DEEPWATER OIL SPILLAGE

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Nov 24, 2024

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1 Business Crisis Student’s Name Institutional Affiliation Course Title Professor’s Name Date

2 Business Crisis In modern business, crises have become common and contributed to massive ethical and legal violations while accumulating significant losses to the tune of billions of currencies. These issues often result in massive losses for organizational stakeholders and society members with no connection to corporations but have to bear the effects of the negative externalities created. Various factors are responsible for these crises, depending on the types of decisions and resources involved. These include poor management decisions, unethical behavior, environmental disasters, and regulatory violations (Ritter & Pedersen, 2020). These issues caused severe consequences such as financial losses, reputational damage, legal liabilities, and bankruptcy. They also had immediate impacts but could have long-term effects like los ing consumer trust and confidence, decreased investor interest, and increased regulatory scrutiny. This makes it necessary for organizations to have effective crisis management strategies that prioritize ethical and responsible behavior, address the root causes of the crisis, and ensure transparency and accountability. This paper analyzes the Deepwater Horizon oil spill by exploring the ethical implications and social responsibility issues it created in the business world. The Crisis The Deepwater oil spill was a 2010 catastrophe in the Gulf of Mexico, causing significant damage to the BP corporation, the environment, and local communities. On April 20, 2010, the Deepwater Horizon drilling rig owned by Transocean but leased by BP experienced an explosion (Joye, 2015). The explosion caused the deaths of 11 workers and injured 17. Additionally, the oil rig sank and caused massive spillage that affected most parts of the ocean.

3 The rig’s location was about 40 miles off the Gulf of Mexico in Louisiana. The spillage lasted approximately three months and released about 4.9 million barrels of oil into the Gulf of Mexico (Joye, 2015). The effects extended to many areas and affected sectors such as marine and wildlife habitats, disrupted fishing and tourism industries in the region, and caused significant economic and environmental damage. An investigation revealed that the explosion resulted from an explosion of a blowout preventer, a device meant the prevention of oil escape in case an accident occurred (Joye, 2015). According to the investigation, the blowout preventer had a faulty design and was not properly maintained. Additionally, the investigation revealed that the organization's management made decision errors that caused this disaster. One aspect of the findings was that BP had a history of engaging in shady deals and ignoring safety while engaging in cost-cutting tendencies. The management had taken several shortcuts in designing and operating the Deepwater Horizon rig (Joye, 2015). For example, the company used a single casing instead of the recommended double casing to save money, which made the well more susceptible to leaks. The other significant finding was that the organization had ignored many warning signs , unusual pressure readings, and gas bubbling up from the well. BP ignored these signs and continued to drill. On the other hand, the organization needed to respond faster to the spill and have adequate plans in place for dealing with a disaster of this scale (Joye, 2015) . The company's initial response efforts were ineffective, and it finally took several months to cap the well. This spill caused massive damage to the public and the company as it had to pay billions of dollars in fines and settlements to individuals, businesses, and government agencies affected by the spill. The organization also suffered significant reputation damage and was subjected to, which affected the entire oil and gas industry (Joye, 2015). BP changed its safety procedures and

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4 management practices significantly after the spill. Additionally, it adversely affected the environment and local communities, resulting in massive damage to marine and wildlife habitats, and it disrupted the fishing and tourism industries in the region. Ethical Evaluation We can evaluate the organization's actions that led to the crisis and the response to the spillage using ethical theories and the principles of corporate social responsibility. John Mill's utilitarianism theory evaluates actions based on their ability to produce the greatest happiness or pleasure for the greatest number of people (Bowen & Bhalla, 2021). One would evaluate these actions by considering their impacts on the organization and society. The organization’s management’s initial response was to downplay the impacts of the explosion in a bid to maximize profits. This shows a deliberate attempt to hide the potential effects of an event that could adversely impact the lives of thousands or millions of people. One thing that comes out is that the action delayed a possible mitigating response to this event (Bowen & Bhalla, 2021). From a utilitarian perspective, this decision was unethical because it prioritized the interests of BP over the welfare of society as a whole. By failing to take prompt and decisive action to mitigate the spill, BP's decisions significantly harmed the environment, wildlife, and local communities, which outweighed any potential benefits that might have accrued to BP. The organization also acted to diffuse the situation and resolve any issues arising from the crisis. On the other hand, the management's actions could be well-intended as the organization attempted to promote the greater good. The top leadership initiated efforts to clean up the spill and compensate affected individuals and communities may be seen as a utilitarian effort to promote the greater good (Bowen & Bhalla, 2021). These actions facilitated effective improvements by reducing the harm resulting from the oil spillage. However, the management

5 only took these actions in response to public pressure, and regulatory oversight forced BP to take responsibility for the spill. From a utilitarian perspective, this delay in taking action may have resulted in a net loss of overall happiness or pleasure for society. The other ethical perspective one would use to analyze the issue would be the deontological ethical theory, which emphasizes the inherent rightness or wrongness of actions, regardless of their consequences (Bowen & Bhalla, 2021). One would evaluate the organization’s actions by assessing whether the management adhered to moral principles. On one side, BP and its officers and directors owe their stakeholders, such as their duty to act with honesty, integrity, and transparency and to prioritize the safety of workers and the environment (Bowen & Bhalla, 2021). From the lens of the deontological theory, the organization’s initial response to downplay the situation’s severity and understate the amount of oil spillage may be considered a breach of these duties. The organization failed to act honestly and transparently by failing to prioritize the safety of the environment, the public, and its workers. This means the actions were wrong, no matter the ultimate consequences. From a different perspective, one would consider the organization’s subsequent efforts to clean up the spill and compensate affected individuals and communities as fulfilling their deontological duties to relieve those impacted by the crisis (Bowen & Bhalla, 2021). However, one constant factor is that the organization took these actions only after public pressure and regulatory oversight forced BP to take responsibility for the spill. From a deontological perspective, this delay in taking action may also be a breach of BP's duties to act with honesty, integrity, and transparency. Additionally, the actions taken by the management could be interpreted as a violation of the principles of corporate social responsibility; these principles emphasize the importance of considering the impact of business decisions on stakeholders beyond just shareholders. BP's

6 actions had significant negative impacts on the environment, local communities, and the economy of the Gulf of Mexico region. The company failed to take responsibility for the harm caused by the spill and initially downplayed the severity of the situation. Fiduciary Duties to the Shareholders Fiduciary obligations allude to the legitimate and moral duties that officers and executives of an enterprise owe to the shareholders, counting devotion, care, and divulgence. Officers and chiefs must act confidently and with unified devotion to the organization and its shareholders (Brennan, 2013). They must make choices that are within the best interests of the enterprise and its shareholders in the event that those choices are not in their best interest. Within the BP case, the administration, officers, and chiefs fizzled to guardian obligations to the shareholders; they were committed to acting within the best interface of the company and its shareholders by taking sensible steps to guarantee that the company works securely and dependably whereas guaranteeing that benefits maximization (Brennan, 2013). The administration prioritized cutting costs and maximizing benefits over guaranteeing the security of its laborers and the environment while overlooking caution signs of each potential issue. Numerous variables can be said to clarify the disappointment in maintaining these guardian obligations. The primary issue would be the corporate culture at BP, which set a tall esteem on cost-cutting and productivity. This culture was strengthened by execution measurements and motivations that compensated administrators for assembly money-related targets (Brennan, 2013). The other issue would be the need for oversight by the board of chiefs. The board was mindful of supervising the company's administration and guaranteeing it worked securely and capably. In any case, the board fizzled to screen BP's operations satisfactorily or hold the administration responsible for its actions.

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7 Statutes and Regulations That Were Not Considered By engineering the displayed emergency and its disappointments, the organization's management abused a few essential statutes, key among them being the Clean Water Act (CWA), which forbids releasing oil or hazardous substances into traversable waters without a allow (Britannica, 2021). BP did not allow the sum of oil to be discharged into the Inlet of Mexico, and the oil spill critically harmed the marine environment. In expansion, BP was found to have damaged the Oil Contamination Act (OPA), which needs companies to have an arrangement for reacting to oil spills and to require steps to anticipate spills from happening (Britannica, 2021). The other statute damaged was the Word-related Safety and Wellbeing Act (OSHA), which needs bosses to supply a secure working environment for workers and to require steps to avoid mishaps from happening. The administration fizzled enough to guarantee the security of its laborers and disregarded caution signs of issues with the well (Britannica, 2021). This was driven by the blast on the Deepwater Skyline fix, which came about within the misfortune of 11 lives. Moreover, the organization damaged the Government Securities Laws were damaged by BP. BP made wrong and deluding explanations to speculators with respect to the degree of the harm caused by the oil spill and the company's endeavors to contain it. This abused the Securities Act of 1933 and the Securities Trade Act of 1934, which require companies to supply exact and honest data to financial specialists (Britannica, 2021). Anticipating and Handling the Emergency In the event that I was overseeing BP, I would have done some things in an unexpected way to avoid the embarrassment from happening. At the best of my list would be safety prioritization activities pointed at keeping everybody secure in and out of the organization. I would have prioritized safety over cost-cutting and money-related pick-up. This would have

8 included actualizing a solid security culture throughout the organization, investing in more secure innovation and gear, and guaranteeing that all workers are appropriately prepared to work securely (Schneider, 2011). One other thing I would consider would be a more grounded requirement; to guarantee that companies are held responsible for their activities, there ought to be more grounded requirement instruments in put, counting more visit assessments and reviews, stiffer punishments for infringement, and more prominent straightforwardness in announcing (Schneider, 2011). I would implement stricter administrative benchmarks to guarantee that companies are required to function securely and securely. This incorporates stricter security and natural measures, the necessity for more comprehensive hazard administration plans, and more grounded arrangements for crisis reaction arranging (Horsley & Hutchins, 2021). I would advance morals since the company's code of conduct should be upgraded to the significance of ethical behavior and imbued within its culture. This might incorporate giving normal preparation to representatives on moral behavior, building up a morals hotline, and making a culture of accountability. At long last, I would satchel activities pointed at transforming remuneration. There is a need to change the official stipend to better adjust to the company's security and natural objectives instead of fair monetary targets (Horsley & Hutchins, 2021). This might incorporate joining non-financial measurements, such as security and natural execution, into official emolument bundles. One imperative viewpoint to consider is part of government controls and how they were abused in the lead-up to the emergency. BP was required by law to have different security measures and conventions input to avoid and react to oil spills, but it shows that numerous of these controls were not taken after or were inadequate (Hoke, 2013). For illustration, BP had gotten notices from its representatives and temporary workers almost potential security issues

9 with the fix and the blowout preventer. However, these notices should have been paid attention to. In expansion, BP was found to have fizzled to keep up and assess hardware legitimately and misrepresented security records. This infringement of government directions illustrates neglect of the security of laborers and the environment and likely contributed to the seriousness of the emergency (Hoke, 2013). Another vital thought is the effect of the emergency on the influenced communities and environments. The Deepwater Skyline oil spill was one of the biggest environmental disasters in US history, causing broad harm to marine life and living spaces within the Inlet of Mexico. The spill, moreover, had critical financial impacts on the locale, especially on the angling and tourism businesses (Hoke, 2013). BP was required to pay billions of dollars in compensation and punishments due to the spill, but numerous contend that the company has not done enough to address the harm caused completely. In terms of anticipating future emergencies, a few changes may be made to the relevant statutes and directions. For case, stricter directions may be put in place to ensure that oil companies are held responsible for safety infringement and natural harm. In expansion, there may be more noteworthy straightforwardness and oversight within the endorsement preparation for offshore penetrating operations (Hoke, 2013). Companies must have more comprehensive plans for reacting to oil spills and frequently test and keep up security gear. As for changes that can be made inside the enterprise, there ought to be a more noteworthy accentuation on moral and dependable behavior. BP's culture during the emergency was characterized by a center on benefits and cost-cutting measures at the cost of security and the environment (Hoke, 2013). To avoid future emergencies, there must be a move toward a culture that prioritizes security, straightforwardness, and responsibility. This may include changes to the company's administration, administration structure, and commerce hones.

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10 Conclusion The Deepwater Horizon oil spill emergency serves as a capable illustration of the significance of moral and dependable behavior within the corporate world. The emergency resulted from a complex transaction of variables, counting BP's culture, government directions, and unexpected circumstances. In any case, it is obvious that BP and its officers and executives may have done more to avoid the emergency and minimize its impacts. From a utilitarian viewpoint, BP's choices to prioritize benefits over security and the environment eventually come about in noteworthy hurt to laborers, communities, and environments. From a deontological point of view, BP had an obligation to ensure the security of its laborers and the environment. The company's disappointment in doing so speaks to an infringement of this duty. The officers and chiefs of BP fizzled to fulfill their guardian obligations to the shareholders by prioritizing short-term benefits over long-term maintainability and security. Whereas it is genuine that the unusual nature of the oil industry played a part in the emergency, it is additionally clear that BP might have done more to anticipate it by taking after government controls and prioritizing security. Moving forward, there must be a more prominent accentuation on anticipating future emergencies through made strides in directions, increased accountability, and a recharged focus on moral and dependable behavior. Stricter controls are implemented to guarantee that oil companies are held responsible for security infringement and natural harm. Companies may be required to have more comprehensive plans for reacting to oil spills. Inside the enterprise, there should be a move towards a culture prioritizing security, straightforwardness, and responsibility.

11 References Bowen, S. A., & Bhalla, N. (2021). 30 Ethical theories and public relations: Global issues and challenges. In Public Relations (pp. 581–598). De Gruyter Mouton. Brennan, K. (2013). A stakeholder analysis of the BP oil spill and the compensation mechanisms used to minimize damage. The University of South Florida , pp. 1–6. Britannica. (2021). Legal action . Encyclopedia Britannica. https://www.britannica.com/event/Deepwater-Horizon-oil-spill/Legal-action . Han, Y., & Clement, T. P. (2018). Development of a field testing protocol for identifying Deepwater Horizon oil spill residues trapped near Gulf of Mexico beaches. PLoS One , 13 (1), e0190508. Hoke, T. (2013). A Question of Ethics: Fostering a Culture of Safety. Civil Engineering Magazine Archive , 83 (1), 38–39. Horsley, J. S., & Hutchins, A. L. (2021). Incorporating Ethics in Disaster Communication Strategy: The Case of the US Government in Deepwater Horizon. Journal of Homeland Security and Emergency Management , 19 (1), 67–86. Joye, S. B. (2015). Deepwater Horizon, 5 years on. Science, 349(6248), 592–593. Ritter, T., & Pedersen, C. L. (2020). Analyzing the impact of the coronavirus crisis on business models. Industrial Marketing Management, 88, 214-224. Schneider, R. O. (2011). Ethics and oil: Preventing the next disaster. Journal of Emergency Management , 9 (3), 11-22.

DEEPWATER OIL SPILLAGE

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