© Chevron 2008 Engineering Ethics – Why It Matters in the Real World Janeen Judah ’81 President Chevron Environmental Management Company February 8, 2008

© Chevron 2008

Engineering Ethics – Why It Matters in the Real World

Janeen Judah ’81

PresidentChevron Environmental Management Company

February 8, 2008Texas A&M University

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Outline of Today’s Presentation

About Chevron and Chevron Environmental Management Company

Engineering Ethics and…

• Your Employer

• Your Boss

• You

Graduate School Options

Questions and Answers

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Exploration & ProductionRefiningChemicalsPowerTechnology

Chevron: A world-class, global energycompany

Chevron Headquarters

• 180 countries

• 53,000 employees

• Over 24,000 retail outlets

• 12 billion BOE oil and gas reserves

• 2.3 million BPD of refining capacity

• 2.6 million BOE daily net production

Chevron ranks among the world’s largest global energy companies

Where are our employees?- 45% in North America

- 23% in Asia Pacific

- 32% in Europe, South America, Africa

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Upstream

Inside Chevron

Downstream

Explore Produce

Midstream

Market

TruckRefine

StoreShip

Pipeline

Technology

Info Tech

Energy Tech

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What is Chevron Environmental Management Company (EMC)?

EMC provides global environmental and abandonment liability management for Chevron.

Work scope includes site remediation, site assessment, facility decommissioning, well abandonment, and site operations and maintenance.

Democratic Republic of the Congo

Richmond Refinery, CA

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EMC Fast Facts

175 Employees

1800 Contractors

4000 service stations and terminals

125 superfund sites

30 refinery sites

70 offshore structures

1000 wells abandoned/year

300 specialty sites

Community Service Lawrenceville, IL

Offshore Gulf of Mexico

Porter Oil Field, Michigan

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Chevron Environmental Management CompanyTouching Chevron’s World

Around The World

Panama

Latin America

California – Central Coast

Alaska

Pakistan

Louisiana

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• Your Employer

• Your Boss

• You



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Ethical Lapses Can Lead to EngineeringFailures

Famous Failures – case studies:

• Hyatt Regency Kansas City Walkway Collapse (1981)

• Challenger disaster (1986)

• Columbia shuttle (2003)

These failures were spectacular & public, but what about more subtle failures?

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What about Legal Issues?Legal & Ethical are not the same

Famous Frauds:

• Enron

• Tyco

• WorldCom

Legal Remedy – Sarbanes-Oxley Act of 2002

• Imposes significant reporting and management oversight requirements for internal controls that may materially affect the value of a company

• Criminal penalties for noncompliance

Fewer famous fraud events in last 3-4 years

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Enron Before and After

Before

Grew 1985-2001 to 7th largest US Company

21,000 employees

Stock price ~$90/share (8/2000)

After

Bankruptcy December 2, 2001

Criminal prosecutions – 34

Arthur Andersen disappears

Liquidation stock announced 1/15/08 – $6.79/share

Sarbanes-Oxley corporate governance

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Sherron Watkins’ Famous E-mail to Ken Lay of EnronAugust, 2001

Dear Mr. Lay,

Has Enron become a risky place to work? For those of us who didn't get rich over the last few years, can we afford to stay?

Skilling's abrupt departure will raise suspicions of accounting improprieties and valuation issues. Enron has been very aggressive in its accounting--most notably the Raptor transactions and the Condor vehicle. We do have valuation issues with our international assets and possibly some of our EES MTM positions.

The spotlight will be on us, the market just can't accept that Skilling is leaving his dream job. I think that the valuation issues can be fixed and reported with other good will write-downs to occur in 2002. How do we fix the Raptor and Condor deals? They unwind in 2002 and 2003, we will have to pony up Enron stock and that won't go unnoticed.

To the layman on the street, it will look like we recognized funds flow of $800 million from merchant asset sales in 1999 by selling to a vehicle (Condor) that we capitalized with a promise of Enron stock in later years. Is that really funds flow or is it cash from equity issuance?

We have recognized over $550 million of fair value gains on stocks via our swaps with Raptor. Much of that stock has declined significantly--Avici by 98 percent from $178 million, to $5 million; the New Power Company by 80 percent from $40 a share, to $6 a share. The value in the swaps won't be there for Raptor, so once again Enron will issue stock to offset these losses. Raptor is an LJM entity. It sure looks to the layman on the street that we are hiding losses in a related company and will compensate that company with Enron stock in the future.

I am incredibly nervous that we will implode in a wave of accounting scandals. My eight years of Enron work history will be worth nothing on my resume, the business world will consider the past successes as nothing but an elaborate accounting hoax. Skilling is resigning now for "personal reasons" but I would think he wasn't having fun, looked down the road and knew this stuff was unfixable and would rather abandon ship now than resign in shame in two years.

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How Do You Balance Safety & Profits?The Lessons from the BP Texas City Refinery Explosion

March 23, 2005 – Process explosion: 15 workers killed, 180 injured

Baker Report – Concluded that process safety was compromised due to high emphasis on cost cutting & poor safety culture at refinery

Prudhoe Bay Oil Spill (3/06) – due to corrosion also due to cost cutting

Criminal:

• October 2007 – BP pleaded guilty to federal environmental crimes - $50MM in fines + 3 years probation

• Plaintiff’s attorneys want >1B$ in fines, hearing this month

Civil: 4000 claims, 1.6B$ spent to resolve about half

Other:

• BP has spent >1B$ in plant upgrades since 3/05

• Management overhaul including early retirement of CEO (July 2007)

Yet 3 more fatalities since then – 7/06, 6/07 & 1/08

Has BP Found the Balance?

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The Chevron WayOur overarching ethical standard

People

Performance

Values

Who we are

What we do

What we believe

What we plan to accomplish

The heart of The Chevron Way is our vision…

to be the global energy company most admired for its people, partnership and performance.

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The Chevron Way: Our Values

Our company’s foundation is built on our Values:

Integrity

Trust

Diversity

Ingenuity

Partnership

Protecting People & the Environment

High Performance

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Chevron Culture

Open-door atmosphere

Mutual respect and trust …diversity is valued

Good work life/personal life balance

Commitment to protecting the environment

A commitment to continuous improvement, both company and personal

Support and involvement in the community

Our culture is a big part of what makes employees want to come to work every day...

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Hard Question – Company Ethics

Should your company do business in a country that may not be ethical?

Democracy or lack of it

Human Rights issues (especially women & minority groups)

Country does not provide basic infrastructure to citizens

Possible siphoning off of government funds by rulers

Environmental standards are not as high as US/EU

And can we make these judgments for them?

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• Your Employer

• Your Boss

• You



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Your Boss May Influence YourDecisions….

Most decisions are not black/white:

• Design uncertainty and risk avoidance

• Economics

• Schedule pressure

• Politics

As a new engineer – how much can you do about it?

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Hard Question – Your Boss & Ethics

What would you do when your Boss tries to influence the outcome of your analysis to meet a preconceived goal?

You are the rookie and the influence may be from high up

The preferred interpretation may be within the boundaries of analysis

“Legal” line is rarely sharp

When do you speak up?

How hard do you push?

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• Your Employer

• Your Boss

• You



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Why Ethics Matters to You:

Once tarnished, a reputation is hard to fix

“Honesty, Integrity, Reliability”

Aggies are held to a higher standard

Guard your reputation carefully – it is one of your most precious assets!

What really ended Coach Franchione’s support?

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Hard Question – Personal Ethics

What would you do when your “company line” does not align with your personal ethical code?

It may be perfectly legal

It may be a matter of perspective or interpretation

You may not have all the facts

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• Your Employer

• Your Boss

• You



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Can Graduate Education Help My Career?

You have many options ─ are they worth it?

MS/PhD in Engineering

MBA

Law School

Disclaimer – these are my personal views!

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Why Graduate Degrees?

Increase technical expertise

Increase credibility and knowledge

Career change or alternate career opportunities

Open doors for advancement and cross-training

Not always more money

Usually enough to get

started

Greater technical expertise

Business knowledge

Career change

M.S.B.S. M.B.A J.D.

Career Development

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MS in Engineering

PurposeIncrease technical expertise

WhenSoon after BS

WhyJob change early in career, increase credibility, technical career path, subject matter expert

Advantages

Increase technical expertise

Increased credibility

Disadvantages

Usually minimal salary increase

Value decreases with time as experience increases

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Master of Business Administration

Purpose“Makes you qualified for anything”

WhenBefore age 30 and/or family (and life gets too complicated)

WhyOpens doors, greater value to company, greater emphasis on business skills in today’s corporations

Advantages

Additional business knowledge

Increasingly important

Opens doors within company

Disadvantages

None

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Types of MBA Programs

Program Cost

Prestige (Top 10) $130,000 – $180,000

(Plus lost wages)

Resident(UT, A&M, SMU, Rice, etc)

$60,000 – $100,000(Plus lost wages)

Executive(UT, A&M, Rice, Tulane)

$60,000 – $80,000(Minus company subsidy)

Night School(UH)

$20,000 – 25,000(Minus company subsidy)

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Law Degree

Purpose/WhyCareer Change

WhenAnytime

Advantages

Career change(you’ll be a lawyer not an engineer)

Disadvantages

Must make a choice between law and others

Law or Engineering?

Starting over with salary

Working with lawyers!

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My Usual Recommendation…

#1 Night or Executive MBA

• Sharpens business skills

• May open doors

• Increases credibility

• Minimal cost/ no lost income

• Lots of options in Houston & other major cities

#2 MS in Engineering

• Especially if you aspire to the technical career path or your undergraduate degree is in another discipline

• Positions you for a technical leadership position, probably earlier

• Options – TAMU Distance Learning or Night/Part time

© Chevron 2008

Questions?

Documents

© Chevron 2008 Engineering Ethics – Why It Matters in the Real World Janeen Judah ’81 President Chevron Environmental Management Company February 8, 2008