ASSIGNMENT – THINKING AND MANAGING ETHICALLY
MASTER OF BUSINESS ADMINISTRATION
AWARDED BY NOTTINGHAM TRENT UNIVERSITY
ASSIGNMENT SUBMISSION FORM
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Name of Student: DONALD WONG KIN SAN
Student Registration Number: KL419
Module Name: TME – THINKING AND MANAGING ETHICALLY
Module Number: WEC-MBA-08-0106
Assignment Title: AN ETHICAL ASSESSMENT OF UNOCAL
Submission Due Date: 17 JUNE 2007
Student’s Electronic Signature: Donald Wong
Plagiarism is to be treated seriously. Students caught plagiarizing, can be expelled from
the programme.
Assignment Form
MBA Jan04
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ASSIGNMENT – THINKING AND MANAGING ETHICALLY
Contents
Executive Summary ………………………………………………………………… 3
1.0
Introduction …………………………………………………………………. 4
2.0
Unocal and the Court of Ethics …..………………………………………… 6
3.0
Unocal’s Moral Responsibility for the Karens ….....…………………….... 18
4.0
The Tussle between Engagement and Isolation …..……….…….….…....... 21
5.0
Conclusion ..……………………....………………………………..………. 25
6.0
References …………………………...………………….………………..... 27
Appendices
1.
Model of Ethical Decision Making …………………………..………......... 31
2.
Content Variables – Factors and Forces that Influence a Company’s Decision
Making …………………………………………………………………….. 32
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ASSIGNMENT – THINKING AND MANAGING ETHICALLY
Executive Summary
Unocal was prosecuted at the court of law, and statement upon statement made by the
trial judges gave a good and reasonable indication of how the case would have been
decided. It would be reasonable to deduce that Unocal would have been found guilty,
and ordered to make hefty compensations, and undertake restitutions which will never
be known. It chose instead to make a settlement to the plaintiffs out of court.
In this paper, we subjected Unocal to the court of ethics. We appraised Unocal’s
actions in Myanmar using four theories of ethics. They are the ethical theories of
Utilitarianism, Rights, Justice, and Care. Each theory was first clarified and its
principles were used to evaluate Unocal’s actions. All four theories unanimously
found Unocal guilty of moral irresponsibility which rendered their deeds in Myanmar
unjustified. We have therefore found a positive correlation between legality and ethics
in our paper.
Having clarified the discourse of the ethical theories, and using them in our analysis
and thinking, we articulated a verdict that Unocal was morally responsible for the
atrocities committed on the minority Karens. In the final part, we discussed the moral
tussle between choosing to engage or disengage, and proposed our views on why we
thought Unocal was mistaken in adopting the premise that engagement is better than
isolation in dealing with rogue regimes.
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ASSIGNMENT – THINKING AND MANAGING ETHICALLY
1.0
Introduction
At first it seems oxymoron that an oil and gas company should ask “Profits and
Principles – is there a Choice?”1 After all we know that “the social responsibility of
every business is to use its resources to increase its profits, and to maximize
shareholder value” (Friedman, 1970, p.125 cited in Laszlo and Nash, 2007;
Gallagher, 2005). However the recent downfalls of corporate icons such as Arthur
Andersen, Barings Bank, Enron, WorldCom appear to be prima facie evidence that
increased attention to business ethics is warranted. Suddenly the tagline from Shell’s
commercial does not seem naïve anymore. Instead it asks us the same poignant
question when we face challenging ethical dilemmas – when we wrestle with our
conscience to decide between right and wrong or good and evil (Velasquez, 2006).
What is ethics? The body of literature offers many varying definitions. We prefer
Velasquez (2006, p. 10) who defined ethics as “the discipline that examines one’s
moral standards or that of a society.” Takala (2006, p. 1) saw ethics from Aristotle’s
proposition of virtue, and posited an interesting definition: “ethics means pursuing the
good life.”
Given that understanding, defining business ethics becomes easy. It is simply a type
of applied ethics – a study and determination of moral right and wrong as applied to
business organisations (Velasquez, 2006). It can also be understood as the pursuit of
a good business life (Takala, 2006).
Contrary to descriptive study which makes no attempt at reaching conclusions, an
ethicist employs normative study to conclude if an action is good or bad or right and
wrong2. Normative study tries to deliver moral verdicts using ethical theories on three
different kinds of issues: systemic, corporate, and individual (Velasquez, 2006).
1
Shell’s advertisement in the National Geographic magazine, May 1999 issue.
The differences between these two schools of taught can be better understood by clarifying the
approaches they employ. While “descriptive” tells us how the world is, “normative” claims of how the
world should be. Thus something which is legal may not be ethical. However what is ethical is usually
and almost always legal (Doost, 2005).
2
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Ethical theories are customarily divided into two groups, usually called teleogical and
deontological (Boatright, 2007). Although both groups have each spawned many
theories, the most prominent of a teleogical and deontological theory are utilitarianism
and the ethical theory of Immanuel Kant respectively (Boatright, 2007; Takala, 2006;
Doost 2005; Sintonen and Takala, 2002; O’Hara, 1998). Takala (2006) also says that
utilitarian – the ethics of utility, and deontology – the ethics of duty are the ethical
grounds most commonly used to reflect on ethical issues.
In the next section, we will use utilitarianism and the three prominent schools of
deontology – rights, justice and caring to assess if Unocal’s actions in Myanmar were
morally right and therefore justified.
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2.0
Unocal and the Court of Ethics
The life which is not examined is not worth living (Plato).
Global companies, operating in foreign host countries with dissimilar cultures and
laws, political institutions and ideologies, commercial practices and customs, and
levels of economic development, are confronted with different ethical standards with
which they gauge their conduct and ascertain their moral responsibilities.
It is tempting in such circumstances to adopt the theory of ethical relativism – under
which something can be judged to be morally good if, in one particular society, it
complies with the prevailing moral standards, but wrong if it does not – and to declare
that the proposed practice or activity is morally acceptable, because is conforms with
the moral standards or practices of the particular society (Silbiger, 1999).
It may be equally tempting to insulate or disassociate itself from questionable conduct
of its host country partner, so that repercussions are muted or avoided (Schoen et al.,
2005). Highly profiled companies like ChevronTexaco, ExxonMobil, Nike, Shell, and
Unocal have all treaded the same path of escape when they faced liability for the
misconduct of third-world governments (Olsen, 2002; Schwartz, 2000).
Unocal knew for a fact that their foray into Myanmar would entail violations of
human rights including forced labour, murder, rape and torture – perpetrated by the
Myanmar military in developing a gas pipeline, and yet it decided to proceed anyway
to engage with the ruling junta (EarthRights International, 2005; Eviatar, 2005;
Holliday, 2005; Rosencranz and Louk, 2005; Schoen et al., 2005). The US Ninth
Circuit Court of Appeals in its landmark decision to allow foreign nationals to sue
American companies for specific and egregious violations of human rights committed
on foreign soil through the use of the Alien Tort Claims Act, had ascertained that
Unocal had indeed committed the actus reus (a wrongful deed) and mens rea (a
wrongful intention) of aiding and abetting human rights law violations in Myanmar
(Rosencranz and Louk, 2005; Schoen et al., 2005).
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Besides jus cogens3 violations, Olsen (2002) contended that Unocal was responsible
for causing the destruction of wetlands and mangrove ecosystems of the Yadana
region as a result of its pipeline construction.
Unocal was found wrong by the court of law (though a sentence was never meted).
We will now subject it to the court of ethics – where the judges are Utilitarianism,
Rights, Justice and Care.
2.1
Utilitarianism
It focuses on the value of the consequences or impacts, and hence it is
also referred to as the Consequential approach (Doost, 2005; Kaptein
and Wempe, 2002). In the words of its founder, Jeremy Bentham, it
approves or disapproves every action whatsoever on the basis of the
tendency it has to augment or diminish the happiness of the parties
whose interests are at stake. The choice is made in accordance with the
greatest benefit for the greatest number of stakeholders at the lowest
possible cost (Velasquez, 2006; Doost, 2005, Sintonen and Takala,
2002).
Utilitarian ethics claims that material utility and hedonistic pleasure are
the only intrinsic values to a person. As a theory of personal morality
and public choice, it expounds (just as Kantianism does) the notion that
morality rests on universalisable, objective, and rational rules of
decision making (O’Hara, 1998).
It is the most pervasive ethics theory, and its influence prevails till
today. Takala (2006) asserts that utilitarianism is the ideological basis
for modern economics, and serves to guide the government of many
3
Jus cogens means violations of norms of international law that are binding on nations even if they do
not agree to them. Such atrocities include torture, forced labour, murder, rape and slavery. The judges
in Unocal’s case found the company guilty of jus cogens violations on the Myanmar people (Schoen et
al. 2005).
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countries in policy-making. The concept of the ‘rational economic
man’ was plausibly founded on utilitarianism. Velasquez (2006)
suggests that modern management techniques such as cost-benefit
analysis and cost-efficiency were based on utilitarianism. It is so
ubiquitous that Nantel and Weeks (1996) argue that the definition and
practice of marketing are almost entirely utilitarian4 (and ironically
marketing is often deemed controversial under the light of ethics).
As O’Hara (1998) puts it, only economic, social, and ecological
functions that promotes sustainable economic growth are taken into
account in utilitarian thinking – and this appeared to have been
Unocal’s prescription of corporate ethics.
Figure 1: Framework of utilitarian ethics
Source: O’Hara (1998), p. 49
The Utilitarian judge will now ascertain Unocal, and dispense
judgement based on the decision of a panel of jury comprising the six
theses of utilitarianism given in Boatright (2007).
4
The authors were referring to Kotler and Turner’s (1981) definition of marketing: “Marketing is
human activity directed at satisfying needs and wants through exchange process.”
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Consequentialism
When we try to calculate the amount of
The rightness of actions is determined utility (i.e. the balance of pleasure over
solely by the consequences.
pain) for each individual affected by
Unocal’s actions (including the company
itself), and that for the whole society, we
see the scale tilting towards pain which
clearly outweighs pleasure.
Hedonism
This method of assessment is very
Only pleasure is ultimately good and pain arbitrary. There is hardly any action
is absent.
where pain is absent. Instead there is
almost always an opportunity cost for
every action taken. In Unocal’s case, the
revenue from oil (typifying pleasure) was
transacted with the blood (typifying pain)
of the local people.
Maximalism
Understood arithmetically, action A is
A right action is the one that has the justified if A > (B+C+D+E+…). In
greatest amount of good consequences performing
this
assessment,
it
is
possible when the bad consequences are important that we be dispassionate lest
also considered.
we be swayed. Because it is arbitrary, this
thesis could produce greater utility for
Unocal if it so elects to magnify the good,
and ignore the bad variables. A bad
action could thus be vindicated by
ignoring
foreseeable
negative
consequences.
Universalism
While this requires people to think in
The pleasure and pain of everyone alike holistic terms, it is not useful in gauging
must be considered.
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the level of utility in the pleasure-pain
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ASSIGNMENT – THINKING AND MANAGING ETHICALLY
equilibrium.
Act-Utilitarianism (AU)
This resembles maximalism but worded
An action is right if and only if it more strongly. It is also clearer and thus a
produces the greatest balance of pleasure better aid for ethical decision making.
(benefit) over pain (cost) for everyone.
And like consequentalism, AU would
dictate an inequilibrium when there is a
greater imbalance of pain over pleasure
as in the context of Unocal.
Rule- Utilitarianism (RU)
In terms of specificity, clarity, and
An action is right if and only if it practical for use, RU is superior to AU.
conforms to a set of rules the general The result of utility calculation using RU
acceptance of which would produce the is
similar
to
those
of
AU
and
greatest balance of pleasure over pain for consequentalism.
everyone.
The jury would deliver a 3-1 majority decision with 2 abstaining. The
utilitarian judge would thus pronounce a verdict that Unocal’s deeds
were wrong and therefore unjustified.
2.2
Rights
Rights play an important role in business ethics, and indeed, in
virtually all moral issues. It holds that decisions must be
consistent with fundamental rights and privileges, such as the
right to privacy, freedom of conscience, and property
ownership (Boatright, 2007; Velasquez, 2006; Richter and
Buttery, 2002). Consequently rights may be understood as
entitlements (Boatright, 2007; Velasquez, 2006).
There are several different types of rights.
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2.2.1
Legal Rights
These are rights recognised and enforced as part of a
legal system.
2.2.2
Moral Rights
Unlike legal rights, moral rights are not limited to a
particular jurisdiction. They are the birthright of every
person, and have universal value in that everyone
irrespective of colour, gender, and nationality possesses
in equal amount by simply being human (Velasquez,
2006).
2.2.3
Specific Rights
These are specific to identifiable individuals. A major
source of specific rights is contracts which bind parties
to mutual rights and duties. In practice, special rights
can cover people group. The Malays in Malaysia for
example, enjoy special economic rights under a social
contract created just before the Independence.
2.2.4
General Rights
These are accorded to humanity in general (albeit with a
Western slant). They include right of free speech, right
to safety and protection, right for education, right to
work, right to free pursuit of interests, etc. These rights
are universal, unconditional (or inalienable), generally
autonomous, and are for the large part, enshrined in the
constitution of most democratic countries.
The two other distinguishable kinds of rights which we
will not delve into are Negative and Positive Rights.
Rights depart from utilitarianism in several ways. Rights require
morality from an individual’s perspective whilst utilitarian holds the
view of a society at large, and promotes its aggregate utility. John
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Locke and his contemporary Immanuel Kant are the major proponents
of the ethical theory of rights.
The Kantian ethics is based on a moral principle named categorical
imperative – everyone should be treated as a free person equal to
everyone else, and everyone has the correlative duty to treat others in
this way (Velasquez, 2006; Trevino and Nelson, 2004). Kant borrows
heavily from the Golden Rule in Christian thought – do to others as
you would want them to do to you, in expounding his two criteria for
determining moral right and wrong – universability and reversibility.
In stark contract to the utilitarian principle, Kantian theory focuses on
motives instead of the consequences of external actions. He denounces
treating people only as means. He argues that people should instead
and always be treated as ends (Velasquez, 2006; Trevino and Nelson,
2004; Kaptein and Wempe, 2002).
O’Hara (1998) has put forward a framework for the ethics of rights
(and also justice) that bears stark contrast with the utilitarian ethics.
Figure 2: Framework of rights and justice (Kantian) ethics
Source: O’Hara (1998), p. 53
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The Rights judge will now deliver its judgement based on a jury that
consists of the two criteria, and one maxim given in Velasquez (2006).
Universability
Kantian tradition would have Unocal act
One’s reasons for acting must be reasons the way the vast majority would – to
that everyone could act on at least in abstain from indulging in activities that
principle.
would violate human rights.
Reversibility
The company’s action was ethically
One’s reasons for acting must be reasons irreversible – it would have neither
that he or she would be willing to have subjected itself (or the American people)
others use, even as a basis of how they to any foreign colonisation nor any of the
treat him or her.
atrocities that were inflicted on the
Karens.
Maxim
Unocal used the second part of this
Never use people merely as means but maxim to argue that their project had
always respect and develop their ability benefited the locals by improving their
to choose for themselves.
standard of living. They have however
craftily sidestepped the first part of the
maxim – never use others as a means to
advance one’s purpose. Their defence
was therefore hollow.
The criteria and maxim of rights would therefore judge Unocal guilty
of moral misgivings, and their deeds unjustified.
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2.3
Justice
Aristotle, the most prominent advocate of the classical ethics theory of
justice proposed three forms of justice (Boatright, 2007).
2.3.1
Distributive justice, which deals with the distribution of
benefits and burdens;
2.3.2
Compensatory justice, which is a matter of compensating
persons for wrongs done to them; and
2.3.3
Retributive justice, which involves the punishment of
wrongdoers.
Among the three kinds of justice, distributive is comparative while
compensatory and retributive are both non-comparative. Distributive justice is
comparative – it considers not the absolute amount of benefit and burdens of
each person but each person’s amount relative to that of others. Conversely the
non-comparative determines the amount of compensation owed to the victim
or the punishment due to a crime based on the features of each case, rather
than a comparison with other cases (Boatright, 2007; Velasquez, 2006).
Decisions and behaviours are judged by their consistency with an equitable
and impartial distribution of benefits and costs among individuals and groups.
John Rawls, famed for his egalitarian theory of justice as equality and fairness,
postulated that social and economic inequalities are permissible and are
compatible with justice – provided that opportunities are fair and open for all
to gain access to them, and that the least advantaged must have a fair slice of
the benefits (Boatright, 2007; Velasquez, 2006; Kaptein and Wempe, 2002;
Richter and Buttery, 2002). His proposition spawned modern concepts such as
the difference principle (in every distribution there is a worst-off person), and
the modern mantra of equal opportunity.
Justice will now pronounce its judgement based on a jury comprising the four
criteria discussed above.
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Distributive justice
Unocal and Total’s investment in the
The distribution of benefits and burdens.
Yadana field had only benefited people in
that area, and the ruling military junta
(Htay, 2005; Schoen et al., 2005). The
rest of Myanmar continue to suffer the
consequences of a degraded environment,
and
expanded
political
oppression
(Carter, 2004). Clearly the principle of
distributive
justice
was
flagrantly
violated.
Compensatory justice
The plaintiffs (villagers i.e. Doe) in Doe
Compensating persons for wrongs done v. Unocal were compensated by the
to them.
defendant (Unocal) in an out-of-court
settlement (Eviatar, 2005; Rosencranz
and Louk, 2005). Hence compensatory
justice was served albeit not by a court of
law.
Retributive justice
As the Doe v. Unocal case was ordered to
Punishment of wrongdoers.
be reheard en banc, a sentence was not
pronounced, and thus, the perpetrators
were not punished (Rosencranz and
Louk, 2005).
Egalitarian justice
Forced labour, arbitrary arrests, murder,
The basic liberty of every person must be rape, etc. were among the atrocities
protected from invasion by others, and committed by the Unocal-Total-junta
must be equal to those of others.
collusion.
Egalitarian
justice
would
denounce the deplorable action of Unocal
to its eternal shame.
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The court of Justice would therefore find it straightforward to arrive at a
decision to pronounce Unocal guilty of breaching all four theories of justice.
2.4
Care
Our literature review shows that Velasquez (2006) and O’Hara (1998)
are the only proponents of the ethical theory of care. Care places
emphasis on caring for the concrete well-being of people close to us
(Velasquez, 2006). It was founded on Carol Gilligan’s research on
Kohlberg’s stages of moral development.
According to O’Hara (1998), care brings the devalued life world of
women, ethnic minorities and marginalised groups in society to
attention, and reevaluates it. She also argues that reciprocity,
mutuality, and relationality are at the centre of a care-based ethics.
Consequently the invisible connections of human dependence on the
sustaining function of families, the subsistence sector, and ecosystems
become visible.
The ethics of care therefore advocates the sustainable interdependence
between human beings and the environment, and promotes the need to
conserve its symbiotic relationship – the yin and yang for present and
future generations.
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Figure 3: Framework of the ethics of care
Source: O’Hara (1998), p. 57
When we appraise Unocal from the perspective of care, we can clearly
see that the company had negated its duty to society and the
environment. By turning a blind eye to the sufferings of the locals
(pain) to achieve profit goals (utility/pleasure), it also jeopardised the
harmony between the land and its inhabitants. The judge of care would
then declare Unocal wrong, and its actions unjustified.
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3.0
Unocal’s Moral Responsibility for the Karens
Myanmar, then Burma has been ruled by a fraternity of military elitists for 45 years
since a March 1962 coup. It has since brutally suppressed every pro-democracy
movement. In May 1990, the junta ignored a nationwide general election that gave a
landslide victory to Aung San Suu Kyi’s National League for Democracy, and has
since 1991 to this very day, consigned the Nobel peace laureate to house arrest.
According to the 1983 census, the Karens constitute only 6.2 percent of the whole
Myanmar population. Together with the Karenni and the Shan, the Karens are the
most severely marginalised, discriminated, and ostracised ethnic groups by the ruling
junta, and consequently they received the worst forms of treatments (Htay, 2005). The
SLORC, whom Unocal partnered, adopted the policy of “draining the ocean so that
the fish cannot swim” in quelling any form of armed resistance. It simply means
undermining the opposition by attacking the civilian population until it can no longer
bear to support the opposition (Htay, 2005, p.45). Egregious atrocities, murders,
forced labour, and human rights violations of all kinds and magnitude have been
committed by the trigger-and-torture-happy SLORC.
Against this backdrop, is Unocal morally responsible for the sufferings and the losses
of the Karens in the Yadana project? Well the US courts thought so, and we are
unequivocally in agreement with them.
The Universal Declaration of Human Rights recognises “the inherent dignity and the
equal and inalienable rights of all members of the human family as the foundation of
freedom, justice, and peace in the world” (United Nations, 1948 cited in Schoen et
al., 2005). This is a very egalitarian, rights, and caring definition from the perspective
of ethical theories. Abetting with the SLORC, and condoning the outrageous
violations of life, liberty, and property are universally wrong. One ought to know that
these activities are wrong: one ought not to murder, rape, torture, and enslave, and
hence, one ought not to cooperate with those who do these activities.
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The claim Unocal made to separate itself from the actions of the military will not hold
up to ethical scrutiny. Unocal is an immediate implicit material cooperator in the
action of the Myanmar military. Unocal and the Myanmar military both had the same
object as goal, Unocal was aware of the activity of the military in support of that
shared goal, and Unocal supplied the military with the material means to secure the
shared objective. In its failure to explicitly disclaim the activities of the military,
Unocal’s cooperation is implicit. Immediate material cooperation in egregious human
rights violations, even if not explicit cooperation, is always ethically wrong
(Boatright, 2007; Schoen et al., 2005; Kaptein and Wempe, 2002).
Years of economic sanctions have caused the ruling military regime to eagerly
welcome foreign investors. Holliday (2005) therefore argues that foreign companies
would be able to exert their influence on the junta to adopt some the values they
embrace in their home countries. In our opinion, Unocal could have played a role in
evangelising the Myanmar government, and in turn conducted its business in ways it
would in the US, but it chose not to. Their failure inevitably raises suspicions about
the company’s moral standards, value systems, and corporate governance. We are not
surprised if Unocal was another one of the many companies that do not walk the talk
of their corporate code of ethics.
Instead of closing its eyes to the use of forced labor by the Myanmar military, Unocal
should have investigated an appropriate wage rate to guarantee the workers earned a
just wage which would not have only permitted the workers to provide their families
with the bare necessities of life, but would have also permitted the workers and their
families to enjoy leisure, rights, and benefits appropriate to the possibility of the
‘‘good life.’’
Instead of ignoring the inclination of the Myanmar military to committing atrocities,
Unocal should have implemented processes, for instance, external international
inspections of workplace conditions to prevent such conduct.
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In place of cooperating and coordinating with the junta in effecting the pipeline
construction, Unocal could have refused to participate in the project until safeguards
against human rights violations were instituted by the Myanmar military.
Finally, Unocal, in deciding to settle the villagers’ claims out of court in lieu of a
potentially enormous legal liability is in itself an admission of guilt. While it may be
argued that the settlement was motivated by a need to salvage its reputation from
further attacks in the public court, we prefer to see it as an acceptance of moral
liability.
Our verdict is clear – Unocal ought to be held morally and materially responsible for
the Karens. Consequently it would be morally justified to compensate the defendants,
and the plaintiffs should receive due sentencing commensurate with the wrongs they
committed.
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4.0
The Tussle between Engagement and Isolation
Unocal knew the conduct and track record of their local partner in Myanmar, and they
knew too that their partner had had an appalling reputation of human rights violation –
particularly with regards to the Karen minority ethnic group. Notwithstanding these
facts, they argued that “engagement” instead of “isolation” is “the proper course to
achieve social and political change in developing countries with repressive
governments” – to justify their venture into Myanmar, and their partnership with the
ruling military regime.
Shwartz (2000) argued that Unocal’s decision to choose engagement over isolation
was founded on three reasons. First, they reasoned that their activities were not
causing any harm. They had complied with government legislations, abided by
environmental standards, and did not use slave labour. Second, they saw themselves
as catalysts for change, and therefore contended that their involvement would more
likely support democratic forces, stimulate change, increase connection with the
outside world, and ensure that the military government will not survive for long.
Third, they claimed that their participation had been legitimised by global institutions
like the World Bank, the IMF, ASEAN, and other international organisations that
have been funding and supporting economic and social projects in Myanmar. They
had earlier refused to participate in a lucrative project in Afghanistan because the
World Bank, IMF, and others would not participate but Myanmar was different.
Hence, they could not see a reason for abstinence.
While the arguments appear to have a certain degree of plausibility, they were flawed.
It is our contention that absolving their responsibility is akin to acquitting a drunkard
who pleads innocence on grounds of drunkenness after going on a shooting spree
injuring and killing others. Like the drunken person, Unocal’s actions may not have
been driven by mala fide5 per se, but we argue that they had been negligent for failing
to calculate the costs of injuries, and human rights violations. Their cost and benefit
analysis was myopic, and probably skewed to simply evaluating the potential profits it
5
A legal term that means done in bad faith.
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might earn in the pipeline project instead of evaluating the social benefits against the
detriments to the Myanmar citizens resulting from the project – an evaluation that
might very well have been undertaken by the jury in consideration of the case at trial.
Unocal had also ignored a 1997 Presidential order to ban U.S. investments in
Myanmar until democratisation, and respect for human rights were evident. To the
eternal ignominy of Unocal’s leaders, they had invested in a country which was the
world’s leading producer of opium and heroin, and tolerates drug trafficking and
traffickers in defiance of the views of the international community (Hadar, 1998).
Consequently, we are in the opinion that Unocal was mistaken for choosing
engagement over isolation. Schwartz (2000) argued that a rule of thumb for
engagement to succeed is the presence of transparency, where for example, Amnesty
International and other organisations are permitted to enter the country, and observe
the conditions people are experiencing. Myanmar had none.
Contrary to Unocal’s stance, we support isolating developing countries with
repressive and recalcitrant governments for five reasons. First, substantial foreign
investments have not achieved positive outcomes. There have been instances where
corporate investments have contributed to conflict and human rights abuses (Anon,
2006; Htay, 2005; Schoen et al., 2005; Olsen, 2002; Schwartz, 2000). Despite the
existing trade and investment barriers, foreign investment in energy and mining
enterprises in Myanmar has become a significant source of revenue for the current
regime. Such projects rarely produce tangible financial benefits to the general
population and arguably further entrench the regime (Htay, 2005; Carter, 2004).
Against popular belief, the much touted prescription of engagement ironically
strengthens the ruling regimes – the very shackles and chains it was supposed to
loosen.
Second, engagement does not foster the much touted economic development that
necessarily leads to improvement of human rights, and a democratic government.
Myanmar’s inclusion into the ASEAN fraternity has proven that. The relationship
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between economic prosperity and growth and political liberalisation is complex, and
there is therefore no causal link between democracy, respect for human rights, and
economic development. (Forcese, 2002 cited in Carter, 2004).
Third, any hope for engagement to succeed is an illusion. Proponents once believed
ASEAN could strategically influence the junta to change. The truth now evident is
this group, known for its long tradition of consensus, is divided on how to handle
Myanmar. While Malaysia and Philippines continue to be vocal in calling for change,
Singapore and Thailand have been reluctant to act because of their heavy investments
in Myanmar (Zulkafar, 2007). Hence the junta no longer takes ASEAN seriously
because they know ASEAN cannot come to a cohesive agreement.
Four, it is simply impossible to do business in such countries without directly
supporting their rogue governments, and their pervasive human rights violations. For
business to take place, foreign companies are required to form joint-ventures with
state-controlled companies, which are in turn steered by the appointed proxies
(Holliday, 2005). It is therefore difficult to imagine how such JV companies can
conduct their business in neutrality when it is covenanted with a local partner that
serves the interest of the abhorrent government it represents.
Five, as the foreign investments do not translate into infrastructure or sustainable
employment for the population, it is our contention that a disengagement strategy,
withdrawal, and banning investments would not negatively affect the innocent
population. It will instead achieve the goal of cutting off the lifeline of the ruling
government as it heavily relies on capital from the investments. Taking a utilitarian
view to achieve the greatest good for the greatest number, we postulate that some
arm-twisting is necessary (and justified) when the road of diplomacy has ended.
In light of Myanmar, we do however realise that any isolation effort will be
undermined by the willingness of ASEAN nations to trade with and support the
regime. And even more detrimental is China and Russia’s economic interests in
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Myanmar. Both countries are heavy investors in Myanmar’s natural resource sectors
like oil, gas and timber (Zulkafar, 2007; Carter, 2004). Further they are veto-wielding
members of the powerful UN Security Council, and may therefore block any hard-line
action against Myanmar.
In the final analysis, we argue that it is not the duty of any companies to stimulate
political change in any country, what more in hardcore military regimes like
Myanmar. This issue is beyond one company, and it is even larger than a regional
caucus of nations like ASEAN. It is also inconceivable to expect multinational
companies to collaborate in unison to boycott Myanmar. Nonetheless companies do
have a moral and societal obligation to fulfil, and when faced with tough dilemmas, it
is our contention that they should choose principles over profits.
We suggest companies to consider using McDevitt et al.’s (2007) model in its ethical
decision making process, and this is provided in Appendix 1. This model may be
useful in helping companies embroiled in the tussle between engagement and
isolation. We have also included as Appendix 2, a framework of factors and forces
that shape and reshape a company’s decision making process.
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5.
Conclusion
Ethics is a fertile ground for animated debates as it often has are no definitive
answers. It is a playground for academic research where theorists can indulge in
eternal disputes with each other over differing interpretation and dispensation of
theories and principles in confronting ethical dilemmas.
Ethics is hot property. It is no empty philosophical abstraction. The fall from grace of
various corporate icons of our generation has fuelled the interests of colleges,
universities, businesses, governments, and societies to engage in the appreciation,
critique, and application of ethical principles and conduct in everyday life.
Increasingly companies awakening to the motives behind embracing codes of ethics,
and good values at its core. And today, more and more books are written about
corporate governance and corporate social responsibility than anytime before in
history.
In this era of globalisation and heightened ethical sensitivity, companies, in their
business activities must benefit both shareholders and stakeholders. Losing sight of
either or favouring one more than the other is a good prescription for costly troubles
later on. There is ample evidence in the body of literature and the practitioner to
support ethical business conduct. Further there is a suite of ethical theories that can
serve to guide ethical direction, diagnose and clarify ethical dilemmas, and provide
the framework to evaluate business strategy ethically prior to implementation.
Ethical behaviour is a good long-term business strategy. We tend to agree with
Velasquez’s (2006) observation that over the long run, and for the most part, ethical
behaviour can give the company significant competitive advantages over companies
that are not ethical. This is not a naïve presumption because we acknowledge ethical
behoaviour can impose losses on the company, and unethical behaviours sometimes
pays off. Obviously not all unethical business practices get punished, and certainly not
all ethical endeavours engender rewards.
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Had Unocal thought and managed ethically, it would have decided against venturing
into Myanmar, and thus averted the sufferings and loss of untold human lives. It
would have also saved itself from the damning reputation from the trial, and perhaps
still be in business today.
For Unocal, dabbling in a foreign country with a repressive military government was
not worth it. In fact, it was wrong. Their strategy of engagement was misguided and it
backfired.
Unocal is history. It is in the power and duty of business leaders and managers today
and the future to choose to run their business ethically. When they are confronted with
the question – Profits or Principles – Is there a Choice? We urge them to answer with
a resounding Yes!
Word count: 3,885 words
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References
1.
Books
Boatright, J.R. (2007), Ethics and the Conduct of Business, 5th ed., Pearsons/Prentice
Hall, New Jersey.
Kaptein, M. and Wempe, J. (2002), The Balanced Company: A Theory of Corporate
Integrity, Oxford University Press, New York.
Trevino, L.K. and Nelson, K.A. (2004), Managing Business Ethics: Straight Talk
About How To Do It Right, 3rd ed., Wiley, New Jersey.
Silbiger, S. (1999), The 10-Day MBA, Piatkus Publishers, London.
Velasquez, M.G. (2006), Business Ethics: Concepts and Cases, 6th ed.,
Pearson/Prentice Hall, New Jersey.
2.
Journal Articles and Research Publications
Anon. (2006), “Strange bedfellows: the uneasy relationship between big business and
ethical principles,” Strategic Direction, Vol. 22, No. 10, pp. 9-12.
Anon. (2005), “Ethics is just about doing the right thing: Shell shocked and IBM goes
fact-finding,” Strategic Direction, Vol. 21, No. 7, pp. 14-17.
Carter, J. (2004), “Economic pressure: the political currency of the Burmese junta;
reform through disengagement,” Legal Issues on Burma Journal, No. 19, pp. 10-34.
Doost, R.K. (2005), “The curse of oil! Search for a formula for global ethics,”
Managerial Auditing Journal, Vol. 20, No. 8, pp. 789-803.
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Gallagher, S. (2005), “A strategic response to Friedman’s critique of business ethics,”
Journal of Business Strategy, Vol. 26, No. 6, pp. 55-60.
Hadar, L.T. (1998), “U.S. sanctions against Burma: a failure on all fronts,” Trade
Policy Analysis, March 26, Centre for Trade Policy Studies, available at
http://www.cato.org/pubs/trade/tpa-001.html, accessed 28 May 2007.
Htay, S. (2005), Economic Report on Burma 2004/05, Federation of Trade Unions
Burma, pp. 1-79.
Holliday, I. (2005), “Doing business with rights violating regimes: corporate social
responsibility and Myanmar’s military junta,” Journal of Business Ethics, Vol. 10,
No.61, pp. 329-342.
Laszlo, C. and Nash, J. (2007), “Six facets of ethical leadership: an executive’s guide
to the new ethics in business,” Electronic Journal of Business Ethics and
Organisation Studies, Vol. 12, No. 1, pp. 1-6.
Lloyd, B. and Kidder, R.M. (1997), “Ethics for the new millennium,” Leadership and
Organisation Development Journal, Vol. 18, No. 3, pp. 145-148.
McDevitt, R., Giapponi, C and Tromley, C. (2007), “A model of ethical decision
making: the integration of process and content,” Journal of Business Ethics, Vol. 73,
No. 2, pp. 219-229.
Nantel, J. and Weeks, W.A. (1996), “Marketing ethics: is there more to it than the
utilitarian approach,” European Journal of Marketing, Vol. 30, No. 5, pp. 9-19.
O’Hara, S.U. (1998), “Economics, ethics and sustainability: redefining connections,”
International Journal of Social Economics, Vol. 25, No. 1, pp. 43-62.
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Olsen, J.E. (2002), “Global ethics and the Alien Tort Claims Act: a summary of three
cases within the oil and gas industry,” Management Decision, Vol. 40, No. 7, pp. 720724.
Richter, E.M. and Buttery, E.A. (2002), “Convergence of ethics?” Management
Decision, Vol. 40, No. 2, pp. 142-151.
Sargent, T. (2007), “Toward integration in applied business ethics: the contribution of
humanistic psychology,” Electronic Journal of Business Ethics and Organisation
Studies, Vol. 12, No. 1, pp. 1-22.
Schoen, E.J., Falchek, J.S. and Hogan, M.M. (2005), “The Alien Tort Claims Act of
1789: globalisation of business requires globalisation of law and ethics,” Journal of
Business Ethics, Vol. 10, No.62, pp. 41-56.
Schwartz, M. (2007), “The ‘business ethics’ of management theory,” Journal of
Management History, Vol. 13, No. 1, pp. 43-54.
Schwartz, P. (2000), “When good companies do bad things,” Strategy and
Leadership, Vol. 28, No. 3, pp. 4-11.
Sintonen, T.M. and Takala, T. (2002), “Racism and ethics in the globalised business
world,” International Journal of Social Economics, Vol. 29, No. 11, pp. 849-860.
Takala, T. (2006), “An ethical enterprise: what is it?” Electronic Journal of Business
Ethics and Organisation Studies, Vol. 11, No. 1, pp. 4-12.
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3.
Electronic and Print Media
EarthRights International (2005), “Doe v. Unocal case history,” EarthRights
International, January 30, available at:
http://www.earthrights.org/site_blurbs/doe_v._unocal_case_history.html,
accessed 13 May 2007.
Eviatar, D. (2005), “A big win for human rights,” The Nation, April 21, available at:
http://www.thenation.com/doc/20050509/eviatar, accessed 14 May 2007.
Rosencranz, A. and Louk, D. (2005), “*135 Doe v. Unocal: holding corporations
liable for human rights abuses on their watch,” Chapman Law Review, Spring 2005,
available at:
http://www.laborrights.org/press/Unocal/chapmanlawreview_spring05.htm,
accessed 13 May 2007.
Zulkafar, M. (2007), “Not so good a friend after all,” The Star, May 30.
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Appendix 1
Model of Ethical Decision Making: Process and Content
Source: McDevitt et al., (2007, p. 223)
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Appendix 2
Content Variables – factors and forces that influence a company’s decision making
Source: McDevitt et al., (2007, p. 221)
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