BP is the leading energy company. BP took its name from the initials of the company’s previous official name British Petroleum. The company was trying to persuade everyone that it was an environmental friendly company that was using and develop alternative energy technology. During its existence it paid so much in fines for pollution that it is become obvious that management did not really care about the environment, but only about maximizing profit in anyway. It was easier for them to pay fines than to change their management system and prove safety improvements in the workplace. After the explosion, BP’s stock price and its reputation went down, and it is one of the numerous results of the disaster. It has definitely happened because of a lack of strong ethical guidance.
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BP- Texas City Oil Refinery Explosion (2005) – Case Summary
In one of the largest oil refineries in Texas City, on March 23, 2005, the explosion and fire took place, which took away 15 lives, injured over 170 people, and obligated thousands residents that lived close to the plant to stay in their homes. BP generates diesel and jet fuel, and gasoline. In 2005 a huge cloud filled with hydrocarbon ignited approximately 1:20 pm. The explosion caused solid harm to the plant and to its name. In fact, the company had couple not so serious accidents before the explosion, and there were none engineering problems addressed by the management of the company. Because of a cost-saving plan, the maintenance and safety was paid less attention that needed in order to avoid the disaster at the plant. For sure, all the responsibility of the accident should be blamed on executives in London that were aware of the safety issues and budget cuts. It was definitely strong mismanagement at the BP and this was proved by investigations that took place in this case. In fact, one of them was provided by Chemical Safety and Hazard Investigation Board that “offered a scathing assessment of the company.”
It is very important to take stakeholders interests into account. BP did not properly place its stakeholders at the center of its strategy. Instead of being fixated on legal liability, which originally impacts internal stakeholders (management, employees, shareholders, creditors, customers); BP should have empathized with external stakeholders (such as the general public, communities, media) that will suffer from the explosion. Finally, BP has hurt all of its stakeholders.
1. What are the facts of the case?
I think the most significant fact is that BP was neglecting obvious warning signs about the plant’s weakening conditions, and was focusing on the minimizing costs and the maximizing profits. Employees were aware of the working conditions at the plant because every day they were going to work with a fear that something terrible could happen at any time. BP failed to repair a lot of safety problems they knew about, and it led to the explosion in 2005, 15 deaths and over 170 injured. BP reduced its expanses for buying safety equipment for employees, cut its budget to lower number of inspection, and maintenance workers at the plant. Indeed, BP did not repair a lot of multi-safety problems that at the end caused the explosion, and at the end the company was fined. Cost cutting and poor maintenance are the main factors in this case that conducted to the disaster.
2. What are the ethical issues?
BP has failed in the inspection and the maintenance of equipment, risk and staff management, working and safety culture, as well as general health and safety assessments. Employees were aware of the working condition at the plant, but they could not protect themselves because they knew that management team would not listen to them and ignore all their ideas. The company’s internal reports indicated that the company had the deficient understanding of the risk, and its workers had the poor understanding of possible consequences.
The Chemical Safety Board’s investigation advised that budget cuts critically influenced on the safe operations at the refinery, and that its executives did not provide efficient guidance, as well misunderstood the importance of controlling main risks.
The company was running for a big profit and forgot about employees’ safety. There was not enough understanding of what can happen. Perhaps it was enough in order to make a decision whether to pay more money for safety or to pay fine later on. Management definitely did calculations on how much it will cost to pay fines and what the price will be for a lost human life in case of the disaster. As always it was easier to ignore all the safety issues, and hope that nothing happens.
3. What are the norms, principals, & values related to the case?
The company has violated the Clean Air Act, and the federal environmental laws. In addition, families of its victims sued the company as well. Unfortunately the company continues to break the federal environmental laws, with the exact the same and analogous violations that led to the explosion in 2005.
4. What are the alternative courses of action?
The company has to book the expenses for safety and never do budget cuts for it. The management has to understand the significance of safety in this field of business, and improving, not ignoring process of safety will pay off in future, by saving the good name of a company and avoiding to pay unbelievably high amount of fine. The management system at BP has to focus not only on measuring and managing occupational safety, but also on process safety. The company has to pay attention to safety and working conditions at the plant.
5. What is best course of action?
I think all three courses should be combined to avoid future disasters, deaths, and injuries at the plant because with paying more attention to safety, working conditions will help to build a strong company reputation. Regular improvement of maintenance and inspection will lead to satisfactory working environment and conditions. A better understanding of the safety culture and management systems in the company by management will solve an issue with mismanagement at the plant.
6. What are the consequences of each possible course of action?
Combine all the course of actions will help to avoid many disasters and explosions in future, save lives of workers, and reduce injures in the working place.
7. What is the decision?
In order to stop those violations the law should be more serious and strict. For ignoring safety improvements, general health and safety assessments, and for violations of law the management team should be sent to the jail and they should understand that consequences will be very serious. The history shows that paying fine will not stop the company from violating safety assessments. It would be a good idea to open a hot line for employees to report any violations at the plant, and those phone calls should be anonymous. It will help to avoid those disasters in future because usually employees are aware of safety and other issues inside of the company.
The Texas City’s inhabitants are remaining faithful to the oil refinery, even though chemical issues and deaths had place. The main reason because of their dependence of BP. This company contributed giant donations to the city, including its parks, schools, and a community center. People know that their town would fade if the refinery would be close because the company is not only the town’s biggest employer, but also its best-paying jobs.
BP company violated most of 6 pillars, among them trustworthiness, respect, responsibility, fairness and caring.
Definitely, the company has to provide constant meetings with the management of the company and explain the importance of all the actions to improve safety and working conditions. Because management has to understand that contribution in today’s business will lead to saving money and help to avoid disasters in future. It will also keep the company name and price stock high, and satisfy needs of stakeholders as well. But as BP’s history shows, those disasters are happening again and again after years and no actions and real attention to improve and avoid it, nobody takes it seriously. For example, one more explosion that happened on Deepwater Horizon in April 2010 and took away 11 lives, and led to an oil spill that heavily polluted the environment. It has a serious influence on the fishing and tourism industries, as well as on fish and animals.
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It seems that for this company it is easier to pay fines and money to family’s whose relatives died at the plant because of the disaster than to change their course in doing fair business and ethical decisions making. People do not understand that by those disasters, they ruin not only the company reputation, but also the environment in general, and do not think about good and healthy future for the next generations. Management has to realize the importance of having safe jobs, more responsible managers, and ethically making decisions.
Finally, management has to not only focus on minimizing costs and maximizing profits, but also do everything needed for employee’s safety and the unpolluted environment. The company has to understand that people’s lives have no cost. Because of their neglect and desire to earn as much money as possible and to save money while risking the safety of their workers, and as the result people die at their work and their families are left without loved ones.
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