Course Code: MGN 645 Course Title: BUSINESS ETHICS AND CSR

Course Instructor: Prof Megha Mehta

Academic Task No.: 1 Academic Task Title: case based assignment

Date of Allotment: 1-9-15 Date of submission: 30-09-15

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I declare that this Assignment is my individual work. I have not copied it from any other student’s work or from any other source except where due acknowledgement is made explicitly in the text, nor has any part been written for me by any other person.

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INTRODUCTION

Crane and Mitten (2010) ‘’business ethics are studies of activities and situation and decisions of businesses in which a business wrongs and rights are properly addressed”

Shell global oil and Gas Company was founded in 1886 by Marcus Samuel in England with headquarters in Netherlands. The company is today regarded as one of the biggest oil Company. In 1907 Shell merged with Royal Dutch Petroleum Company in other to increase its market share, the merger significantly transformed the company to what it is today. Shell global became the major supplier of petroleum during and after the World War 2. Shell has about 25,000 petroleum and gas station in the United States alone and several others in other nations of the world. Shell is also one of the world most profitable companies with revenue of $451.2 billion and income of $16.5 billion (shell.com)

This report will carry out a responsible business practice of shell oil and to ascertain if this responsible practice conforms to the responsible corporate ethics and behaviour.

ETHICAL ISSUES FACED BY THE COMPANY

OPERATIONS

Shell Company is considered as one of the top most providers of efficient and cleaner burning fuel in the world, in other words for shell to uphold its position in the market and also for them to compete shell adopts a differentiation strategy. This strategy has a chief effect on its operational activities, the project-delivery capabilities and technology.

In order to create a more effective and efficient return to shareholders, other strategies include investing in low cost and quality energy to customers.

More profitable production and lower exploration cost helped recompense for the sharp fall in the price of oil and also raised the profit significantly, in just 3 months the profit increased from $3.6billion to $5.8billion, approximately 31%.

Bp plc, Total and Chevron are the top competitors of shell. Shell do not responsibly adapt to competition and legislation laws by government and often chose bribery as its way out, this can have a undesirable impact on shell as their reputation and profit will drastically reduce as bribery and corruption reduces the rate of competition in a market, a recent business ethics survey conducted by shell shows that 75% of shells retailers who participated believe that shell’s management was very corrupt, greedy, incompetent and unethical.

In 2004 shell admitted to have provided untrue information and also admitted to have been involved in corruption practices in which shell bribed officials to hasten the importation of oil drilling machinery to Brazil, Angola and Nigeria.

Shell has often been practicing a double standard by operating with advance and cleaner facilities in developed countries and traditional and unhygienic facilities in developing countries like Nigeria in which shell releases about 19 tons of sulphur dioxide in poor communities like Ogoni and Bodo on a daily basis, in countries like Denmark the sulphur dioxide released by shell is extremely lower than the released sulphur dioxide in Nigeria. Shell often refuses to accept full responsibility for the re-occurring spillage and blames it on their machineries; this shows how unethical shell is.

A lot of people have been campaigning for shell to stop practicing double standards, the campaign have achieved some level of successes as it made shell amended some its policies after the campaign, yet shell still continue to abuse these developing communities and environment, communities like Ogoni particularly Bodo that its core occupation is fishing and farming and has been negatively affected by shells continuous oil spillage, and pollution which has led to environmental and ecological degradation in most of the oil producing communities in Nigeria.

MNCs like shell have to be responsible in their operations and not irresponsible to the environment in which they operate in, shells immoral behaviour disrupts the human rights act; shell corrupted witnesses to swear against Ken Saro Wawa, and had him and other prominent Ogoni men executed and also caused the demise of over 750 people in Ogoni land. This merciless act was perfectly executed with the full corporation of both Shell and the Nigerian government, Shell delivered ammunition to the ruthless Nigerian security forces also witnesses and provided false information against the people of Ogoni, a community which has generated shell billions of dollars.

Almost all of shells processes have always been inadequate and disastrous to the communities they operate in.

HUMAN RESOURCE MANAGEMENT

Shell staffs more than 92,000 in over 70 countries of the world, workers are required to undertake an online valuation and if found appropriate an interview would then be arranged before they are been presented the job, this process takes less than a month shell provides employment openings to the local environment in which it functions in, they train and develop local suppliers and contractors. These relates with Friedman’s theory which states that’’ businesses shouldn’t just be all about profit making, but also ought to be socially and environmentally conscience by providing employments opportunities to its communities by not been discriminatory’’

Shell’s workers are goal getters; this is why shell denotes them as key to the efficient and effective delivery of the company’s strategy.

Shell invests a lot of money in the training and development of its workers in other to bring out the best in them and also to uphold its competitive advantage as the finest provider of cleaner

burning fuel. Shell is stared as one of the greatest company when it comes to gratifying performance; employees who do well are remunerated through cash and discounts in sporting facilities, dental and medical care depending on their geographical location.

However Shell do not fully obey to the drugs law act, in 2013 shell was blamed of selling alkyl nitrites in one its south Yorkshire garage, alkyl nitrites are very damaging to the body and can cause demise if swallowed, a local of Yorkshire told of her aversion and how appealed she was to see alkyl nitrites been sold next to children’s sweet shelve in shell garage, this can have a harmful impact on kids as they will grow with the opinion that it was just regular for them to buy and ingest alkyl nitrites. Shell spokesman disproved the allegation, stating that his company does not permit the sale of alkyl nitrites in any of its garage and is very keen to making sure that alkyl nitrites are removed from any of its garage if any is found.

Shell in 2007 noted more loss of staff than any other multimillion dollar oil company in the world, with death rate twice higher than BP, 28 contractors and two employees of shell were killed.

The demise of these contractors and employees would have been prevented if shell had taken its risk assessment very seriously

Furthermore shell workers are mostly sufferers of their lack of examination of faulty gear’s, in 2008 shell asked to pay $109,600 for not adequately training its employees in one of its largest refinery ‘’Anacortes’ ’on how to properly tackle emergencies.

MARKETING

Calling to mind some of the covered unethical shell processes identified previously, it is also observed in its marketing segment of operation where unfair or wrong marketing steps have been assumed by shell to better its brand image

Toymaker Company Lego was enforced not to renew its contract worth £68 million with shell; Greenpeace an environmental pressure group blamed shell of using the toymaker brands to build brand trustworthiness with the next generation. Lego spokesman ‘’ we do not like the way used by Greenpeace to report the issue, as this may have produced some difference with our stakeholders about the way we operate. We want to firmly say that with the way things seems to be we are promising you all that as soon as our present contract ends with shell we are not going to renew it anymore’’

Greenpeace considers the toymaker company ‘’Lego’’ should strictly and sensibly choose their partners to avoid them associating with bad companies such as shell. Greenpeace environmental pressure group uploaded a video on YouTube against shell which they titled ‘’everything is not awesome’’ the video was viewed by about six million people.

The Advertising Standard Authority has disapproved shell’s advert saying it is misleading, in the advert shell claimed that the companies $10 billion oil sand project in Canada is a sustainable energy. Shell oil sand project consumes more energy than the companies oil exploration activities; it also increases the amount of carbon dioxide emissions in the environment. According to a recent report, the oil sand project emits more emissions than the normal emissions released when producing the ordinary oil.

Defra,2008 ‘’ best practice guidance on environmental claims stated that green claims should not be vogue, for example by trying to give a good impression about general concern for the environment, claims should often stop the use of terms such as ‘’sustainable’’ green’’ non-polluting and so on’’

Dutch shell admitted that their sustainable development is geared towards fostering ways of meeting the ever-growing demand for energy in the present generation, without compromising it with their corporate needs.

FINANCE

Shell claims to obey the Accounting Standards Boards regulations, which states that organisations must be transparent and provide a financial statement that is free from error and is complete and that gives a true picture of the business financial position and assets statement reports are published on the company’s website. Shells financial statement does not actually reflect the true financial position and assets of the business.

BBC, 2004, shell overstated its oil and natural gas reserve with a whopping $250 million barrels in Norway, after it notice that about 3.9 billion had evaporated, the overstatement of shells oil and natural reserve has drastically reduce investors’ confidence and trust in the company, the trust of investors of shell is said to be low at present shells overstatement of its reserve transpired for a long period of time. SEC, 2004 ‘’ shell overstated its oil and natural gas with about $4.47 billion and also overstated its standardized measure cash flow with not less than $6.6 billion.

Shell also misstated its RRR (Resource Replacement Ratios) if shell had not overstated its oil and natural reserve its resource, replacement and ratios would have been accurate.

Shell avoiding paying tax to government despite been one on the most profitable oil industry in the world shows how irresponsible and unethical their businesses are: shell moved most of its operations from the united kingdom to low tax zones like Switzerland by moving its ownership, shell also shifted its trademarks to Netherlands all these they did in other for the British tax authorities not to have a grip of their operations. Shell needs to practice responsible ethics by publishing the amount of tax it pays to governments in which it operates in, transparency in business is a driven force to success and shell has to conform fully to the ethical business practice.

RECOMMENDATIONS

For shell to halt its brand name from dropping it must be very transparent and follows fully by the financial reporting council standards and in also stop the company from paying huge amount of money for violating the standards of reporting as this lead to shell paying $250 million to both the united kingdom and united states securities and exchange commission, this money shell had to pay would have been better used by the company in sourcing for more sources of energy and training and development of employees.

Shell should morally work with the Nigerian and foreign government to extend ways of eliminating the undesirable impact of shells operations activities which has significantly caused environmental harms in local communities like ogoni in Niger- Delta Nigeria, as shell’s excessive release of Co2 to this exposed community has done more harm than good, excessive Co2 release can immensely cause global warning.

Shell should abstain from paying and using Nigerian security agencies to arrest, torture, as this lead to the murder of protesters in some Niger-delta regions of Nigeria, shell must respect the human right act. A federal court in the United States says it has documents which show how shell collaborated with the Nigerian military which led to the illegal killing of demonstrators in the Niger-Delta region. The Right Approach states that individuals must be treated with dignity and their choices must be respected and individuals must be an object of manipulation.