Shell/Royal Dutch Group
Shell and Royal Dutch Group formed “Group” to operate in the oil industry making the world’s largest, fully integrated petroleum company. They controlled oil exploration, production, spreading pipelines, tankers, and refining. They also marketed their strengths well, which made them an oil giant. Their official headquarters are in London and The Hague. By 1995, Shell Nigeria was the biggest oil company in Nigeria. The company was a joint venture between Shell and the Nigerian Federal Government. The government also owned National Petroleum Corporation, which had a 55% stake in Shell. Shell Nigeria’s primary objective was to find, produce, and deliver hydrocarbons safely, responsibly, and economically for the benefit of their stakeholders. Shell was the first company to invest in Nigeria. They soon realized that Nigeria had the finest crude oil in the world; oil production standards gained popularity soon. Shell’s top competitors, including Chevron and Exxon, were ousted of business in Nigeria. Shell had easily gained visibility as a top multinational corporation.
Shell Nigeria employed more than 2000 employees, with 94% of all employees of Nigerian descent. Ogoni is the ethnic group that represented the Nigerian delta shore. Although the major oil production was in the delta region, less the 2% of the employees where employed by Shell Nigeria. Local people did most of the dangerous work, such as drilling and blasting during oil exploration. The Nigerian government was at and financial advantage, and profited greatly from this venture. 90% of the net revenues went to the Nigerian federal government in the form of taxes and royalties. The remaining 10% went to Shell, Elf, and Agip.
Production costs in Nigeria are relatively high by international comparison, and use of sophisticated technologies is advancing. The key comparative advantage, Nigerian oil quality, keeps its business on the top. Shell makes $170-190 million in profits from Nigeria every year, with a speculation that the real benefits may be much higher. Nigeria’s regime and production-sharing arrangements cannot fully account for the country’s attractiveness to oil companies. The control over operating costs by foreign oil companies is probably the key to the understanding high profits in the Nigerian oil industry (Fred 56). Nigeria has also offered Shell a dominant position in the oil industry, which other countries did not—in addition to high profits. Nigeria was at an advantage because it had ready oil reserves with unlimited depletion. It is asserted that political instability did not make Nigeria less valuable to Shell.
The problem with Shell arose because of the difference in strategy and the responsibility towards the shareholders. Nigerian government and Shell worked together, but the relations soon faded. Shell was reluctant to confess, but was frustrated by the Nigerian government’s large take and failure to pay revenue that it owed to its corporate partners. Corruption in Nigeria was at peak and Shell was becoming frustrated with the Nigerian government activities. The managing director of Shell in Nigeria once accused the government of being a “black hole of corruption acting like a gravity…pulling us down all the time” (341).
Political instability in Nigeria was a major obstacle to economic development. Nevertheless, many companies continue to invest in Nigeria. Despite the political instability Shell wanted to make investments in the country. Nigeria was more attractive to Shell than other countries because profits were higher than elsewhere. Shell took an important strategic approach that made political instability less significant to Shell. Shell was aware of the risk that would face in an unstable country like Nigeria. According to economists, Nigeria is seen as a highly unfavorable nation for business. Shell continues to expand its foreign direct investments in Nigeria despite of the increasing political risks in the country and acknowledging alternative investment opportunities in other countries.
Political instability did not deter Shell from investing in Nigeria. In the late 1900s, Nigeria saw seven different military governments. Ogonis, the underrepresented ethnic group disturbed oil operations on various occasions in the decade of 90s. They spontaneously protested their under representation. These are the only people affected by the oil operations. Ogoniland, where these tribes lived, was the major source of oil production and these people—most important for oil production. Yet, they did not receive any revenue from the site’s development. Despite the huge profit that Nigerian Government and Shell were making, these people were deprived and stood still watching this unfair practice. The state where these people lived was the poorest in Nigeria—despite its richness in oil mines. No environmental protection actions were carried out to avoid the multiplying contaminated water and water related diseases. The population was also relatively denser. Once a British engineer commented that “he never saw a poor neighborhood in a rich oil area”. Ken Saro-Wiwa was an environmental activist who could not see the sufferance that these people had to face. He was the leader of Ogoni insurgency, and a writer and a Nobel peace prize nominated laureate. He along with the Ogoni people drafted bill of rights to find their existent position in Nigeria. They issued a demand notice to Shell oil and Nigerian Oil Company to pay the damages of $4 billion for destroying the environment and $6 billion in unpaid rents and royalties to the Ogoni people (345). Wiwa claimed that Shell had been responsible for serious environmental degradation in the Oganiland; Shell denied all the factual allegations. Later, Wiwa was arrested erroneously by the Nigerian government in charge of murder and was hanged with other associates to silent the voice of rights. This led to the international boycott of Shell. Shell was claimed to have bribed the witnesses and government officials to remove the obstacles from its operation.
Problems in the oil industry remain significant pose a threat to oil operations in future. As a result of the Nigerian government’s unwillingness to come up with payments, many oil companies have announced spending cuts in their operating budgets. Ethnical local conflicts remain a potential risk for the future.
Political Instability in Nigeria
Nigeria is a Democratic Republic that uses the United States as a model, with executive power exercised by the president. The current president of Nigeria, Umaru Musa Yar’Aduawho, was elected in 2007. Prior to the election of a democratic president, Nigeria went through a history of frequent military interventions in politics, a long period of military dictatorship, executive impunity, and efforts of some rulers to force themselves into power without the support of the vast majority of the citizens of the country. Many of these events caused years of political instability and military dictatorship that eventually stunted Nigeria’s development. Governments should understand that without the establishment of government that is accountable, the chances of addressing other major problems like poverty, inhumane living conditions, and lack of education are slim. Even today, seven years after the restoration of civilian democratic rule, there are several continuous political challenges to sustaining the political order in Nigeria. Also, Nigeria’s stability has been repeatedly threatened by fighting between fundamentalist Muslims and Christians over the spread of Islamic law (Sharia) across the heavily Muslim north. One-third of Nigeria’s 36 states are ruled by Sharia law. More than 10,000 people have died in religious clashes since military rule ended in 1999.
When analyzing the political instability in Nigeria, we can determine that the major causes are the failure of politicians to sufficiently address the basic aspects behind democracy and constitutionalism. When these important issues are not implemented and addressed properly, a pattern of rising abuse of power, brazen corruption, disregard for due process and the rule of law, intolerance of political opposition, and complete political instability results. Others argue that the centralization of power and therefore the fading of federalism has also been to blame for political instability in Nigeria.
Since the oil boom of the 1970’s, the Nigerian economy has been in crisis despite continued expansion of oil production. Shell established a first mover advantage in 1950. In the 1960’s, Shell managed to penetrate state structures which helped to hedge political risk in the country during this time of political turmoil. “In 1995 Shell Nigeria was the largest oil company in the country. The company itself was actually a joint venture with the Nigerian federal government… ” (340). It was clear that both Shell and the Nigerian government tried to work together in the oil industry, but the relation between both of them was often strained and, to top things off, political instability and corruption in Nigeria were always a major source of tension and irritation to many Shell executives. It is hard to understand how even though political instability is a key obstacle in Nigeria, Shell is continuing to invest in the country. “Shell Nigeria’s operations were huge, not only by Nigerian standards, but even by those of the parent firm. In 1995, Shell Nigeria produced an average of almost one million barrels of crude oil a day; about half of Nigeria’s total output…, and it provided over 14% of Shell’s total world oil production.” (341). When analyzing how much oil Shell is able to produce in Nigeria, it is evident that political instability does not hinder Shell from operating there. Another aspect is the interconnectedness of Shell with state structures in Nigeria and the strategic perspective explores how Shell’s approach may make political instability less problematic to the company.
According to Shell Nigeria representatives,
In our view, there are three major factors at the root of the instability in the Niger Delta – unfulfilled aspirations for political recognition and influence, poverty and historical neglect, and criminality. We believe that the situation needs to be addressed through dialogue, alongside immediate infrastructure development and providing employment. We continue to work with the communities, the federal, state and local governments, and other agencies in an effort to help restore peace in the Niger Delta. We continue to improve the way we manage our relationships with communities to contribute to social development in the region using new Global Memoranda of Understanding. (GMOU)
They commit to investments over five years and so encourage long-term relationships with communities and help to build trust. They bring different parts of the community together and pool the funds to allow investment in more effective, higher-value projects.
Political instability is an increasing problem in Nigeria at the present time. Since 2004, an uprising has broken out in the Niger delta, a major oil-producing region. The desperately impoverished local residents of the delta have seen little benefit from Nigeria’s vast oil riches, and rebel groups are fighting for a more equal distribution of the wealth as well as greater regional autonomy. This uproar is commonly seen in many other developing countries throughout the world. Violence by rebel groups has disrupted oil production and reduced output by about 20%. Nigeria is one of the world’s largest oil producers and supplies the U.S. with one-fifth of its oil. Political instability and no government interaction have cause problems such as the endangering of worker’s lives and a reduction in the production of oil.
Even more recently, political instability continues to be present. For example, the April 2007 national elections were an important time for the country because it marked the first transition from one democratically elected president to another. Unexpectedly, they were marred by widespread allegations of fraud, ballot stuffing, violence, and chaos. According to The New York Times, “Just days before the election, the Supreme Court ruled that the election commission’s decision to remove Vice President Atiku Abubakar, a leading candidate and a bitter rival of President Olusegun Obsanjo, from the ballot was illegal. Ballots were reprinted, but they only showed party symbols rather than the names of candidates. Umaru Yar’Adua, the candidate of the governing party, won the election in a landslide, taking more than 24.6 million votes. Second-place candidate Muhammadu Buhari tallied only about 6 million votes. International observers called the vote flawed and illegitimate. The chief observer for the European Union said the results cannot be considered to have been credible. Many expected a prolonged legal battle to determine the next step in the process.” This is another clear example of how unstable the country really is.
The conclusion that political instability can be conducive to business is significant since one expects political instability to be inherently harmful to business. Unlike many other oil industry related companies in the world such as BP and Halliburton, Shell has not pulled its employees from Nigeria, in spite of the enormous danger they are putting their worker through. “It’s an important region for Shell,” said Finlay MacDonald, a fund manager at Britannic Asset Management in Scotland. “Given the degree of political instability there, it’s a region that comes with a relatively high degree of risk.”
The Execution of Ken Saro-Wiwa: Its cause and Its Impact
What is a martyr? Is a martyr the one who suffers for the sake of a righteous principle, or is a martyr the one who voluntarily suffers death as the penalty for refusing to renounce their belief? In either case, Ken Saro-Wiwa is a qualified martyr, for he sacrificed his own life to bring the justice to his people, the Ogoni. Wiwa was a writer, served for Nigerian federal government, had his own business, and was also a successful scriptwriter. However, he was also well known for being the Nigerian activist that voiced for Ogoni people’s rights. He was later on charged for murder. Despite international society’s appeal for his acquittal, the Nigerian government executed Saro-Wiwa. Let’s examine what lead to his execution and the consequences of his death.
Unlike many other Ogoni Nigerians who intended to secede from Nigeria during the Biafran civil war, Ken Saro-Wiwa sided with the federal government of Nigeria because he believed that it “would do better by seeking full democratic rights in a federal state than through secession” (344). This is important because advocates of democracy would not only applaud such an ideology, but other nations would as well. The advocates of democracy would support it because the Nigeria’s military government is notorious for heavy corruption and human right abuse; they believe that a democratic government would likely take care of these problems. On the other hand, most nations would also find this ideology acceptable because it does not support secession. Many countries in the world would advocate democracy, but tolerate no secession of its local states. There are several examples such as Canada and its Quebec, Spain and its Catalonia, Russia and its Chechnya, etc. In short, Saro-Wiwa had no problem in finding supporters from international communities. Consequently, it was not a surprise that he became a Noble prize nominee.
The support from outside of Nigeria alone would not make Saro-Wiwa a successful leader; Saro-Wiwa also dedicatedly worked for Ogoni people’s right to the extent that he assumed a risky position in the Movement for the Survival of the Ogoni People (MOSOP). Saro-Wiwa was the main founder of the MOSOP, and he chose to become the “spokesman” as “he felt that he would be most effective as a writer and press coordinator” (345). Saro-Wiwa was very committed in helping his people. Indeed, Saro-Wiwa’s past experience would make him a great spokesman, but holding a key position in an organization antagonized by the military government of Nigeria ultimately put him in danger. Saro-Wiwa must have been aware of that, but he still chose to best serve his people. He placed the well being of the Ogoni people before his own.
It is interesting to note that Max Weber’s Theory of Leadership can be applied at this particular point. According to Max Weber, there are three social bases of leader legitimacy: they are traditional, rational and charismatic authority. “Traditional authority rests on an established belief in the sanctity of immemorial traditions and the legitimacy of the status of those exercising authority under them.” A good example of the traditional authority is the Ogoni tribal chiefs who joined the MOSOP, as their leadership mostly relied on their status as the Ogoni clan headman. “Rational authority rests on a belief in the legality of patterns of normative rules and the right of those elevated to authority under such rules to issue commands.” Since bureaucracy is considered as a model of modern rational organization, the bureaucratic Nigerian government fits the role of rational authority. “Charismatic authority is based on devotion to the specific and exceptional sanctity, heroism or exemplary character of an individual person, and of the normative patterns or order revealed or ordained by him.” (220) Ken Saro-Wiwa is indeed a charismatic leader of the Ogoni people for all his efforts to bring social change to Ogoniland.
However, the mighty leader of the Ogoni people was nothing but trouble in the eyes of the Nigerian government. The Nigerian government wholly disliked Saro-Wiwa. Because of Saro-Wiwa, an Ogoni Bill of Rights was drafted and the MOSOP was created. If it was not of Saro-Wiwa, the Ogoni people would not be so united and confident to contend with the government, calling for “political autonomy; cultural, religious, and linguistic freedom; a “fair portion” of the religion’s economic resources; and higher standards of environmental protection of Ogoni people” (345). On top of that, MOSOP had support of several international communities since the organization, under the leadership of Saro-Wiwa stood for nonviolent mass mobilization to urge voluntary concession from Nigerian government. Therefore, the Nigerian government was likely to attribute the increasing pressure from both inside of outside of the country to Saro-Wiwa.
Shell definitely did not consider Saro-Wiwa an ally because the Ogoni leader pointed out that the oil magnate was responsible for turning Ogoniland into a wasteland. “MOSOP issued a propagandistic “demand notice calling on Shell and the NNPC to pay damages of $4 billion for destroying the environment and $6 billion in unpaid rents and royalties to the Ogoni people” (345). Shell disputed the charges and refused to pay the damages to the Ogoni people. Shell’s action may have been unjust, but were understandable. Few companies would be willing to make payments to a group of people whom did not even have their government’s support. Nevertheless, MOSOP’s campaign successfully channeled the Ogoni people’s hatred and grudge toward Shell. It was not a coincidence that ever since the foundation of MOSOP, civil disturbances in Ogoniland, mainly against Shell, dramatically increased. These incidents resulted in large damages to Shell’s installation in Ogoniland. Shell was under the impression that although Saro-Wiwa was against the use of violence, he indirectly motivated the insurgent group.
As a result, both Nigerian military government and Shell did not sit around to see Saro-Wiwa became a greater threat to them. MOSOP became divided because one group of members, supported by the president of the organization, wished to work with the military government “to suppress violence in exchange for various favors from the regime” (349). Another group, led by Saro-Wiwa, refused to cooperate with the military authorities. Saro-Wiwa also organized the National Youth Council of the Ogoni People (NYCOP) in order to discipline the militant young Ogonis. Saro-Wiwa refused to succumb to the government because that would be against his democracy ideal. He established NYCOP to exercise his influence and limit the radical actions of the militant Ogonis. Garrick Leton, the leader of the conciliation approach, resigned from the organization and Saro-Wiwa became a greater threat to the Nigerian government by becoming president of MOSOP. Saro-Wiwa would now be marked as the major leader of Ogoni insurgency. The military authorities quickly devised a plan to eliminate the leader. They accused and imprisoned him for the murder of several of MOSOP’S former leaders.
Saro-Wiwa might have walked out of the cell alive if he had abandoned his philosophy and cooperated with the Nigerian authority and Shell, but he chose to die honoring his belief. He felt the military would use his acquittal as a weapon to strike down the Ogonis’ morale by making their leader renounce his own ideology. Saro-Wiwa chose to be executed in order to not betrayal his people and beliefs.
Ken Saro-Wiwa was hung. The execution of Saro-Wiwa resulted in several impacts worldwide. The biggest impact was on the Ogoni people. The execution of Saro-Wiwa meant their loss of a bright leader who was committed in bringing justice to his people. He was charismatic and united the Ogoni people under his leadership. He was also resourceful and had the support of several human right and environmentalist groups throughout the world. Without Saro-Wiwa, the Ogoni people fell into a deeper struggle. The human right groups and environmentalist groups condoled for the loss of a great fighter of human right and environment protection. Shell was criticized for not lending enough support to rescue Saro-Wiwa. Several groups launched boycotts against Shell. There were organizations such as London Royal Geographic Society, who “voted to reject the company’s charitable contributions” (339). The military government of Nigeria became infamous for executing Saro-Wiwa. The benefits overweighed the negative publicity. They removed a steady leader of insurgency, and Shell did not leave the country. The federal government was the biggest winner in this incident.
Nevertheless, Saro-Wiwa did not die for nothing. His deed of rallying for the Ogoni people’s right and his effort to bring the justice to the Ogini people will be remembered. Most importantly, Saro-Wiwa honored his belief by giving his life. His martyrdom will encourage his followers and supporters to continue his unfinished works. Hopefully one day there will be full democracy in Nigeria, and the Ogoni people will be able to collect the payments for the damages have been done to them.
Environmental Issues & Militarization in Nigeria
Shell’s environmental impact was another problem that fueled the anger of the local delta communities. Saro-Wiwa’s MOSOP group accused Shell of severe environmental ruin. According to Saro-Wiwa, “oil exploration turned Ogoni into a waste land: lands, streams and creeks are totally and continually polluted…acid rain, oil spillages and oil blowouts have devastated Ogoni territory” (345-346). Shell disputed the charges and stated that they were committed to dealing with the environmental issues that were caused by them. Shell also argued that their operations only consisted of 0.3 percent of the region and most of the problems were due to the people in the area. But not everyone agrees with Shell’s view. One environmental group described Shell’s effects as such: “The environment effects of having more than 100 oil wells (most of which are Shell owned) in Ogoni territory have been severe. Between 1976 and 1991, almost 3000 separate oil spills, averaging 700 barrels each, occurred in the Niger delta. Response to oil spills is slow, and often very damaging. A major spill at Ebubu in 1970 was set alight, causing irreparable damage to the ground it spilled on. Though the area of the spill is unusable, and still leaks oil into surrounding water supplies, Shell has it recorded having been cleaned up twice. The more recent experience of Osaro Okochi, a farmer from Eleme, who was still waiting for a pipeline to be fixed 6 weeks after it started leaking, shows that Shell has not improved its record since”(Insular). It is very difficult to know who to believe in these circumstances. In 1995 the World Bank did find evidence of considerable environmental damage, but noted that most was not due to oil pollution. In fact, they noted that it was mostly due to “overpopulation coupled with poverty and weak environmental regulation” (346).
The World Bank did go on to find that of the problems caused by oil companies the worst was gas flaring. Companies sometimes burn the natural gas that is produced during the oil exploration process, and this is called gas flaring. In most areas of the world a majority of this gas is captured and sold. For example, in America less than one percent of this gas is burned or flared, and the rest of the world’s average is less than five percent. In Nigeria, over 75 percent of this gas was burned having serious adverse environmental effects. These flare produce a lot of greenhouse gases and contribute to global warming. “Residents in the immediate area experienced constant noise, heat, and soot contamination.”(346) Shell was eventually involved in a joint venture to capture some of these gases in 1991, but even by 1995 the project was still not operating and it was not clear if the project would proceed. Despite some beliefs, Nigeria did have environmental laws in place. In 1988, they passed the Federal Environmental Protection Agency Decree, and then later the National Environmental Protection Regulations. These laws basically required the” installation of pollution abatement devices, restricted toxic discharges, required permits for handling toxic wastes, and mandated environmental impact studies…(347)”. Shell may have observed the local laws and they may have not, but overall they did not use the same standards they would have used in other parts of the world. It seemed as though they were able to have a profound effect on the local government because of the corruption.
After many years of oppression and not receiving their fair cut of oil value that were extracted from their land, some of the Ogoni people decided to retaliate. Most of the Ogoni leaders were opposed to violence including Saro-Wiwa’s. The local people tried boycotts, and other peaceful methods trying to gain attention to the negligence that was going on. Because the Ogoni were only a small fraction of the population they could not get much political power, and those that did rule the country were corrupt and did not disperse tax money equally. This unfair rule by the government intensified the already poor conditions of the Ogoni people.
They realized that petitioning the government was fruitless. Concluding that they had no choice but to take matters into their own hands, they decided that they would have to go after the oil companies themselves. This meant going after Shell’s plant and refineries directly. In the 1990’s there were many instances of young men attacking oil workers and rigs. The young men would usually hold hostage, either the workers or the rigs themselves, and demand money or improvements to roads and other community necessities. They would also often vandalize the rigs and take equipment from them. When these attacks happened Shell called the Nigerian police. During this time some accounts reported that Shell began working closely with Nigerian police. Shell especially worked with the supernumerary police or mobile police units. In fact, Shell provided “material and logistic support to police protecting its facilities” (p.348). Shell defended this practice by saying it was a requirement by the police force and all companies had to do it. There were also allegations that Shell provided more just guns. It was believed that Shell also provided buses, boats, and helicopters among other items.
Eventually Shell pulled out completely from the region. Shell estimated that between the two years of 1993 to 1995 the effects of these attacks caused more than 42 million dollars in damage, and decided it was too risky and dangerous to keep their ongoing operations. The pull out of Shell led General Abacha the new military ruler to take a hard line approach against the Ogoni people. First of all he developed a “special forces” group to restore order. This group reportedly instigated clashes between different ethnic groups, destroyed houses, and fired randomly killing people, committed rapes and various other offenses. Amnesty International reported that “2000 people had been killed”. This “process” was called “the militarization of commerce”. Despite their efforts Shell did not return to the region. Although Shell cannot control how the government acts we can easily see that they had a great influence on their decisions either advertently or inadvertently.
Ethics and Social Responsibility
The case Shell Oil in Nigeria presents many situations in which ethical and social responsibilities are involved. According to the text, ethics “are moral standards, not governed by law, that focus on the human consequences of actions…meets higher standards than that established by law” (48). On its part, Social responsibility refers to the obligation of an organization’s management towards the welfare and interests of the society which provides it the environment and resources to survive and flourish, and which is affected by the organization’s actions and policies. Based on these definitions, Shell Oil and the Nigerian government failed to demonstrate ethical and social responsibility towards the community that provided the company with the resources it needed to survive.
The first situation found in the case involves the government of Nigeria, and how they ran the country. Specifically how their corrupt and unethical ways affected the people who lived along the area where oil was found. This area was known as the Niger delta and was populated by different ethnic groups. The most predominant group was the Ogoni (341). First of all, the type of government found in Nigeria was one of militarization. The case states that, “Since its independence from Britain in 1960, Nigeria had been ruled by military governments” (342). This shows that Nigerians did not enjoy a democracy in which their rights and needs were served. This meant that the government and ultimately the population had to recur to illegal methods to survive. The country was run by corrupt people who only were interested in getting rich in spite of the means. For example the case states that “white elephant projects” were establish in which only the government and those who obtained the contracts benefited (342). These projects did not benefit the locals because they did not have logic behind them; for example the development of a steel industry “in a country that had neither high-grade coal nor iron ore” (342). This situation created a country in which only those in government and the ones that had connections to it enjoyed a wealthy life, while locals were being driven to poverty everyday. With a corrupt government and plummeting wages “people simply [had] no alternative but to take these sorts of inducements in order to get by” (342). This situation in which their country found itself drove locals to also look into the same means that their government employed to help them survive.
This example shows the lack of ethical conduct officials showed. Rather than use any funds the government obtained through taxes from the oil companies to improve the lives of their constituents they used those funds to enrich themselves. Those funds could have been put to better use by providing locals with projects that really better the community such as schools, clinics, and subsidized housing. These projects were badly needed by the local children. For instance only 30 to 40 percent of the children that resided along the oil producing area attended primary school (343). Further more the housing was poorly constructed and unsafe to live, “only one-fifth of rural housing was considered…‘physically sound’” (343). As the case suggests unethical conduct of local officials drove the community to severe poverty even though they lived in one of the wealthiest areas in oil.
Shell also demonstrated a lack of ethics and social responsibility towards the Nigerian community. This first example shows how little Shell cared about the well being of the community. In an effort to maintain good relations with the locals Shell Nigeria provided the locals with some assistance. For instance the company spent about $20 million in projects. These projects included “building classrooms and community hospitals, paying teacher salaries, funding scholarships for Nigerian youth, and operating an agricultural station” (343). However this assistance was only a fraction of the money destined for projects in betterment of the community. Ultimately these funds benefited the company’s interests. For instance two thirds of the funds allocated for community projects were used to build and maintain “roads to and from oil installations” (343). These roads, in spite of being constructed to benefit the community, did not benefit it at all because most of the locals did not own cars. It is understandable that the company would wish to better the infrastructure of the place where it is making business, however it is not fair to use money allocated to better the local community when it is known that certain projects will not have a major impact on them. The company should use or start a fund allocated to future, or in this case current investments. The money allocated for the community could have been used to hire more teachers, build more schools and hospitals, or provide better housing for the community. Many times it is expected for the government to take care of its people, however when the government does not show interest to help them, and when a company is benefiting from the resources found in others’ land it is only good business to try and help improve the lives of this individuals, especially when their living conditions are deplorable.
This second example not only shows the lack of social responsibility on Shell Nigeria’s part, but also a lack of ethical behavior. Locals blamed “complete destruction of the ecosystem” on all the waste and pollution created by oil companies, but in particular Shell (345). Even though Shell only clamed to operate in a small part of the region their production was massive. In 1995 it was reported that the company was producing “one million barrels of crude oil a day” (340). This vast production certainly must have had an impact beyond what Shell was willing to accept. Instead they chose to blame the environmental degradation on a “rising population, over farming, and poor sanitation practices by local residents” (346). Later it was found that some of those allegations were true, however the company did wrong on blaming it all on the practices of the community.
It may well have been true that some of the environmental problems the Nigerian community faced were cause by other reasons other than the oil companies; however Shell’s reluctance to accept part of their responsibility shows their lack of ethics. There is one theory that breaks ethics into different stages of development named the Theory of Moral Development, by Lawrence Kohlberg (52). This theory consists of six stages that identify one’s ethical behavior at different levels, from being forced to behave ethically to being ethical out of one’s own principles (52). Of these six stages, Shell’s conduct can be identified at stage four. In this stage one is ethical based on a “social system,” or “law-and-order” (52). According to the theory, people’s ethics in this stage are driven by laws. In spite of having laws concerning the environment (347), Shell did not see the need to abide by them because these laws were no reinforced. Shell never saw a formal sanction on their actions, therefore did not see the need to bring their ethic forward.
As mentioned before, the company was able to do more in helping the people from whose land it was getting profits. In order to solve some of the environmental problems caused by over farming and poor sanitations practices, the company could have been able to employ them in one of the many oil fields it occupied. About 2 percent of the company’s employees were locals (341). They company would have helped greatly the economy of this community if it employed most of them in the oil fields. Also as part of their development projects, it could have built a sewage system to help improve the sanitation condition of the community. Instead the company chose to ignore the social responsibility it owed to the place and people from where it was making business.
Recommendations
If Shell continues to do business within Nigeria, it will face several problems. First, they will continue to be under constant public scrutiny for their “unethical and unjust” business practices within Nigeria. They also must deal with a politically unstable country which can resort to undemocratic behavior at any time. The fraud and corruption within the government is still proven to exist, which makes business matters uncertain. The deprived tribes, in these over-drilled and polluted areas, also grow weary of both Shell and an unsupportive government. Insurgents can continue to cause damage to equipment and buildings.
Shell has already begun taking action to by supporting the development of social and economic programs and infrastructure. Shell has currently spent 28.5 million on water, electricity, and new road projects (Shell.com). As of 2006, Shell has awarded over 15,000 scholarships to youth attending both secondary schools and universities. They’ve also built several schools, complete with computer rooms and internet access. LiveWIRE was also established to help youth learn vocational, entrepreneurial, and leadership skills (Shell.com). In addition to increasing education opportunities, Shell has also refurbished and upgraded 27 health care facilities in Nigeria. They also trained health care workers in vaccine management and in treating HIV patients, which is a common disease in Africa. These steps have showed the Ogoni people that Shell is trying to make amends for their unethical behavior in the past
Our first recommendation to Shell is to continue to correct the damage that has occurred in the Delta region due to the drilling of oil. Shell should work with human rights organizations to further fun environmental, education, and economic development within the region. This small investment in restoring and maintaining the environment will create a positive image for the company. It will also subdue the local people from disrupting and destroying Shell’s Nigerian operations. Shell’s number one goal is to secure the rich oil industry within the Delta in order to maintain a profit. Satisfying the immediate needs of the people will ensure that business can continue.
Our second recommendation is for Shell to give diversity and negotiation training to their workers in the Delta Region. They should begin to hire more Ogoni people, which would satisfy their need for employment. It might also create a safer and less polluted environment, as the Ogoni people will fight to sustain their property. An ethics and corruption program should be put in place by top management. All workers should be aware of all culture and political issues, and should be aware of how to deal with them. An outside agency should be hired to do ethical audits, to ensure that all is being done to maintain a positive organizational culture. More communication between Shell, human rights organizations, and the government should ensue to make sure that all is being done to maintain the environment while maximizing profits. Human rights issues should be immediately addressed to ensure that innocent people such as Ken Sawo-Wiwa do not die.
Lastly, Shell should begin exploring alternate methods of fuel such solar, wind, hydro power, and biomass. Supplies of fossil fuel are quickly diminishing, and to ensure that Shell stays ahead of competition alternate methods of fuel should be researched. Oil drilling also creates many environmental issues; gas flaring is the main problem. Burning 75 percent or more of this gas will have an adverse environmental effect such as global warming. Nigeria did have laws in place to control situations like this because of their corrupt government. Shell should be consistent in how it handles environmental issues throughout all countries. For example, gas flaring is less then 1 percent in U.S. and more than 5 percent in Nigeria. Becoming more environmentally responsible will create more confidence and trust within its future potential partnering countries.
Conclusion
In doing business with developing countries much effort should be given to maintaining ethical, humane, and fair behavior. A company’s ethics can be easily lost at the sight of high profits from poor nations. Shell lost credibility when it choose to make excuses for its unethical behavior in Nigeria. Shell can still correct the problem, with the Nigerian government’s assistance, and help all parties who benefit from the country’s vast amount of rich oil.
References
Akani, Fred. “Shell Nigeria looking at base.” Offshore 57.6 (June 1997): 20. Vocational and Career Collection. EBSCO. [Library name], [City], [State abbreviation]. 17 June 2007. .
Frynas, Jedrzej George. “Political instability and business: focus on Shell in Nigeria.”
Lawrence, Anne T. “Shell Oil in Nigeria.” International Organizational Behavior. Ed. Anne Marie Francesco, Barry Allen Gold. Upper Saddle River, NJ: Pearson, 2005. 339-353.
Shell.com. Accessed June 16, 2007
Third World Quarterly 19.3 (Sep. 1998): 457-478. Academic Search Complete. EBSCO. [Library name], [City], [State abbreviation]. 17 June 2007. .
