Exxon Ethics: Business Impact of Valdez and Grand Bois

Introduction

When discussing business ethics, one corporation in particular often comes to mind: Exxon. Since the late 1980s, Exxon has been the poster child for unethical corporate conduct. The ecological disaster that occurred in Prince William Sound, following the Exxon Valdez running aground on Bligh Reef and spilling millions of gallons of oil, is infamous. The scandal at Grand Bois, Louisiana, further exacerbated the organization's poor ethical reputation.

Good people, acting as corporate agents, can make harmful decisions. By understanding the ethical implications of their decisions, senior executives may be able to avoid making similarly harmful decisions in the future. Presenting the ethical and business implications of Exxon's experiences can also reiterate the importance of raising ethical concerns in the minds of mid- and lower-level managers, as well as their employees, and facilitate the removal of barriers in the workplace to raising those concerns (Hamilton & Berken). The following literature review investigates the business impact of Exxon and the ethical considerations that evolved from these incidents.

The research included the qualitative review of relevant literature. Identification of relevant literature was conducted through an electronic search for published articles or reports, in scholarly journals, concerning Exxon and business ethics. The author used a list of Boolean conditional keyword phrases to perform the literature search. These search terms allowed the author to quickly and easily identify the literature most likely to be relevant to the topic. Bibliographies from the identified literature were then searched for additional references to appropriate sources.

Grand Bois, Louisiana: Overview and Events

Cutting costs is an important part of any business. In order to remain competitive, it is critical to produce a product with cost efficiency in mind. It was this desire to cut costs that would lead to the unethical management decisions made by Exxon at Grand Bois, Louisiana, in the early 1990s.

Exxon management decided in March of 1994 to seek lower-cost disposal for oilfield wastes that had been declared hazardous in Alabama. Eighty-one trucks of exploration and production waste were moved from Big Escambia Creek, Alabama, to the Campbell Wells–U.S. Liquids disposal facility, located next to the small community of Grand Bois (Hamilton & Berken, 2005; Moberg & Moberg, 2005).

Although the Resource Conservation and Recovery Act exempted all exploration and production wastes from being classified as hazardous, it allowed state governments to regulate the disposal of these wastes within their boundaries. In Alabama, Exxon was required to dispose of these wastes in a certified facility. Louisiana, however, allowed the waste to be "pumped into large shallow open pits or cells surrounded by low earth dikes and mechanically stirred so the water and other volatile compounds would evaporate. The dried residue would be hauled to a disposal site and buried. Disposal in Louisiana was estimated to have saved Exxon $515,200, at $92 per barrel for the 5,600 barrels of waste" (Hamilton & Berken, 2005).

When the waste arrived at the disposal facility, it was pumped into cell number 11, a location less than 500 yards from the nearest dwelling. Toxic fumes spread through nearby homes. All children in a nearby school were assembled in the gymnasium in hopes of reducing their exposure to the toxic fumes. Although none of the air monitoring equipment at the site demonstrated dangerous concentrations of chemicals, no testing was done for benzene or hydrogen sulfide, despite these chemicals being listed on the shipping manifests of the trucks carrying the waste.

A renewed interest in closing the facility ensued, and the community enlisted the help of a local physician who had treated residents for headaches, sinus problems, and respiratory difficulties — all of which he deemed related to the disposal plant. However, neither he nor a toxicologist from Louisiana State University was able to demonstrate a causal linkage between the health complaints and the plant. Private concerns among oil company executives were that Grand Bois was one of the best-run disposal sites in the state, and if it were determined to be an environmental hazard, more problems would emerge at other facilities as well (Hamilton & Berken, 2005).

Lawsuits were filed, and for more than a year the turmoil in Grand Bois was national news. The government was accused of protecting the petroleum industry at the cost of its citizens. In response, however, the state began to reevaluate the exploration and production waste problem. A series of blood tests conducted on citizens by a Louisiana State University toxicologist revealed a significant number of abnormalities when compared to blood tests from another community in the region (Hamilton & Berken, 2005).

During the trial of the first eleven cases against Exxon and Campbell Wells–U.S. Liquids, the defense maintained not that they had not exposed citizens to toxic materials, but that they had followed all regulations and laws set forth by the United States and the State of Louisiana, and therefore should not be required to pay damages. They argued that they had not broken any laws and that the plaintiffs could not prove they had suffered damage, nor was there a causal link between the disposal site and the residents' health problems. A wife of an injured worker from Alabama read about the trial online, and his testimony was introduced just prior to the end of the trial, demonstrating that the waste had indeed caused real medical injuries. It also undermined the credibility of Exxon's medical expert, who had cast doubt on the residents' claims.

In addition, Exxon's legal team was accused of deliberately failing to produce a letter about the injured worker during discovery. Denying this, Exxon's legal team claimed the letter had been lost somewhere within the company (Hamilton & Berken, 2005).

During deliberations, Campbell Wells–U.S. Liquids reached a settlement with residents, making an unspecified payment and agreeing to close cell number 11. Exxon did not offer a settlement, and the next day the jury returned a verdict of not guilty, finding no long-lasting medical effects on the residents as a whole. The majority of the jury felt that although Exxon had been wrong in producing and dumping the waste, the company was abiding by the law and therefore could not be punished for following established regulations. Concern remained, however, regarding the failure to disclose information about the key witness during discovery. The trial judge held a private conference with Exxon regarding the company's internal investigation into why these documents had not been turned over to the plaintiffs. "Plaintiffs' attorney then received a letter from Exxon attorney admitting that Exxon's senior in-house attorney knew of a letter from the injured Alabama worker. Also, the defendants' physician failed to mention during his testimony that he had examined the injured worker" (Hamilton & Berken, 2005). With these facts presented, the judge fined Exxon $325,000 to cover legal fees for withholding pertinent documents from the plaintiffs. No new trial was granted, however.