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Solved by verified expert:Read the Union Carbide Corporation and Bhopal case that begins on page 384 of your Business, Government, and Society textbook. Consider the concerns as described in this case and prepare a memorandum that addresses the concerns described below. Your memo should be completed in narrative form (you may use headings if you choose to do so for organizational purposes, but do not list your responses in bullet form). Maximum page length: 10 pages (double spaced).Identify all of the potential ethical issues you see (if any). Describe and analyze the implications of each issue, including who or what were affected by the company’s response. In identifying issues and addressing their implications, your discussion should be as comprehensive as possible—you should consider any economic, social, or ecological implications, as well as the potential impact at least two cultural differences you can identify. Additionally, your analysis should thoroughly identify and discuss at least two potential courses of action that the company could have taken with respect to each issue you have discussed. Clearly demonstrate your reasoning process—identify and explain any ethical principles or arguments you are relying on; do not simply state unsupported conclusions. If you choose to apply any approaches to ethical reasoning that you learned about in this course, clearly state what they are and how you are applying them to this case. Of the possible solutions you identified, which would you recommend that the company should have adopted as a resolution? Again, fully explain and justify your recommendations. Finally, explain how you would implement each solution you have recommended.This assignment will make up a percent of your grade to be determined by your faculty member.
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Union Carbide Corporation and Bhopal
On December 3, 1984, tragedy unfolded at the Union
Carbide pesticide plant in Bhopal, India. Water entered
a large tank where a volatile chemical was
stored, starting a violent reaction. Rapidly, a sequence
of safety procedures and devices failed. Fugitive
vapors sailed over plant boundaries, forming a
lethal cloud that moved with the south wind, enveloping
slum dwellings, searing lungs and eyes, asphyxiating
fated souls, scarring the unlucky.
Bhopal is the worst sudden industrial accident
ever in terms of human life lost. Death and injury estimates
vary widely. The official death toll set forth
by the Indian government for that night is 5,295, with
an additional 527,894 serious injuries. Greenpeace
has put the death toll at 16,000. 1
The incredible event galvanized industry critics.
“Like Auschwitz and Hiroshima,” wrote one, “the
catastrophe at Bhopal is a manifestation of something
fundamentally wrong in our stewardship of the
earth.” 2 Union Carbide was debilitated and slowly
declined as a company after the incident. The government
of India earned mixed reviews for its
response. The chemical industry changed, but according
to some, not enough. And the gas victims
endure a continuing struggle to get compensation
and medical care. 3
UNION CARBIDE IN INDIA
Union Carbide established an Indian subsidiary
named Union Carbide India Ltd. (UCIL) in 1934.
At first the company owned a 60 percent majority
interest, but over the years this was reduced to 50.9 percent.
Shares in the ownership of the other 49.1 percent
traded on the Bombay Stock Exchange. This
ownership scheme was significant because although
UCIL operated with a great deal of autonomy, it
gave the appearance that Union Carbide was in control
of its operations. By itself, UCIL was one of India’s
largest firms. In 1984, the year of the incident, it
had 14 plants and 9,000 employees, including 500 at
Bhopal. Most of its revenues came from selling
Eveready batteries.
Union Carbide decided to build a pesticide plant
at Bhopal in 1969. The plant formulated pesticides
from chemical ingredients imported to the site. At
that time, there was a growing demand in India and
throughout Asia for pesticides because of the “green
revolution,” a type of planned agriculture that requires
intensive use of pesticides and fertilizers on
special strains of food crops such as wheat, rice, and
corn. Although pesticides may be misused and pose
some risk, they also have great social value. Without
pesticides, damage to crops, losses in food storage,
and toxic mold growth in food supplies would
cause much loss of life from starvation and food
poisoning, especially in countries such as India.
Exhibit 1 shows a Union Carbide advertisement
from the 1960s that describes the company’s activities
in India.
The Bhopal plant would supply these pesticides
and serve a market anticipated to expand rapidly.
The plant’s location in Bhopal was encouraged by
tax incentives from the city and the surrounding
state of Madhya Pradesh. After a few years, however,
the Indian government pressured UCIL to
stop importing chemical ingredients. The company
then proposed to manufacture methyl isocyanate
(MIC) at the plant rather than ship it in from
Carbide facilities outside the country. This was a
fateful decision.
Methyl isocyanate, CH3NCO, is a colorless, odorless
liquid. Its presence can be detected by tearing
and the burning sensation it causes in the eyes and
noses of exposed individuals. At the Bhopal plant it
was used as an intermediate chemical in pesticide
manufacture. It was not the final product; rather,
MIC molecules were created, then pumped into a
vessel where they reacted with other chemicals. The
reaction created unique molecules with qualities that
disrupted insect nervous systems, causing convulsions
and death. The plant turned out two similar
pesticides marketed under the names Sevin and
Temik.
In 1975 UCIL received a permit from the Ministry
of Industry in New Delhi to build an MIC production
unit at the Bhopal plant. Two months before the
1 “Has
the World Forgotten Bhopal?” The Lancet, December 2,
2000, p. 1863.
2 David
Weir, The Bhopal Syndrome (San Francisco: Sierra
Club Books, 1987), p. xii.
3 Rama
Lakshmi, “Justice for Bhopal Victims,” The Economic
Times, February 18, 2011.
Chapter 11 Multinational Corporations 385
issuance of this permit, the city of Bhopal had enacted
a development plan requiring dangerous industries
to relocate in an industrial zone 15 miles
away. Pursuant to the plan, M. N. Buch, the Bhopal
city administrator, tried to move the UCIL pesticide
plant and convert the site to housing and light commercial
use. For reasons that are unclear, his effort
failed, and Buch was soon transferred to forestry duties
elsewhere.
The MIC unit was based on a process design
provided by Union Carbide’s engineers in the
United States and elaborated by engineers in India.
EXHIBIT 1
Union Carbide
Advertisement
This ad
appeared
in Fortune
magazine in
April 1962.
Source: Courtesy
of Union Carbide
Corporation.
386 Chapter 11 Multinational Corporations
The design required storage of MIC in big tanks.
An alternative used at most other pesticide plants
would have been to produce small amounts of MIC
only as they were consumed in pesticide production.
The decision to use large storage tanks was
based on an optimistic projection that pesticide
sales would grow dramatically. Since an Indian law,
the Foreign Exchange Regulation Act of 1973, requires
foreign multinationals to share technology
and use Indian resources, detailed design work was
done by an Indian subsidiary of a British firm.
Local labor using Indian equipment and materials
built the unit.
In 1980 the MIC unit began operation under
UCIL’s management. During the five years of design
and construction, densely populated shantytowns
sprang up nearby, inhabited mainly by impoverished,
unemployed people who had left rural areas
seeking their fortunes in the city. A childlike faith that
the facility was a benevolent presence turning out
miraculous substances to make plants grow was
widespread among them.
In fact, when the MIC unit came on line the plant
began to pose higher risk to its neighbors; it now
made the basic chemicals used in pesticides rather
than using shipped-in ingredients. One step in the
manufacture of MIC, for example, creates phosgene,
the lethal “mustard gas” used in World War I. The
benighted crowd by the plant abided unaware.
In 1981 a phosgene leak killed one worker, and a
crusading Indian journalist wrote articles about dangers
to the population. No one acted. A year later, a
second phosgene leak forced temporary evacuation
of some surrounding neighborhoods. Worker safety
and environmental inspections of the plant were
done by the state Department of Labour, an agency
with only 15 factory inspectors to cover 8,000 plants
and a record of lax enforcement. 4 Oversight was not
vigorous.
Meanwhile, the Indian economy had turned
down, and stiff competition from other pesticide
firms marketing new, less expensive products reduced
demand for Sevin and Temik. As revenues fell,
so did the plant’s budget, and it was necessary to defer
some maintenance, lessen the rigor of training,
and lay off workers. By the time of the incident, the
MIC unit operated with six workers per shift, half the
number anticipated by its designers.
UNION CARBIDE’S
RELATIONSHIP WITH THE
BHOPAL PLANT
What was the organizational relationship of Union
Carbide Corporation in the United States to its subsidiary,
Union Carbide India Ltd., and ultimately to
the Bhopal plant? How much direction and control
did the corporate parent half a world away in
Danbury, Connecticut, exercise over the facility?
The Bhopal plant fit into the Union Carbide management
hierarchy as shown in the chart in Exhibit 2.
Although Carbide employees from the United States
managed the plant in its early years, in 1982, under
pressure from the government, it was turned over to
Indian managers. The experience of colonial rule in
India created a strong political need for leaders to
put on shows of strength with foreign investors.
Indians felt a burning desire to avoid any appearance
of subjugation and demanded self-sufficiency.
This is what had led to passage of the law requiring
foreign investors to use Indian firms and workers
in certain ways—and to put pressure on Union Carbide
to turn the plant completely over to its Indian
subsidiary.
The Bhopal plant was but one of 500 facilities in
34 countries in the Union Carbide Corporation
universe. There was no regular or direct reporting
relationship between it and Union Carbide’s headquarters
in Connecticut. At the request of UCIL,
employees of Union Carbide had gone to India
twice to perform safety inspections on the plant.
Other than those occasions, managers in the United
States had received information or reporting about
the plant only infrequently and irregularly when
major changes or capital expenditures were requested.
Thus, the Bhopal plant was run with near
total independence from the American corporation.
In litigation to determine where victims’ lawsuits
should be tried, a U.S. court described its autonomy
in these words:
[Union Carbide Corporation’s] participation [in the
design and construction of the plant] was limited
and its involvement in plant operations terminated
long before the accident . . . [It] was constructed and
managed by Indians in India. No Americans were
4 Sheila
Jasanoff, “Managing India’s Environment,”
Environment, October 1986, p. 33.
Chapter 11 Multinational Corporations 387
employed at the plant at the time of the accident. In
the five years from 1980 to 1984, although more than
1,000 Indians were employed at the plant, only one
American was employed there and he left in 1982.
No Americans visited the plant for more than one
year prior to the accident, and during the 5-year
period before the accident the communications between
the plant and the United States were almost
nonexistent. 5
Thus, the Bhopal plant was run by UCIL with
near total independence from the American corporation.
Despite this, shortly after the gas leak Chairman
Warren M. Anderson said that Carbide accepted
“moral responsibility” for the tragedy.
THE GAS LEAK
On the eve of the disaster, tank 610, one of three storage
tanks in the MIC unit, sat filled with 11,290 gallons
of MIC. The tank, having a capacity of 15,000
gallons, was a partly buried, stainless-steel, pressurized
vessel. Its purpose was to take in MIC made
elsewhere in the plant and hold it for some time until
it was sent to the pesticide production area
through a transfer pipe, there to be converted into
Sevin or Temik.
At about 9:30 p.m. a supervisor ordered an operator,
R. Khan, to unclog four filter valves near the
MIC production area by washing them out with water.
Khan connected a water hose to the piping above
the clogged valves but neglected to insert a slip
blind, a device that seals lines to prevent water leaks
5 In
re Union Carbide Corporation Gas Plant Disaster at
Bhopal, 809 F.2d 195 (1987), at 200.
EXHIBIT 2
Union
Carbide’s
Organization
Structure as
Related to the
Bhopal Plant
Warren M. Anderson
Chairman and CEO
Alec Flamm
President
Bhopal Pesticide
Plant
Technology, Services
& Specialty Products
Group
Union Carbide USA
Agricultural Products
Company, Inc.
USA
Board of Directors
Board of Directors
Union Carbide
India Ltd.
Bombay
Union Carbide
Eastern, Inc.
Hong Kong
388 Chapter 11 Multinational Corporations
into adjacent pipes. Khan’s omission, if it occurred,
would have violated established procedure.
Because of either this careless washing method or
the introduction of water elsewhere, 120 to 240 gallons
of water entered tank 610, starting a powerful
exothermic (heat building) reaction. At first, operators
were unaware of the danger, and for two hours
pressure in the tank rose unnoticed. At 10:20 p.m.
they logged tank pressure at 2 pounds per square
inch (ppsi). At 11:30 p.m. a new operator in the MIC
control room noticed that the pressure was 10 ppsi,
but he was unconcerned because this was within tolerable
limits, gauges were often wrong, and he had
not read the log to learn that the pressure was now
five times what it had been an hour earlier.
Unfortunately, refrigeration units that cooled the
tanks had been shut down for five months to save
electricity costs. Had they been running, as the MIC
processing manual required, the heat rise from reaction
with the water might have taken place over days
instead of hours.
As pressure built, leaks developed. Soon workers
sensed the presence of MIC. Their eyes watered. At
11:45 p.m. someone spotted a small, yellowish drip
from overhead piping. The supervisor suggested
fixing the leak after the regular 12:15 a.m. tea break. At
12:40 the tea break ended. By now the control room
gauge showed the pressure in tank 610 was 40 ppsi.
In a short time it rose to 55 ppsi, the top of the scale.
A glance at the tank temperature gauge brought
more bad news. The MIC was 77 degrees Fahrenheit,
36 degrees higher than the specified safety limit and
hot enough to vaporize. Startled by readings on the
gauges, the control room operator ran out to tank
610. He felt radiating heat and heard its concrete
cover cracking. Within seconds, a pressure-release
valve opened and a white cloud of deadly MIC vapor
shot into the atmosphere with a high-decibel
screech.
Back in the control room, operators turned a
switch to activate the vent gas scrubber, a safety device
designed to neutralize escaping toxic gases by
circulating them through caustic soda. It was down
for maintenance and inoperable. Even if it had been
on line, it was too small to handle the explosive volume
of MIC shooting from the tank. A flare tower
built to burn off toxic gases before they reached the
atmosphere was also off line; it had been dismantled
for maintenance and an elbow joint was missing. Another
emergency measure, transferring MIC from
tank 610 to one of the other storage tanks, was foreclosed
because both were too full. This situation also
violated the processing manual, which called for
leaving one tank empty as a safeguard.
At about 1:00 a.m. an operator triggered an alarm
to warn workers of danger. The plant superintendent,
entering the control room, ordered a water
spraying device be directed on the venting gas, but
this last-resort measure had little effect. Now most
workers ran in panic, ignoring four emergency buses
they were supposed to drive through the surrounding
area to evacuate residents. Two intrepid operators
stayed at the control panel, sharing the only
available oxygen mask when the room filled with
MIC vapor. Finally, at 2:30, the pressure in tank 610
dropped, the leaking safety valve resealed, and the
venting ceased. Roughly 10,000 gallons of MIC,
about 90 percent of the tank’s contents, was now settling
over the city.
That night the wind was calm, the temperature
about 60°, and the dense chemical mist lingered just
above the ground. Animals died. The gas attacked
people in the streets and seeped into their bedrooms.
Those who panicked and ran into the night air suffered
higher exposures.
As the poisonous cloud enveloped victims, MIC
reacted with water in their eyes. This reaction, like
the reaction in tank 610, created heat that burned
corneal cells, rendering them opaque. Residents
with cloudy, burning eyes staggered about. Many
suffered shortness of breath, coughing fits, inflammation
of the respiratory tract, and chemical pneumonia.
In the lungs, MIC molecules reacted with
moisture, causing chemical burns. Fluid oozed from
seared tissue and pooled, a condition called pulmonary
edema, and its victims literally drowned in
their own secretions. Burned lung tissue eventually
healed, creating scarred areas that diminished
breathing capacity. Because MIC is so reactive with
water, simply breathing through a wet cloth would
have saved many lives. However, people lacked this
simple knowledge.
UNION CARBIDE REACTS
Awakened early in the morning, CEO Warren M.
Anderson rushed to Carbide’s Danbury, Connecticut,
headquarters and learned of the rising death toll.
When the extent of the disaster was evident, a senior
management committee held an urgent meeting.
Chapter 11 Multinational Corporations 389
It decided to send emergency medical supplies, respirators,
oxygen (all Carbide products), and an
American doctor with knowledge of MIC to Bhopal.
The next day, Tuesday, December 5, Carbide dispatched
a team of technical experts to examine the
plant. On Thursday, Anderson himself left for India.
However, after arriving in Bhopal, he was charged
with criminal negligence, placed under house arrest,
and then asked to leave the country.
With worldwide attention focused on Bhopal,
Carbide held daily press conferences. Christmas
parties were canceled. Flags at Carbide facilities
flew at half-staff. All of its nearly 100,000 employees
observed a moment of silence for the victims. It
gave $1 million to an emergency relief fund and
offered to turn its guesthouse in Bhopal into an
orphanage.
Months later, the company offered another $5 million,
but the money was refused because Indian politicians
trembled in fear that they would be seen
cooperating with the company. The Indian public reviled
anything associated with Carbide. Later, when
the state government learned that Carbide had set up
a training school for the unemployed in Bhopal, it
flattened the facility with bulldozers.
CARBIDE FIGHTS LAWSUITS
AND A TAKEOVER BID
No sooner had the mists cleared than American attorneys
arrived in Bhopal seeking litigants for damage
claims. They walked the streets signing up
plaintiffs. Just four days after the gas leak, the first
suit was filed in a U.S. court; soon cases seeking
$40 billion in damages for 200,000 Indians were filed
against Carbide.
However, the Indian Parliament passed a law giving
the Indian government an exclusive right to represent
victims. Then India sued in the United States.
Union Carbide offered $350 million to settle existing
claims (an offer rejected by the Indian government)
and brought a motion to have the cases heard in
India. Both Indian and American lawyers claiming to
represent victims opposed the motion, knowing that
wrongful death awards in India were small compared
with those in the United States. However, in
1986 a federal court ruled that the cases should be
heard in India, noting that “to retain the litigation in
[the United States] . . . would be yet another example
of imperialism, another situation in which an established
sovereign inflicted its rules, its standards and
values on a developing nation.” 6 This was a victory
for Carbide and a defeat for American lawyers, who
could not carry their cases to India in defiance of the
government.
In late 1986 the Indian government filed a $3.3
billion civil suit against Carbide in an Indian court. 7
The suit alleged that Union Carbide Corporation, in
addition to being majority shareholder in Union
Carbide India Ltd., had exercised policy control
over the establishment and design of the Bhopal
plant. The Bhopal plant was defective in design because
its safety standards were lower than similar
Carbide plants in the United States. Carbide had
consciously permitted inadequate safety standards
to exist. The suit also alleged that Carbide was conducting
an “ultrahazardous activity” at the Bhopal
plant and had strict and absolute liability for compensating
victims regardless of whether the plant
was operating carefully or not.
Carbide countered with the defense that it had a
holding company relationship with UCIL and never
exercised direct control over the Bhopal plant; it was
prohibited from doing so by Indian laws requiring
management by Indian nationals. In addition to the
civil suit, Carbide’s chairman, Warren Anderson,
and several UCIL executives were charg …
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