final project (shell nigeria)

Being a Leader Final Project (Part 2) 1

A Study of Shell Nigeria Oil Company and its Stakeholders

Part 2 (Week Seven)

A review of basic issues regarding the Background and Interests of Stakeholders

of

Shell Nigeria Oil Company

RICHARD M. EAILEY

15561671


Chapter 1

Introduction

The intent of this research project is to provide basic knowledge of The Royal

Dutch Shell Corporation and the Shell Nigeria Oil Company and its operation in

the Niger Delta in particular regarding its ethics, performance, social involvement,

contribution to national income and its contribution to keeping the environment

green.

This research starts with a background into the history and culture of the Shell oil

company worldwide and in particular its Nigeria operations. It provides an insight

to the extent of their operations worldwide and its contribution to the worlds’

energy demands and responsibility to minimizing pollution of the environment in

which it operates worldwide.

Secondly it looks at the various theories from different literature sources that

relate to the Shell Nigeria Corporation and its operations in the Niger Delta region

as it relates to the oil spillage problem and compensation sort by affected

communities.

Thirdly it looks specifically at the issue of this wicked problem of oil spills in the

Nigeria and the different views of the politicians, the communities in which they

operate and the response of the Shell Nigeria Oil corporation. This is done from

three different stakeholders prospective; The Shell Chief Executive Officer, A

local Shell Nigerian employee and A Shell investor.

Finally the findings of the investigation and possible solutions and

recommendations for a resolution to this wicked problem would be put forward

for discussion.


Chapter 2

Introduction and Discussion of Theories and Models from the Literature

In this chapter we would look at the Royal Dutch Shell Oil company operations

worldwide and in particular the Nigeria operations from several different angles.

We will look at how Shell Nigeria operations can impact upon the three

stakeholders; The CEO of Shell, an investor and a local Shell employee. Then

we would look at this wicked problem with the oil spill in the Niger delta.

Shell is a global group of energy and petroleum companies. It is headed by Chief

Executive Officer Peter Voser and is located in The Hague, the Netherlands. The

parent company The Royal Dutch Shell plc is incorporated in England and

Wales.

According to Forbes Global 2000 the Royal Dutch Shell plc is the fifth largest

company in the world. The company boasts of having some of the most stringent

code of ethics in the oil industry as well as some of the more environmentally

friendly operations and safety records for oil and gas operations worldwide. The

company is located in over ninety countries worldwide and has a total staff of

around ninety three thousand employees.

Ethics

The company emphasizes adherence to its high ethical standards it has set in its

code of ethics for all Directors and Senior Financial Officers. In essence the code

of ethics states the following:

a. They shall all act in accordance with the highest standards of honesty,

integrity and fairness and that they should expect the same from others

while maintaining a good work relationship that encourages that

encourages the same.

b. They should excuse themselves from any decision making process that

may cause conflict of interest by affiliation and should advise about this in

writing.


c. Should not have any financial interest in any contracts awarded by any

Shell company or affiliates.

d. Should not accept third party gifts that may seem to impact their decision

making on any particular issue related to awarding of contracts.

e. Avoid any relationship with a contractor that may compromise transacting

business in a professional fair and competitive basis.

If any of these codes are broken it is the responsibility of any employee in the

organization to report it without any fear of intimidation of victimization.

It is clear for anyone to see that Shell has very high standards of ethics

engrained in its corporate profile. In todays’ world there is a strong emphasis on

organizations and its managers being ethically strong. These follow the many

scandals of large corporations during recent times and the increasing

investigations from regulators and the general public at large.

Generally individual countries would have their regulations regarding code of

ethics for corporations. Good companies who preach high ethical standards

generally operate above the minimum requirements set by these regulations.

Operating in such a manner would boost a stakeholder like an investor

confidence that the company would not run afoul of the laws. “Shell’s standard

for their ethics is considered an asset worth protecting at all cost.”

Technology advancement

Shell has pledged to continued enhancement of its operation by continually

searching for new ways of producing energy in as safe and efficient a manner as

possible. To this end they have invested in state of the art technology to enhance

exploitation of reservoirs by extracting the maximum possible from wells. They

have reduced the flaring of gas from wells thus minimizing the carbon dioxide

emitted to the atmosphere. Their facilities are engineered to the latest industry

codes in order to maximize production while at the same time reducing the rate

of plant and equipment failure and by extensions accidents.


Shell’s corporate social responsibility

Shell insists on using as many employees as possible from the areas in which it

operates, once the necessary skills are available. They have taken a decision to

put back money into the communities by assistance with social projects both

financially and by volunteering employee and technical assistance where

necessary. In 2010 they spent 13 Billion dollars on goods and services from

countries with lower income and over 121 million dollars in voluntary social

investments in 2010.

Shell has shown tremendous social responsibility by advising that it would take

care of oil spills at their location even if the spills were an act of sabotage. They

stated they are determined to be transparent in their response to oil spills and

have launched a website to track their response to and clean up of all oil spills at

their facilities. From a stakeholder like a local Shell employee’s standpoint this is

great news as they wouldn’t think they are working for a company that’s

destroying their environment but rather enhancing the community. This would

also help Shell’s image in the communities from which these employees come

from. Similarly an investor would also be impressed by this because it would

minimize the possibility of law suits which may inhibit the company to pay

dividends. Shell Nigeria has even shown faith in local communities by letting

them decide on and develop projects themselves while Shell takes care of the

funding.

Environmental responsibility

Shell has insisted that they always do impact assessments by trying to identify

the positive and negative impacts that can arise out of their activities. They

adhere to all local environmental regulations and consult with the people in the

community to work towards ways to continually improve the social and

environmental performance. The environmental impact assessment captures all


relevant baseline data and goals are set and tracked throughout the life of the

project. This again has a positive effect on the investor stakeholder as it shows

the responsibility of Shell to take all necessary precautions before starting a

project which minimizes potential operational accidents to plant and environment

which bodes well for longevity and stability which would encourage an investor to

even invest more in the company.

Quality assurance

Shell is committed to the highest quality standard as required by law of all

countries in which it operates. This is evidenced by the phasing in of all barges to

be double-hulled and achieving these seven years ahead of the European Union

requirements. Similarly all their ships that transport crude are all double-hulled in

an effort to minimize spills from tankers. Here again the investor would be

impressed as important steps have been taken to protect the assets and the

environment. All of the above measures enhance the Shell CEO as a person who

is highly concerned with not just making profits, but doing so in a highly ethical

and corporately social and responsible manner.

Production capabilities

Shell is responsible for two percent of the world’s oil production and 3.3 percent

of natural gas production. Over the past five years they have spent over 2.1

Billion dollars on alternative energy development, carbon capture and storage.

Shell is a significant player in both the upstream part of the oil and gas business

as well as the downstream aspects. On the upstream side they search for oil and

gas in every place around the world. On the downstream side they operate over

thirty refineries around the world that convert raw crude into lube oils, gasoline,

bitumen, liquefied natural gas and a host of other products that the world

depends on.

Economic contribution

Shell has contributed approximately 3.5 billion in royalties and taxes paid to the

Nigerian government in 2010. Shell awarded 947 million dollars worth of


contracts to Nigerian companies in 2010. Ninety percent of employees employed

in Nigeria are Nigerians. They contributed 59.8 million dollars to the Niger Delta

development fund and 22.9 million dollars to community development projects in

2010.

Wicked problems

It is quite clear to see that the issues present in this case make this a wicked

problem. Wicked problems can be defined as long complex, obscured, non linear

type problems that often do not have any clear cut wrong or right solution to

them. They tend to be like a virus that constantly mutating all the time, hence the

suggestion by most experts that one comes up with resolutions rather than

solutions to wicked problems.

(Rittel and Webber) suggest that there are ten criteria for wicked problems. Even

thought the criteria seem to overlap and that some scholars advocate they be

trimmed to five categories, it’s a mistake people make.

1. “There is no definite formulation of a wicked problem.”One would have to go

through an infinite amount of data to understand or solve a wicked problem

2.” Wicked problems have no stopping rules.”A tame problem is stopped when it

is solved. Wicked problems are resolved not solved so it never stops.

3. “Solutions to wicked problems are not true-or-false, but better or

worse.”Individual s differs according to their personal beliefs etc. and thus has

different perceptions on solutions.

4.” There is no immediate and no ultimate test of a solution to a wicked

problem.”Any solution today will spark controversy about another possible

solution the next day and so on.

5.” Every solution to a wicked problem is a "one-shot operation"; because there is

no opportunity to learn by trial-and-error, every attempt counts significantly.


6.” Wicked problems do not have an enumerable (or an exhaustively describable)

set of potential solutions, nor is there a well-described set of permissible

operations that may be incorporated into the plan.”

7.” Every wicked problem is essentially unique.”Every wicked problem has its

own set of rules. There are no set patterns.

8. “Every wicked problem can be considered to be a symptom of another

[wicked] problem.” Because a wicked problem can go on and on and on, it more

than likely would have had its genesis from a previous wicked problem.

9. “The causes of a wicked problem can be explained in numerous ways. The

choice of explanation determines the nature of the problem's resolution.”There

are no guide lines for determining the right or wrong approach to solving wicked

problems.

10.” [With wicked problems,] the planner has no right to be wrong.”

Wicked problems can seem to go to infinity, and thus one should look for the

right resolution that fits the right time. Because unlike a tame problem which can

be classified as linear in nature and can be approach in a logical problem solving

manner and come up with a correct or incorrect solution.

Most wicked problems are stakeholder dependent, usually political professional

or generally social issues to which there is no right or wrong answer. This case is

classified as a wicked problem because of the following issues:

1. The issue of the oil spills.

2. The question of how did the spillage occur? Was it operational or

equipment failure? Was it sabotage?

3. Compensation for the people in the affected community.

4. The engagement of the services of unscrupulous companies lacking

certification.


5. Whether or not the Government would mandate companies to clean up

their spillages and pay adequately people who are affected.

6. Dishonest government officials who may be in bed with the oil pirates.

7. The cutting out of all the illegal homemade refineries that are polluting the

forests of the Niger Delta.

Stakeholders

Stakeholders can be classified as, “persons or groups with legitimate interest in

procedural or substantive aspects of corporate activity. Stakeholders are

identified by their interest in the corporation whether or not the corporation has

any corresponding interest in them.” (Donaldson and Preston)

In this case it is evident that the CEO, an investor and a local Nigerian employee

are all stakeholders in Shell but albeit for their own different reasons. (Donaldson

& Preston) further emphasizes that each stakeholder should be given equal

attention at the same time.

This is further emphasized by the Stanford Research Institute quote,

“Stakeholders are those groups without whose support the organization would

cease to exist.” (SRI, 1963; quoted in Freeman,1984:31). In other words the

managers of corporation should encourage inputs from all stakeholders as a

means to an end, i.e. the organization’s ultimate goal of continuity, profitability,

growth and establishment.

To understand the principle of equal treatment to all stakeholders, consider a

scenario where the community is not taken into consideration and all employees

are external to the region. Obviously there will be no support for an entity

operating in this environment and it would be subject to protest and sabotage

from residents of the community. This would not auger well for the long term

sustainability of the organization and certainly would not encourage a

stakeholder like an investor to be interested in the business.


In today’s world where businesses are highly scrutinized for the way they

operate both financial, sociably and environmentally, it’s of paramount

importance for the CEO as a stakeholder to steward his organization to be at the

cutting edge of all three facets and enhance his reputation as a leader.

An investor stakeholder would be concerned about the stability and longevity of

the company and would have issues with the possibility our huge law suits

imposed on Shell for damage to the environment caused by oils spills. This can

affect the company’s’ ability to pay dividends.

A local Shell employee may similarly have interest in Shells’ sustainability from a

personal standpoint of job security as well as concerns for the ecological

damages caused by spills that affect their families who depend on fishing and

planting the land for survival.


Chapter 3

An Examination of the Various Approaches to Leadership

In this chapter we would review some of the different types of leadership which

can be used by all the parties concerned to try and resolve this wicked problem.

One of the issues with situations like these is the aggrieved parties always make

the assumption that the government is in collusion with the company and allow

them to have their way for in exchange personal benefits (bribery).

Charismatic leadership

Charismatic leadership is where the leader has the ability to effectively

communicate in such a manner that compels followers to be inspired and

motivated emotionally. Charismatic leaders are people who seem to have been

born with this innate ability to affect people’s inner emotions and get them to

follow their lead. However a leader should not just rely on charisma alone to lead

as this can be a problem for succession planning. The following leader may not

have any charismatic qualities. Charismatic leadership usually is a good

enhancement to other forms of leadership. A modern day example of a

charismatic leader is Nelson Mandela.

Transactional leadership

Transactional leadership is basically like a give and take business relationship.

You have something I want and I have something you want. This is the basis for


the term as it is in fact a tran-saction. Here the leader is known to have control

over his or her followers and can provide reward or punishment depending on

whether a deed gets done or not. Transactional leadership is deemed to be old

school leadership by some people; however it is still one of the more common

forms of leadership in the world today. Transactional leadership doesn’t

guarantee loyalty from one’s follower.

Transformational leadership

Trans-formational leadership seeks to form a partnership where the leader and

followers work together for the good of the organization or cause and seek to

effect changes that would transform the situation into something mutually

acceptable to both parties. Usually transformational leadership is intertwined with

charismatic leadership as leaders of this disposition tend to inspire and motivate

followers to go way beyond the call of duty without looking for any reward, unlike

transactional leadership.

According to Bass and Avolio, transformational leaders display behaviors

associated with five transformational styles: “Idealized behaviors: (living one’s

ideals), Inspirational motivation: (inspiring others), Intellectual stimulation;

(stimulating others) and Individualized consideration: (coaching and developing

others).” (Bass and Avolio, 1994)

Transformational leaders can therefore be looked at as a sort of mentor and

motivator that encourages individual members to look beyond their individualism

and seek to enhance each other for the benefit of the whole group. This way they

achieve higher levels of achievements than they would have as individuals.

Throughout the eight fast paced weeks of this module on leadership I have been

enlighten by the knowledge gained from the literature as well as the invaluable

exchanges with my fellow students and instructor over the blackboard discussing

various topics. This is where I have learned tremendously because we are all

from different cultural backgrounds and what we may take for granted in our part

of the world is not necessarily so in others. Also it was amazing to see how


different cultural heritage impacts upon how leaders operate in different parts of

the world.

Had I been the CEO of Shell I would have viewed this case as an opportunity to

heed the advice of Giam Sweigers- “Never waste a good crisis” and view this

situation as an opportunity and not a headache. I would have used a

collaborative approach to resolve this situation as well as follow the

transformational leadership approach. This would have involved keeping

meetings with the head of all the main stakeholder groups, principally among

them are the government, the communities in the affected areas, the

environmental interest groups. I would gather a group of my top executives in

Shell Petroleum Development Company of Nigeria headed by the CEO and first

get all the facts of the situation in the Niger Delta region. I would be up front and

admit if we were at fault and advice what action we would take to rectify such

situations. One of the mistakes leaders make is not admitting wrong doings and it

creates feeling of mistrust which is difficult to overcome.

As (Margolis and Stoltz 2010) stated,” collaborative, inquisitive and encourage

people to generate their own options and possibilities.” For this situation to be

resolved it must be an all inclusive effort and every one must be heard. Shell’s

integrity can be reinforced by testimonies from local shell employees, as they

would quicker believed by the Nigerian stakeholders than a foreigner. I would

stand by the Shell brand of ethics and do a presentation of all that Shell has done

for the communities and what it has contributed to the development of the

country as well as the plans for the future continuity of operations in Nigeria.

As the CEO of Shell “I would state my personal brand that is a reflection of the business as state this openly for all to know and be committed and do not compromise this under any circumstances”. Sanjiv Ahuja–Chairman, Orange, UK


Chapter 4

Conclusion/Recommendations

In concluding this project and survey of literature on the Shell oil company it can

be said that the company has high ethical standards and generally stands by its

words. Shell is at the forefront of technology and has a very good safety record

throughout all its operations worldwide. It clearly assist in all communities in

which they operate with many social projects, employing locals once they have

the necessary skills required and even go as far as training people with skills so

that they can be employed.

Findings on Shell operations in the Niger Delta

Most of Shell producing fields is located in the Niger Delta region in Nigeria. Shell

has stated that any oil spillage whether as a result of failures or sabotage would

be cleaned up at their expense and that the appropriate remedial work would be

done. The problem began with the head of the Environmental Health Services

Provider Association of Nigeria insisting that the government force Shell to pay

compensation to communities affected by oil spillages from their operations.

Shell has reported that most of the spills have been caused by illegal refining and

theft at their facilities and thought they are willing to clean up the spills they are

unable to do so effectively because of the militant gangs operating in the area.

There appear to be several corrupt government officials working with the pirates

who steal oil from Shells’ facilities using badges that transport the oil to tankers

anchored off the coast.

The wicked problem

This situation has resulted into a wicked problem with many stakeholders as

mentioned by (Conklin and Weil 1997). Each stakeholder would have their own

perspective on how the situation should be resolved. The nature of these

problems prohibits them from being solved by any one individual and I suggested


a collaborative effort on all the stakeholders to find a resolution that is workable

for all parties concerned.

Stakeholders

The different stakeholders in this case would all have their own individual feeling

about the issues at hand and should be encouraged to keep regular meetings as

it’s the only plausible way to effect come to a resolution of the situation. The CEO

would be wise to reiterate Shells’ commitment to working with the people of the

Niger delta in remediating areas affected by spills and even though they may not

have been caused by Shell to foster confidence in the company. The government

would have to assist by weeding out corrupt politicians who are in concert with

the pirates who are stealing oil from Shells’ facilities on a daily basis.

Finally this situation is a very complex one with the future of Shell Nigeria

operations hanging in the balance. Shell would be well advised to get into serious

discussion with the government and the environmental groups to find workable

solutions that are acceptable to all concerned. Next they would have to find some

means to meet with the leaders of the militant groups who are a constant source

of harassment to the government and sabotaging of Shells’ facilities. Shell being

the outsider may have to even go beyond what they are presently doing and give

more to the people of the Niger Delta region in an effort to win them over as

many of these people are extremely poor and live below the poverty line.


Reference List

Bass, B.M.& Avolio, B.J. (1994) Improving organizational effectiveness

throughtransformational leadership. Thousand Oaks, CA: Sage Publications

Conklin, E. J. & Weil, W. (1997) ‘Wicked problems: naming the pain in

organizations’. Available from http://www.leanconstruction.dk/_root/media/15.pdf

Freeman,R.E. 1984.Strategic management: A stakeholder approach. Boston:

Pitman.

Donaldson, T. & Preston, L. E. (1995) 'The stakeholder theory of the corporation:

concepts, evidence, and implications', The Academy of Management Review, 20

(1), pp.65–91.

"Never Waste a Good Crisis” (Giam Swiegers)

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http://search.ebscohost.com.ezproxy.liv.ac.uk/login.aspx?

direct=true&db=buh&AN=9503271992&site=ehost-live&scope=site

http://www.shell.com/home/content/footer/about_this_site/shell_websites/

Rittel, H. and Webber, M. (1973). "Dilemmas in a General Theory of Planning".

Policy Sciences, Vol. 4, pp 155-169. Elsevier Scientific Publishing Company, Inc:

Amsterdam.

Sanjiv Ahuja–Chairman, Orange, UK50 Lessons Reference #325 © 2004–2010, Fifty Lessons Ltd. All rights reserved. Reproduction in whole or in part is strictly prohibited.

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Appendices

final project (shell nigeria)

Documents