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Being a Leader Final Project (Part 2) 1
A Study of Shell Nigeria Oil Company and its Stakeholders
Part 2 (Week Seven)
A review of basic issues regarding the Background and Interests of Stakeholders
of
Shell Nigeria Oil Company
RICHARD M. EAILEY
15561671
Being a Leader Final Project (Part 2) 2
Chapter 1
Introduction
The intent of this research project is to provide basic knowledge of The Royal
Dutch Shell Corporation and the Shell Nigeria Oil Company and its operation in
the Niger Delta in particular regarding its ethics, performance, social involvement,
contribution to national income and its contribution to keeping the environment
green.
This research starts with a background into the history and culture of the Shell oil
company worldwide and in particular its Nigeria operations. It provides an insight
to the extent of their operations worldwide and its contribution to the worlds’
energy demands and responsibility to minimizing pollution of the environment in
which it operates worldwide.
Secondly it looks at the various theories from different literature sources that
relate to the Shell Nigeria Corporation and its operations in the Niger Delta region
as it relates to the oil spillage problem and compensation sort by affected
communities.
Thirdly it looks specifically at the issue of this wicked problem of oil spills in the
Nigeria and the different views of the politicians, the communities in which they
operate and the response of the Shell Nigeria Oil corporation. This is done from
three different stakeholders prospective; The Shell Chief Executive Officer, A
local Shell Nigerian employee and A Shell investor.
Finally the findings of the investigation and possible solutions and
recommendations for a resolution to this wicked problem would be put forward
for discussion.
Being a Leader Final Project (Part 2) 3
Chapter 2
Introduction and Discussion of Theories and Models from the Literature
In this chapter we would look at the Royal Dutch Shell Oil company operations
worldwide and in particular the Nigeria operations from several different angles.
We will look at how Shell Nigeria operations can impact upon the three
stakeholders; The CEO of Shell, an investor and a local Shell employee. Then
we would look at this wicked problem with the oil spill in the Niger delta.
Shell is a global group of energy and petroleum companies. It is headed by Chief
Executive Officer Peter Voser and is located in The Hague, the Netherlands. The
parent company The Royal Dutch Shell plc is incorporated in England and
Wales.
According to Forbes Global 2000 the Royal Dutch Shell plc is the fifth largest
company in the world. The company boasts of having some of the most stringent
code of ethics in the oil industry as well as some of the more environmentally
friendly operations and safety records for oil and gas operations worldwide. The
company is located in over ninety countries worldwide and has a total staff of
around ninety three thousand employees.
Ethics
The company emphasizes adherence to its high ethical standards it has set in its
code of ethics for all Directors and Senior Financial Officers. In essence the code
of ethics states the following:
a. They shall all act in accordance with the highest standards of honesty,
integrity and fairness and that they should expect the same from others
while maintaining a good work relationship that encourages that
encourages the same.
b. They should excuse themselves from any decision making process that
may cause conflict of interest by affiliation and should advise about this in
writing.
Being a Leader Final Project (Part 2) 4
c. Should not have any financial interest in any contracts awarded by any
Shell company or affiliates.
d. Should not accept third party gifts that may seem to impact their decision
making on any particular issue related to awarding of contracts.
e. Avoid any relationship with a contractor that may compromise transacting
business in a professional fair and competitive basis.
If any of these codes are broken it is the responsibility of any employee in the
organization to report it without any fear of intimidation of victimization.
It is clear for anyone to see that Shell has very high standards of ethics
engrained in its corporate profile. In todays’ world there is a strong emphasis on
organizations and its managers being ethically strong. These follow the many
scandals of large corporations during recent times and the increasing
investigations from regulators and the general public at large.
Generally individual countries would have their regulations regarding code of
ethics for corporations. Good companies who preach high ethical standards
generally operate above the minimum requirements set by these regulations.
Operating in such a manner would boost a stakeholder like an investor
confidence that the company would not run afoul of the laws. “Shell’s standard
for their ethics is considered an asset worth protecting at all cost.”
Technology advancement
Shell has pledged to continued enhancement of its operation by continually
searching for new ways of producing energy in as safe and efficient a manner as
possible. To this end they have invested in state of the art technology to enhance
exploitation of reservoirs by extracting the maximum possible from wells. They
have reduced the flaring of gas from wells thus minimizing the carbon dioxide
emitted to the atmosphere. Their facilities are engineered to the latest industry
codes in order to maximize production while at the same time reducing the rate
of plant and equipment failure and by extensions accidents.
Being a Leader Final Project (Part 2) 5
Shell’s corporate social responsibility
Shell insists on using as many employees as possible from the areas in which it
operates, once the necessary skills are available. They have taken a decision to
put back money into the communities by assistance with social projects both
financially and by volunteering employee and technical assistance where
necessary. In 2010 they spent 13 Billion dollars on goods and services from
countries with lower income and over 121 million dollars in voluntary social
investments in 2010.
Shell has shown tremendous social responsibility by advising that it would take
care of oil spills at their location even if the spills were an act of sabotage. They
stated they are determined to be transparent in their response to oil spills and
have launched a website to track their response to and clean up of all oil spills at
their facilities. From a stakeholder like a local Shell employee’s standpoint this is
great news as they wouldn’t think they are working for a company that’s
destroying their environment but rather enhancing the community. This would
also help Shell’s image in the communities from which these employees come
from. Similarly an investor would also be impressed by this because it would
minimize the possibility of law suits which may inhibit the company to pay
dividends. Shell Nigeria has even shown faith in local communities by letting
them decide on and develop projects themselves while Shell takes care of the
funding.
Environmental responsibility
Shell has insisted that they always do impact assessments by trying to identify
the positive and negative impacts that can arise out of their activities. They
adhere to all local environmental regulations and consult with the people in the
community to work towards ways to continually improve the social and
environmental performance. The environmental impact assessment captures all
Being a Leader Final Project (Part 2) 6
relevant baseline data and goals are set and tracked throughout the life of the
project. This again has a positive effect on the investor stakeholder as it shows
the responsibility of Shell to take all necessary precautions before starting a
project which minimizes potential operational accidents to plant and environment
which bodes well for longevity and stability which would encourage an investor to
even invest more in the company.
Quality assurance
Shell is committed to the highest quality standard as required by law of all
countries in which it operates. This is evidenced by the phasing in of all barges to
be double-hulled and achieving these seven years ahead of the European Union
requirements. Similarly all their ships that transport crude are all double-hulled in
an effort to minimize spills from tankers. Here again the investor would be
impressed as important steps have been taken to protect the assets and the
environment. All of the above measures enhance the Shell CEO as a person who
is highly concerned with not just making profits, but doing so in a highly ethical
and corporately social and responsible manner.
Production capabilities
Shell is responsible for two percent of the world’s oil production and 3.3 percent
of natural gas production. Over the past five years they have spent over 2.1
Billion dollars on alternative energy development, carbon capture and storage.
Shell is a significant player in both the upstream part of the oil and gas business
as well as the downstream aspects. On the upstream side they search for oil and
gas in every place around the world. On the downstream side they operate over
thirty refineries around the world that convert raw crude into lube oils, gasoline,
bitumen, liquefied natural gas and a host of other products that the world
depends on.
Economic contribution
Shell has contributed approximately 3.5 billion in royalties and taxes paid to the
Nigerian government in 2010. Shell awarded 947 million dollars worth of
Being a Leader Final Project (Part 2) 7
contracts to Nigerian companies in 2010. Ninety percent of employees employed
in Nigeria are Nigerians. They contributed 59.8 million dollars to the Niger Delta
development fund and 22.9 million dollars to community development projects in
2010.
Wicked problems
It is quite clear to see that the issues present in this case make this a wicked
problem. Wicked problems can be defined as long complex, obscured, non linear
type problems that often do not have any clear cut wrong or right solution to
them. They tend to be like a virus that constantly mutating all the time, hence the
suggestion by most experts that one comes up with resolutions rather than
solutions to wicked problems.
(Rittel and Webber) suggest that there are ten criteria for wicked problems. Even
thought the criteria seem to overlap and that some scholars advocate they be
trimmed to five categories, it’s a mistake people make.
1. “There is no definite formulation of a wicked problem.”One would have to go
through an infinite amount of data to understand or solve a wicked problem
2.” Wicked problems have no stopping rules.”A tame problem is stopped when it
is solved. Wicked problems are resolved not solved so it never stops.
3. “Solutions to wicked problems are not true-or-false, but better or
worse.”Individual s differs according to their personal beliefs etc. and thus has
different perceptions on solutions.
4.” There is no immediate and no ultimate test of a solution to a wicked
problem.”Any solution today will spark controversy about another possible
solution the next day and so on.
5.” Every solution to a wicked problem is a "one-shot operation"; because there is
no opportunity to learn by trial-and-error, every attempt counts significantly.
Being a Leader Final Project (Part 2) 8
6.” Wicked problems do not have an enumerable (or an exhaustively describable)
set of potential solutions, nor is there a well-described set of permissible
operations that may be incorporated into the plan.”
7.” Every wicked problem is essentially unique.”Every wicked problem has its
own set of rules. There are no set patterns.
8. “Every wicked problem can be considered to be a symptom of another
[wicked] problem.” Because a wicked problem can go on and on and on, it more
than likely would have had its genesis from a previous wicked problem.
9. “The causes of a wicked problem can be explained in numerous ways. The
choice of explanation determines the nature of the problem's resolution.”There
are no guide lines for determining the right or wrong approach to solving wicked
problems.
10.” [With wicked problems,] the planner has no right to be wrong.”
Wicked problems can seem to go to infinity, and thus one should look for the
right resolution that fits the right time. Because unlike a tame problem which can
be classified as linear in nature and can be approach in a logical problem solving
manner and come up with a correct or incorrect solution.
Most wicked problems are stakeholder dependent, usually political professional
or generally social issues to which there is no right or wrong answer. This case is
classified as a wicked problem because of the following issues:
1. The issue of the oil spills.
2. The question of how did the spillage occur? Was it operational or
equipment failure? Was it sabotage?
3. Compensation for the people in the affected community.
4. The engagement of the services of unscrupulous companies lacking
certification.
Being a Leader Final Project (Part 2) 9
5. Whether or not the Government would mandate companies to clean up
their spillages and pay adequately people who are affected.
6. Dishonest government officials who may be in bed with the oil pirates.
7. The cutting out of all the illegal homemade refineries that are polluting the
forests of the Niger Delta.
Stakeholders
Stakeholders can be classified as, “persons or groups with legitimate interest in
procedural or substantive aspects of corporate activity. Stakeholders are
identified by their interest in the corporation whether or not the corporation has
any corresponding interest in them.” (Donaldson and Preston)
In this case it is evident that the CEO, an investor and a local Nigerian employee
are all stakeholders in Shell but albeit for their own different reasons. (Donaldson
& Preston) further emphasizes that each stakeholder should be given equal
attention at the same time.
This is further emphasized by the Stanford Research Institute quote,
“Stakeholders are those groups without whose support the organization would
cease to exist.” (SRI, 1963; quoted in Freeman,1984:31). In other words the
managers of corporation should encourage inputs from all stakeholders as a
means to an end, i.e. the organization’s ultimate goal of continuity, profitability,
growth and establishment.
To understand the principle of equal treatment to all stakeholders, consider a
scenario where the community is not taken into consideration and all employees
are external to the region. Obviously there will be no support for an entity
operating in this environment and it would be subject to protest and sabotage
from residents of the community. This would not auger well for the long term
sustainability of the organization and certainly would not encourage a
stakeholder like an investor to be interested in the business.
Being a Leader Final Project (Part 2) 10
In today’s world where businesses are highly scrutinized for the way they
operate both financial, sociably and environmentally, it’s of paramount
importance for the CEO as a stakeholder to steward his organization to be at the
cutting edge of all three facets and enhance his reputation as a leader.
An investor stakeholder would be concerned about the stability and longevity of
the company and would have issues with the possibility our huge law suits
imposed on Shell for damage to the environment caused by oils spills. This can
affect the company’s’ ability to pay dividends.
A local Shell employee may similarly have interest in Shells’ sustainability from a
personal standpoint of job security as well as concerns for the ecological
damages caused by spills that affect their families who depend on fishing and
planting the land for survival.
Being a Leader Final Project (Part 2) 11
Chapter 3
An Examination of the Various Approaches to Leadership
In this chapter we would review some of the different types of leadership which
can be used by all the parties concerned to try and resolve this wicked problem.
One of the issues with situations like these is the aggrieved parties always make
the assumption that the government is in collusion with the company and allow
them to have their way for in exchange personal benefits (bribery).
Charismatic leadership
Charismatic leadership is where the leader has the ability to effectively
communicate in such a manner that compels followers to be inspired and
motivated emotionally. Charismatic leaders are people who seem to have been
born with this innate ability to affect people’s inner emotions and get them to
follow their lead. However a leader should not just rely on charisma alone to lead
as this can be a problem for succession planning. The following leader may not
have any charismatic qualities. Charismatic leadership usually is a good
enhancement to other forms of leadership. A modern day example of a
charismatic leader is Nelson Mandela.
Transactional leadership
Transactional leadership is basically like a give and take business relationship.
You have something I want and I have something you want. This is the basis for
Being a Leader Final Project (Part 2) 12
the term as it is in fact a tran-saction. Here the leader is known to have control
over his or her followers and can provide reward or punishment depending on
whether a deed gets done or not. Transactional leadership is deemed to be old
school leadership by some people; however it is still one of the more common
forms of leadership in the world today. Transactional leadership doesn’t
guarantee loyalty from one’s follower.
Transformational leadership
Trans-formational leadership seeks to form a partnership where the leader and
followers work together for the good of the organization or cause and seek to
effect changes that would transform the situation into something mutually
acceptable to both parties. Usually transformational leadership is intertwined with
charismatic leadership as leaders of this disposition tend to inspire and motivate
followers to go way beyond the call of duty without looking for any reward, unlike
transactional leadership.
According to Bass and Avolio, transformational leaders display behaviors
associated with five transformational styles: “Idealized behaviors: (living one’s
ideals), Inspirational motivation: (inspiring others), Intellectual stimulation;
(stimulating others) and Individualized consideration: (coaching and developing
others).” (Bass and Avolio, 1994)
Transformational leaders can therefore be looked at as a sort of mentor and
motivator that encourages individual members to look beyond their individualism
and seek to enhance each other for the benefit of the whole group. This way they
achieve higher levels of achievements than they would have as individuals.
Throughout the eight fast paced weeks of this module on leadership I have been
enlighten by the knowledge gained from the literature as well as the invaluable
exchanges with my fellow students and instructor over the blackboard discussing
various topics. This is where I have learned tremendously because we are all
from different cultural backgrounds and what we may take for granted in our part
of the world is not necessarily so in others. Also it was amazing to see how
Being a Leader Final Project (Part 2) 13
different cultural heritage impacts upon how leaders operate in different parts of
the world.
Had I been the CEO of Shell I would have viewed this case as an opportunity to
heed the advice of Giam Sweigers- “Never waste a good crisis” and view this
situation as an opportunity and not a headache. I would have used a
collaborative approach to resolve this situation as well as follow the
transformational leadership approach. This would have involved keeping
meetings with the head of all the main stakeholder groups, principally among
them are the government, the communities in the affected areas, the
environmental interest groups. I would gather a group of my top executives in
Shell Petroleum Development Company of Nigeria headed by the CEO and first
get all the facts of the situation in the Niger Delta region. I would be up front and
admit if we were at fault and advice what action we would take to rectify such
situations. One of the mistakes leaders make is not admitting wrong doings and it
creates feeling of mistrust which is difficult to overcome.
As (Margolis and Stoltz 2010) stated,” collaborative, inquisitive and encourage
people to generate their own options and possibilities.” For this situation to be
resolved it must be an all inclusive effort and every one must be heard. Shell’s
integrity can be reinforced by testimonies from local shell employees, as they
would quicker believed by the Nigerian stakeholders than a foreigner. I would
stand by the Shell brand of ethics and do a presentation of all that Shell has done
for the communities and what it has contributed to the development of the
country as well as the plans for the future continuity of operations in Nigeria.
As the CEO of Shell “I would state my personal brand that is a reflection of the business as state this openly for all to know and be committed and do not compromise this under any circumstances”. Sanjiv Ahuja–Chairman, Orange, UK
Being a Leader Final Project (Part 2) 14
Chapter 4
Conclusion/Recommendations
In concluding this project and survey of literature on the Shell oil company it can
be said that the company has high ethical standards and generally stands by its
words. Shell is at the forefront of technology and has a very good safety record
throughout all its operations worldwide. It clearly assist in all communities in
which they operate with many social projects, employing locals once they have
the necessary skills required and even go as far as training people with skills so
that they can be employed.
Findings on Shell operations in the Niger Delta
Most of Shell producing fields is located in the Niger Delta region in Nigeria. Shell
has stated that any oil spillage whether as a result of failures or sabotage would
be cleaned up at their expense and that the appropriate remedial work would be
done. The problem began with the head of the Environmental Health Services
Provider Association of Nigeria insisting that the government force Shell to pay
compensation to communities affected by oil spillages from their operations.
Shell has reported that most of the spills have been caused by illegal refining and
theft at their facilities and thought they are willing to clean up the spills they are
unable to do so effectively because of the militant gangs operating in the area.
There appear to be several corrupt government officials working with the pirates
who steal oil from Shells’ facilities using badges that transport the oil to tankers
anchored off the coast.
The wicked problem
This situation has resulted into a wicked problem with many stakeholders as
mentioned by (Conklin and Weil 1997). Each stakeholder would have their own
perspective on how the situation should be resolved. The nature of these
problems prohibits them from being solved by any one individual and I suggested
Being a Leader Final Project (Part 2) 15
a collaborative effort on all the stakeholders to find a resolution that is workable
for all parties concerned.
Stakeholders
The different stakeholders in this case would all have their own individual feeling
about the issues at hand and should be encouraged to keep regular meetings as
it’s the only plausible way to effect come to a resolution of the situation. The CEO
would be wise to reiterate Shells’ commitment to working with the people of the
Niger delta in remediating areas affected by spills and even though they may not
have been caused by Shell to foster confidence in the company. The government
would have to assist by weeding out corrupt politicians who are in concert with
the pirates who are stealing oil from Shells’ facilities on a daily basis.
Finally this situation is a very complex one with the future of Shell Nigeria
operations hanging in the balance. Shell would be well advised to get into serious
discussion with the government and the environmental groups to find workable
solutions that are acceptable to all concerned. Next they would have to find some
means to meet with the leaders of the militant groups who are a constant source
of harassment to the government and sabotaging of Shells’ facilities. Shell being
the outsider may have to even go beyond what they are presently doing and give
more to the people of the Niger Delta region in an effort to win them over as
many of these people are extremely poor and live below the poverty line.
Being a Leader Final Project (Part 2) 16
Reference List
Bass, B.M.& Avolio, B.J. (1994) Improving organizational effectiveness
throughtransformational leadership. Thousand Oaks, CA: Sage Publications
Conklin, E. J. & Weil, W. (1997) ‘Wicked problems: naming the pain in
organizations’. Available from http://www.leanconstruction.dk/_root/media/15.pdf
Freeman,R.E. 1984.Strategic management: A stakeholder approach. Boston:
Pitman.
Donaldson, T. & Preston, L. E. (1995) 'The stakeholder theory of the corporation:
concepts, evidence, and implications', The Academy of Management Review, 20
(1), pp.65–91.
"Never Waste a Good Crisis” (Giam Swiegers)
http://liverpool.fiftylessons.com/viewlesson.asp?l=1213
http://search.ebscohost.com.ezproxy.liv.ac.uk/login.aspx?
direct=true&db=buh&AN=9503271992&site=ehost-live&scope=site
http://www.shell.com/home/content/footer/about_this_site/shell_websites/
Rittel, H. and Webber, M. (1973). "Dilemmas in a General Theory of Planning".
Policy Sciences, Vol. 4, pp 155-169. Elsevier Scientific Publishing Company, Inc:
Amsterdam.
Sanjiv Ahuja–Chairman, Orange, UK50 Lessons Reference #325 © 2004–2010, Fifty Lessons Ltd. All rights reserved. Reproduction in whole or in part is strictly prohibited.
Being a Leader Final Project (Part 2) 17
Appendices
Being a Leader Final Project (Part 2) 18