Legal Problems Arising from Ethical Issues
Oil and gas industry is something which holds importance in the daily lives of general public due to the different things which are provided through this industry. However, there are a number of sustainability issues surrounding this industry, as a result of which, controversies are raised around the environmental and economic effects of activities undertaken in this industry. These activities include the fracking and the oil spills which have a negative impact over different stakeholders, in which the prime one is the environment, and this is followed by the ones dependent on the environment, in addition to the different stakeholders of company indulging in such activities. The main ethical concern in this relates to keeping the corporate profits before the sustainability.
The ethical issue which were presented through the case study given above, particularly in context of harming the environment for the sake of earning profits, could also result in legal problems for the company. The main issue relates to the environment related acts of the different jurisdictions in which incidents take place. The harm caused to environment is deemed as a breach of statutory laws in this regard, for instance, the National Environmental Policy Act in US. The Environmental Protection Agency in US particularly takes care of such issues (Eccleston & Doub, 2012). Such statutory instruments are the reason why penalties are imposed on the companies for damaging the environment. Another legal issue relates to the breach of corporate social responsibility norms, which have been integrated in the statues of the different nations.
The ethical issues are often perceived by the communities as not being issues at all. This is particularly true in the context of the given case study as the ethical issue was related to making a choice between profits for the company or damaging environment. The community deems it important to earn profits for the company, particularly because the members of the community are stakeholders of the company. However, they give supremacy to the needs of the environment as the same affect them in a direct manner. This is due to the environment being a provider, particularly for the ones who directly depend upon it, which includes the landowners, natives, fishermen, business owners and even the native corporations.
In order to deal with the issues which were presented forth through the case study, there is a need for the companies to adhere strictly to the laws which have been drawn particularly in context of environment. There is also a need to make the ethical decisions where different ethical theories are applied so that the benefit of majority is kept before the benefit of few. Instead of fixing the situation with public relations, there is a need for internal changes to be brought, where the company changes its approach from ignoring the environment towards working upon environment. There is a need for an ethical leadership, which gives equal focus to profits and the environment, if not give supremacy to environment.
Perception of Ethical Issues by the Community
By following the laws which have been drawn, the companies would be able to avoid the penalties of millions which are imposed on the company due to causing damage to the environment. However, at times, such adherence can become costly, in terms of their strictness resulting in enhanced care to be taken, and in terms of time and money invested in following these. Ethical decision making is expected from the businesses due to the needs to take care of the different stakeholders, but if at every instance community is kept before profits, the companies would not be able to earn profits. Public relations do help in mending the negative image which has been created due to these incidents, but these are a temporary measure only. Lastly, the best approach is internal changes as an ethical leadership can ensure proper weightage to be given to environment and company profits.
The ethical issues which were presented in this case study also had an impact on the employees of the companies, in context of their conduct, morale and expectations. The conduct of employees becomes negative due to the negative conduct of the company. This makes them disloyal towards the company. Where the employees do not indulge in unethical conduct as is adopted by the company, they become distant from the company, which results in company losing their talent. The morale and the expectations of the employees also take a hit as they do not want to be associated with the companies which are famous for its negative acts. This makes it a problem for the companies in attaining and retaining talent.
Not only the employees of the company are impacted, but also is the organizational culture when the acts covered in the case study are undertaken. The organizational culture becomes unethical where the qualities of trust and confidence amongst the people of the company are replaced with deceit and disloyalty. Apart from the employees, even the top management becomes only focused towards earning for them, instead of earning for the company, which ultimately proves costly for the company. Even when an unethical issue is raised, instead of brining the same forward in terms of whistle blowing, the employees take advantage of the same. So, the aim of earning profits for the company results in the company cutting its own roots.
In order to deal with such issues, there is a need for the company to draw up a code of ethics, which is applicable on all the stakeholders of the company, instead of merely upon its employees. So, the code of ethics would also apply on the suppliers apart from the employees of the company. By following these codes, the company would also be able to regulate its own conduct. There is a need to set examples before the employees, which is to be done through effective and ethical leadership. Lastly, there is a need for the companies to form ethics committees, which can ensure that the drawn codes are adopted properly.
Mending the Situation
By aligning these codes with issues of sustainability and corporate social responsibility, a leading example can be presented before the employees of the company. This would help not only in attaining and retaining talent, but also in adopting an ethical organizational culture. However, these can be difficult to implement, which puts up a requirement of ethics committee to be made. Again, these ethical committees cannot work beyond the ambit of the top personnel of the company, particularly its senior management. And when the senior management is unethical themselves, the entire purpose of drawing codes or forming ethics committees remains unmet. An ethical leadership, as discussed earlier, would result in adopting such codes not only in their letter, but also in their spirit. This would ensure that when faced with an ethical dilemma, the best suitable option for all the people would be taken. Though, this can result in company losing some profit making ventures, owing to them being unethical.
In the previous sections, it was identified that the decisions have to be made in an ethical manner, where the benefit of the world is given supremacy. This is stemmed from the leading ethical theory of utilitarianism. As per this theory, such actions are deemed as correct ones which help in maximizing of the utility of an action. So, the actions which results in the happiness of the majority of people, would be deemed as the correct and ethical decision (Bykvist, 2010). When this theory is applied to the sustainability issues highlighted in the oil and gas industry, it becomes clear that the ethical actions would have been such which had caused benefit to the different stakeholders of the company. In this regard, the companies like BP and Exxon should have been careful in their actions, such that the oil spillages would not have been caused.
The next ethical theory which is important in context of the given case study is the virtue ethics. Virtue ethics is an ethical theory as per which such actions are deemed as correct where they consist of some virtues. These virtues include the ones of integrity, honesty, fairness and justice, amongst the others (Hursthouse & Pettigrove, 2016). Where the oil and gas industry faces sustainability issues, they have to take such decisions which are fair towards the stakeholders, they have to be honest in their compliances to the legal frameworks, and they need to have integrity and honesty in their conduct. This would require them to undertake activities like fracking but in a matter which does not damage the ecosystem of the ocean. And any kind of oil spillage has to be avoided at all situations.
Impact on Employees and Organizational Culture
The third key ethical theory which can be adopted in this case is the deontological theory which was a theory presented by Immanuel Kant and helps in getting out of ethical dilemmas. As a result of this theory, the morality of the action is the factor upon which an action is deemed as moral or immoral. As per this theory, the focus has to be placed on the actions which are undertaken instead of the end results of such actions (Naaman-Zauderer, 2010). Had the companies in the company adopted this approach, they would have undertaken good actions. This means that any instance of oil spillage would have been avoided. This would have been done by having two key personnel on the board, so that even when one dozed off, the other could have stopped any incident from happening. Also, such time schedules would have been adopted where the lack of sleep would not have been a problem. And specific actions would have been undertaken to avoid any incidents of mixing drink and work.
The best out of the three ethical theories of utilitarianism, virtue ethics and deontological theory, in terms of being most appropriate and applicable is utilitarianism. This is because this theory helps in maximizing the utility of an act by attaining the results which have the best result for the majority of people. This would ensure that the companies take special care while doing any activity, for instance, when they undertake fracking, they would ensure that the ocean or ocean life is not harmed. This can be done by adopting measures to compensate the environment, and even by limiting the fracking activities. Where the incidents of oil spillage are caused, the companies would ensure that steps are taken to clean the ocean, however costly the same may be, instead of simply paying the penalties. This would ensure that the companies give back to the environment what they take from it, if not giving more to the environment.
The reason why virtue ethics was not deemed as the best option is due to the lack of clarity on what can be deemed as a virtue and the extent of such virtues. For instance, the virtue of honesty requires companies to tell the truth. But the same cannot be done in every case and the most basic example of this is the confidential information or the trade secrets of the company. If the company, in context of being honest, discloses such information, it would be devastating for the company. The reason for not choosing deontological theory is also similar to these reasons. The actions cannot be deemed right or wrong till the time they bear any result. In just the expectation of an action to result in ill-effects, does not justify not adopting such action. To state that a particular drilling activity would necessarily harm the environment is wrong, would be unfair and also act as a barrier towards the growth of business.
Dealing with Ethical Issues in the Oil and Gas Industry
The theory of utilitarianism further proves the right one as the some results in maximization of utility for the different stakeholder groups as have been identified in the appendix of this discussion. By concentrating on maximization of utility, the companies would ensure that the environment is not harmed, which in turn would ensure that the ocean life and the ecology of the ocean is safeguarded, which in turn would maximize the utility for landowners, natives, fishermen, business owners and even the native corporations (Plessis, Hargovan & Bagaric, 2010). When this would be done, the company would be deemed as an ethical company, resulting in the stakeholders of such companies being benefitted due to increased revenues translating into increased salaries and dividends. Thus, by simply taking care of the environment and by ensuring that the actions are taken which do not have a negative impact on the economy, the stakeholders would be benefitted, which would in turn help the oil and gas industry, as it would no longer be famous for its sustainability issues.
The theory of utilitarianism shows the results of the actions to be ethical only when the end results are best for the majority. When this theory is applied to the different options which were discussed early on in context of steps which can be taken by the company to fix the situation, the best option which comes forward is for the company to follow the laws which have been drawn in this regard in a strict sense. The laws have to be followed in spirit as well, instead of just letter as this would help in guiding their actions to be ethical. This theory also shows that instead of merely engaging in public relations to cover up the damage, there is a need to avoid such actions which require such cover up actions. Each employee has to be ethical in them, so that such unethical activities are avoided, and where the same is done, the employees need to be whistle blowers in order to benefit the majority.
On the basis of theory of utilitarianism, the most appropriate step for the company would be to adopt an ethical leadership. This is because the ethical leadership would ensure that the actions being undertaken by the company are for the benefit of the majority, instead of the benefits of the company alone. An ethical leadership would in turn ensure this by drawing up the code of ethics and forming an ethics committee, to ensure that the work of the company is done towards the benefit of the majority. An ethical leadership is able to align the different alternatives available in order for bringing out the best actions for best results, in turn helping the companies in working towards being sustainable.
On the basis of the improvements which have been discussed in context of steps which can be taken by the company to fix the situation, the improvements which are expected is that there would be no incident of actions been taken by regulatory agencies like Environmental Protection Agency. The success of this could be measured not only by lack of actions being taken by such agencies, but the company being deemed as an ethical company in oil and gas industry, if not across all the industries. This can also be checked through the disclosures which are made in the annual reports of the companies, where such penalties have to be declared. An absence of such activities would result in the measures suggested above being deemed as a success.
For the improvements suggested for ethical leadership, the same needs to be adopted. In this regard, there is a need for brining such members to the board of the company who are leaders in ethics fields, or in field of corporate governance. Where the same is not possible, the actions undertaken by the companies in context of their code of conduct and ethics committee would be a proof of steps being taken towards ethical leadership. Related to this would be the adoption of code of ethics, which are not only drawn for the employees, but for the suppliers as well, as they are an important aspect for the company in being ethical. This is because ethical partnerships promote adherence to the points stated above and in working towards a sustainable environment.
The time frame for these actions would be yearly based. In other words, each year, the companies and their annual data would be analysed, along with different disclosures being made by the company, to see if the steps stated above have been adopted. The codes of ethics are something which is visible prominently on the websites of the company, and so the time frame for adoption of code of ethics would be six months. The formation of an ethics committee also needs to be undertaken in this time frame only. All in all, a specific time frame cannot be fixed as the suggestions given above are constant ones which have to be applied in repeated manner. For instance, there is a need to ensure that the ethical leadership stays ethical and continues to work in this direction.
References
Bykvist, K. (2010). Utilitarianism: A Guide for the Perplexed. London: Bloomsbury Academic.
Eccleston, C., & Doub, J. P. (2012). Preparing NEPA Environmental Assessments: A User’s Guide to Best Professional Practices. London: CRC Press.
Hursthouse, R., & Pettigrove, G. (2016). Virtue Ethics. Retrieved from: https://plato.stanford.edu/entries/ethics-virtue/#FormVirtEthi
Naaman-Zauderer, N. (2010). Descartes’ Deontological Turn: Reason, Will, and Virtue in the Later Writings. Cambridge: Cambridge University Press.
Plessis, J.J.D., Hargovan, A., & Bagaric, M. (2010). Principles of Contemporary Corporate Governance. (2nd ed.). Cambridge: Cambridge University Press.
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