alone, and several lights went on. But as more than a half hour
passed, none of the witnesses did anything more. The killer had time to drive away, leaving Ms. Genovese collapsed on the sidewalk, and then to drive back to stab her again.
Thirty-eight people later admitted they had heard Ms. Genoveses screams, but no one
even called the police until after she was dead.3
The second incident happened many years later. In 1983, in New Bedford, Massachusetts, a young woman went into a bar to buy a pack of cigarettes. She was gang-raped
on the pool table while customers watched and even cheered.4
THE DUTY TO RESCUE: A LIBERAL-COMMUNITARIAN APPROACH
Steven J. Heyman5
Rescue and the Common-Law Tradition
Consider two notorious incidents: the 1964 slaying of Kitty Genovese and the 1983
New Bedford tavern rape. In both cases, neighbors or bystanders watched as a
young woman was brutally and repeatedly assaulted, yet they made no effort to
intervene or call for help. Under current doctrine, their inaction breached no legal
duty, however reprehensible it may have been morally.
Suppose, however, that a police officer had been present at the time. Surely we
would not say that the officer was free to stand by and do nothing while the attack
took place. The state has a responsibility to protect its citizens against criminal violence. It performs this function largely through its police force. An officer who unjustifiably failed to prevent a violent crime would be guilty of a serious dereliction of
duty, which might result in dismissal from the force or even criminal prosecution.
Thus the officer would have a legal duty to act. But what if there is no officer on
the scene? In that situation, the state can fulfill its responsibility to prevent violence
only by relying on the assistance of those persons who are present.
Contrary to the conventional view, there is strong evidence that, for centuries,
the common law of England and America did recognize an individual duty to act in
precisely such cases. According to traditional legal doctrine, every person was
3
A. M. Rosenthal, Thirty-Eight Witnesses: The Kitty Genovese Case (Berkeley, CA: University of California
Press, 1999).
4
This incident is the basis of a film, The Accused, with Kelly McGinnis and Jody Foster.
Steven J. Heyman, The Duty to Rescue: A Liberal-Communitarian Approach from The Responsive Community 7(3), Summer 1997, pp. 4449. Reprinted by permission.
5
Law, Ethics, Business
entitled to protection by the government against violence and injury. In return for this
protection, individuals had an obligation not merely to obey the law, but also, when
necessary, to actively help enforce it. Thus, individuals at the scene of a violent
crime had a duty to intervene if they could do so without danger to themselves. If
they could not, they were required to notify the authorities.
With the development of modern police forces in the 19th century, this tradition
of active citizen participation in law enforcement gradually declined. In recent decades, however, it has become increasingly clear that effective crime prevention
requires the efforts of the whole communitya recognition that is reflected, for
example, in neighborhood crime watch and community policing programs.
Rescue and the Liberal Tradition
A duty to prevent violence finds support not only in the Anglo-American common-law
tradition but also in liberal political theory. According to Locke and other natural rights
theorists, individuals enter into society to preserve their lives, liberties, and properties. Under the social contract, citizens obtain a right to protection by the community
against criminal violence. In return, they promise not only to comply with the laws,
but also to assist the authorities in enforcing those laws. In this way, Locke writes,
the rights of individuals come to be defended by the united strength of the whole
Society. In On Liberty, John Stuart Mill recognizes a similar duty on the part of individuals. Mill agrees that everyone who receives the protection of society owes a
return for the benefit, including an obligation to bear ones fair share of the labours
and sacrifices incurred for defending the society or its members from injury.
In addition to endorsing a duty to prevent violence, liberal thought suggests a
way to expand that duty into a general duty to rescue. According to liberal writers,
the community has a responsibility to preserve the lives of its members, not only
against violence but also against other forms of harm. For example, Locke, Blackstone, and Kant all maintain that the state has an obligation to relieve poverty and
support those who are unable to provide for their own needs. In Lockes words,
both natural right and common charity teach that those should be most taken
care of by the law, who are least capable of taking care of themselves. Of course,
this is also a major theme in contemporary liberal political thought.
Rescue and Communitarian Theory
Communitarian theory supports and deepens the argument for a duty to rescue. On
this view, community is valuable not merely as a means to the protection of individual rights, but also as a positive human good. Human nature has an irreducible social
dimension that can be fulfilled only through relationships with others. The community
has a responsibility to promote the good of its members. But this can be fully
achieved only within a society whose members recognize a reciprocal obligation to
act for the welfare of the community and their fellow citizens. A core instance is the
duty to rescue.
Of course, some might doubt whether contemporary society is characterized by
the kind of community required for a duty to rescue. Community is not simply given,
however; it must be created. Common action, and action on behalf of others, plays a
crucial role in creating relationships between people. Thus the adoption of a duty to
rescue might not merely reflect, but also promote, a greater sense of community in
modern society.
The Contours of a Duty to Rescue
Advocates of a duty to rescue
one can act with little or no
enough. Because its purpose
duty should not be limited to
usually propose that it be restricted to cases in which
inconvenience to oneself. But this does not go far
is to safeguard the most vital human interests, the
easy rescues, but should require an individual to do
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anything reasonably necessary to prevent criminal violence or to preserve others
from death or serious bodily harm. Rescue should not require self-sacrifice, however.
Thus the duty should not apply if it would involve a substantial risk of death or serious bodily injury to the rescuer or to other innocent people.
This responsibility falls on individuals only in emergency situations when no officer is present. Moreover, the duty would often be satisfied by calling the police, fire
department, or rescue services.
In performing the duty to rescue, one acts on behalf of the community as a
whole. For this reason, one should receive compensation from the community for
any expense reasonably incurred or any injury suffered in the course of the rescue.
Any other rule would mean that some people would be required to bear a cost that
should properly be borne by the community at large, simply because they happened
to be at a place where rescue was required.
Far from diminishing liberty, the recognition of a duty to rescue would enhance it
by strengthening protection for the most basic right of allfreedom from criminal
violence and other serious forms of harm. And by requiring action for the sake of
others, a duty to rescue also has the potential to promote a greater sense of community, civic responsibility, and commitment to the common good.
QUESTIONS
1. According to the writer, a change in our lawa new duty to rescuemight
change the way people think, heightening their awareness of one another as
members of a community, and leading them to be more responsive to one
another. Do you think law can have such power? Can you think of any examples
where a change in the law seemed to improve the moral climate of our society?
2. Do you think law should be used as a tool for shaping a shared moral climate?
Why or why not?
WHEN RESCUE IS REQUIRED
The law recognizes a number of exceptions to the no duty to rescue rule. Many
states impose criminal penalties, for example, for failing to report child abuse or an
accident in which someone is killed. Only a few statesRhode Island, Vermont,
Wisconsin, Hawaii, and Minnesotaimpose a more general duty to rescue by statute. In theory, violators would be fined. In fact, however, the statutes are rarely, if
ever, invoked.
One means of finding a legal duty to rescue is through contract law. Certain
persons assume contractual responsibilities to help others or to prevent them from
being harmed. A lifeguard, for instance, cannot ignore a drowning swimmer, nor
can a firefighter let a building burn. While a person could be disciplined or fired
for refusing to attempt rescue under such circumstances,6 to commit to a dangerous
job such as policing or firefighting is itself a statement of willingness to risk ones life
to save livesto risk rescue as a part of an ordinary days work. In fact, of the 343
firefighters killed on September 11, 2001, 60 were not on duty that day, but
responded to the alarm as if they were.
6
For reasons of public policy, however, civil lawsuits against police, fire, or other government workers are
rarely permitted.
Law, Ethics, Business
When peopletrained or notvolunteer to rescue, they become legally bound
to take reasonable care in finishing what they have started. In one case, an 80year-old woman had a stroke while she was shopping at a department store. A salesclerk led her to the store infirmary and left her unattended for six hours. By the time
help arrived, her condition was irreparably aggravated, and the store was held liable
for failing to carry through on the rescue attempt.7 Liability is imposed in this kind
of case for making a bad situation worse: The person in trouble may be lulled into a
false sense of security, believing they will be helped, and other would-be rescuers
may not realize assistance is needed.
Another exception to the no duty to rescue rule applies when a person has
endangered another, even indirectly, or has participated in creating a dangerous situation. When professionals in a mental institution release a violent psychotic without taking measures to make certain he will be properly medicated, they may be
putting members of the public in danger. When organizers of a rock concert sell
general admission tickets to a performance of a wildly popular group and do not
provide lane control, they may be held responsible for the fatal result as fans are
suffocated in the crush to gain entry.
Finally, a set of exceptions is triggered when there is a special relationship between the person who needs help and the person who must take responsible action.
Special relationships may be based on their custodial, rather intimate nature, such as
that between a parent and child or between a teacher and young pupils. Or such
relationships may exist because of an economic connection, such as that between
an employer and employees or between a provider of public transportation and its
passengers. In either type, the relationship involves a degree of dependency. The law
allows those who are dependent to expect reasonable protection from harm and
requires the more powerful to provide it. A father must make some effort to save
his drowning infant, and a city transportation system must take reasonable steps to
protect its subway riders from criminal attacks.
Ethical Decision Making: A Toolkit
We have been looking at the way U.S. law addresses the question of balancing two
important values, that of freedomthe freedom of individuals like Mr. Bigan to choose
not to help in an emergency, for exampleand that of responsibilitythe responsibility
we might have to respond to one another in certain circumstances.
Suppose a business decision, although legal and profitable in the short term, causes
harmful effects on people and on the natural environment. Again, there is interplay
between freedom and responsibility, but here we will focus more on ethics than on law.
Ethics and the Gulf Oil Spill of 2010
The tragedy unfolding on our coast is the most painful and powerful reminder yet that the
time to embrace a clean energy future is now.
PRESIDENT BARAK OBAMA, (JUNE 15, 2010)
7
Zelenko v. Gimbel Bros. Inc., 287 N.Y.S. 134 (1935).
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BP CEO Tony Hayward said he would just like to get his life back. You know, I say give
him life plus 20.
JAY LENO
While much ethics is indeed about individual behavior, the best even of that has
considered individuals as they are situated in various nested relationships such as family,
nation, class, gender, and humanity. Any rules for individuals that ignore context and
situation are probably well ignored.
HENRY SHUE
One of the largest oil companies in the world, BP (formerly British Petroleum) is a multinational corporation headquartered in London. It has subsidiaries worldwide, including
two in North America. BP possesses drilling rights in the Macondo Prospect, off the
coast of Louisiana in the Gulf of Mexico. In order to access the crude oil there, BP leased
a rig from Transocean, the worlds biggest offshore drilling company. With more than
26,000 employees and a fleet of 136 vessels, Transocean operates in some 30 countries.
BP also hired Halliburton, the second largest oilfield services company, to cement and
seal off the well once drilling was complete. Halliburton employs more than 50,000 people and provides services in 70 countries.
While all three of these mega-firms would play a part in this scenario, it was BPs
responsibility to address safety. And safety was certainly at risk. In recent years, as the
worlds appetite for oil has grown and as the political complexities of obtaining it in
the Middle East have increased, companies like BP have been focusing on new sites and
new technologies for oil extraction. Since the 1990s, they have been exploring deep sea
drilling in the Gulf of Mexico and elsewhere. Deepwater drilling in the Gulf is particularly hazardous due to the high-pressure mix of oil and natural gas trapped in pockets
within a twisted landscape of salt on the seabed. Huge bubbles of gas can move suddenly
to the surface with volcanic force. According to geophysicist Roger Anderson of Columbia Universitys Lamont-Doherty Earth Observatory, many of the ultra-deep wells in the
Gulf of Mexico are full of natural gas; the dangerous bubbles that come up the pipes are
called kicks. Anytime a company enters a new deposit, he says, its unknown what
youre going to find.8
So BP had to consider the risk of a blowout, a destructive gusher of oil and/or
natural gas. Industry-wide, the most commonly used safety device is a valve called a
blow-out preventer (BOP). Located on the sea floor, it is designed to pinch through
the well pipe to cut off any leak. BOPs, operated manually or automatically through a
system of sensors, are not fool-proof, however. They can fail in extreme weather conditions, and they can clog during the cementing of a well or during an explosion.
BP could have installed a so-called acoustic cut-off switch, which would activate
the BOP remotely in case the rig was damaged or destroyed. Although these switches
were legally required in Norway and Brazil, they were not mandated in the United States.
In fact, for a decade, while U.S. lawmakers considered this safety option, BP had been
lobbying hard against any such regulation, arguing that acoustic switches were too
expensive$500,000 eachand would sometimes cause unnecessary shut-downs. These
would be costly too: BPs rental rate for Transoceans rig, for instance, was about
$500,000 per day.
8
Faye Flam, The Dangers of Deep-Sea Oil Drilling, The Philadelphia Inquirer, June 7, 2010.
Law, Ethics, Business
Although Transocean would be drilling at greater than usual depths in the Gulf of
Mexico, BP was also aware that blowouts rarely occurred, and that the first line of
defense, the BOP, would normally control any blowout.
As we know, the unlikely happened. On April 20, 2010, there was an explosion on
Deepwater Horizon. The rig burned and sank over the next two days; 11 Transocean
workers were killed and 17 others were injured. A leak 5,000 feet below sea level began
to gush oil, ultimately releasing an estimated 4.9 million barrels of crude oil into the Gulf
of Mexico over 87 days before it was capped. This was the largest marine oil spill in
history.9
We now ask: Were the decisions made by BP before, during, and after the Gulf Spill
ethical?
There are many different ways to answer this question. Ethical analysis, unlike much
quantitative analysis, can be a messy, complex business, without a clear and definitive
outcome. However, we do have tools at our disposal to help us make these complicated
assessments.
First, lets turn to an approach that will be familiar to you. It amounts to the bedrock principle of strategic management; it underlies the entire free market system. This
value system is so embedded in both business theory and business reality that we might
fail to recognize it as not only an economic perspective, but also as an ethical one.
Free Market Ethics
A basic assumption of classic microeconomic theory is that the overriding goal of any
business is to be profitable. As trustees (fiduciaries) of the shareholders, managers have
a primary responsibility to try to improve the value of shareholder investment. In fact,
under the law of corporations, managers are answerable to the owners of a company
its stockholdersif they fail to take reasonable care in running it.
Milton Friedman, a well-known free market economist and a proponent of this
view, has written:
In a free enterprise, private property system, a corporate executive is the employee of
the owners of the business. He has a direct responsibility to his employers. That
responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules
of society, both those embodied in law and those embodied in ethical custom. In a
free society, there is one and only one social responsibility of businessto use its
resources and engage in activities designed to increase its profits so long as it stays
within the rules of the game, which is to say, engages in open and free competition
without deception or fraud.10
Friedman argues it is wrong for managers to use corporate resources to deal with
problems in society at large. Decisions regarding what might be best for society should
be made in the political arena, and implementation of policies agreed upon there should
be funded by tax dollars. For managers to make those kinds of decisions themselves, and
to use corporate monies to pay for them, is the equivalent of thefttheft of stockholders
resources.
9
Information for this introductory background has been gleaned from pp. 13 of Tim Lemper, Josh Bruce,
and Mimi C, The BP Spill in the Gulf of Mexico: A Case Study in U.S. and International Legal and Ethical
Issues, presented at the Academy of Legal Studies in Business, August 2010 in Richmond VA.
10
The Social Responsibility of Business is to Increase its Profits, New York Times, September 13, 1970.
11
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Lets apply Friedmans thinking and free market ethical theory to BPs decision. First
of all we might ask, is deepwater drilling for oil in the Gulf of Mexico likely to be profitable for BP?
Consider demand: At present, global consumption of oil is at 80 million gallons a
day, and an upward trend continues, as people in developing nations learn to want
what the developed world hasgoods and services that are fossil fuel dependentand
are increasingly able to afford those habits of consumption. And while renewable energy
is expected to cut into the virtual monopoly of fossil fuels, there remains a great deal of
uncertainty as to when and to what extent this will occur.
Consider supply: About ten per cent of the worlds more than 1.3 trillion gallons of
oil reservesover 800 billion barrelslies miles under the ocean floor. Given the combination of strong global demand for hydrocarbons, robust oil prices, and technical
advances that have allowed companies to go further offshore and thousands of feet
beneath the seabed to extract energy resources, deepwater oil and gas production has
expanded rapidly in recent yearsup nearly two-thirds since 2000. Most of the new
areas for exploration are in the so-called golden triangle, along the coast of Western
Africa, South America, and the Gulf of Mexicotheir once-joined geological formations
having been separated by the continental drift that became the Atlantic Ocean. And
while deepwater oil comprises a fraction of total global production, its potential is vast.
Financial analysts forecast a vigorous future for it in the next 10 to 15 years.11
With an estimated 30-40 billion barrels in oil and gas reserves, the Gulf of Mexico
represents a development opportunity for companies like BP, a place where they can
enjoy close proximity to the United States and low offshore tax rates. By 2000-2001,
deepwater drilling accounted for the majority of oil production in the Gulf. In 2009, BP
announced it had located a giant oil deposit about 200 miles south of Louisiana, one of a
dozen such discoveries.12 BP is the most active oil firm in the area, but it is not alone; by
the end of 2009, the deep waters of the Gulf of Mexico were dotted with more than 35
drilling vessels.13
Considering overall strategic direction, then, it seems that continuing its deepwater
oil exploration and production work in the Gulf will sustain profits and give BP a competitive advantage.
Using Friedmans analysis, we also need to ask whether the BPs actions were legal.
Now that the calamitous spill has happened, the regulatory environment is in flux. The
Obama administration imposed a moratorium on deepwater14 drilling in the Gulf of
Mexico pending safety studies, in summer 2010. It was lifted in October 2010, as new
safety regulations were put in place. However, at the time when BP made its decision not
to install the acoustic back-up switch, there was no legal requirement to do so. Milton
Friedman would contend that corporations have every right to voice their opinions by,
for example, lobbying vigorouslyas BP didagainst more costly safety mandates.
Friedman would point out that corporate political activity should focus on increasing
11
Manouchehr Takin, a senior analyst at the Centre for Global Energy Studies (CGES), quoted in Sarah
Arnott, Shell defends deepwater oil drilling, as profits soar, The Independent, July 30, 2010. http://www.inde
pendent.co.uk/news/business/news/shell-defends-deepwater-oil-drilling-as-profits-soar-2039028.html. Last visited
August 7, 2010.
12
Deepwater Oil Exploration, Wikinvest http://www.wikinvest.com/concept/Deepwater_Oil_Exploration. Last
visited August 7, 2010.
Ben Rooney, BP Biggest Player in Deepwater Oil, June 14, 2010. http://money.cnn.com/2010/06/11/news/
companies/BP_deepwater_drilling/index.htm. Last visited August 7, 2010.
13
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Defined as drilling more than 1,000 feet under the seabed.
Law, Ethics, Business
shareholder value. Corporate resources should be deployed solely to increase the value of
shareholder investment. The more expensive acoustic switch would only make sense, in
this analysis, if it would enhance profits.
With perfect hindsight, we can see that it might have done so. The back-up switch
operated remotely to activate the BOPmight have prevented the explosionthe deaths,
the injuries, the lost rigand might have prevented the spill. Again, with perfect hindsight we can see that such a choice would have saved BP at least $20 billion in clean-up
costs, untold amounts in criminal and civil lawsuits, and severe reputational damage
with inevitable consequences to the bottom line. Through the summer of 2010, video
images of oil spewing into the water were a constant, then-CEO of BP Tony Hayward
complained that he wanted his life back, and as BPs shockingly poor safety record
was being uncovered, public outrage reached a tipping point. From boycotts of BP gas
stations to Internet contests to rename the company that had recently branded itself as
Beyond Petroleum,15 this outrage was palpable. At least in the short term, BP lost stock
value as a result of the spill; for the first time the company was unable to pay investors
dividends, halting them until 2011.16 By mid-summer 2010, the company had lost more
than $100 billion in market value, the worth of its stock halved since the rig explosion.17
Although the company has pockets deep enough to pay the legal claims against it and
cleanup costs, and although the stock price will probably rebound, the spectacle of the
87-day gusher will leave BP with a lasting stigma. As oil gushed into the Gulf, there
was talk of its vulnerability to a takeover by rival Exxon Mobil, and news that the British
government would not intervene to prevent such a move.18
While these cascading negative effects are now evident, at the time BP made the
decision about the back-up switch a catastrophic oil spill was an outside possibility.
And even factoring in such an event, BP might have gone ahead as planned. The company had been generating strong profits$14 billion in 2009and would survive even
an epic disaster. The publics attention span is notoriously short. Outrage can be forgotten; the need for oil is an American mantra. BP management might have noted how
Exxon Mobil, responsible in 1989 for (until the Gulf spill) the biggest oil spill in U.S.
history, had managed to stave off claims through vigorous defense litigation and had
still not made payments to commercial fishermen nearly 20 years later. So even if BP
foresaw the possibility of a major spill, moving forward with the Deepwater Horizon
contract and continuing deepwater oil production in the Gulf of Mexico appeared be
an ethical choice in microeconomic terms, well-aligned with shareholder interests.
With the this approach, there would be no need to be concerned with the interests
of other stakeholdersexcept to the extent that these too might impact profits. BPs
decision would not be made out of concern for the families whose livelihoods might be
dependent on tourism or fishing in Gulf waters, in other words, or out of concern for the
thousands of birds and sea creatures at risk should a spill occur. In any case, just before
Deepwater Horizon exploded, the potential for calamity might have seemed vague and
15
Some entries to the renaming contests: Blame Proof, Bad People, Black Pelican, Best Polluter, Behind
Politics, Breaking Promises. For more: http://www.greenpeace.org.uk/files/tarsands/index.html Last visited
August 8, 2010.
BP Stops Dividend Payments During Oil Spill, CBS News Business, June 16, 2010, http://www.cbsnews.
com/stories/2010/06/16/business/main6588695.shtml. Last visited August 8, 2010.
16
Michael Kunzelman, BP has lost more than $100B in value since oil spill started, USA Today, http://www.
usatoday.com/money/industries/energy/2010-06-25-bp-stock_N.htm. Last visited August 8, 2010.
17
18
James Moore, Bloomberg Businessweek, July 12, 2010. http://www.businessweek.com/globalbiz/content/jul2010/
gb20100712_341314.htm. Last visited August 8, 2010.
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unlikely, while what was sharply in focus was the fact that BP was 43 days behind schedule. Delays had already cost the company more than $21 million in rig rental rates. It
made sense, according to the free market approach to ethics, to push on.
Notice how this analysis meshes with a belief in expanding freedom of choice for
individualsand in minimizing government interference with that freedom. Such thinking, which we saw supporting the no duty to rescue rule, has been key in the development of both our market economy and our legal system. The underlying assumption is
that we can best progress as a society if we grant as much leeway as possible to private
preference, allowing people (and private associations of people, like corporations) to do
what they think best with their own resourcesas long as they do not infringe of the
rights of others to do the same.
Utilitarianism: Assessing Consequences
Through much of Western history, the most influential ethical reference point has been
religious; the rules to be followed were God-authored and were written on mens
hearts. It was a radical break with tradition, then, for eighteenth-century philosopher
and social thinker Jeremy Bentham to suggest an entirely new frame of reference. Ethical
behavior, he argued, was not a matter of pleasing God, but of bringing about as much
happiness as possible for the greatest number of people. According to Bentham, the
definitive moral standard is that of utility, requiring us to consider the consequences
of an act (or a social policy) for all those affected by it. One of Benthams followers,
nineteenth-century philosopher John Stuart Mill, would become the best-known proponent of this ethical approach, known as utilitarianism.
According to the principle of utilitarianism, the right way to behave in a given situation is to choose the alternative that is likely to produce the greatest overall good. Costbenefit analysis, the sort of efficiency calculation that is common to business decision
makingwhat BP might have used to assess the profitability of deepwater oil productionis based on notions of utility. As an ethical theory, however, utilitarianism asks
us to compare the harms and benefits of an action not just for the decider, but for all
who will be affected by the decision. In the BP scenario, this would mean, at the least,
not only weighing the effects of the decision on BPs investors, but also looking at the
consequences to other important stakeholders, including, for example, the workers who
were killed or injured in the Deepwater Horizon explosion, the people living in the
coastal areas of the Gulf of Mexico, and the wide array of living creatures contaminated
by the oil, and the American public overall.
In a utilitarian analysis, we will want to evaluate both short and long-term consequences to these stakeholders, paying close attention to the size of each group, the nature
of the effects on each group, and the likelihood that particular consequences would actually ensue. Ultimately, if the benefits that flow from a decision appear to outweigh the
harms, we would identify that decision as ethical. Lets try to make this kind of complex
utilitarian calculation in the Gulf scenario.
We have already assessed the consequences for one stakeholder groupBP shareholdersin the discussion above. Certainly this is a significant group, with major investors including large British insurance companies, U.S. money management firms,
Norwegian, Kuwaiti, Chinese and Singaporean government-controlled investment
funds. Americans own half of BPs stock, and many British pension funds are dependent
on the fortunes of the company. Significant loss of stock value would have ripple effects
within thousands of individual lives. Yet as we have explained, it is likely that BPs stock
will regain value as time goes by. As of mid-July 2010, it was estimated the spill would
cost $37 billion in clean up, fines, and compensation claims. Assuming BP alone (and
Law, Ethics, Business
not its partners) pays for all of that, the final sum would be more like $29 billion after
tax deductions, an amount that would not strain BPs finances; the company was
expected to generate $30 billion in 2010. Its proven oil and gas reserves were worth
$220 billion, and the company held additional assets and equity worth $40 billion.
Clearly, BP will not be going bankrupt, and can withstand the burden of costs related
to the spill.19 In sum, although we cannot forecast them perfectly, the kinds of consequences that shareholders might suffer here are financial, are spread out over thousands
of individuals, and may be insignificant in the long-term.
As we turn to other stakeholder groups, we notice that they are affected much
more negatively. Most tragically, 11 people were killed and 17 injured as the Deepwater
Horizon exploded and sank. Although the number of people in this group is small,
losses of life and health weigh heavily on the scale as we assess the consequences of
BPs decision to forego the back-up switch. Of course at the time the decision was
made, the failure of the BOP may have seemed unlikely, and utilitarian analysis would
factor that in, but it would also factor in the extent of the possible harm, so extreme in
this case.
Many have described the post-spill Gulf as a gigantic chemical experiment, with asyet unknown effects on its delicate ecosystem. We know that, from the well-head 5,000
feet below the surface, nearly 5 million gallons of crude oil gushed into the Gulf for
about three months. We also know that BP sprayed 1.8 million gallons of a chemical
dispersant on the spill, causing much of it to break into tiny droplets and form several
massive plumes with oil contaminants spiraling through the water column. As this
book was being written, in the summer of 2010, only some of the environmental consequences of this disaster were evidentothers had yet to unfold.
By July 2010, one third of the Gulfs fishing areamore than 80,000 square mileshad
been closed,20 affecting the livelihoods of thousands in coastal Louisiana and Mississippi.
Here is a glimpse into what happened as nearly 2 million acres of Louisianas oyster beds
were declared off-limits:
Hundreds of oystermen have stopped fishing. Processors have shut down. Gulf restaurants have closed, and chains such as Red Lobster have yanked the briny morsels
off their menus. Thats only the beginning. Scientists fear generations of larvae
and mollusks could be wiped out, destroying harvests for years.
After the Deepwater Horizon rig explosion, Louisiana officials decided to use Mississippi River water to push back encroaching oil. Culverts built into the rivers levee
system were opened, redirecting freshwater into saltwater estuaries. The resulting
change in salinity can be fatal to the mollusks. State scientists started checking beds
two weeks ago. Their early findings: a wide spread of dead oysters.21
This article goes on to explain how deeply-embedded oyster harvesting (and oysterappreciating) is in the local culture (The oyster is to Louisiana what corn is to Iowa or
John Schwartz, Weighing the Possibility of Bankruptcy for BP, New York Times July 10, 2010; Tallying
BPs Bill on the Gulf Coast, New York Times, July 14, 2010.
19
Jeff Goodell, The Poisoning, Rolling Stone, July 21, 2010. The impact has been huge on the Gulfs $2.4
billion seafood industry.
20
P.J. Huffstutter, Nicole Santa Cruz and Ashley Powers, Oil Spill Threatens Gulf Oyster Industry, Livelihoods, Seattle Times, July 18, 2010. http://seattletimes.nwsource.com/html/nationworld/2012391634_oysters19.
html. Last visited August 11, 2010.
21
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oranges to Floridapart sustenance, part identity.), and how important the $1 billion
oyster industry has been to a region recently ravaged by Hurricane Katrina. While loss
to livelihood is one of the consequences of the Gulf Spill for which people can make
compensable claims, there is some question about how quickly they will be paid. (Recall
the decades-long struggle of Alaskan fisheries against Exxon Mobil for recovery costs.)
And if fish and seafood supplies are tainted long termor even perceived to beconsequences will be both profound and impossible to measure. This is one of the challenges
of the utilitarian calculus: How do we put a number on the loss of a way of life? These
kinds of ripple-effects can be felt most deeply by the most vulnerable. Along the Gulf
coast, African American and immigrant communities which have recently been battered
by Hurricane Katrina have been hit especially hard, both economically and psychologically; children in the area are suffering higher rates of depression since the Spill.
The Gulf is one of the most productive natural environments on the planet. Every
spring, great migrations of fish and birds arrive there to spawn and lay their eggs. The
area nurtures 1,200 fish species, millions of migratory birds, mammals like bottlenose
dolphins, and endangered creatures like sea turtles. One of the most tragic aspects of
the oil spill was its timing, in the middle of biological spring, just as the Gulf had
burst into new life, with birds returning to nest and baby pelicans cracking out of the
eggs in their rookeries. The oil spill has already killed hundreds of birds, dolphins, and
sea turtleswe know because we have found and counted them.22 But what we still dont
know, and wont know for many years, is how the enormous spill is affecting and will
affect the creatures at the lower end of the food chainthe smaller fish, their eggs and
larvae, the filter feeders like oysters which are nourished by the water they
pump through themselves, down to the tiny plankton that is the basis for the entire ecosystem. There is tremendous uncertainty as to the damage that is occurring under the
surface, within the huge plumes of water mixed with oil. Experts worry that toxicity
will be locked into the food chain for years, doing damage that will be difficult to trace
back to BP. As Mark David, director of Tulane Universitys Institute on Water Resources
Law & Policy put it, If you end up with a bunch of dead fish five years from now,
it becomes very hard to prove BP killed them.23 It is often difficult, in a utilitarian analysis, to untangle the various harmsand the benefitsthat flow from a complex
situation.24
According to Jeremy Bentham, when we evaluate consequences for those affected by
an action, we should include all those who are capable of experiencing pain or pleasure.
Human beings can experience pain or pleasure, but so can all sentient beingsall are conscious of such feelings. The salient inquiry, according to Bentham, is not can they reason, but rather can they suffer? For the purposes of utilitarian analysis, then, we can
22
As of July 2010, rescue workers had found dead, or alive but oiled, some 4,000 birds, 700 sea turtles, dozens
of dolphins and a whale. This count excludes the hundreds of birds that have been left in order to avoid disturbing their nesting areas.
Matthew Brown, Teams Begin to Tally Losses and Costs of the Oil Spill, The Philadelphia Inquirer, July
32, 2010.
23
24
In mid summer 2010, scientists detected several plumes between 2,000 and 4,000 feet below the surface.
These huge15 miles long and 5 miles wide, in one instance; 22 miles long and 6 miles wide in another
rivers of oil are likely to affect the Gulf through two mechanisms: The first is oxygen depletion. By May 2010
scientists were estimating 30 percent less oxygen inside the plumes. The second is toxic after-effects. We have
no idea how these gigantic oil-contaminated undersea rivers will affect fish and other sea creatures, nor for
how long. As Lisa Levin of the Scripps Institution of Oceanography puts it, All the zones of life interact, and
now theyre probably all being hammered. Sharon Begley, What the Spill Will Kill, Newsweek, June 14, 2010.
Law, Ethics, Business
assume that now, and for many years to come, there will be considerable suffering on the
part of vast numbers of living creatures related to the oil spill of 2010. Again, measuring
that pain would be an impossible exercise, but we can sense its scope and magnitude.
There are a myriad other effects of the Gulf spill that are now or will someday be felt,
most of them negatively, by other stakeholders. The tourism business in Florida has taken a
big hit, for example, and although BP will eventually pay claims, the damage to perception
cannot be easily repaired, and the Florida coast may endure years of economic aftershock.
As we have traced the after-effects of BPs decision not to employ a back-up switch,
we see mostly harmful consequences. But if we widen our lens to examine BPs strategic
decision to be a major participant in deepwater oil extraction in the Gulf of Mexico, we
can detect an array of benefits. The U.S. economy is deeply reliant on energy, and on oil.
To the extent that the U.S. oil supply is compromised, the economy itself is compromised. The Gulf is the source of 30 percent of the crude oil consumed in the United
States,25 and as we have seen, BP is the biggest player in the deepwater oil production
in the Gulf. There can be no doubt that if BP discontinued its efforts, we would see negative reverberations for millions of U.S. citizens, who would have to pay more to build,
heat and cool homes and businesses, to purchase food, and to fill the tanks of their
SUVs, for example.
In late May 2010, as BPs pipe was spewing thousands of gallons of crude oil a day,
the Obama administration imposed a six-month moratorium on new deepwater projects
and suspended operations on more than 30 exploratory wells. In response to industry
complaints, on June 22, 2010 District Court Judge Martin Feldman overturned the
order, describing the irreparable harm it would cause. An excerpt from his opinion
gives us a glimpse of the type of injury that might result should BP turn away from its
Gulf oil development strategy:
Gulf of Mexico drilling activities rely upon a vast and complex network of technology, assets, human capital and experience. Indeed, an estimated 150,000 jobs are
directly related to offshore operations. The government admits that the industry provides relatively high paying jobs in drilling and production activities. Oil and gas
production is quite simply elemental to Gulf communities. There are currently
approximately 3600 structures in the Gulf, and Gulf production from these structures accounts for 31% of total domestic oil production and 11% of total domestic,
marketed natural gas production. [D]eepwater oil exploration and production in
the Gulf employ[s] over 11,875 people.26
Our utilitarian analysis, as it attempts to address a range of stakeholders and the full
range of consequences to them, leaves us with a more fine-grained picture but also with
a host of uncertainties. On balance, it is no longer clear that BPs decisions were ethical.
The harms to human and environmental stability caused by the spill seem to weigh
heavily against the benefits to the local and U.S. economy of deepwater drilling itself.
Deontology: Rights and Duties
In contrast to the utilitarian concern with consequences, and with maximizing social
welfare, deontological ethics is marked by steadfastness to universal principlesfor
example, respect for life, fairness, telling the truth, keeping promisesno matter what
Erwin Seba, Nearly Half Gulf of Mexico Oil Production Shut, The Economist, July 25, 2010. http://www.
reuters.com/article/idUSTRE66O24A20100725. Last visited August 12, 2010.
25
26
Hornbeck Offshore Services et.al. v. Salazar, 2010 U.S. Dist. LEXIS 61303 (E.D. La., June 22, 2010)
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the consequences. At the core of this approach to making ethical choices is the understanding that moral action should be guided by certain overriding rights and duties.
The most famous deontological thinker, eighteenth-century German philosopher
Immanuel Kant, believed that human beings could reason their way to a set of absolute
rules for right behavior. A person should never lie, according to Kant, even when lying
seems to produce a good result. Suppose someone running away from a murderer tells
you where he is going to hide, and then the murderer rushes up to ask you where the
first person went. Wouldnt this be a good time to lie? Kant would say there is never a
good time, even in this example.
Moral behavior, then, is a matter of holding, without exception, to certain principles.
Kant believed that each person has the right to be treated with respect as the equal of
every other, and that each person has the corresponding duty to treat everyone else
with respect as an equal.
He arrived at this by means of his categorical imperatives. The first of these states
that people should be willing to have the reasons for their actions become universal principles. That is, people should be willing to live in a world where an action they chose to
take would be repeated for the same reasons whenever the same situation arose, even if
they wound up on the receiving end of such actions.
Think of BPs decision regarding the acoustic back-up switch. If we apply Kants
first categorical imperative, the decision maker should ask: Would I want to live in a
world where multinational corporations drilling for oil in sensitive coastal regions cut
costs by forgoing the use of safer technology? Perhaps the BP decision makers would
defend such decisions, but the Kantian universalizing framework asks the decisionmakers to imagine themselves at the short end of the stick. What if BPs then-CEO
Tony Hayward found the English Channelthe body of water where he went to watch
a yacht race in June 2010befouled the way the Gulf was? Assuming other BP managers
would be similarly upset by pollution in their home waters, in deontological terms, their
actions would fall short of being ethical. We might also frame the question more broadly:
Whenever anyone is in a situation where it would be possible to save money by curtailing
safety protections, what if they did so? If BP managers valued their lives, they would not
want to live in a world where this was the general rule. How would they feel stepping into
a car, a subway, or an airplane?
In another formulation of the categorical imperative, Kant states that we should
have respect for the intrinsic value of other people and not just use them as means to
achieve our own purposes. By this Kant did not mean that people should never use
other people at all. People use one another in mutually beneficial ways all the time.
For example, in a typical contractual transaction, each party to the agreement gives
something up to get what it wants. Each party uses the other: When you purchase gasoline, you use the oil companys product and it uses you to pay for it. Kant would
have no objection here. Rather, he believed it was unethical for people to use others only
as a means to accomplishing their own purposes, with no mutual benefit attached. So, if
an oil company uses slave labor to build an oil pipeline in Southeast Asia, it would be
violating this Kantian categorical. Here one party the more powerful oneis effectively
able to remove the free will of the other, to make it do what it wants the way a puppeteer
pulls a marionettes strings. What is lostof great ethical value in deontologyis the
right to autonomy, the right to make fully informed decisions for oneself about how to
live ones life.
Lets look at BPs decision-making immediately after the Deepwater Horizon explosion. First of all, although the company was using submersible robots to work on and to
film the undersea gusher from the start, it would not permit scientists to have access to
Law, Ethics, Business
the site or to any information the company had about the leak. Meanwhile BP
announced that the rate at which oil was flowing into the Gulf was relatively minimal;
for the first few days after the rig exploded, it claimed the pipe was leaking 1,000 barrels
(42,000 gallons) a day. A week into the spill, Sky Truth, a small nonprofit group that
uses satellite images to monitor environmental crises, estimated the flow at 5,000 barrels
(210,000 gallons) per day.27 The next day, the government, over BPs objections, raised
its estimate of the flow-rate to 5,000 barrels. By May 4, BP was admitting to Congress
that the rate could be 60,000 barrels, the equivalent of an Exxon Valdez spill every four
days.28 But throughout this time, BP had much grimmer data in hand. Internal company
documents that became public in late June revealed that BP had predicted, in the case of
a failure of the BOP, a flow rate as high as 100,000 barrels per day. Speaking to the
media about this, Congressman Ed Markey, chairman of the House Select Committee
on Energy Independent and Global Warming, noted that even as BP was telling the government the leak was 5,000 barrels a day it knew better:
It was their technology; it was their spill camp, theyre the ones that should have
known right from the beginning, and either to limit their liability or because they
were grossly incompetent, they delayed a full response to this disaster.29
In deontological terms, the fact that BP withheld accurate and important information, combined with its superior access to it, violated the categorical imperative. In effect,
the more powerful entity in this situation was preventing other people from making
fully-informed decisions about critical aspects of their liveswith the rescue of the Gulf
hanging in the balance.
As BP repeatedly downplayed the size of the spill, it also argued that any attempts to
measure it were both impossible and unnecessary.30 Experts sharply disputed both assertions. Scientists at the Woods Hole Oceanographic Institute in Massachusetts, for
instance, have been using ultrasound to measure flow rates at the ocean floor for decades, and were ready to apply the technique to the Gulf spill, but were rebuffed. As for
the importance of calculating the size of the spill, scientists say that its size relates
directly to the scope of the damage that can be expected onshore and in the ocean. Environmental groups argue that understanding the flow-rate is also the key to understanding how to prepare an appropriate response capacity for the future. An accurate spill-rate
number, they say, should be the touchstone of any plan to deal with the next deepwater
accident.31
As we examine BPs actions from this angle, we see them falling short of several
deontological principles. Kantian thinking maintains that certain fundamental rights
should not be violated under any circumstances. Just as lying would never be acceptable with this approach, neither would an infringement of one of these basic rights.
Primary among these is the right to life and to health. BP, in its decision regarding
the acoustic back-up switch, put the lives and health of workers at riskand as we
27
Julie Cart, Tiny Group has Big Impact on Spill Estimates, LA Times, May 1, 2010.
John M. Broder, Campbell Robertson and Clifford Krauss, Amount of Spill Could Escalate, Company
Admits, New York Times, May 4, 2010.
28
29
Justin Gillis, Size of Spill Underestimated, Scientists Say, New York Times, May 13, 2010.
As BP spokesperson Tom Mueller put it on May 14, 2010: Were not going to take any extra efforts to calculate the flow there at this point. Its not relevant to the response effort, and might even detract from it.
Doug Suttles. BP COO, Global Exploration said of the leak, Since the beginning, weve said its impossible to
get a precise number.
30
31
Id., Gillis.
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know several were killed in the rig explosion. In the aftermath, as the company persisted in withholding spill-rate data, it hampered the response. In essence, BP was
lying. Here too, the right to health was at stake, as any hope for the health of the
Gulf, and of the people who depend on it for a livelihood, would rest on the best possible clean-up and recovery.32
In response to the spill, BP made heavy use of a dispersant called Corexit, spraying
nearly 2 million gallons on the waters surface and injecting it at the gusher to fragment
the oil. This was the first time that chemical dispersants were used over such a vast area,
so the whole process was experimental. Again, BPnot the government, and not the
environmental scientific community, was in control. Dispersants cause the oil on the surface to form small droplets and sink. The effect is to dramatically reduce the size of an
oil slick.33 According to Jeff Goodell of Rolling Stone:
BP argued that dispersing the spill reduced the number of brown pelicans and sea
turtles coated in oil, and prevented it from reaching fragile shorelines, where it is
difficult to clean and deadly to breeding grounds for shrimp and other sea life. But
the chemicals also benefited the company by effectively covering up the spill, breaking it up into thousands of smaller slicks that dont look so bad on the nightly
news. Its about PR, says Steiner, the scientist whose expertise helped contain
the Valdez disaster. Its about keeping the oil out of sight, and out of the public
mind, so fewer people really understand what is happening in the Gulf and get
outraged by it. During the Valdez response, he adds, Corexit earned a telling
nickname: Hides-it.34
To the degree that BPs decision on the dispersants was intended to cover up the
extent of the damage to the Gulf, the companys behavior violates Kantian principles.
One difficulty with deontology is the confusion created when different universal
rights and duties crop up in the same ethical problem and seem to conflict with one
another. How does one decide which absolute value should prevail? Consider the
intensity of conflicting beliefs on the question of abortion. Both the right-to-life and
the pro-choice factions are convinced that their points of view derive from natural
rights; both embrace referents that each of them consider beyond debate, beyond compromise. We can see this kind of conflict playing itself out in the post-spill scenario in
the Gulf. While some argue we need a moratorium on deepwater drilling to ensure that
safety and environmental concerns are prioritizedin line with the right to life and
healthothers will argue (on the same grounds) that the Gulf should be re-opened
immediately to the fishing and shrimping industries, and to all extractive energy
projects.
Virtue Ethics: Habits of Goodness
For some critics, both the utilitarian and deontological frameworks are inadequate in a fundamental sense; while both set forth logical bases for deciding what might be called moral
minimathe floor beneath which no one should drop in terms of ethical choicesthey are
silent on the concept of moral excellence. They also focus on the moral acceptability of
Tim Webb and Ed Pilkington, U.S. Congressman Says Companys Worst-case Assessment of Leak was 20
Times Higher Than Public Estimate, The Guardian, June 20, 2010.
32
33
Because the surface oil was greatly reduced by the dispersants, collecting it by skimming was more difficult.
Only 67,000 barrels were skimmed.
34
The Poisoning, July 21, 2010.
Law, Ethics, Business
actions. Virtue ethics, on the other hand, directs our attention to what human beings are
capable of being, on how they can cultivate the habits of good character that will naturally
lead them to their fullest potential.
This strand of thinking derives from Aristotle, who argued that people develop their
moral abilities, called virtues, through training, by being repeatedly exposed to demonstrations of decent behavior within families and communities. We learn to become courageous, generous, just, honest, cooperative, and cheerful gradually, as we become
habituated to living in social settings where these qualities are exhibited and valued.
Ethics, then, is not a matter of teasing out the correct choice given a series of knotty
dilemmas; it is instead a lifelong conditioning process. In harmonious relationship
with their communities, people thrive, learning the habits that allow them to excel at
everything they are capable of doing. In a sense, they assimilate habits of generosity,
temperance, fairness and courage the way a chameleon takes on the colors around
itself. People who have been raised within a virtuous community are able to behave
virtuously, applying ethical principles to concrete situations in a rather seamless and
natural way.
Virtue ethics does raise its own set of questions, however. What does it mean to
define moral character in term of ones community? What community? At present, too
many people are living in family environments in which relatedness endures in spite of
severe economic and psychological stresses. Half the population of the world lives in
poverty. If children grow up in hardship, where the natural environment is harshly
degraded and the social fabric is weakened, does the transmittal of virtuous habit become
a luxury? If families cannot effectively teach virtue to their young, what are the alternatives? Schools? Religious communities? How do we judge which moral community is
best?35 And what do we mean by community in the business context? Where is the community touchstone in the Gulf Spill scenario?
To answer this question about a large company like BP, we must examine what is
called corporate culture. Here one scholar describes what is meant by the culture of an
organization:
The pattern of basic assumptions that a given group has invented, discovered, or
developed in learning to cope with its problems of external adaptation and internal
integration, and that have worked well enough to be considered valid, and, therefore,
to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.
More colloquially, a company might describe its culture as the way we do things
around here.
35
Julie Ragatz, Associate Director of the Center for Ethics in Financial Services at The American College,
answers the question this way: The virtuous person is one who thrives mentally, physically and in community
with others (socially). [No matter where they have been raised], people who are ungenerous and unjust will
not get along with other people. People who lack courage will be anxious and fearful, people who are intemperate will be physically sick. People who are rageful are ill in all aspects. While there are differences among
communities, most agree that there is a core set of virtues rooted in the sort of beings we arenamely beings
who depend on others, have emotions and a self-consciousness, have physical bodies and can think rationally.
Ragatz goes on to talk about conflicts among communities and their effects on virtue development: Communities overlap in a series of concentric circles, the virtue of integrity demands that a person carry the same
moral values and commitments at work, at home and in her community engagement. Fractured people, people
who espouse one value in church and a different one in the boardroom cannot by definition flourish.
21
22
CHAPTER 1
What forces inside a company determine the type of culture that develops inside it?
What forces outside a company might influence that process?
BP is the fourth largest company in the world. It is third largest of the six supermajors, the giant multinational energy (oil and natural gas) corporations. A quick
sketch of its history: In 1908, when a wealthy Englishman struck oil in Iran, the AngloPersia Oil Company was formed. This was a colonial operation, partially owned by the
British Empire. Eventually, as the countries in the region (and the world) began to shed
their colonial status and to nationalize their natural resources, British Petroleum (as it
was then called) had to regroup and reset its corporate strategy. The government sold
its stake in the company in 1995, and it came under the leadership of John Browne, a
bold, charismatic dealmaker.
In the late 1990s, at a cost of $200 million, Browne launched an enormous corporate
re-branding exercise, changing the companys name from British Petroleum to BP, coining the slogan Beyond Petroleum and redesigning its corporate insignia. Instead of the
more than 70-year-old British Petroleum shield, the new logo was a yellow white and
green sunburst, suggesting the company was looking past oil and gas toward an ecofriendly future of renewable energy. Billboards announced, for example, that BP was
partnering with Urban Park Rangers to release four bald eagles into upper Manhattan,
or that BP believes in alternative energy. Like solar and cappuccino. At the end of
each ad, was the sly comment, Its a start.
Originally conceived as pure public relations, this massive re-imaging seemed to
have caught the imagination of CEO Browne. He began consulting with Greenpeace
and pledged to spend $1 billion on solar technology. Instead of joining companies like
Exxon, who with President Bush were challenging the science behind global warming
and calling for more research, Browne argued that the U.S. should sign the Kyoto Protocol, the worlds first treaty for addressing greenhouse gas emissions. Companies composed of highly skilled and trained people cant live in denial of mounting evidence
gathered by hundreds of the most reputable scientists in the world, he declared, speaking at Stanford University in 2002. Ironically, given BPs core mission, he was advancing
the case for reduced consumption of fossil fuels: Climate change is an issue which raises
fundamental questions about the relationship between companies and society as a whole,
and between one generation and the next.
At the same time, Browne was building the company up to be the worlds secondlargest oil company (after Exxon). He presided over a wave of cost-cutting and consolidation, as BP took over some of its American competitors, fired thousands of
employeesmany of them engineers–and streamlined itself significantly, so that it
came to rely more on outside contractors. Browne distinguished himself in the industry as a risk-taker, chasing after some of the most expensive and potentially lucrative
projects. He set aggressive profit goals, pushing managers to cut costs sharply in order
to meet quarterly targets. By 2002, BP had gross revenues of $174 billion, 15,500 service stations in the United States, and was operating in 100 countries. In seven years,
under Brownes leadership, share value had jumped 80 percent. And in the midst of
the Beyond Petroleum PR blitz, BP was producing almost 3.5 billion barrels of oil
and gas annually.
We can investigate BPs culture by a process of triangulation. We can look at the
companys aspirationsat the values it claimed to support. We can find out what
employees and experts can tell us about how the company was run, noting how those
values were operationalized. And we can observe whether BPs actual track recordits
behaviorreflected its values.
First, the aspirations. The companys Web site presents Our Values:
Law, Ethics, Business
BP wants to be recognised as a great companycompetitively successful and a
force for progress. We have a fundamental belief that we can make a difference in the
world.
We help the world meet its growing need for heat, light and mobility. We strive
to do that by producing energy that is affordable, secure and doesnt damage the
environment.
BP is progressive, responsible, innovative and performance driven.

Progressive: We believe in the principle of mutual advantage and build productive
relationships with each other, our partners, and our customers.
Responsible: We are committed to the safety and development of our people and the
communities and societies in which we operate. We aim for no accidents, no harm
to people and no damage to the environment.
Innovative: We push boundaries today and create tomorrows breakthroughs
through our people and technology.
Performance driven: We deliver on our promises through continuous improvement
and safe, reliable operations.36
Now lets look at how the company was run, and how it performed. In 2005, a 20-foot
geyser of volatile chemicals ignited at a BP plant in Texas City. Fifteen workers were killed
and more than 170 people were injured. The plant, built in 1934, was long overdue for capital investment. Routine maintenance that might have prevented the accident had been
delayed due to pressure to cut expenses. And there had been unstable leadershipfive
managers in six years.37 Perhaps most telling was this comment from a report completed
two months before the explosion, compiled by the Telos Group, a consulting firm: We
have never seen a site where the notion I could die today was so real. A U.S. government
investigation found the explosion was caused by organizational and safety deficiencies at all
levels of BP, fining the company a then-record $21 million for more than 300 safety
violations.
A year later BP was responsible for another horrific accident: 267,000 gallons of oil
leaked in Prudhoe Bay in Alaska, the worst spill in that areaand again, the cause was
preventable. Investigators found corrosion throughout miles of BPs pipe network, which
was poorly maintained. Here too, the company paid more than $20 million in fines.38
In 2005 there were serious problems at Thunder Horse, BPs 15-story offshore
production platform in the Gulf of Mexico. This was supposed to be BPs crowning
glory, with the potential to produce 20 percent of the Gulfs oil, but because a valve
36
http://www.bp.com/sectiongenericarticle.do?categoryId=9002630&contentId=7005204. Last visited August 13,
2010.
37
According to Tom Kirchmaier, professor at Manchester Business School, Lord Browne ran BP as if it was a
financial firm, with managers rotating into new positions, handed challenging profit targets, and rotated out
again before the consequences of their decisions were upon them.
38
In 2009, OSHA inspectors revisited BPs Texas City facility and discovered more than 700 safety violations,
proposing a record fine of $87.4 million. Most of this was for the companys failure to abide by the prior
Texas City settlement. And in March 2010, just before the Deepwater Horizon explosion, OSHA found yet
more safety violations at BPs Ohio refinery, for a $62 million fine. According to one OSHA administrator,
Senior management told us they are very serious about safety, but we observed that they havent translated
their words into safe working procedures and practices, and they have difficulty applying the lessons learned
from refinery to refinery or even from within refineries. Sarah Lyall, In BPs Record, a History of Boldness
and Blunders, New York Times, July 13, 2010.
23
24
CHAPTER 1
had been installed backwards, Hurricane Dennis flooded the vessel. Then other flaws
emergedfaulty welding, full of cracks and breaks. Thunder Horse had to be dismantled.
The similarities that run through these instances of failure on the part of BP also
showed up in early investigations of the Deepwater Horizon explosion of 2010: All were
high-risk ventures, marked by rushed and shoddy work, and a disregard for safety.
Chairman of the House Energy and Commerce Committee Henry A. Waxman, when
questioning former CEO Tony Hayward as the Gulf was gushing BPs oil, said:
There is a complete contradiction between BPs words and deeds. BP cut corner
after corner to save a million dollars here and a few hours there. And now the
whole Gulf Coast is paying the price.
We see a striking dissonance between BPs stated values (We are committed to the
safety and development of our people and the communities and societies in which we
operate. We aim for no accidents, no harm to people, and no damage to the
environment.) and its relentless sacrifice of safety for the sake of results. As assistant
to the Secretary of Labor for OSHA Jordan Barab has said, BP has systemic safety and
health problems. They need to take their intentions and apply them much more effectively on the ground, where the hazards actually lie.39 Such a strategy seems to have
been adopted by BP rival Exxon. Scarred by its own experience of a major spill in
Alaska, Exxon is now number one for safety among the oil majors. Before drilling a
well, it runs complex modeling programs to forecast whatever obstacles might be
encountered. Exxon trains its contractors to recognize risky behavior, and asks employees for suggestions for safety improvement. Contrast this with a confidential survey of rig
workers that was taken a month before the Deepwater Horizon explosion. Many
expressed concern about safety and felt they would be punished for reporting problems
or mistakes.40
We come away from this analysis of the culture of BP with a sense that the Beyond
Petroleum campaign and the companys official statements valuing safety and the protecting the environment amount to little more than empty rhetoric. In terms of virtue
ethics, then, BP has much to do to close the gap between its aspirations and its ways of
doing business. And given these mixed messages, we can imagine how difficult it has
been for BP employees to develop the kind of virtuous habits they would needcourage,
for example, even heroismto confront a culture that repeatedly rewards speed and risktaking over other values.
Ethic of Care
The ethical theories we have looked at so far assume that decisions about the right thing
to do are ultimately private, made by individuals in isolation. Whether using their intellectual powers or responding to trained habit, people act as autonomous beings, as free
agents in this process. But suppose we began ethical analysis with a different understanding? Suppose we start with the assumption that people are deeply connected to one
another in webs of relationships, and that ethical decisions cannot be made outside the
context of those relationships? Ethics becomes a matter of nurturing and reinforcing the
Jad Mouawad, Fast-Growing BP Also Has a Mounting List of Spills and Safety Lapses, New York Times,
May 9, 2010.
39
Robbie Brown, Official Denies BP Put Cost Ahead of Safety at Oil Rig,” New York Times, July 23, 2010. As
of June 2010, BP had 760 OSHA fines for willful safety violations. Exxon Mobil had only one.
40
Law, Ethics, Business
ties we have with one another. This alternative view has become known as the ethic of
care, as it is based on caring for others.
The ethic of care is based on the work of feminist psychologist Carol Gilligan, who
studied moral development. Her research initially led her to believe that men and
women approached moral issues from different perspectives. While most men had an
individualistic focus on abstract rights and justice, women tended to focus on caring,
on supporting human interconnectednessan approach that Gilligan saw as undervalued, and which she characterized as a different voice. Over time this understanding
has shifted: Rather than a split between male versus female ethics, it is thought that
both of these approaches can be accessed by either men or women.
To analyze the Gulf Spill from the perspective of the ethic of care, we will want to
consider the network of relationships in this complex scenario to try to determine which
are the most important, the most fundamental. We will do this by putting the Gulf Spill
in context, both widening our lens to include relevant broader circumstances, and narrowing our focus to absorb some of the specifics, the particular details that make this
event distinctive. Both macro and micro contextual clues will be useful. Finally, as we
get to the point of establishing which are the most crucial relationships, the ethic of
care requires us to think about how best to nourish and sustain them. This perspective
is less concerned with following a set of abstract principles to avoid harm than with the
relatively messy business of proactively caring for others. It asks us to be creative in discovering workable compromises to support the relationships that matter most.
So lets start with the broader context. Starkly evident in the bigger picture surrounding
the Gulf Spill is the global hunger for energyand for oil. Just days before the Deepwater
Horizon explosion, the International Energy Agency forecasted that global oil demand
would hit a record high in 2010 and would continue to rise as world economy recovers,41
in spite of the recent world financial crisis. The demand for oil has remained strong in the
United States since the late 1970s; developing countries are catching up fast. In June 2010 in
fact, China overtook the U.S. in energy consumptionposting record crude oil imports of
5.4 million barrels per day. (In terms of per capita rates, the U.S. still leads: The average
American still consumes about 10 times as much oil as the average Chinese.)
Meanwhile, obtaining the supply to meet eager demand has become more difficult.
Conventional (near-shore and shallow) oil reserves are largely depleted, and so extraction has focused on those that are unconventional, as companies squeeze oil out of
rocks like sandstone or drill deep into water and then deep underground. Accessing oil
in these locations is something like an extreme sport, rife with environmental and health
risks.42 According to Robert Bea, professor of engineering at the University of California
Berkeley who has worked on offshore oil installations:
This is a pretty frigging complex system. Youve got equipment and steel strung out
over a long piece of geography starting at surface and terminating at 18,000 feet
below the sea floor. So it has many potential weak points. The danger has
Susan Lyon, Rebecca Lefton, Daniel J. Weiss, Quenching Our Thirst For Oil, Center for American Progress,
April 23, 2010. http://www.americanprogress.org/issues/2010/04/oil_quench.html. Last visited August 17, 2010.
While the World Energy Outlook projects oil demand will hit 105 million barrels per day by 2030, a recent
New York University study found that official projections like these were far too conservative, predicting total
demand in 2030 at 138 mbd.
41
42
The risks of deepwater drilling for oil is comparable to other fossil fuel energy extraction processes: mountaintop removal mining for coal, or example, or fracking (fracturing with water and chemicals under high
pressure) into rock for natural gas.
25
26
CHAPTER 1
escalated exponentially. Weve pushed it to the edge in this very very unforgiving
environment, and we dont have a lot of experience.43
A prominent feature of the Gulf Spill context, for the major energy firms, includes
the pressure of world financial markets, which expect good news on a quarterly basis. So
the majors compete fiercely, amidst powerful incentives to cut costs and mount highrisk, potentially lucrative ventures.
Add to this government oversight that was almost the inverse of government oversight.44 The Minerals Management Service (MMS), a division of the federal Department
of the Interior, was charged with issuing leases and regulating drilling on the Outer Continental Shelf. But for decades, it actually functioned to rubberstamp energy projects, disallowing virtually none, and granting exemptions so that firms were not required to
provide environmental impact statements.45 The MMS, staffed with individuals with
industry experience and ties, facilitated a round of back-scratching that had little to do
with the public interest, granting leases, collecting payments, and sending them back to
Washington. Meanwhile the oil industry kept up a flow of generous political donations:
In the 2010 election cycle, for example, oil and gas contributed nearly $13 million to
congressional candidates, about 71 percent of them Republicans. And for the part
decade, the oil industry has been one of the most powerful lobbying groups in Washington, spending nearly a billion dollars since 1998.46 These expenditures appear to be producing results. While he campaigned for the presidency with a host of green and
alternative energy promises, Barack Obama was the recipient of energy industry support.
According to the Center for Responsive Politics, over the past 20 years BP has given
more than $3.5 million to federal candidates, with the largest chunk going to Obama.
These donations came from both BP employees ($638,000) and from the companys
political action committees (BP-related PACs supplied $2.89 million). In the spring of
2010, just three weeks before the Deepwater Horizon exploded, President Obama proposed expanding offshore oil exploration.47
Now if we examine some of the specific contextual details surrounding the Gulf
Spill, we see that the MMS was aware of problems that deepwater drilling operators
were having with that key equipment component, the blowout preventer or BOP. The
agency had studies from 2002 and 2004 revealing malfunctions of the so-called blind
shear ram blades inside the BOPs that were designed to slice through pipes and seal
Quoted in John McQuaid, The Gulf Oil Spill: An Accident Waiting to Happen, Yale Environment 360,
May 10, 2010.
43
44
Observers have noted an intriguing similarity: Both the Securities and Exchange Commission and the nowdismantled Minerals and Management Service were rife with anti-government culture. Both operated on the
assumption that industry was to be trusted. There were staffers at both agencies who were watching porn on
government computers instead of worrying about what might be going on either the trading floor or the ocean
floor. Paul M. Barratt, Surviving the Spill, Bloomberg Business Week, June 7-13, 2010.
45
In 2009, BPs Deepwater Horizon lease received such an exemption, based on company analyses downplaying the likely size of an offshore spill, stating the most likely size would be 4,600 barrels. The actual spill has
been estimated to be about 25 times that size.
David M. Hershzenhorn and Eric Lightblau, Tricky Balance For Politicians for Oil States, New York Times,
June 18, 2010.
46
Erika Lovley, Obama Biggest Recipent of BP Cash, Politico, May 5, 2010. http://www.politico.com/news/
stories/0510/36783.html. Last visited August 18, 2010. Although Obama was the biggest recipient of BPs support in the 2008 election cycle, Democrats received only 40 percent of their contributions. Moreover commentators have suggested that Obamas willingness to open up offshore drilling was a strategic move to make
a federal green energy bill more likely.
47
Law, Ethics, Business
blown out well-heads. According to experts, the integrity of the blind shear ram is the key,
the most crucial factor for safety in deepwater drilling. In a rare instance of adopting a regulation, the MMS began requiring companies to submit evidence that their blind shear
rams would function under high pressure conditions. Yet in 2009, when the agency
reviewed BPs application to begin drilling the Macondo well, it ignored its own
rules. MMS approved the permit without proof that BPs BOP could actually shear pipe
and seal a well at 5,000 feet. It never asked for and never reviewed BPs own dataa report
completed in 2000 pointing to vulnerabilities in this critically important piece of
equipment.48
Another contextual detail surrounding the Gulf Spill is the way decisions had to be
made under pressure, and by representatives of different companies with different ways
of doing business. As we recall, Deepwater Horizon was BPs operation, but the work was
done on a Transocean rig leased by BP (for about a half million dollars a day), and
Halliburton was hired to provide cementing services, to reinforce and seal off the well
as drilling was completed. University of California Berkeley engineer Robert Bea has
described a problem with fragmented responsibilities here:
Each of these organizations has fundamentally different goals. BP wants access to
hydrocarbon resources that feed their refinery and distribution network. Halliburton
provides oil field services. Transocean drives drill rigs, kind of like taxicabs. Each has
different operating processes.49
And each of them had different orientations. On April 20, 2010, BP was trying to
seal the well and move on; its concerns were cost and speedthe project was already
more than a month behind schedule. On the rig itself, Transocean workers were more
concerned with controlling the well. This culture clash would come to a head shortly
before the explosion. At an investigative hearing in May 2010, Douglas H. Brown, chief
mechanic for Deepwater Horizon, said he witnessed a skirmish on the rig the morning
of the blast between a BP well site leader and members of Transoceans drilling crew.
According to Brown, it was sparked by BPs insistence that they displace protective,
heavy drilling mud with lighter saltwater before the well was sealed with a cement plug.
I remember the company man saying this is how its going to be, Brown testified.50
He recalled the Transocean installation manager grumbling as they left this meeting,
Well, I guess thats what we have those pinchers for, referring to the shear rams on
the BOP, implying that removing the drilling mud would risk an emergency. Hours
later, the rig exploded.
Investigative environmental journalist John McQuaid, writing about the Deepwater
Horizon disaster as a classic low probability, high impact event, points to the assumption
that was being madeby BP and by all the big oil companies doing deepwater drilling
that a major catastrophe was so unlikely it was not worth considering.51 H…

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Introduction:

The concepts of ethics, corporate governance, and corporate social responsibility (CSR) have become increasingly important in the modern business world. The focus on social responsibility and ethical behavior has grown in recent years as consumers have become more socially conscious and demand companies that behave responsibly. This paper will examine the ethical theory that best supports the B-corp concept and evaluate the likelihood of traditional corporations using social responsibility as a competitive strategy. Additionally, the paper will identify how companies can use social responsibility as a competitive strategy in the marketing of their products/services, supply chain, charitable activities, strategic investments, or operations.

Description:

In this paper, we will explore the relationship between ethics, corporate governance, and corporate social responsibility. We will begin by examining the ethical theory that best supports the B-corp concept. Based on the e-Activity, we will evaluate and provide supporting evidence for the ethical theory or theories that offer the most significant support for the concept of B-corp. Furthermore, we will go on to assess the likelihood of traditional corporations using social responsibility as an effective competitive strategy. We will delve into the reasons why companies might or might not use social responsibility as a competitive strategy, and what the outcomes of such a strategy might be for the business. Finally, we will identify at least one way that a company we are familiar with uses social responsibility as a competitive strategy and the impact of such a strategy on the company’s performance. In conclusion, this paper aims to provide a comprehensive analysis of the concepts of ethics, corporate governance, and corporate social responsibility and their impact on the modern business world.

Headings:
1. Introduction
2. The ethical theory that best supports the B-corp concept
3. The likelihood of traditional corporations using social responsibility as an effective competitive strategy
4. Case Study: Company incorporation of social responsibility as a competitive strategy
5. Conclusion

Objectives:
1. To understand the concept of B-corp and its ethical implications.
2. To explore the relationship between corporate governance, ethics, and social responsibility.
3. To evaluate the effectiveness of the social responsibility as a competitive strategy for traditional corporations.
4. To discover the ways in which companies use social responsibility as a competitive strategy.

Learning Outcomes:
1. Students will be able to explain the underlying ethical theories that support the B-corp concept.
2. Students will be able to identify the key elements of corporate governance, ethics, and social responsibility and their interrelationships.
3. Students will be able to assess the likelihood of traditional corporations using social responsibility as an effective competitive strategy.
4. Students will be able to analyze the ways in which companies use social responsibility as a competitive strategy in various facets of their operations.

Ethics, Corporate Governance, and Corporate Social Responsibility (CSR)

1. The ethical theory or theories that best support the B-corp concept:
The ethical theories that best support the B-corp concept are deontology and virtue ethics. According to deontology, corporations have a moral obligation to act in a socially responsible manner, regardless of the impact on their profits. Virtue ethics, on the other hand, emphasizes the development of ethical traits that lead to responsible behavior.

2. Likelihood of traditional corporations using social responsibility as an effective competitive strategy:
Traditional corporations are increasingly recognizing the importance of social responsibility as a competitive strategy. However, the degree to which they incorporate social responsibility into their operations varies depending on factors such as industry norms and pressures from stakeholders.

3. Example of a company using social responsibility as a competitive strategy:
Nike is an example of a company that has used social responsibility as a competitive strategy. The company has invested heavily in sustainable manufacturing practices and has adopted environmentally friendly processes in its supply chain. Additionally, Nike has supported charitable causes and has made strategic investments in social and environmental initiatives that align with its values. By doing so, Nike has not only enhanced its reputation but has also differentiated itself from its competitors, resulting in a competitive advantage.

Solution 1: Ethical Theories Supporting B-Corp Concept

The ethical theory that best supports the B-corp concept is stakeholder theory. According to this theory, a business organization should focus not just on its profit motive but also on the interests of all stakeholders including customers, employees, suppliers, communities, and the environment. The B-corp concept aligns with the stakeholder theory as it requires certified companies to meet strict social and environmental performance standards in addition to profitability. This concept supports the idea that businesses have a responsibility towards their stakeholders and that they can use their operations as a positive force for social and environmental change.

Solution 2: Using Social Responsibility as a Competitive Strategy

It is highly likely that traditional corporations can use social responsibility as an effective competitive strategy. In today’s world, consumers are becoming more aware and concerned about the social and environmental impacts of the products they consume. Hence, businesses that are socially responsible tend to gain a competitive advantage over their competitors. Companies that invest in sustainable supply chains, support charitable activities, make strategic investments in social causes, and practice environmentally conscious operations are perceived positively by consumers and stakeholders. Therefore, social responsibility can be used as a means to differentiate oneself from competitors and garner customer loyalty.

One example of a company that has effectively used social responsibility as a competitive strategy is Patagonia. This outdoor clothing company is known for its sustainable and environmentally conscious practices. For instance, it donates 1% of its sales to environmental causes, uses recycled and organic materials for production processes, and has fair labor policies. These practices have helped Patagonia build a loyal customer base, enhance its brand value, and gain a competitive edge in the outdoor clothing industry.

Suggested Resources/Books:
– “Corporate Social Responsibility: Readings and Cases in a Global Context” by Andrew Crane and Dirk Matten
– “Business Ethics: A Textbook with Cases” by William H. Shaw
– “The Responsible Company: What We’ve Learned From Patagonia’s First 40 Years” by Yvon Chouinard and Vincent Stanley
– “The Triple Bottom Line: How Today’s Best-Run Companies Are Achieving Economic, Social, and Environmental Success – and How You Can Too” by Andrew W. Savitz

Similar Asked Questions:
1. How does corporate governance relate to business ethics and corporate social responsibility?
2. What role do ethical theories play in shaping corporate social responsibility initiatives?
3. Can implementing socially responsible practices effectively differentiate a company from its competitors?
4. What are some potential challenges in implementing and enforcing ethical practices within a corporation?
5. How has the concept of corporate social responsibility evolved over time, and what challenges and opportunities does it present for businesses today?

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