Oil is a very big business and Exxon (then commonly known as Esso and now known as Exxon-Mobil) is the biggest of them all. For years it was the largest corporation in the world and it had always occupied the top 5 slots in the Fortune List of 500 largest corporations in the world. These corporations are so big that it is difficult to even imagine their size. Only 28 countries of the world had more annual income than Exxon in 2005, based on the purchasing power parity method. The bottom 150 countries collectively may not have their annual GDP equal to that of Exxon. With oil price shooting to USD 95 per barrel in November 2007, the energy companies are bound to get bigger and wealthier. Nothing wrong with that, but we hope they will be more environment conscious. It was reported in February 2005, that Exxon-Mobil has become the wealthiest company in the world, in terms of market capitalization, replacing GE of USA. The New York Times issue of January 30, 2006 has mentioned that Exxon-Mobil reported a gross income of USD 371 billion and a profit of USD 36.13 billion for the year ending 2005. This means that the profit is almost equal to Kenya's estimated GDP of USD 39.45 billion in 2005. Exxon-Mobil had hence become the biggest corporation in the world replacing Wal Mart. USA's estimated GDP in 2005 was USD 12,370 billion. This means Exxon's income was 3% of the US GDP.
The Valdez incident:
A number of oil companies formed a consortium to operate an oil terminal called "Alyeska" in the port of Valdez off the Alaskan coast. Almost all oil companies own or hire Supertankers for transport of crude oil from various terminals for processing it further. The Exxon- Valdez was a most modern supertanker having the latest navigational aids costing USD 125 million in 1987.
On March 24, 1989, it sailed out of the port of Valdez, fully laden. It was eased out into the outer harbor by the port pilot as per custom in all ports. The Captain of the supertanker had a history of drinking problem and his auto driving license was revoked three times, yet he was thought fit enough to command a supertanker in the coastal waters. The top management of Exxon was aware of the drinking problem and had sent him for some rehabilitation program. The port pilot noticed alcohol in the breath of the Captain but thought it was not serious enough to affect his faculties. He handed over charge and the Captain increased the speed to 12 knots. He then handed over the supertanker to a third officer, who was not authorized to pilot supertankers off the coast. This was against the rules. Soon the supertanker ran into reefs and huge holes were ripped in the ship's hull and it began dumping crude oil into the sea. It is estimated that 11 million gallons of crude oil was dumped into the sea in a matter of 7 to 8 hours.
The Consequences:
This Alaskan region is a nature lover's paradise known as Prince William Sound. Immediate victims were the sea living creatures like shrimps, sablefish, sea otters, herring roe eggs and water fowls. It was also a home for 200 different species of birds for summer nesting. While there was no loss of human life, millions of these sea living creatures died. On the commercial side, fishing was banned for some time and it caused enormous losses to fishermen and affected their livelihood. The losses were incalculable. This became the battleground for oil industry and the environmentalists. The people of Alaska lost their faith and trust in the oil industry. Exxon did everything to clean up the mess, though it was a PR nightmare for it. The people of Alaska became very angry when they learnt that the Captain's blood alcohol level was 0.06 against the permitted level of 0.04. This was 9 hours after the accident. Doctors estimated that the blood alcohol level must have been around 0.19 at the time of accident, assuming that the normal metabolism of a healthy individual took place. This means there would be absolutely no coordination between the brain, eyes and the limbs. The captain was dismissed by Exxon and criminal charges were brought against him by the state.
What are the Ethical and Legal issues out of the above incident. Please send your views on the above to madhavan@mmg.name and we will publish the best one in these pages.
References: "Business Ethics" by Rogene A Buchholz and Sandra B Rosenthal, both Professors at Loyola University of New Orleans and published by Prentice Hall, Englewood Cliffs, New Jersey, USA - 1998 and various dispatches of "The New York Times", USA.
The above is an abridged and condensed version of the article published on August 09, 2004. Members of madgopes.com can access the original article in its site.
© Coyright. November 22, 2007. Www,madgopes.com. Without Prejudice. All rights reserved.
Business Ethics - Problems in Natural Environment - The Exxon Valdez Incident - To learn more about this author, visit Madhavan T Gopalachary's Website.
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Madhavan T Gopalachary
(Visit Madhavan's Website)
Madhavan Gopalachary, nick name "madgopes"
(g pronounced as in go) given by IIT
classmates, is a Mechanical Engineer and
an alumnus of Indian Institute of
Technology, Madras having passed out
specializing in IC Engines &
Thermodynamics.
He has nearly 35 years of experience in
the Corporate World. He started off as a
trainee and handled sales, marketing,
manufacturing, product management, profit
center management, strategic planning and
corporate development including R & D in
various organizations and at various
levels before becoming a CEO. His last two
professional assignments were at CEO level
before embarking to start management
consultancy business on January 01, 1998.
He has worked for British, Swedish MNCs as
well as very large Indian business houses.
He has spent a large portion of his time
from June 1998 till date in East African
Countries practicing as an independent
Management Consultant.
More details can be obtained at the
following web sites:
mmg.name
/mtg.html;
mmgconsu
lting.biz/
Madhavan's articles can be accessed at www.madgopes.com
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