Madgopes.com will highly appreciate if the readers click on ads of interest and visit the advertisers and sponsors. Please help us to help you. Thank you and have a nice day First written on August 09, 2004 Revised and Updated Saturday, July 26, 2008 Business Ethics - Problems in the natural environment - The Exxon-Valdez Oil Spill Incident I will be the Judge, I will be the Jury and I will sentence you to Death - Caterpillar to Alice in 'Alice in Wonderland' by Lewis Carroll Oil is a very big business and Exxon-Mobil is the biggest of them all. Before the merger with Mobil took place, it was known as Exxon and its well known brand as 'Esso". For decades  it was the largest corporation in the world and it had occupied the top 2 slots in the Fortune List of 500 largest corporations in the world, competing with GM for the first place. These corporations are so big that it is difficult to even imagine their size. Only 28 countries of the world have more annual income than Exxon based on the purchasing power parity method today. The bottom 150 countries collectively may not have their annual GDP equal to the annual income of Exxon-Mobil. With oil price shooting to USD 97 per barrel in November 2007, all the energy companies are bound to get bigger and wealthier. It was reported in February 2005 by the New York Times, that Exxon-Mobil had become the wealthiest company in the world, in terms of market capitalization, replacing GE of USA. It is bound to remain at the top for quite sometime to come because of massive increase in oil prices despite the depreciation of the USD. The Valdez incident A number of oil companies formed a consortium to operate an oil terminal called "Alyeska" in the port of Valdez off the Alaskan coast. Almost all oil companies own or hire Supertankers for transport of crude oil from various oil terminals for processing it further. The Exxon- Valdez was a most modern supertanker having the latest navigational aids built in a San Diego shipyard and costing USD 125 million in 1987. On March 24, 1989, it sailed out of the port of Valdez, fully laden. It was eased out into the outer harbor by the port pilot as per custom in all ports. The Captain of the supertanker had a history of drinking problem and his auto driving license was revoked three times, yet he was thought fit enough to command a supertanker in the coastal waters. The top management of Exxon was aware of the drinking problem and had sent him for some rehabilitation program. The port pilot noticed alcohol in the breath of the Captain but thought it was not serious enough to affect his faculties. He handed over charge and the Captain increased the speed to 12 knots immediately in the narrow waters. He then handed over the supertanker to a third officer, who was not authorized to pilot supertankers off the coast. This is against the maritime laws and rules. Soon the supertanker ran into Bligh reef trying to avoid an iceberg and huge holes were ripped in the ship's hull and it began dumping crude oil into the sea. It is estimated that 11 million gallons of crude oil was dumped into the sea in a matter of 7 to 8 hours.  The Consequences This Alaskan region is a nature lover's paradise known as Prince William Sound. Immediate victims were the sea living creatures like shrimps, sablefish, sea otters, herring roe eggs and water fowls. It was also a home for 200 different species of birds for summer nesting. While there was no loss of human life, millions of these sea living creatures died. On the commercial side, fishing was banned for some time and it caused enormous losses to fishermen and affected their livelihood. The consequential losses were incalculable. This became the battleground for oil industry and the environmentalists. The people of Alaska lost their faith and trust in the oil industry. Exxon did everything to clean up the mess, though it was a PR nightmare for it. The people of Alaska became very angry when they learnt that the Captain's blood alcohol level was 0.06 against the permitted level of 0.04. This was 9 hours after the accident. Doctors estimated that the blood alcohol level must have been around 0.19 at the time of accident, assuming that the normal metabolism of a healthy individual took place. This means there would be absolutely no coordination between the brain, eyes and the limbs and the Captain was punch drunk and was not in control of his senses. How nobody noticed it remains a mystery. The captain was dismissed by Exxon after the incident and criminal charges were brought against him by the state.  What are the Ethical and Legal issues out of the above incident ? Please send your views on the above to madhavan@mmg.name and we will publish the best one in these pages. Postscript added on November 24, 2007 We visited a website www.valdezscience.com which is fully devoted to the environmental recovery of PWS. The Exxon-Valdez spill is not the largest oil spill and there are bigger spills. It is ranked 59 in the list. It is a beautifully designed, well researched and well maintained site with excellent details and graphics. However, we find many of the information defensive and later realized that the research is funded by Exxon-Mobil and this is given at the bottom of the page. This can lead to conflict of interests. It is always advisable not to take money from the defendant in such cases. Mistakes do happen and even giant corporations are liable to make mistakes. But many Alaskans are not willing to forgive Exxon for the disaster and an e-mail from a reader received in December 2004 is given below: Sat, 11 Dec 2004 5:33 PM From: "Alice ******" To: "Madhavan T Gopalachary" <madhavan@mmgindia.com> I just read your article on the Exxon Valdez. One of your questions was about fishing being legal and if the same number of sea life would die. I'm paraphrasing. The point is, it may be decades before those waters and coast line return to the way they were. This will affect future sea life. I was fortunate to cruise from Portage to Valdez in the mid 1980's. No amount of money will ever return Prince William Sound to the way it was, only time. I still will drive 10 miles down the road before I will stop at an Exxon (and now Mobil) station. It hasn't hurt their bottom line but it gives me satisfaction to know that I don't contribute to their wealth. Besides I quietly pass it along. The best and worst advertising a company can have is by word of mouth. Thank you for the very informative article. A grateful reader, Alice ******* Note: The e-mail IDs of our readers are never revealed by us. The surname has been deleted to protect the ID of the reader.  Postscript added on June 25, 2008 The New York Times reported on June 25, 2008 that the US Supreme Court had finally given its ruling that Exxon-Mobil need to pay USD 500 million only, as against USD 5 billion awarded by the jury earlier for the above disaster. This was originally fought in the State courts of Alaska. A Federal court later reduced the punitive damages to USD 2.5 billion on appeal by Exxon. Exxon's appeal was based on the fact that it had already spent USD 3.4 billion in trying to correct the damages. Nearly 33,000 affected Alaskans will share this award, which means each of them will receive $ 15,000 as damages. It was a 5-3 ruling, with one Judge abstaining because he held Exxon stock. This appears to be a fair and just ruling by the honorable supreme court. However, since the disaster occurred in 1989, whether the court took into account the inflation over the years and the depreciation of the dollar is not known. It is very important that the courts take this factor into consideration in cases like this because it has dragged on for nearly 2 decades. This ruling is important because the disaster occurred not because of willful neglect by Exxon. It did its best to correct the situation. The Indian Supreme Court awarded USD 600 million as damages in the Bhopal disaster, where 3300 people died and 10,000 people affected permanently for life in some manner. It was a case of willful neglect by Union Carbide. These two ruling are very important from long term point of view as precedents. The punitive damages must be high only in cases of willful neglect. The Judiciary of two great democracies have proved that the legal systems work. However, the following gives a different twist to the story.  Added on July 25, 2008 I received an e-mail today from one Mr. Kellie Kvasnikoff, the Chief Information Technology Officer for the Snoqualmie Indian Tribe. He is one of the affected commercial fishermen in the disaster. In his mail he has not agreed with the US Supreme Court Judgment and has claimed travesty of justice. He has requested for our help in his mobilization for support by sending his petition. We at madgopes.com are not competent to comment on the legal matter which has been pronounced at the highest judiciary level in USA. However, we feel that there is no harm in acceding to his request. Those interested can visit his petition site at, http://www.rallycongress.com/exxon/1168 and do what they deem fit as per their conscience. We would like to make it clear that we have no personal interest in the matter and this is without prejudice from our side in the dispute between the people of Alaska and Exxon. If this helps the affected parties in some manner to arrive at a mutually amicable and acceptable solution, we are happy about it. Our policy is very clear. We want justice to be done to all in any dispute. That is all to it. Thank you for your time.  Madhavan Gopalachary Personal Musings added on July 26, 2008 I have always believed in Law and Justice. Its effectiveness decides the framework of societies. In any democratic system, the legislators frame laws, the executive implement them and the judiciary interprets them. Unfortunately, we are having a peculiar situation developing these days. The laws are being amended in Parliaments to favor giant banks, large business houses etc., which puts an average common man at a disadvantage and giant institutions get away with blue murder. A common man cannot fight money power when he does not have money. Pray tell me who can go on fighting in courts for decades. One has to work. One has to eat. One has to live. People have families to look after. People have financial commitments. Not many people know that in India, most poor farmers die without getting justice fighting the rich landlords for decades. The rich keep getting adjournments of court proceedings. With millions of cases pending in courts, it takes decades. The judiciary is not responsible for framing laws, they can only interpret them. I do not know the situation in USA, but after going through the various comments in the petition, it appears that all is not well, even in a rich country like USA. How can the judiciary decide the laws and then be the judge and jury ? There is something seriously wrong. If societies have to survive and grow, people should not lose faith in the judiciary. Judiciary represents God in human form. They have an exalted status in societies. Judiciary must always apply the principle of natural justice. When that does not happen the moral degradation of societies starts, people become cynical, lose faith in the system and entire civilizations eventually disappear.  Written  by Madhavan T Gopalachary Reference: "Business Ethics" by Rogene A Buchholz and Sandra B Rosenthal, both Professors at Loyola University of New Orleans and published by Prentice Hall, Englewood Cliffs, New Jersey, USA - 1998 and various dispatches of "The New York Times", USA. The above is an abridged and condensed version of the article first published on August 09, 2004. Paying Members of madgopes.com can access the original article from the articles index page which covers all the ethical and legal implications.  The views, opinions and interpretations are personal. Sponsorship does not mean that the sponsors endorse them. Editorial Policy © Copyright, Jul-08 . www.madgopes.com . Without prejudice. 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