Reference no: EM1324686

Business Ethics and Social Responsability

CASE STUDY:

Royal Dutch Shell in the Niger Delta (Frederick Bird)

Shell began oil extraction in the Niger Delta in the late 1950s. Between 1950 and 2000, Shell extracted oil for more than 250 billion dollars. During this time, in 2000, the standard of living of the five million people who live in this region has not improved. In many ways it is even lower than it was 40 years ago. Obviously, a significant number of people have found a job. Shell has more than 2000 employees there, almost all whom are from Nigeria. It offers scholarships to hundreds of promising Nigerian students and built dozens of medical clinics, primary schools and community centers.

Since the early 1970s, Shell is forced to conduct its affairs in Nigeria as a minority shareholder to the Nigerian government, which holds 55% stake, while Shell owns 30% and two state enterprises share the rest. It is the former who manages all activities. The Nigerian government claims a very important part of the wealth generated by oil in the form of royalties, taxes and profit sharing. The country's top leaders have used this wealth to build a new capital, engage in lavish public works which they themselves privileged, gave themselves high remunerations and benefits, and fund the most part of government spending. Over the years, Nigeria has witnessed more than half a dozen strikes against the state. Indeed, various groups, often led by military, overthrow governments to appropriate the wealth generated by petrodollars.

The people of the Niger Delta, in particular, resent this situation. They feel that their environment deteriorates. They protested against the fact that Shell burns by flares 85% of the natural gas that accompanies crude oil during its extraction. They feel that these riches, which in a certain way belongs to them, ends up in the hands of their oppressors. They complain in particular with the difficulty they have in obtaining fresh water. Most often, fresh water must be pumped from an underground aquifer. The most effective way to do this is to use an electric pump that they cannot afford or do not have the means to repair when broken. Several groups of people of Delta are already protesting. In some cases, people are attacking Shell installations, especially pipelines of the region. For Shell, these incidents stem from ethnic conflicts and are the result of vandalism. The company has decided to strengthen its staffing in security forces and sometimes asks military of regional or federal government to come protect facilities. On several occasions the troops have exercised excessive violence against the inhabitants of the delta, killing dozens of people.

Questions:

1. What is today the responsibility part of Shell in this situation?

2. What actions should Shell now reflect on?

3. How could the company have acted more responsibly?

4. Is it possible to imagine behavior that Shell could have adopted to have a larger portion of the wealth created by the extraction of oil remain in the Niger Delta rather than in the hands of the Nigerian government?

5. How could Shell have gone about in developing closer relations with the inhabitants of the Niger Delta? What could Shell have done to change the practices of the Nigerian government?

6. In general, should companies seek to influence the policies and practices of a questionable government? If yes, by what means?