TOPIC: TITANIC/BHOPAL DISASTER AND

CORPORATE GOVERNANCE

Professor: A. Kuppuswamy

Indian Academy School of Management Studies (IASMS)

Submitted by: Priyabrata bhattacharjee

Abstract

Scandals have always been part and parcel of corporate world as in any other walk of life. Unfortunately no other walk of life continuously and consistently propagates ethics and transparency as much as corporate do. Generally business is set up with the motive of making money. It should follow some specific principles, rules and guidelines which are widely accepted for carrying on a healthy business activity. The history is an evidence of many disasters which resulted as a result of violation of ethics in the business. Some of the examples that we can state here are the disasters of Hiroshima and Nagasaki, Bhopal tragedy, titanic sink and many more. The topic revolves around the dreadful incidence of Bhopal tragedy and the Titanic sink. The ethics if was sincerely followed would not have resulted in such misfortunes.

It is the responsibility of every organization to see that it is not indulging in any unethical activities to make profit and is instead beneficial to everyone.

Business Ethics

Business ethics is the branch of ethics that examines ethical rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and any special duties or obligations that apply to persons who are engaged in commerce. Those who are interested in business ethics examine various kinds of business activities and ask, "Is the conduct ethically right or wrong?"

Business ethics is a form of applied ethics, a branch of philosophy. As such, it takes the ethical concepts and a principle developed at a more theoretical, philsophical level, and applies them to specific business situations. Generally speaking, business ethics is a normative discipline, whereby particular ethical standards are assumed and then applied. It makes specific judgments about what is right or wrong, which is to say, it makes claims about what ought to be done or what ought not to be done. While there are some exceptions, business ethicists are usually less concerned with the foundations of ethics (met ethics), or with justifying the most basic ethical principles, and are more concerned with practical problems and applications, and any specific duties that might apply to business relationships.

Good business ethics should be a part of every business. There are many factors to consider. When a company does business with another that is considered unethical, does this make the first company unethical by association? Some people would say yes, the first business has a responsibility and it is now a link in the chain of unethical businesses.

Importance of business Ethics

For a business to achieve long-term profits, customer relationship is of utmost importance. To gain a long-term relationship with customers and achieve customer return for the business, the business needs to be based on ethics. The trustworthiness of a business, its customer service, its customer care, its way of dealing with customers and its urge to retain their old customers, is a part of the business ethics. Business ethics leave a long-lasting impression on the customers and the impression on their minds builds trust, fetching a business more customers while retaining the older ones.People who seek motivation behind being ethical should understand that they are ethical by definition. Ethics is an integral part of running a business and hence ethical values accompany business by default. Without following certain ideals in business, one cannot become successful. Success that is attained without a foundation of strong ethics is bound to be short-lived. A business cannot continue to prosper without an ethical base. A few successes can be coincidences or flukes but persistent success can only be a result of a strong foundation of ethics.The benefits given by the business organization should not be used in an unfair manner. The use of company resources for personal benefits and taking an undue advantage of business resources is completely unethical. Using the wealth of the business for personal reasons is not ethical. Using company funds for personal reasons is unethical. A thoughtful and a careful utilization of company resources is a part of business ethics. A vigilant and a prudent use of resources is an essential component of ethics in business.Accepting bribes, pleasing the so-called 'important' clients, favoring a part of the customers while being unfair towards the others is against business ethics. The primary aim of business is not just to maximize profits. It is rather to cater to the needs of society and work towards benefiting the masses.Experts in business management and researchers have endorsed the need for businessmen and company professionals to study ethics. They have asserted the importance of founding business on ethical values and following them. They have urged management professionals to adhere to ethics and accept it as a part of business. Ethics remain being important in business and strong ethical values shall take the business a long way!

Titanic Disaster

An Overview

This paper describes the cause in the part of the crew member and the inadequacies in part of shipping company to follow unethical practices which lead to the legendary Titanic disaster.

RMS Titanic was the largest passenger steamship in the world when she set off on her maiden voyage from Southampton, England to New York City on 10 April 1912. Four days into the crossing, at 23:40 on 14 April 1912, she struck an iceberg and sank at 2:20 the following morning, resulting in the deaths of 1,517 people in one of the deadliest peacetime maritime disasters in history.

An Olympic-class passenger liner, RMS Titanic was owned by the White Star Line and constructed at the Harland and Wolff shipyard in Belfast, Ireland. She set sail for New York City with 2,227 people on board. The high casualty rate when the ship sank was due in part to the fact that, although complying with the regulations of the time, the ship carried lifeboats for only 1,178 people. A disproportionate number of men died due to the women and children first protocol that was followed.

 “After crossing the English Channel, the Titanic stopped at Cherbourg, France, to board additional passengers and stopped again the next day at Queenstown (known today as Cobh), Ireland. As harbor facilities at Queenstown were inadequate for a ship of her size, the Titanic had to anchor off-shore, with small boats, known as tenders, ferrying the embarking passengers out to her. When she finally set out for New York, there were 2,240 people aboard.”  

Titanic was designed by some of the most experienced engineers, and used some of the most advanced technologies available at the time. It was a great shock to many that, despite the extensive safety features, Titanic sank. The frenzy on the part of the media about Titanic's famous victims, the legends about the sinking, the resulting changes to maritime law, and the discovery of the wreck have contributed to the interest in Titanic.

The ship was doomed and it was slowly sliding into its watery grave. But why did the largest, most advanced ship of the century sink? 

It was Captain Smith's fault

This was Captain E. J. Smith's retirement trip. All he had to do was get to New York in record time. Captain E. J. Smith said years before the Titanic's voyage, "I cannot imagine any condition which would cause a ship to founder. Modern shipbuilding has gone beyond that." Captain Smith ignored seven iceberg warnings from his crew and other ships. If he had called for the ship to slow down then maybe the Titanic disaster would not have happened.

It was the shipbuilder's fault

 About three million rivets were used to hold the sections of the Titanic together. Some rivets have been recovered from the wreck and analysed. The findings show that they were made of sub-standard iron. When the ship hit the iceberg, the force of the impact caused the heads of the rivets to break and the sections of the Titanic to come apart. If good quality iron rivets had been used the sections may have

stayed together and the ship may not have sunk.

It was Bruce Ismay's fault

Bruce Ismay was the Managing Director of the White Star Line and he was aboard the Titanic. Competition for Atlantic passengers was fierce and the White Star Line wanted to show that they could make a six-day crossing. To meet this schedule the Titanic could not afford to slow down. It is believed that Ismay put pressure on Captain Smith to maintain the speed of the ship.

It was Thomas Andrews' fault

The belief that the ship was unsinkable was, in part, due to the fact that the Titanic had sixteen watertight compartments. However, the compartments did not reach as high as they should have done. The White Star Line did not want them to go all the way up because this would have reduced living space in first class. If Mr Andrews, the ship's architect, had insisted on making them the correct height then maybe the Titanic would not have

sunk.

It was Captain Lord's Fault

The final iceberg warning sent to Titanic was from the Californian. Captained by Stanley Lord, she had stopped for the night about 19 miles

north of Titanic. At around 11.15, Californian's radio operator turned off the radio and went to bed. Sometime after midnight the crew on watch reported seeing rockets being fired into the sky from a big liner. Captain Lord was informed but it was concluded that the ship was having a party. No action was taken by the Californian. If the Californian had turned on the radio she would have heard the distress messages from Titanic and would have been able to reach the ship in time to save all passengers.

Enquiries:

 Both America and Britain held inquiries into the disaster. Both reached the almost identical conclusions.

 The American inquiry concluded that Captain Smith should have slowed the speed of the boat given the icy weather conditions.

 The British inquiry, on the other hand, concluded that maintaining speed in icy weather conditions was common practice.

 Both inquiries agreed on who was most at fault - Captain Stanley Lord of the Californian. The inquiries stated that if Lord had gone to Titanic's assistance when the first rocket was seen then everyone would have been saved.

 Both inquiries made recommendations:

 All ships must carry sufficient lifeboats for the number of passengers on board. Ship radios should be manned 24 hours a day. Regular lifeboat drills should be held. Speed should be reduced in ice, fog or any other areas of possible danger.

Ethical issues for Titanic Disaster

The ship was considered to be one of the largest, luxurious and used most advanced technologies of the time. But the steel that was used for its construction was not fit for the temperature in the Atlantic Ocean. As the water came in contact with the keel i.e; the bottom part of the ship, it started becoming brittle and as the time passed by the degree of weakness grew stronger and stronger. Finally when the ship collided with the iceberg it broke down as chandelier hit by the stone.

Secondly, the numbers of lifeboats were insufficiently less which counted only 20 which could accommodate around 1178 people. Whereas the capacity of Titanic was 3600 passengers, but carried about 2227 of them during its voyage. It proves that the ethics was not at all followed by its ship building company i.e. White star line.

The third and the most important issue for the disaster were the crew members of her. Titanic was headed by Captain Edward J. Smith along with Jack Phillips and Harold Bride. On the second day of the voyage captain had got signals of iceberg on his wireless on the next day as they got the message of numerous icebergs but they termed it as” non essential messages” and hence did not inform it to the bridge . The very next day while sailing they spotted a large iceberg directly ahead of the ship. The Iceberg, right ahead!” It was too late by that time and the accident had to happened, the legendary titanic struck in the iceberg taking the life of around 2000 precious humans.

The Bhopal gas tragedy 1984

Introduction:

This paper describes the inadequacies in the response of the UnionCarbide Corporation to the accidental release of the highly toxic gas, methylIsocyanate, from its plant in Bhopal, India in 1984. Over 20,000 people are estimated to have died from exposure to this gas since 1984, with some 120,000 chronically ill survivors. Union Carbide fought to avoid compensation or to keep it very low. The long, much delayed process of distributing compensation focused on minimizing payouts to victims. The corporation tried to blame the accident on a disgruntled employee, whereas key parts of the safety equipment designed to stop the escape of the gas were not functioning or were turned off. The corporation has always sought to underplay the health effects and has refused to release its research on the health impacts of the gas (which could have helped develop more effective treatment). In addition, the medical services in Bhopal have failed to develop a health care service that offers sustained relief and treatment to the communities most affected. This paper also describes the work of the Sambhavna Trust, a charitable body set up to work with the survivors, and its programme to develop simple, more effective, ethical and participatory ways of carrying out research, monitoring and treatment. Its programmes combine traditional and western systems for health care and it ensures that individuals and communities are actively involved in all aspects of public health.

An Overview

The Bhopal disaster (also referred to as the Bhopal gas tragedy) is the world's worst industrial catastrophe. It occurred on the night of December 2–3, 1984 at the Union Carbide India Limited (UCIL) pesticide plant in Bhopal, Madhya Pradesh, India. A leak of methyl isocyanate (MIC) gas and other chemicals from the plant resulted in the exposure of several thousands of people. Estimates vary on the death toll. The official immediate death toll was 2,259 and the government of Madhya Pradesh has confirmed a total of 3,787 deaths related to the gas release. [ Other government agencies estimate 15,000 deaths. Others estimate that 3,000 died within weeks and that another 8,000 have since died from gas-related diseases. A government affidavit in 2006 stated the leak caused 558,125 injuries including 38,478 temporary partial and approximately 3,900 severely and permanently disabling injuries.

UCIL was the Indian subsidiary of Union Carbide Corporation (UCC). Indian Government controlled banks and the Indian public held 49.1 percent ownership share. In 1994, the Supreme Court of India allowed UCC to sell its 50.9 percent share. The Bhopal plant was sold to McLeod Russel (India) Ltd. UCC was purchased by Dow Chemical Company in 2001.

People were terrified, as they woke up to find themselves surrounded by dense poison clouds. Neither Union Carbide nor the local authorities provided direction, support, help or guidance that

night or in the following days. In the intervening years, victims’ organizations have fought relentlessly for justice, recognition and support.They have received little either through the legal process or from the Indian government.The fact behind the incident is that MIC is a highly volatile gas which must be stored at zero degrees centigrade. Yet the refrigeration unit in the factory had been shut down to cut costs as per directions from Union Carbide headquarters in Danbury, USA. Any escaping MIC should have entered a caustic-soda scrubber to be neutralized. The scrubber was not operating on the night of the disaster. Escaping toxic gases were supposed to go to the flare tower, where a pilot flame would burn off the gas. The pilot flame was off and the pipeline to the flare tower disconnected. Water sprayers designed to take care of leaks in the atmosphere did not have sufficient pressure to reach the required height. The sabotage claim, therefore, is unsustainable. But even if it were credible, the hazardous design of the plant and the blatant lack of safety systems as well as reckless cost-cutting are sufficient to underline the liability of the US Corporation.

Ethical Issues For Bhopal Gas Tragedy:

The corporation has always sought to underplay the health effects and has refused to release its research on the health.

The medical services in Bhopal have failed to develop a health care service that offers sustained relief and treatment to the communities most affected.

The corporation and its chairman, Warren Anderson, were charged with manslaughter, grievous assault and other serious offences. The Indian government did not take serious action against it.

Neither Union Carbide nor the local authorities provide supportive help or guidance to the needy.

Proper preventive measures were not taken care of, which resulted in leakage of MIC which is a very toxic and volatile in nature leading to loss of many lives.

UCC to make profit violated all legal rules and regulation and did not offerCorporate Social Responsibility.

As corporate and businesses gain importance worldwide and in India, corporate social responsibility is becoming a key component of company policy. Shareholders, consumers, unions, employees, the government, NGO’s, and the local community are all showing an increasing interest in the measure of social responsibility demonstrated by the corporate sector. But what exactly is Corporate Social Responsibility (CSR)?

A generally accepted statement about CSR could be that it is the responsibility of the business towards the society that it takes from. It is the management of the business in a manner such that it produces a positive impact on society. Critics of CSR say that the primary purpose of a

business is to make profit, and that it has no additional duty as long as it complies with all rules and regulations. Not doing anything negative might seem easy, but it could actually go a long way.

It would mean that the company pays all its employees right from management to manual labour fair wages, provides everyone sick leave, insurance, and good working conditions with safety regulations in place. It does not use child labour, and gives reasonable compensation toward those who might be negatively affected by the company’s actions. It would mean that it protects the environment to the best of its ability within the sphere of its operations, pays all taxes and never makes false claims to the consumers or shareholders.

Could all of the above actually be included as a part of CSR? Some would say that it is all a business has to do, and nothing more is required. A business is not an entity which is supposed to directly serve the people; it only has to make money according to fair means.

If you look into the policies of Indian corporate, almost all the major companies have well-formed CSR policies. These include community development programmes, upliftment of the underprivileged through health, education, etc. It would seem like the corporate are all putting a fair amount of their profit into actively doing something positive for society.

At the same time, of course, we hear of labor unions, strikes, coercive land acquisitions, destruction of the environment, and so on. What is more important – that a business should do something positive, or that it should not do anything negative?

Perhaps one of the starkest examples of the failure of a corporate to do its duty is the incident of the Bhopal Gas tragedy of 1984, when gas leaked from a Union Carbide plant, which resulted in the death of over 10,000 people and is acknowledged as the worst industrial disaster in history.

Some say CSR is taken up by companies in an effort to detract the attention of the public from activities which are unethical, like in the case of cigarette manufacturers, or companies which make use of child labour. In these cases, it is important to remember that doing something positive does not cancel out the effect of negative consequences of their actions that emanate from the core business itself.

So perhaps, CSR is not an obligation upon a business. But these days, all consumers like to feel that the enterprises they support are doing ‘their bit’ toward society. Shareholders look into CSR policies before investing. Even fresh graduates are keenly interested in a prospective company’s CSR mandate. Not being socially responsible, it seems, is starting to become taboo in the corporate world.

Ultimately, it is more beneficial to the company to have CSR activities than not. They are the ones who gain goodwill; they are the ones who make more profit. This is, after all, the aim of any business enterprise. And nobody is complaining, for we seem to have reached a win-win situation.

Corporate Governance

Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, the board of directors, employees, customers, creditors, suppliers, and the community at large.

Report of SEBI committee (India) on Corporate Governance defines corporate governance as the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal & corporate funds in the management of a company.” The definition is drawn from the Gandhian principle of trusteeship and the Directive Principles of the Indian Constitution. Corporate Governance is viewed as business ethics and a moral duty. See also Corporate Social Entrepreneurship regarding employees who are driven by their sense of integrity (moral conscience) and duty to society. This notion stems from traditional philosophical ideas of virtue (or self governance) and represents a "bottom-up" approach to corporate governance (agency) which supports the more obvious "top-down" (systems and processes, i.e. structural) perspective.

Bhopal Gas Tragedy

The recent court verdict on the Bhopal gas tragedy delivered after 26 years is a classic story of how India as a nation succumbs to the mighty corporate power of the Multi National corporations. The tragic episode also reveals the double standards of the United States government and the multinational corporation’s .The Indian government, judiciary, political system, large sections of civil society    could only further the interests of the MNC’s at the cost of the poor victims of the horrifying gas tragedy.

But, the Supreme Court diluted the case by altering the charge from culpable homicide to criminal negligence.  The culpable homicide   attracts ten year punishment while criminal negligence invites only two year imprisonment. .This is the travesty of justice. .After 26 years, the accused got only two year imprisonment and was immediately released on bail. Not a single American was punished. The CEO of the MNC, who is the prime accused is still not punished. The United States even now rejects any request for extraditing Warren Anderson, the CEO of the MNC. He was declared as a proclaimed   obscandor. The Indian government and the United

States claim that Anderson is not found though the TV channels show us the house of this prime accused in the affluent suburbs of New York. The US government cannot find someone who is very much living in the country under full media glare. But is involved in an incessant war in Afghanistan to locate Bin Laden and Mullah Omar.  The US double standards in this regard are very clear.

In fact, Anderson came to India few days after the tragedy. He was arrested at the Bhopal Airport. But, he was escorted to the company guest house. He was released on bail within two hours. Then he was taken in the government car to the Airport. He was taken back to Delhi in Madhya Pradesh state government aircraft. The state government aircraft cannot be provided unless there is an explicit order from the state chief minister.  He happily went  to United States .Now, the ruling congress party is busy in defending the dubious role of the then chief minister Arjun Singh and the then prime minister Rajiv Gandhi.  It is shocking to note that the congress government has now appointed Group of Ministers GOM to look into the matter and submit a report in ten days. The judicial system took 26 long years to deliver too little punishment after too long time.  The government was in a deep slumber all these years. Not just, the congress, the BJP led NDA government and the United Front governments were  Luke warm in their response  and did precious little to get Anderson extradited. The then CBI official even publicly stated now that the premier investigating agency got written instructions from the ministry of External Affairs to go slow on the efforts to get Anderson extradited.

The political system simply crawled before the   MNC to protect the corporate chief. The victims of the Bhopal Gas tragedy got on an average compensation of a meager Rs. 12,000   per individual. This is less than what US president demanding for marine life due to oil leak in the Gulf of Mexico. The lives of Indians are not worth even the marine life.

Notwithstanding the travesty of justice in Bhopal, the central government is moving heaven and Earth to enact the civil nuclear liability bill. This bill is aimed at ensuring that the foreign equipment suppliers   do not have any liability if a nuclear accident occurs. The U S companies want full protection from any liability as they are all set to export nuclear equipment worth billions of dollars. The central government in an unabashed manner is determined to harm the interests of Indian people to protect the profits of US companies. The civil nuclear liability bill should be dropped immediately at the back drop of the experience of Bhopal verdict. Otherwise, the victims of nuclear accidents cannot even file cases and get even this negligible compensation.

Titanic

The calamity of the ship which was thought too big to sink did not capsize the company that owned it. But the White Star Line, which had roamed the seas through wars, depressions and revolutions since the mid-1800s, was unable to survive the greed, hubris and deceit of one man. It is an experience that carries some valuable lessons for today’s financial empires and Wall Street titans as well.

On a crystal-clear, star-filled April evening in 1912, what had been to that point an astonishing triumph of human imagination and engineering suddenly changed into a tragedy on a horrific and incomprehensible scale. It was 11:30 pm on the night of April 14th when the ship’s lookout called down to the bridge. What took millions of words in plans, designs, work orders, contracts and printed material was about to be undone by a mere three: “Iceberg right ahead.” The second officer then made the fateful, and, by most later accounts, calamitous, decision to stop and reverse propellers. Less than three hours later, in the early morning of April 15th, RMS Titanic descended to the bottom of the Atlantic Ocean, taking 1,517 souls with her.

One who did not perish that night was the chairman of the Titanic’s owner, White Star Lines. J. Bruce Ismay’s survival was not exactly miraculous. Fulfilling Montaigne’s aphorism, Ismay did not enjoy the reputation of a hero because of his escape that night, either to the general public, who tended to vilify him as coward, or to his valet, Richard Fry, who was not as fortunate as his master in avoiding the cold clutch of the cruel sea. William Henry Harrison, Ismay’s secretary, also went down with the other 1,516 men, women and children.

The disaster, and all the morbid press it generated, along with hundreds of lawsuits, did not end the White Star Line, however. It steamed on for some years, until it was bought up in 1927 by Lord Kylsant of Carmarthen, becoming a part of the Royal Mail Steam Packet Company, the largest shipping empire of the time.

Lord Kyslant had a well-deserved reputation as something of the “Napoleon of the seas” for his ability to conquer his competitors and impress investors. Like Conrad Black -or Lord Black of Crossharbour, as he prefers to be known even while residing at the Coleman Correctional Facility in Florida- he steered a course of deference-producing success until it was halted by an encounter with prison-confining deceitfulness.

He was a larger-than-life figure in London’s business and social circles, acquiring many honors along the way. He financed his empire through massive amounts of debt and the generous use of other people’s money. The Royal Mail was a darling of the stock market at the time and both its fortunes and Kylsant’s own lavish life style required that the shares of the company be kept high. Like others before and after him, Kylsant made a decision at some point that if his business could not be made to look good on its own merits, a little fudging with the figures might help. So it was in 1931 that Kylsant found himself charged with accounting fraud and was later sent to prison for a year. Lord Kylsant’s long fall from grace shocked the world and led to the disintegration of the

company, including the fabled White Star Line. There was a British government-forced merger with Cunard, but White Star never sailed again or operated under under its own flag.

In an irony as large as the name Titanic itself, the calamity of the ship which was thought too big to sink did not capsize the company that owned it. But the White Star Line, which had roamed the seas through wars, depressions and revolutions since the mid-1800s, was unable to survive the greed, hubris and deceit of one man.

Somewhere in all of this, even without the benefit of the binoculars that the Titanic’s lookouts did not have (they were locked in a cabinet and the key was misplaced during the ship’s test runs), one might discover a lesson about the recent financial disaster that has been unleashed upon the stock market and the global economy. Its cause was not natural or celestial; it was not preordained or the result of an asteroid hitting the earth. It was brought on by more common suspects: everyday greed, a giddy sense of intoxication induced by fast money that made a whole crew of business decision-makers and investors laugh at the unfashionable attire of risk, an obliviousness to duty (and even common sense) on the part of directors and regulators, and an epidemic of self-delusion afflicting too many CEOs and Wall Street titans that they, also, were too big to fail and too smart to ever encounter the sudden reversal of the propellers of fortune.

Conclusion:

The participation of individuals in a community is crucial for the success of any community-based health program and avoiding such misfortunes. Through educational campaigns and meetings awareness among the people can be generated. The trust perceives its work as part of the survivors’ struggle in Bhopal and works closely with the survivors’ organizations. The legendary Titanic sink would not have come to realty if business ethics would have been followed carefully. Thus from the above disasters we can draw the conclusion that if business and ethics don’t go hand in hand leads to disasters.