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Shell Ethical Failure in Nigeria



Nowadays, Africa turns into a continent of instability. Tens of big and small interstate and internal conflicts literally tear it into parts. Redrawing of the political map of the Dark Continent has begun. The international consortium of oil companies led by Royal Dutch Shell leaves the delta of the river Niger, the main area of oil production in the country. The Shell Company sells the key Nigerian Nambe Creek Trunk Line pipeline, pumping of oil on which often stops because of blasting and holes for the purpose of oil plunder. Shell intends to switch to deep-water oil production to be protected from attacks and plunders (“Shell in Nigeria: What are the issues?”, n.d.)

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Brief Background of Shell Company

A small English company engaged in oil transportations has united with the Royal Dutch Company engaged in its production, which has turned them into one of the main players in this sector. Pursuing their own interests, heads of the company entered without hesitation an alliance with the III Reich, with the Nigerian dictator Abash, and Burmese military junta of SLORC; and dictators least of all paid attention to social and ecological aspects.

The Shell company is included in ten largest corporations of the world and is one of the world leaders in the power and oil-processing industry. It also takes leading positions in gas and chemical branches and performs the development of new ecologically safe power sources. Shell has carried out the investigation, production, and oil refining procedures for already more than a century in 40 countries of the world. About a hundred thousand people in 90 countries and regions of the world work in the Shell company. The headquarters of the company is located in The Hague, the Netherlands.

The division of the Shell concern called "Shell Lubriсants" is the world leader in the market of ready lubricants as industrial appointments and required elements for automobile and commercial transport. Shell lubricants, which are made at 70 Shell oil refineries, are realized more than in 120 countries of the world. Shell is the largest investor in research activity among leading oil companies. In 2008, the company spent nearly $1.3 billion on researches on the latest technologies for the production of more effective fuel.

Background of Ethical Controversies at Shell

The situation with illegal inserts in oil pipelines has gained an unprecedented scope in Nigeria. The volume of stolen oil has reached maximum values for the last three years: about 60 thousand barrels a day. Instead of allowing bandits to steal oil further and pollute the environment, the company thinks about closing its site. In general, according to estimates of representatives of the company, the annual volume of stolen oil in Nigeria amounts to $6 billion.

Officials of the Nigerian state company National Petroleum Corp do not agree with figures of Shell and speak about more modest volumes of oil theft. However, both officials of Nigeria and representatives of private companies say that a branched-out and well-financed criminal network works on the theft of "black gold" in the delta of Niger. In particular, Shell claims that bandits have their own infrastructure, including shipyards for the construction of barges with the purpose of transporting stolen oil, and mini-terminals for its storage are being constructed (Shell Global, n.d.).

Ethics Theoretical Framework

The concept of interested parties offered by E. Freeman in 1984 has become one of the original and productive steps in the development of the theory of corporate social responsibility (Freeman, Harrison, & Wicks, 2007, p. 32). The matter with the word "stakeholders" is those earlier managers of corporation pursued the aims of "shares holders" (stockholders), but it is not absolutely fair because there are also other "holders of interest" whose welfare largely depends on actions of a corporation or who can significantly influence welfare of the corporation (Phillips, 2003). A key ethical idea of this theory consists in the thought that managers have to start operating the company in interests of all interested parties and not just shareholders (Friedman & Miles, 2006, p. 63). One can notice that this theory is not an alternative in relation to the theory of corporate social responsibility, but only successful terminological addition.

More Technology Research Paper Topics

The stakeholder theory and the concept of stakeholders or interested parties are among the best-known theoretical designs. This theory lies in the context of a problem of the relationship between business and society (Freeman, 2010, p. 84). Moreover, it is in its own way authoritative and conventional, but at the same time, it is one of the most discussed theories.

Under E. Freeman's definition, stakeholders of the company are any individuals, groups, or organizations that have a significant impact on decisions made by a company or appear to be under the influence of these decisions. Therefore, as a rule, stakeholders are usually owners of the company, its hired managers, and the personnel of the company (not managers), i.e. internal stakeholders. Buyers of products of the company, suppliers of resources, the state, local community (society), and public groups (organizations) constitute external stakeholders (Friedman & Miles, 2006, p. 53). Respectively, according to the concept, one of the basic provisions is reduced to the fact that owners and managers of the company have to operate so that the interests of the listed stakeholders are not restrained and the corresponding special ethical balance remains intact. Thus, such functioning and development of the company are a practical confirmation and the real proof of the social responsibility of the company.

The theory of stakeholders is a theory of a special model of the company, which definitely interprets it as socially responsible institute of the modern (capitalist) society. One of the most important categories of this theoretical design consists in the wealth of the organization. Hence, such wealth is defined as a special integrated indicator of the ability of the company to make various benefits for its stakeholders for a long time (Phillips, 2011). Therefore, functions of the stakeholders’ management include maximization (optimization) of an increment of the richness of the organization and optimization of its social responsibility. Such responsibility is an important private component of a more general function of the corresponding general management of the company.

Key Components of the Failure

There are four key components of the failure:

  1. High level of corruption.
  2. Oil theft by gangster groups.
  3. The weakness of Nigerian politicians.
  4. High crime rate.

Analysis of the Ethical Failure

In Nigeria, there is a big problem, which consists of illegal inserts in pipelines and oil theft. Such actions often lead to a violation of deliveries on damaged oil pipelines and to environmental pollution. The authorities of Nigeria have repeatedly declared that these crimes will be stopped and that they will strictly punish violators.

In addition, recently the terrorist organization called Boko Haram, which organized a number of acts of terrorism in northeast Nigeria in August-September, has become very active. Fighters committed an assault on the hostel of the agricultural college, having shot 50 sleeping students. Actually, the group financed the activity by illegal theft of oil from the Nembe Creek oil pipeline belonging to Royal Dutch Shell. In 2012, fighters paralyzed the process of production and transportation of oil in the delta of the river Niger.

Unethical Environmental Decisions

Human rights activists have accused Shell of human rights violations. Some Nigerian and international organizations have stated that the systematic inability of the government of Nigeria and oil giant Shell to eliminate terrible oil pollution in the delta of the river Niger is shameful. Friends of Earth Europe, Environmental Rights Action, Platform and the Centre for Environment, Amnesty International, and Human Rights and Development (CEHRD) have published a report describing shocking inaction of the Shell company and the government of Nigeria, as well as unwillingness to eliminate pollution in Ogoniland despite respective recommendations of the UN research.

In 2011, the Program of the UN for environment published scientific research about a situation in the area of Ogoniland in the delta of the river Niger. The research told about extensive environmental pollution, serious health hazard of the population, including pollution of drinking water that had been unrecognized earlier, and basic insolvency of procedures of the Shell company for elimination of oil spills (International Press Office, 2014).

The research of the UN conducted at the request of the Nigerian government and paid by the Shell company revealed serious insolvency of the government in regulation and control of activities of such companies as Shell. Besides, the report told about systematic inability of Shell for many years to liquidate the consequences of oil spills. According to the research of the UN, specialists of the organization found out that sites, which had been cleared according to statements of Shell, remained polluted (“Royal Dutch Shell Plc - Human rights,” n.d.).

Since the date of the publication of the UN research in 2011, Shell has defended and continued to use methods of elimination of oil spills, which the report recognized as inefficient. In the report entitled "No progress", it is emphasized that Shell manipulates information with the purpose of evading responsibility for old and leaky pipes that are so old that the company does not open information neither on prescription of their operation nor on their state (Center for Constitutional Rights, n.d.).

Shell and governments of Nigeria and countries where the company (The Netherlands and the United Kingdom) is represented use benefits from oil production in the delta of the river Niger. Now, they have to support the process of ecological and social rehabilitation and comprehensive implementation of recommendations provided in the UN research. This goal has been declared by a group of organizations.

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Allegations of Corruption

Theft and handicraft oil refining have turned into a parallel economy, generating parallel power and anarchy. The population deprived of other sources of income survives on not only stolen oil but also on the financing of local politicians (votes are bought and government officials are bribed with this money). Oil oligarchs of Nigeria become richer, but people become poorer. High levels of corruption and extortion at customs reach such amounts that deliveries of cars and equipment can be made during a customs year.

The Kidnapping of Company’s Employees

Activities of terrorist groups are financed with the stolen oil. Its fighters commit massacres in northeast Nigeria. The oil-bearing delta of the river Niger has turned into an area of gangster groups that often declare themselves to be defenders of the people. They trade in theft of oil and piracy attacks on vessels.

The purpose of pirates consists of those tankers, which ply between the Gulf of Guinea and the delta of the river Niger where rather small and separate oil fields are located. The majority of ships are attacked on the anchor parking, during the drift, or during overload of oil or oil products from one tanker to another. About a third of them are attacked when passing through the Gulf of Guinea.

Unlike the Somali pirates whose activity has sharply fallen under the pressure of international Navies, pirates have become more active than before in the Gulf of Guinea. Nigerian bandits are crueler, easily commit murders, and take not only white citizens from rich countries but also kidnap members of the Shell company (Amnesty International, n.d.).

Not only oil tankers, but also civil passenger ships and ferries with hundreds of passengers are attacked. Quite often, attacks are followed by murders. Simply for intimidation pirates have begun to attack with several machine gun fires aimed at motor ships. On mangrove islands of the delta, there is a wide infrastructure that renders services to the piracy business, including shipyards that build barges for transportation of stolen oil, inhabited bases, oil terminals, and moorings. Periodically, the Naval Forces and police make raids there, destroying some piracy bases and underground factories for oil distillation. However, such actions are only a drop in the ocean.

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Regulatory Failure

The government of Nigeria seeks to transfer land production to domestic oil companies, having left more difficult and capital-intensive projects on the deep-water shelf to large foreign players. The companies are disturbed also by the uncertainty relating to a number of definite provisions of the Nigerian oil bill intending to change the image of the branch. The bill has been stuck in the parliament for two years and it is improbable that the law will be adopted before the elections to take place in February 2015.

Principal Stakeholders

The concept of interested parties suggests considering specific representatives of the society: workers, consumers, suppliers, local community, etc. The company influences each of these representatives specifically and, therefore, it is possible to set concrete limits of responsibility for each of the representatives. In other words, the concept of an "interested party" has personified and made the concept of the "society" more substantial in the theory of corporate social responsibility. This concept has become a successful development of the terminology of corporate social responsibility and now practically any textbook on ethics of business and any researcher in the field uses the term "interested party".

There have been attempts on the basis of the concept of interested parties to revise the theory of the firm. After all, this concept calls into question the traditional understanding of owners of a firm as only persons whose interests their agents (managers) operate the firm. All interested parties can be considered as principals of managers. Respectively, managers can behave unfairly (opportunistically) in relation to any of the interested parties.

The theory of stakeholders claims that the purposes of organizations have to take into account various interests of different parties, which will represent a certain type of an informal coalition. The relative power of various groups of influence is the key moment during the assessment of their value and organizations often range them on the relation to each other, creating a hierarchy of relative importance. Stakeholders can also have certain relations, which are not always of a cooperative nature, but instead can be rather competitive. However, all stakeholders can be considered as a uniform inconsistent whole whose interests will define a trajectory of the evolution of the organization.

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Action Plan

It is necessary to conduct an analysis of Shell’s stakeholders, which includes identification and systematization of main stakeholders, assessment of their purposes, collection of information about them, use of this knowledge in the course of strategic management, and application of the accepted strategy. Shell’s management means communications, negotiation, contracts, relations with stakeholders, and motivation of their behavior for the purpose of determining the greatest benefit for the organization. Unlike the analysis of stakeholders, which is carried out for the purpose of the best adaptation to an organizational environment, management means direct interaction with stakeholders. Actually, these two processes are interrelated.

Conclusion

Withal, a global environmental disaster in the delta of Niger has already occurred and the local population still lives there today. The company swears that it respects highly ethical standards. However, it will be more difficult for them to keep their promise in process of tension rise in the oil market. Shell thinks about a possible closure of a site of the oil pipeline in Nigeria because of a large number of unauthorized inserts and theft of considerable volumes of oil. The problem of illegal inserts in pipelines and oil theft has been topical in Nigeria for a long time. Similar actions often lead to violation of deliveries on damaged oil pipelines and to environmental pollution. The authorities of Nigeria have repeatedly declared that these crimes will be stopped and that violators will be punished. Nevertheless, Shell declares that this problem has become even more aggravated recently.

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