The Business Practices of Royal Dutch Shell from an Ethical Perspective

Abstract 

The research paper evaluates the business practices of Royal Dutch Shell from an ethical perspective. Many multinationals maximize profit at the expense of less developed countries because of poverty and illiteracy. Royal Dutch Shell has competed unfavorably in Nigeria with the objective of maximizing profit at the expense of local communities. The oil spills have affected the livelihoods and lands of about 35 villages that had over 35000 inhabitants. According to various ethical theories such as Kantianism, Utilitarianism, and Virtue Ethics, the company’s actions were unethical. Royal Dutch Shell failed to develop open and genuine dialogue, development, and engagement with the local community ( Kennedy, Welch, & Monshipouri, 2017) . The outcome of Shell’s actions was pain and suffering of the Ogoni people. If the company had taken full responsibility for their actions, there would not have been a case of global concern. 

Keywords: Kantianism, virtue ethics, individualism, environmental impact, human rights, profits, Nigeria, Royal Dutch Shell, audit, responsibility 

Business Ethics 

As globalization increases, many companies have indulged in unethical practices with the objective of maximizing profits. Royal Dutch Shell has competed unfavorably in Nigeria with the objective of maximizing profit at the expense of local communities. Various human rights organizations such as Amnesty International and the Human Rights Watch have called for investigations into Royal Dutch Shell regarding their unethical practices in some less developed countries such as Nigeria. There are thousands of witness statements and internal company documents indicate that the company may have been involved in a brutal campaign against the Ogoni people who were demonstrating against the environmental impact of the company. Moreover, there are cases of the use of hazardous chemicals that had adverse effects on their employees. Also, the company has caused severe environmental impact in the Niger Delta. The research paper will evaluate the business practices of Royal Dutch Shell from an ethical perspective. 

Environmental Impact of Shell in Nigeria 

Because of the impact of compromised pipelines, Shell caused the 2008 oil spills in Nigeria that resulted in thousands of barrels of oil to spill into the environment. It was the worst environmental impact in the country's history. The oil spills affected water channels and swamps the size of Portugal. Furthermore, it caused the loss of a large chunk of mangrove vegetation in the country. The oil spill affected the livelihoods and lands of about 35 villages that had over 35000 inhabitants. Although the company accepted responsibility for the damage, Shell argued that they were not fully responsible for the oil spills and the amount of compensation should be reduced. However, in 2013, the company was found guilty of neglect by a Hague based court ( Ekatahet al., 2011) . During the case, it was discovered that the company was aware of its old and faulty pipelines since 2002. The company was required to clean up the oil spill and pay compensations worth $84 million. 

The case was considered to have global importance because there were concerns regarding the scope of responsibilities regarding multinationals involved in human rights abuses. Care ethics explain that businesses should focus on relationships with other people before other issues. It involves maintaining, building, and strengthening relationships. Businesses should act rightly and display care for the people they interact with. However, it was quite disappointing that Shell took about six years before they took the case seriously and about three years before they began the clean-up ( Kennedy, Welch, & Monshipouri, 2017) . They took years to recognize the environmental impact of their practices. Moreover, the negative environmental impact destroyed the relationship between the company and local communities. Therefore, the company has questionable human rights standards that have affected its image in Nigeria. 

According to Milton Friedman and capitalism, the main objective of a business is to use the available resources and engage in processes that will maximize profit. However, the economic activities should always be within the law. As observed during the case, Shell was practicing individualism. They argued that the environmental impact of the oil spills was not as severe as the independent experts had claimed. The arguments were made so that they could minimize compensations by reducing additional costs that would cut their profits. Moreover, the company insisted that the damage was not caused by old and faulty pipelines but by sabotage. Shell was attempting to place the blame on other parties so that they could avoid the financial responsibilities of the cleanup ( Pegg & Zabbey, 2013) . Nevertheless, by not taking up the responsibility for the oil spills, the company spent more money during the litigation process. The company is individualistic because they were not willing to take responsibility when the catastrophe took place. Ultimately, the court announced they were guilty of neglect and were required to compensate the local communities. 

Human Rights Abuses 

Amnesty International has been keen to reveal the swathe of horrific crimes carried out by the Nigerian military. However, Shell appears to have played a role in the unethical practices. During the 1990s, the Nigerian military had the campaign to control the Ogoni people's protests against the negative impact of Shell's activities on the environment. The pollution has serious and widespread human rights violations that could be amounted to criminal offenses. Evidence provided by Amnesty International indicates that Shell encouraged the Nigerian military to control the protests with full knowledge that a military campaign would cause burning of villages, unlawful killings, rape, and torture ( Pegg & Zabbey, 2013) . During the brutal crackdown, Shell even offered material support to the military such as transport. In more than one instance, some military commanders who were infamous for human rights violations were paid to continue the crackdown. 

It cannot be disputed that Shell had a key role in the human rights abuses that occurred in Ogoni people’s land. The role in the human rights abuses offers ground for criminal investigations. The military's campaign against the Ogoni people leads to the execution of nine men including Ken Saro-Wiwa, an activist, and writer who was leading the protests. After the executions, there was a blatantly unfair trial that caused a global outcry. In 2017, four widows of the men executed during the military crackdown filed a case against Shell in the Netherlands accusing the business of complicity regarding the deaths. A company or individual may be held criminally responsible for a particular crime if they facilitate, encourage, exacerbate, or enable the crime even if they did not act directly ( Wijesinghe, 2018) . For instance, Shell was aware of the impact of a military crackdown on local populations but they encouraged the military to continue its acts through financial and material assistance. 

During the 1990s, Shell was the richest and most influential company in Nigeria. During the brutal campaign against the local communities, the Nigerian government and Shell acted as business partners because they frequently met to discuss the protection of their investments. Minutes and internal memos from their meetings indicated that Shell lobbied senior government officials to support military action even after they knew that the security forces were carrying out mass killings. Moreover, the records also showed that Shell offered financial or logistical support to military and police personnel regardless of the fact that they were aware that the security forces were involved in murderous attacks against protestors (Kadafa, 2012). The company has continuously denied their involvement in the human rights abuses but there has been little progress to investigate their role in the human rights violations. 

Consequentialism insists that the rightness of an action is fully dependent on the results or consequences of the action. The outcome of Shell’s action was the death and suffering of protesters. Therefore, Shell's actions during the entire process were unethical. The protests were a response to decades of Shell oil spills that were destroying the environment. By 1993, the Ogoni people declared that the company was not welcome in the area, forcing Shell to leave because of security concerns. Although Shell attempted to publicly downplay the adverse environmental impact of its activities, internal documents and audit revealed that the company's senior management was aware that the local population had legitimate grievances ( Cooper, 2017) . Additionally, senior executives were concerned about the faulty and poor state of the pipelines. According to consequentialism, Shell’s actions were wrong because they caused environmental damage. 

In 1990, Shell requested security protection from elite paramilitary police in one of the villages where there were peaceful protests. Within two days, the security forces continuously attacked the village with grenades and guns causing the deaths of over 80 people and burning down about 600 houses. Worse, they dumped the victims’ bodies in one of the rivers in the area. From this point, Shell executives were aware of the risks associated with calling for the intervention of the military or security forces. Despite the knowledge, there was clear and accurate evidence showing that the company continued calling for the intervention of security forces. Three years later, the security forces intervened on behalf of Shell in Ogoni land during one of the protests and it led to the shooting of 11 protesters ( Pegg & Zabbey, 2013) . A few days after the shooting, Shell executives held meetings with senior security and government officials. The minutes of the meeting showed that instead of raising concerns about the loss of lives and destruction of property, Shell was asking the government to continue protecting their investments. 

In addition, to lobbying senior government officials, Shell offered financial support to the security forces. Internal company documents show that the company issued $900 to a special unit that was dedicated to restoring peace and order in Ogoni land ( Ekatahet al., 2011) . The financial assistance was offered a few days after the unit's commander had ordered the shooting of unarmed protesters who were outside the company's regional headquarters in Port Harcourt. Furthermore, the document indicates that the payment was a show of motivation and gratitude for the continued support and favorable disposition for Shell’s activities in the future. In many situations, Shell's request for assistance in tackling the problem was followed by a series of brutal human rights violations by security forces. According to amnesty international, Shell would also play a direct role in some situations when they transported armed forces to the villages to break up the protesters. Therefore, Shell's actions amount to facilitating or enabling the security forces to commit the crime. 

By 1993, Shell had written to the military administrator of Rivers State and named certain communities leading the protests and requested the assistance from the military. The brutal human rights violations reached a peak in `1994 when the special units conducted a raid on many Ogoni villages, detaining, killing, raping, and torturing people. According to a report by Amnesty International in June 1994, about 30 villages were attacked and at least 50 people were extra-judicially executed. Internal Shell documents report that Shell’s then Chairperson in Nigeria, Brian Anderson, was aware of the crisis but ignored the human rights violations. In 1995, about 6 leaders of the protesters were executed (Kadafa, 2012). A review of Shell's internal documents indicates that Shell was aware that the leaders of the protests were highly likely to be tortured and executed. Therefore, it is obvious that Shell encouraged the government to continue the brutal crackdown. 

Utilitarianism 

Utilitarianism is an ethical theory that insists that people should make decisions according to the consequences of the actions. One of the common sayings in the theory is ‘maximizing the overall good.’ A responsible stakeholder approach demands that they must accept and urge a company to develop capabilities and sensitivities that will inspire trust regardless of competing and diverse interests. However, Royal Dutch Shell did not comply with the principles of utilitarianism. According to the situation, it showed that the company was only interested in maximizing profit and not the overall good. By waiting and ignoring their environmental impact for several years, they were hoping that the local communities would lose interest and influence in the situation. 

Royal Dutch Shell failed to develop open and genuine dialogue, development, and engagement with the local community. The outcome of Shell's actions was pain and suffering of the Ogoni people. A genuine utilitarian approach would have been to clean up the oil spills regardless of the cause so that they could maximize the overall good of most people. They should have taken an initiative to clean up the oil spills rather than wait several years to address the problem. Shell should have realized that oil exploration without compliance with local customs, culture, and environmental impact may have positive economic growth in Nigeria but would have had minimal or no positive impact on the standard of living of poor people in the community ( Rossouw & Van Vuuren, 2017) . Therefore, Shell was maximizing profit at the expense of the lives and health of the Ogoni people of Nigeria. 

Virtue Theory 

The theory emphasizes the importance of character traits that promote flourishing and wellness of local communities. It encourages people and businesses to act in a way that avoids malicious character traits. Virtue ethics reminds all individuals to evaluate the actual processes in the corporate world and the outcomes of the actions. Royal Dutch Shell did not adhere to virtue ethics. None of their actions promoted the flourishing and wellness of the Ogoni people. Their actions did not show important virtues such as teamwork, wisdom, or compassion to the plight of the Ogoni people. If they had insight and wisdom, they would have repaired the faulty pipelines in 1990 before the protests began. Compassion would have forced the business to compensate local communities without calling for the intervention of security forces regardless of the cause of the oil spill ( Hennchen, 2015) . Teamwork between the local community, company, and government would have ensured the situation was properly managed before it became catastrophic. All in all, Royal Dutch Shell acted unethically. 

Kantianism 

Kantianism dictates that people and businesses should always behave in a manner that honor and respects individuals and their choices. Business should not harm, lie, or cheat to get their way. The theory is mainly concerned with the moral drive in the motivation of an action and the moral acceptance of the action. By attempting to manipulate information and downplaying their negative environmental impact, Royal Dutch Shell did not comply with the principles of Kantianism. The company attempted to cloud the whole problem with monetary compensation and hiding facts so that they could prevent people from making rational decisions. Furthermore, the company refused to release the internal reports that revealed the poor structural integrity of the pipelines. The company lied to the local population. Ultimately, their actions caused great harm. Also, the court ordered the compensation and cleanup but Shell did not volunteer the actions. Therefore, there was no moral worth regarding the motivation of their actions after the case ( Rossouw & Van Vuuren, 2017) . They did not compensate the local population and carry out the clean up because it was the right thing but because they were ordered by the court. 

According to the analysis, the Royal Dutch Shell fought tooth and nail to downplay their human rights violations while blaming the impact on other parties. If the company had taken full responsibility for their actions, there would not have been a case of global concern. Shell should have realized that taking responsibility involved accepting duties and tasks of clean up and compensation. The Nigerian government should have also taken responsibility because they are shareholders in the company ( Rossouw & Van Vuuren, 2017) . The shareholders should have set up a fund that would have taken care of the victims of human rights violations associated with Royal Dutch Shell. Moreover, the company should repair all the faulty pipelines to ensure similar events do not occur in the future. 

Conclusion 

The research paper evaluates the business practices of Royal Dutch Shell from an ethical perspective. According to the research paper, it is evident that a business cannot operate in a vacuum and they exist in a social context to which it may be catastrophic to be insensitive and unethical. Regardless of the outcome of the case, to date, the company is still being heavily criticized for the inadequate cleanup. Various health and civil rights organizations argue that the cleanup did not meet international best practices, local requirements, and the company's procedures. Amnesty International is still fighting for the rights of the victims of the unethical practices of Royal Dutch Shell. However, Shell's actions are not isolated. Many multinationals maximize profit at the expense of less developed countries because of poverty and illiteracy ( Hennchen, 2015) . Ultimately, their main objective is to make a profit regardless of their social and environmental impact. 

References 

Cooper, S. (2017). Corporate social performance: A stakeholder approach . Routledge. 

Ekatah, I., Samy, M., Bampton, R., & Halabi, A. (2011). The relationship between corporate social responsibility and profitability: The case of Royal Dutch Shell Plc. Corporate Reputation Review , 14 (4), 249-261. 

Hennchen, E. (2015). Royal Dutch Shell in Nigeria: where do responsibilities end?. Journal of Business Ethics , 129 (1), 1-25. 

Kadafa, A. A. (2012). Oil exploration and spillage in the Niger Delta of Nigeria. Civil and Environmental Research , 2 (3), 38-51. 

Kennedy, E. T., Welch, C. E., & Monshipouri, M. (2017). Multinational corporations and the ethics of global responsibility: Problems and possibilities. In Human Rights and Corporations (pp. 123-147). Routledge. 

Pegg, S., & Zabbey, N. (2013). Oil and water: the Bodo spills and the destruction of traditional livelihood structures in the Niger Delta. Community Development Journal , 48 (3), 391-405. 

Rossouw, D., & Van Vuuren, L. (2017). Business ethics . Oxford University Press. 

Wijesinghe, P. (2018). Environmental Pollution and Human Rights Violations by Multinational Corporations.