ETHICS AND BUSINESS RISK

There are many instances throughout corporate history of how companies have
disregarded ethics or morals in the quest for wealth. This can increase business risk
due to breaking the law, damaging their image and the effects of lawsuits and
damages.
Breaking the Law
Bribery and corruption are widespread in the developing nations. Companies say
that the only way to get things done is to pay the bribes. Although few companies
publicly defend bribing officials in third world countries, many privately condone
bribery on several grounds. First, there are strictly financial considerations. Bribes
can prevent delays that might otherwise have serious financial implications. In a
capitalistic environment, we need an even playing field, and if other businesses
engage in bribery, then either we do or face being at a competitive disadvantage.
Second, there are practical considerations owing to what appears to be the
universal nature of bribery in third world countries. Often foreign government
officials are so corrupt that it is virtually impossible to do business without playing
by the unspoken rules. Thus, theres nothing morally wrong with participating in
bribery.
On November 4, 2010 the United States Department of Justice announced a series
of settlements whereby seven firms were to pay criminal fines and civil
disgorgement penalties amounting to a total of $236.5m, in a settlement in relation
to the Foreign Corrupt Practices Act. Five of the firms were Royal Dutch Shell,
Transocean Inc, Global SantaFe Corp, Pride International and Noble corporation
(Thomson Reuters , 2010).

This type of transgression if repeated has the potential to place the companies
involved at serious risk.
It is this acceptance of thats the way the system works that perpetuates and fuels
the bribery culture. If all companies adopted a strong ethical position and refused
to pay the bribes the corrupt system would fail.
Some companies have taken steps to distance themselves from corruption. BP was
the first oil company to support the Publish what you pay campaign, a campaign
for greater transparency in oil companies dealings with foreign governments.
StatoilHydro was the first major oil company to start disclosing ALL revenues and
payments in the countries in which it operates. It has set out a clearly defined
ethics code of conduct and is promoting this in the different countries it operates in
(Statoil, 2008).
Damage to Company Image
In the 1990s Shell was involved in a highly damaging controversy in Nigeria. The
Ogoni people of the Niger delta, a minority tribe, had seen their land decimated by
years of drilling. Ken Saro-Wiwa helped form the Movement for the Survival of
the Ogoni People, and began protesting. The army ordered a brutal crackdown and
series of killings, beatings, and arrests took place. Saro-Wiwa was eventually
framed for murder and executed. This event was met with widespread
condemnation and the bad publicity surrounding it was extremely difficult for
Shell. It is difficult to say if Shell were complicit in these events but they certainly
could and should have stopped it or at the very least spoken out against it. Shell
eventually distanced themselves from Nigeria in an attempt to regain credibility.

Companies have set up Corporate Social Responsibility policies. These policies

clearly state the companies ethical and social stand point. The main problem with
this is when individuals fail to live up to the statements
Unethical business practices will continue to be seen in the oil and gas sector as
some companies continue to think that the lack of ethics will have no impact. In
many ways they are correct. Shell and Total do not seem to be struggling despite
poor ethical records. From a sales point of view ethics, or the lack of them, have
little impact. Due to the very nature of the product the ethical stance of the end user
will be weaker. When we buy petrol we dont know where it came from or who
suffered as a consequence and so companies are protected. The world is reliant on
oil and will therefore look the other way as long as it keeps flowing.

GOAL NEED TO BE SET FOR STRATEGY

Scope
Niger-delta region is the most oil-rich region in Nigeria and houses a wide variety
of ethnic groups and eco-diversity zone, swamps, creeks, fish ponds. Nigeria since
its independence in 1960 has experienced several military rules leading to
instability, underdevelopment. Absence of healthcare, education and infrastructure
associated with extreme poverty leads to a hostile environment for conducting
business. Ethnic and religious diversity apart from the underdevelopment are the
root cause of conflicts and the hostile environment, (Frynas, 1998). SPDC [Shell in
Nigeria] which is operating in the region since 1937, despite of political instability
and hostile environment SPDC continues to do good business in Nigeria. SPDC
undertook several social initiatives to develop the situation of localites. We analyze
such different programs initiated by Shell in Nigeria since 1960 until the 2011
GMoUs in the socio cultural context of Niger-delta. We would refer the incident in
Ogoniland; where the Ogoni ethnic-group led by Ken Saro-Wiwa organized
demonstrations against both the Federal Government and Oil MNCs demanding
the needs for development and stop pollution of environment by the Oil companies
in the region devastating the rich ecological system. This resulted Shell to pull-out
from its operation in Ogoniland, leaving behind its infrastructure.

We have seen that Shell, from its commitment towards the sustainable community
development, took several initiatives since 1960 until 2011. Prior initiatives failed

due to several reasons, which introduces the need of GMOU approach which until
proves to become successful.

We identified following deficiencies of the previous approaches which led to its

failure
Ownership
Transparency
Collaboration
Participation of local communities
Gender imbalance
Top-down development approach
We have also concluded that despite political instability and hostile environment
Shell is eager to continue business in Nigeria; reason behind this could be
Inadequacy on the part of Federal Government to issues environmental and other
policies to control Shell and other MNCs in his region brings an opportunity for
MNCs to operate and perhaps exploit the areas.
MNCs providing excuse of the so-called hostile environment when it comes to
compensation originated from their poor operation and maintenance.

NEEDEDSTRATEGY
Collaboration

Shell paid attention to earn quick-results to maintain its goodwill and an operable
situation, lack of the presence of a mainstream government led umbrella-initiative
(Aaron, 2012) these sporadic initiative though having good interest and enthusiasm
were bound to fail. The planning and implementation of the CA initiative was
entirely done/controlled by Shell (Amadi and Abdullah, 2011) without any
participation from communities.

Participation of local communities

in the early initiatives taken by Oil MNCs lack participation of government and
local authorities, leading to scenario of lack of a driver of continuous and
sustainable growth (Aaron, 2012). Even if MNCs were keen despite government
drive no such initiative achieves its desired result. CA, CD focus on traditional
corporate culture restricts its ownership, impact and sustainability of results
(Amadi and Abdullah, 2011). In some cases it can be argued that CA projects
originates more agitation because one project [hospital or school] in one particular
region might create enmity in some other region where this project was nto done.

CONFRONTATION MATRIX
What I did not mention in the SWOT article is that I always try to find an equal number of strengths, weaknesses,
opportunities and threats. Specifically, I try to have a minimum of three points each, but no more than five. While it obviously
is not a total disaster if you find one or two more strengths than weaknesses, I still try to equalize. Its just the way I prefer it,
and it makes certain things easier.
Even though the number of statements can vary, I recommend that you do not go totally crazy. Besides being an ineffective
way of working, youll end up with a large number of possible strategies, which is not what you necessarily want.
Anyway, lets move on.
First of all, there are many ways to fill in the matrix. I will not go through all of them, but I will touch on one particular method
and then Ill explain the method that I prefer.
Some marketers (even very experienced ones) use plus and minus signs to fill in the matrix, and I do not recommend this
method. They will, for instance, rate Strength 1 against Opportunity 1 and give it either plus or minus signs. Obviously, the
more plus signs the better. So their matrix may look something like this:

S1

O1
+++

O2
--

S2
S3

+/--

W1

--

The problem with this method is that people tend to give their weaknesses and threats minus signs, because they represent
something that is not so good for the organisation. If this is the case, then youll end up focussing on strategic options that
might not be best at all. In other words, weaknesses weighed against threats could also produce very useful results.
I (and many others) prefer using numbers. Given that the total number of strengths and weaknesses can vary, you cannot
just stick to one system. For example, my SWOT shows three statements each. If that is the case, Ill give the best option
three points, the second best option two points and the third one point. The remaining ones get zero point. So my matrix
might end up looking like this:

S1

O1
0

O2
3

O3
1

T1
2

T2
3

T3
0

S2
S3

0
2

2
0

2
3

0
0

0
1

0
3

W1
W2

0
3

0
0

0
0

3
1

2
0

1
2

W3

But in reality, my matrix will never end up looking like this, because I will not be the only one assigning points to each
combination. And unless youre a super marketing genius, I dont recommend that you fill in this matrix by yourself; you
should always consider the opinion of others. I usually work in a project group, so when we get to the confrontation matrix,
well just all give our opinions and assign points to the combinations and at the end well count the scores. Our attentions
goes out to which ever scores best. For example, in a group of four, each column will always have 24 point in total; the toal
points per row can vary:

S1
S2

O1

O2

O3

T1

T2

T3

0
1

11
10

4
8

3
4

6
9

0
10

S3
W1

10
3

1
0

12
0

5
7

3
4

1
11

W2
W3

6
4

0
2

0
0

5
0

1
1

2
0

I just did this randomly, but here is my point; according to the former matrix, we should pay attention to O 1 W 2. However,
the latter tells us that we should focus on O 1 S 3. This is the result of involving more people in the process. As I
mentioned, I usually work in a group, but if you are not in that situation you can simply ask some of the employees of the
organisation (which you are writing the plan for) to help you out. Which is actually something that I wish I wouldve done
more often, simply because they know the organisation very well.
In this example, there are six scores of 10 and above, which leaves us with six options (though you could also choose to not
count the 10s). Usually, youll want to see 3 -5 options come out of your matrix. If you get more than five options you should
probably go back to you internal and external analysis, and seriously consider doing it all over again. Very rarely will you get
more than five options that can lead to something good.
Presumably, you know that the actual matrix goes into the enclosure. So in the chapter of the confrontation matrix, youll
simple describe the options that youve found to be useful.
When youve done all of this, you can move on to yet another matrix, which is the strategic options matrix in the Strategic
Options chapter.