BP Oil Spill
Table of Contents
- Introduction. 2
- Business issue (background) 2
- Relevance of the issue to the study of business and society. 3
- How issue impact key stakeholders. 4
- Critique the media’s presentation of the issue. 6
- Possible future outcomes for this issue. 6
- Conclusion. 7
- References. 8
According to the systems theory, business organizations do not operate in vacuum because they are in constant interaction with the surrounding environment.BP oil spill business organization This means that a business organization cannot operate in isolation without considering the impact of its operations on all stakeholders. Different from the classical model of business operations in which the sole reason for existence of a business was to maximize profitability for the stakeholders, the contemporary business models define the obligations of the business to different stakeholders (Shrivastava, 1995). The media plays an active role in redefining the role of business because it helps to project the image of the business to the stakeholders. BP oil spill business organization The case of BP oil spill in the Gulf of Mexico is a good example of how the media plays an active role in protecting the image of a business to the different stakeholders and perhaps redefines the response of the stakeholders to the business issue at hand (Barker, 2011). This study will explore the issue of BP oil spill in the Gulf of Mexico, how it affected the
Business issue (background)
BP experienced one of the worst oil spills in history when 200 million gallons of crude oil gushed to the Gulf of Mexico for a period of 87 days, making it the biggest oil spill in the history of the United States (Brennan, 2013). This was as a result of an explosion of the Deepwater Horizon drilling rig on 20th April 2010. The spill affected more than 16,000 miles of coastline stretching to Texas, Louisiana, Mississippi, Alabama, and Florida. By the time the well was finally sealed on July 2010, the gushing oil had claimed the lives of more than 11 people and injuring 17 others (Peterson et al., 2012). More than 8,000 animals died including birds, turtles, and mammals within the first six months of the spill (Mendelssohn et al. 2012). In addition, out of the 400 miles of Louisiana’s coastline, 125 miles had been polluted. In response, the government announced that it would set aside $20 billion fund to respond to the spill. More than 30,000 people also responded to calamity and volunteered to clean the Gulf Coast by cleaning oil, beaches, caring for the affected animals, and others (Gill, Picou, & Ritchie, 2012). BP was fined a $40 billion an added $16 billion for violation of the Clean Water Act (Partlett & Weaver, 2011).
The case of BP is important in understanding the ethicality of a business organization. Business organizations do not operate in isolation (Barker, 2011; Jurkiewicz & Giacalone, 2014). In line with the General Systems Theory (GST), although there are clear boundaries of a business entity, it cannot be assumed to operate independently but must be conceptualized in relationship to their surroundings. A business is embedded into a broader social environment and it continuously interacts with different stakeholders in the environment (Brennan, 2013). The new conceptualization contrasts the earlier theories like the ownership theory of the firm which perceives the business as a separate entity from the owners with a purpose of maximizing profit for the shareholders. Stakeholder theory of the firm asserts that a business serves a broader purpose that is aimed at creating value for the society, which means that while the business has to create profit for the owners, it must also create other kinds of values (Miles, 2012). This implies that a business has multiple obligations to the stakeholders. A stakeholder is any person who affect or is affected by the decisions, policies, and operations of an organization, including who engages in direct economic transaction with the business or market stakeholders, and nonmarket stakeholders who are not engaged in direct economic exchange with the business. The concept of corporate social responsibility entails that a business must put commitment to the social and environmental responsibility in all areas of its operation. BP failed to observe its social and environmental responsibility because the spill affected the environmental and the social partners in different ways (Barker, 2011). Therefore, BP has ethical obligation to different stakeholders and in all its operations, it must ensure that it meets these obligations (Bryant, Hunter, & Hunter, 2010). This case is important because it shows how BP failed in meeting these obligations.
Corporate citizenship requires that a company should focus on and respond to the stakeholders expectations. Applying the stakeholder theory to this case, there are different stakeholders who were affected by the spill. The market stakeholders for BP include employee, managers, customers, creditors, suppliers, wholesalers, and retailers; while the nonmarket stakeholders including governments, communities, nongovernmental organization, business support groups, media, and competitors (Brennan, 2013).
The first market stakeholders who were affected by the tragedy were the workers of the company (Brennan, 2013). When the rig exploded, there were 126 of BP’s workmen on the rig and only 115 got evacuated, which means 11 workmen lost their lives (Cleveland, 2010). The shareholders were also affected because the share prices of the company fell by 52% within 50 days, which means their wealth were greatly eroded on the New York Stock Exchange, from a high of $60.57 on April 20th to $29.20 on June 9th (Tharp, 2010; Cherry et al. 2015). In addition, the company spent $3.12 billion by July 2010, which ate into the profitability of the company, further eroding the returns of the shareholders (Partlett & Weaver, 2011). The customers were also affected by the oil spill. The company experienced a consumer backlash with sales dipping to as down as 10% because consumers lost confidence in the company (Balmer, 2010). The suppliers, wholesales, and retailers were greatly affected by the dipping sales and some wanted the name of the company changed to Amoco to save them from the consumer backlash (Webber, 2010; Brennan, 2013). The creditors of the entire BP business chain were affected because of failure to meet the financial obligations as a result of low sales and fines. As a result of the low sales, wholesalers and retailers were not in a position to meet their financial obligation to creditors (Barker, 2011).
Nonmarket stakeholders were also affected in different way by the spill.BP oil spill business organization The US government had to set up a $20 billion fund to deal with the arising environmental crisis, money that could have been used in meeting other governmental obligations (Partlett & Weaver, 2011). BP failed to be ethical because it did not comply with the legal requirements at the time to protect the environment as a part of its ethical obligation and corporate responsibility (Brennan, 2013). The government had to make adjustment to the regulatory environment to enact the drilling moratorium that delayed issuing of drilling permits, which affected other stakeholders as well. The environment was the greatest casualty with devastating effect on sea organism and the entire ecosystem (Henkel, Sigel & Taylor, 2012). Approximately 1,100 miles of coastal wetland was affected (National Academy of Sciences, 2013). More than 32 National Wildlife Refuges were at risk, including the second largest refuge in the country, Breton National Wildlife Refuge (Cleveland, 2010). From 2010 to 2012, more than 817 bottlenose dolphins were reported dead as a result of the spill (National Academy of Science, 2013). More than 8,000 animals died including birds, turtles, and mammals within the first six months of the spill (Colwell, 2014). The communities were also affected. Fishermen in the area had to abandon their trawls and the commercial fish production dipped by 20% as a result of fisher closure (National Academy of Sciences, 2013; Allen & D’Elia, 2015; Cope, Slack, Blanchard, & Lee, 2013).
The media, one of the most important nonmarket stakeholders was also affected because it dedicated a lot of time and space to reporting about the spill. BP oil spill business organization There was heavy media coverage, including images that showed ruined coastline and tar balls that appeared on the shore, which affected public perception (Balmer, Powell & Greyser, 2011). The media portrayed the spill in a negative way and heaped blame on BP showcasing it as a good case of corporate irresponsibility. This affected not only the public perception but also reaction. As a result of extensive media coverage around the world, tourist activity in the Gulf of Mexico declined with reservation going down to 25% (Jones, 2011).Overall, the media reported negatively about the spill with images of birds and turtles covered with oil used frequently to shape the public opinion.
The Gulf of Mexico spill was a monumental event in the oil drilling industry. There are many likely outcomes, one of them being a stringent regulatory environment that will ensure that corporations in the oil drilling industry pay more attention the impact of their operations. However, while this is a direct impact of the industry, the indirect outcome of the issues is likely growth in corporate social responsibility (Andreoli & Lefkowitz, 2009).BP oil spill business organization With the consumer backlash experienced on the BP products, other companies are likely to think twice about their corporate social responsibility, which means organizations will become more responsible to the needs of their stakeholders (Butterfield, Trevino, & Weaver, 2000).
In conclusion, BP oil spill is a case of failure by a business organization to respond to the needs and expectations of the stakeholders. The BP oil spills was an important social issues because it exemplified the failure of business to undertake their corporate social responsibility. It affected different stakeholders in different ways as has been discussed in this study. However, the spill is likely to enforce the concept of corporate social responsibility in future.
Andreoli, N., & Lefkowitz, J. 2009. Individual and organizational antecedents of misconduct in organizations. Journal of Business Ethics, 85(3), 309–332.
Balmer, J. M. T. 2010. The BP deepwater horizon debacle and corporate brand exuberance. Journal of Brand Management, 18: 97–104.
Balmer, J. M. T., Powell, S. M., & Greyser, S. A. 2011. Explicating ethical corporate marketing insights from the BP deepwater horizon catastrophe: the ethical brand that exploded and then imploded. Journal of Business Ethics, 102: 1–14.
Barker, K. 2011. Spillionaires: Profiteering in the Wake of the BP Oil Spill. Business Ethics. Accessed online http://business-ethics.com/2011/04/13/1612-%E2%80%98spillionaires%E2%80%99-profiteering-and-mismanagement-in-the-wake-of-the-bp-oil-spill/. Viewed September 14, 2016.
Brennan, K. 2013. A Stakeholder Analysis of the BP Oil Spill and the Compensation Mechanisms Used to Minimize Damage. An Honors Thesis, University of South Florida, November.
Bryant, M., Hunter, T., & Hunter T. 2010. BP and Public Issues (Mis)Management. Ivy Business Journal, September/October, 2010.
Butterfield, K. D., Trevino, L. K., & Weaver, G. R. 2000. Moral awareness in business organizations: Influences of issue-related and social context factors. Human Relations, 53, 981–1018.
Cherry, K.E. et al. 2015. After the BP Deepwater Horizon Oil Spill: Financial and Health Concerns Among Coastal Residents and Commercial Fishers. Current Psychology, 34(3): 576-585.
Cleveland, C. J. 2010. Deepwater Horizon Oil Spill. Accessed Online http://www.eoearth.org/article/Deepwater_Horizon_oil_spill?topic=50364. Viewed September 14, 2016.
Colwell, R.R. 2014. Understanding the Effects of the Deepwater Horizon Oil Spill. BioScience, 64(9): 755.
Cope, M. R., Slack, T., Blanchard, T. C., & Lee, M. R. 2013. Does time heal all wounds? Community attachment, natural resource employment, and health impacts in the wake of the BP deepwater horizon disaster. Social Science Research, 42: 872–881.
Gill, D. A., Picou, J. S., & Ritchie, L. A. 2012. The Exxon Valdez and BP oil spills: a comparison of initial social and psychological impacts. American Behavioral Scientist, 56(1): 3–23.
Henkel, J.R., Sigel, B.J., & Taylor, C.M. 2012. Large-Scale Impacts of the Deepwater Horizon Oil Spill: Can Local Disturbance Affect Distant Ecosystems through Migratory Shorebirds? BioScience, 62(7): 676-685.
Jurkiewicz, C.L. & Giacalone, R.A. 2014. Organizational Determinants of Ethical Dysfunctionality. Journal of Business Ethics, 136(1): 1-12.
Mendelssohn, I. et al. 2012. Oil Impacts on Coastal Wetlands: Implications for the Mississippi River Delta Ecosystem after the Deepwater Horizon Oil Spill. BioScience, 62(6): 562-574.
Miles, S. 2012. Stakeholders: essentially contested or just confused? Journal of Business Ethics, 285-298.
National Academy of Sciences. 2013, July 10. Assessing impacts of the Deep-water Horizon oil spill in the Gulf of Mexico. Accessed online http://www.sciencedaily.com/releases/2013/07/130710122004.htm. Viewed September 14, 2016.
Partlett, D. F., & Weaver, R. L. 2011. BP Oil Spill: Compensation, Agency Costs, and Restitution. Washington and Lee Review, 1342-1355.
Peterson, S. et al. 2012. A Tale of Two Spills: Novel Science and Policy Implications of an Emerging New Oil Spill Model. BioScience, 62(5): 461-469.
Shrivastava, P. 1995. The role of corporations in achieving ecological sustainability. Academy of Management Review, 20: 936–960