Case Study: BP Texas Refinery Essay
Case Study: BP Texas Refinery
According to Lewicki, Saunders & Minton (2003), adopting an unethical approach to negotiation in business can have serious consequences. A recent explosion at the British Petroleum (BP) Texas refinery on 24 March, 2005 reiterated this and demonstrated the effect of an unethical approach to negotiation with the death of 15 contract workers.
Ethical behaviour refers to the standards of conduct such as honesty, fairness, responsibility and trust. (Lewicki et al 2003) These standards are broadly applied and determine whether a course of action is right or wrong in a given situation. (Lewicki et al 2003) According to Es (1955), advocates of the ‘absolutist’ position hold a rigid view of what is right and wrong. In contrast, a ‘relativist’ approach would suggest ethical behaviour be contingent in nature, therefore having no set definition of what is right and wrong.
History is fraught with examples of unethical behaviour, from Nazi Germany of 1945 to recent atrocities in the Balkans and Rwanda. However, in those instances there was no negotiation involved. There are also numerous examples of unethical behaviour adopted in negotiation that have occurred in modern society. These have ranged from large scale unethical business issues such as the recent BP Texas refinery’s failure on safety provisions; Patrick’s wharf workers incident and the Hardie’s asbestos compensation dispute; to smaller everyday unscrupulous business dealings.
Research into ethics and negotiation is primarily focused towards examining the standard of truth. (Lewicki et al 2003) Attempting to define ‘truth’ raises a number of controversial issues. For example, ‘what constitutes a lie?’ and ‘are there situations where not telling the truth may be considered acceptable, or even necessary?’ (Lewicki et al 2003: pp.167)
The inherent competitive nature of most negotiating situations would suggest a certain degree of deceptive behaviour was a necessary component of negotiating. (Friedman & Shapiro 1995) Thus ethical negotiation becomes a question of distinguishing those behaviours which are deemed acceptable from those which are unacceptable. Negotiators need to be aware of the implications of their behaviour as failure to adhere to established ethical conventions may ultimately result in undesirable consequences. (Es, 1955)
Ethics in Negotiation
Given that information is a major source of power in negotiation it is not difficult to understand why negotiators may be attracted to deceptive behaviours. Ultimately the party who acquires information of the highest quality or uses it more persuasively will have a significant advantage over their opponent. (Lewicki et al 2003) By engaging in deceptive behaviour negotiators can manipulate information to the advantage of their own self-interest. (Es, 1955) For example negotiators often present inaccurate or misleading information in an attempt to alter their opponent’s perceptions, preferences and priorities. (Lewicki et. al. 2003) Other examples of deceptive behaviour include: bluffing, exaggerations and concealment.
Lack of responsibility for ones actions is a significant concern with respect to unethical behaviour in negotiations. (Byrnes, 1987) It is quite often the case that negotiators will attempt to justify their use of unethical behaviour by shifting the focus to the other party. For example a negotiator may perceive the other side to have adopted a competitive approach, therefore the use of unethical tactics is justified in their minds as a necessary defence mechanism. Other self-serving rationalisations include: the belief that the end justifies the means, it was unavoidable and the behaviour was appropriate to the situation. (Lewicki et. al. 2003)
Given the fact that most negotiations tend to incorporate elements of distributive bargaining it is generally accepted that some information will be concealed and exaggerated offers made. (Friedman & Shapiro 1995) Even the most cooperative of negotiators will be reluctant to facilitate a completely trusting and honest negotiating environment. Negotiators need to find a suitable medium which communicates their integrity while maintaining a safe bargaining position. (Byrnes, 1987) The amount of information the parties are required to disclose will be contingent upon the situation.
Unethical behaviour in negotiations can lead to both positive and negative outcomes. (Lewicki et. al., 2003) However, incentives for deception often create a serious moral tension resulting in unethical negotiators displaying signs of post negotiation guilt and discomfort. (Byrnes, 1987) By failing to adhere to established ethical conventions in negotiations, a party may find itself gaining an unfavorable reputation in the eyes of its constituencies, the opposition and affected publics. (Lewicki et. al., 2003) According to Byrnes (1987), this can in turn affect future relations between the parties as well as setting up a negative sentiment for future disputes and negotiations.
Case study: BP Texas Refinery
A recent accident at the BP Texas refinery provides us with an example of the potential ramifications of adopting an unethical stance in negotiation. According to Laredo Morning Times (2005), despite numerous criticisms by the American Occupational Safety and Health Administration (OSHA) of willfully violating safety rules and regulations, several fines and previous incidents which highlighted the plant’s safety inadequacies, BP maintained its hard line stance on workplace safety negotiations. It was a decision which ultimately cost 15 contract workers their lives.
The Texas City explosion was the eighth time this decade a fatal accident had been reported at a BP-owned plant – and the third fatal accident in Texas City alone. Thus, this recent fatal accident again raises debate over the issue of ‘money versus morality’ and questions whether BP (given its recent poor track record, as described by Olsen (2005)) acted ethically when addressing safety concerns in negotiations with their workers.
From a financial perspective, the Texas refinery is, according to Klinger (2005), BP’s biggest and the third-largest in the US. It processes 460,000 barrels of crude oil a day, enough to supply 3 per cent of America’s petrol demand. However, from a safety perspective, an analysis of industry statistics, news accounts and accident reports shows that, BP leads the U.S. refining industry in deaths over the past decade, with 22 fatalities since 1995 – more than a quarter of those killed in refineries across America. Furthermore, compared to the company’s major U.S.-based peer, Exxon Mobil Corp, than 10 times as many people have died in BP refineries. (Jordan, 2005)
The Texas City plant’s long history of safety problems failed to awaken company’s management into making safety issues their primary focus. Despite, their valiant attempts in several previous workplace negotiations with BP, the union had been unable secure to better working conditions and reparations to work equipment.
In the weeks before the accident at Texas City, the oil giant’s dismal record landed BP on an internal federal watch list of companies ‘indifferent’ to their legal obligations to protect employee safety because of a fatal explosion in Texas City in September 2004 that killed two pipe fitters and injured a third, when pressurized, superheated water was released from a 12-inch check valve. (Laredo Morning Times, 2005) The incident resulted in a $109,500 OSHA fine, including seven serious violations and a willful citation for failing to relieve trapped pressure within a pipe.
The explosion happened in the ventilator stack that was being started up again following extensive maintenance. It resulted in 15 fatalities, while another 70 people were injured. In response to the incident, BP spokesman Hugh Depland insisted that BP makes safety a priority and that there have been “significant upgrades at Texas City” in recent years: “As a result of the previous incidents we’ve made a number of changes in safety – including increased safety reviews by all members of the leadership team, an enhanced safety team for all employees and creation of a full-time safety audit team.” (Olsen, 2005)
According to Laredo Morning Times (2005), the problem could have occurred because BP officials might have focused too much on individual worker safety that they missed problems with overall system safety. Whilst safety statistics may have improved because more workers were avoiding minor injuries, lurking problems, such as the outmoded ventilator stack that spewed liquid and gas before igniting, had been neglected.
A good company would have investigated all accidents, incidents and near misses and said, “We’ll fix what we find, and we’ll follow it to completion.” (Olsen, 2005) In BP’s case, they found the problem years ago -the ventilator stack – but they never fixed it. The fact that the Texas plant is BP’s biggest refinery, would lead to the assumption that it would have been receiving regular attention, but with such a poor safety record and constant fines, it’s obvious that the management is continuing to sweep the issue under the rug. The current searing oil prices on the US and global markets may have persuaded the management to adopt such an approach, purely in the interests of profitability but that doesn’t make it condonable. The matter is currently under further investigation by the OSHA.
The evidence presented by Olsen (2005) and Laredo Morning Times (2005) suggests that the repeated causes of accidents and deaths in BP refineries can be linked to a weak unionist movement within the workers at the refinery. According to Jordan (2005), plant workers were represented by the Paper, Allied-Industrial, Chemical and Energy Workers International Union (PACE), and, as mentioned above, failed to improve safety conditions for the workers. Statistically, as verified by the evidence that Olsen (2005) and Laredo Morning Times (2005) presented, the number of accidents and deaths at BP refineries continued to climb in recent history, and the union was prepared to take a much bolder stance to finally rectify the situation.
A fierce negotiation between BP and its workers, which are mainly contractors, erupted at the Texas BP refinery several weeks before the fatal explosion occurred. According to Olsen (2005), the workers argued that they were working in an outdated temporary operating unit that had no warnings or evacuation procedures. Furthermore, as verified by Wheelwright (2003), the workers argued that their benefits as independent contractors do not cover compensation for workplace injuries. BP argued with the intention of satisfying the worker’s requests for better occupational health and safety measures, but according to Olsen (2005), seemed unwilling to spend too much time and resources to reinstall safety mechanisms and procedures from bottom up.
The union representing the contractors working for BP was aware of BP’s poor safety record, and played hardball tactics, delivering a ridiculously harsh opening stance. Furthermore, the union was collaborating and forming allegiance with a third party company that reviews and reports the safety procedures and industrial hazards of a workplace. The union threatened to force an inspection of the poorest sections of the plant, and to release the information to the media.
The union targeted the very heart of this sensitive issue, using the poor safety record as evidence that BP has, according to Laredo Morning Times (2005) gotten it wrong all along and that it was time to completely overhaul their safety measures. According to the facts that Laredo Morning Times (2005) and Olsen (2005) presented, such as the accusations of BP willfully violating safety rules and procedures, delaying fixing problems and hiding investigation reports of previous accidents, it can be argued that BP had a habit of finding quick solutions in order to satisfy workers and minimize disruption to the workplace. This was also evident in their negotiation tactics.
Pushed into the corner by the union’s harsh (but true) attacks, BP had no choice but to re-evaluate their stance on safety measures. This, according to Lewicki et. al. (2003) is one of the consequences of the hardball tactic that the union employed. BP resorted to using what Lewicki et. al. (2003) classifies as unethical forms of bargaining. According to Olsen (2005), there was an initial report informing BP of the dangers of the temporary operating unit. However, BP chose to conceal that information from the union.
The negotiators from BP waved off the allegations of hazardous work conditions as exaggerations on the workers’ behalf, and indicated that their reports showed no substantial evidence for any hazardous sites. Finally their closing offer was to achieve an increased safety review by all members of the leadership team by creating an enhanced safety team for all employees and by employing a full-time safety audit team. Unfortunately the establishment of these teams, according to Olsen (2005) and Laredo Morning Times (2005), was delayed and did not happen before the explosion that killed 15 people occurred.
Conclusions and Recommendations
As discussed in the earlier section on ethics, it can be argued that BP adopted an unethical approach to resolving the dispute. They were involved in many of the features of an unethical dissolution, including bluffing, exaggerations and concealment. BP was focused on simply achieving the short-term outcome of minimizing disruption and satisfying the workers, and by this they demonstrated a strong belief in the ends justifying the means. While it can be argued that the negotiators from BP achieved this goal, it can be clearly seen that because of the lack of urgency and value they placed on their workers’ lives, the true outcome of the negotiation was disastrous.
A recommendation extends from Byrnes’ (1987) work that was mentioned above. It involves achieving a positive sentiment when the parties sit down on the negotiation table. Repeated incidents of falsification and lies which cost lives will create an aura of distrust which will lead to a disruption in the work force as well as hardball tactics being employed by the opposing party in future negotiations. Employing one of Walton & McKersie’s (1965) key systems in negotiations called attitudinal structuring, which involves open and honest communications between parties and the sharing of safety reports and progress, can give the union confidence that BP will work to fix any hazardous environments in the workplace.
This understanding between the parties will also allow BP to target the aspects of occupational health and safety that the workers truly value (instead of reports by Olsen (2005) indicating that BP was spending all their time just saying “don’t strain your back” and “don’t get dirt in your eyes”). This will help achieve their goal of gaining worker support and reducing the disruption to the workforce. This recommendation, of course, hinges on BP’s willingness to spend the resources to develop these programs. However if BP’s true intentions are to improve their safety record and to decrease the number of accidents and deaths at their plants, establishing an honest and reliable means of communication to the workers is the first step toward correcting their flawed past.