Business ethics dilemmas and resolutions

Ethics

The company I am studying is British Petroleum (BP). BP is a global, vertically integrated energy company. The issue is going to be the Deepwater Horizon situation. The timeframe will be present day, rather than dissecting the past. Today, the effects of that disaster are still being felt along the Gulf coast, especially with respect to shellfish. The official narrative of BP and even some environmental officials is that the Gulf has returned to normal, but the local fishermen disagree, and are paying a high cost today for the spill (Jacobsen, 2012).

The paper discusses what ethical obligation BP has, if any, to the fishermen of the Gulf Coast who continue to experience problems with respect to the aftermath of Deepwater Horizon. At particular issue is the company's ethical track record, which has tended to be poor (Mauer & Tinsley, 2010). There are a number of ethical theories that the company can use to resolve this dilemma. These include utilitarianism, consequentialism and of course the Milton Friedman argument (1970).

The company has taken the Friedman approach, and will now seek to communicate its rationale for this approach to two different stakeholder groups. The first is to the company executives, who we will presume have been working feverishly to find a resolution to this issue. The second is the relevant environmental authorities. The company does not plan to address the fishermen directly, because that represents an informal communication channel. The company's communications department recommends that only formal communications channels should be used when dealing with sensitive matters, as such an approach allows the company to control the dialogue and exhibit message consistency.

In conclusion, BP is faced with an ethical dilemma. The memos to key stakeholders will explain how the dilemma has been resolved and what this resolution means for those stakeholders.

For Internal Use Only

November 12, 2012

The executive team at British Petroleum has been for the past 2 1/2 years working with the people in the affected areas of the United States Gulf Coast to mitigate the damages associated with the Deepwater Horizon incident. In that time we have engaged in a variety of strategies ranging from clean-up, to habitat rehabilitation and compensation. In recent months, there have been complaints both in the media and expressed to the company about adverse impacts that the disaster had with respect to sea life in the Gulf, in particular shellfish.

This memo is to outline the process by which the company has examined this issue. British Petroleum has long accepted some responsibility for the disaster that occurred as the result of the problems on Deepwater Horizon. The first step was to reference BP's Code of Conduct with respect to ethical standards. The Code provides us with the guiding principles that underlie all of our decision-making, not just the resolution of ethical dilemmas. The Code takes a values-based approach rather than setting specific rules, so its guidance is an important part of the process.

The second step in the process was to conduct a stakeholder analysis. Even a specific issue such as the health of shellfish in the Gulf is subject to a number of stakeholders. The issue has been raised repeatedly by fishermen in the Gulf, so they and their families are one key stakeholder group. Their interest is in being able to make a living fishing for shellfish in the Gulf of Mexico. The second stakeholder group is the shareholders of BP. This stakeholder group is critical because they provide the financing that runs this business. They are the owners, and we as managers have an obligation to increase the value of their shares. Many have argued, including Friedman (1970), that the shareholders are the most important stakeholder in any publicly-traded company. The environment itself is another stakeholder, albeit one that cannot file a claim. Managers, employees, customers, suppliers and regulators are other stakeholder groups whose needs were taken into consideration.

In the final analysis, it has been determined that the most important stakeholder group is the shareholders, and that as agents for those shareholders we have a duty to maximize the value of their shares. This duty must be, as Friedman notes, within the bounds of the law. Therefore, the decision has been made to set aside the issue of the health of Gulf fisheries for the time being. No assistance will be offered to Gulf fishermen alleging BP culpability in their plight, and no company monies will be committed to either research of the situation or to compensation.

These decisions were not made lightly. There is a strong case to be made using deontological arguments that the BP should take responsibility for the suffering of the Gulf fishermen. However, the company notes that Gulf fishermen have had two years to adapt to the possibility that they will need new careers. If they are suffering today, it is in part because they undertook no effort to mitigate the damage done to them. BP will honor any judicial ruling that compels it to engage in actions on behalf of these fishers, and it will also comply with any environmental regulations that might arise from this situation.

However, BP recognizes that the most important obligation it has is to increase shareholder profits. The course of action that BP has undertaken meets the objective of maximizing shareholder profits within the bounds of the law. The managers of BP, as agents of the shareholders, do not have any further ethical duties with respect to this situation.

MEMO: re Health of Gulf Shellfish Stocks Post-Spill

NOT for PUBLIC RELEASE

Attn: Department of the Environment

This memo serves to outline the plans that British Petroleum ("BP," "the Company") will undertake in response to the complaints by Gulf Coast fishermen about the yields that they have been experiencing in the past two years since the Deepwater Horizon disaster. This memo will contain a summary of the issue at hand, a brief summary of BP's decision-making process and finally a concluding statement outlining BP's plans and how that will affect the Department of the Environment ("the Department"). BP does not feel that it has any further obligations under the law towards these fishers or towards the health of sea life in the Gulf of Mexico in general.

The issue has arisen due to complaints lodged by fishermen along the Gulf Coast both directly with the Company and also through various news media outlets. The fishermen allege that shellfish stocks have been subject to adverse harm as the result of the Deepwater Horizon spill in 2010. Claims thus far have tended to be anecdotal in nature. However, such claims have included calls to action both on the part of British Petroleum and on the part of the Department of Environment. As the Company and the Department have worked closely on this issue for the past 2 1/2 years, this memo will outline how BP intends to approach this issue.

When faced with an ethical dilemma, BP first turns to its guiding principles, which are laid out in the Code of Conduct, which is available for download here http://www.bp.com/sectiongenericarticle.do?categoryId=9038306&contentId=7006600

The Code provides guidance for resolving ethical dilemmas, but it does not provide specific structure or rules.

The Company then conducts a stakeholder analysis. In this process, stakeholders are first identified, then their needs are outlined. Finally, the relevant stakeholders are prioritized, and it is this prioritization process that guides the final action.