University of Chicago
Type of paper: Thesis/Dissertation Chapter
Shell Oil in Nigeria
1. What are some of the factors explaining why corruption and bribery are so high in Nigeria?
Nigeria is considered to be one of the most corrupt countries in the world. Many different forms of corruption are familiar to Nigeria including political corruption, bureaucratic corruption, electoral corruption, embezzlement, and bribery. Corruption has even been said to be a viable enterprise in Nigeria due to the involvement of citizens, government officials, and private corporations alike. Two main factors help explain why corruption and bribery are so high in Nigeria, these factors include Nigeria’s complete dependence on the petroleum industry and profit-focused companies taking advantage of a less developed, vulnerable country’s government and social systems.
Companies operating in Nigeria have a reputation for being a main driving force behind the corruption. They are constantly accused of allowing and actively participating in corrupt practices to ensure their strategic goals are accomplished. Besides bribing government officials and misrepresenting figures these companies decline to engage people who are trying to fix the system. Instead of participating in the problem, companies as large as Shell should be setting an example for ethical business practices in developing regions. They should be ensuring that their investments in the community are being funneled to the appropriate channels for improving things like infrastructure and the standard of living for Nigerians. The weak government is easily influenced by bribes and other kickbacks, and companies like Shell are quick to take advantage. Shell has been known to use bribery as a means to get secure new licenses and territories and circumvent customs laws. This type of activity is so common that it has become somewhat of a local culture. The losers in this scenario are the general public in Nigeria whose land is exploited and destroyed by oil pipelines and spills. These people have little means of fighting the current system because of the huge amounts of resources that large companies like Shell have and their ability to offer incentives to the local government with these resources. This current system will not change unless Nigeria’s dependence on petroleum reduces. Due to poor macroeconomic management, they are completely dependent on Petroleum (accounts for 95% of foreign exchange earnings). Without development in other industries the country will always be at the mercy of Shell and the petroleum industry.
2. Was Shell involved in the execution of the poet Ken Saro-Wiwa? What impact did the poet’s death have on Shell?
Ken Saro-Wiwa was a native Nigerian, part of the Ogoni tribe, and a leading environmentalist in the area in the early 1990’s. He was a determined critic of the Nigerian government and destruction of his homeland by Shell oil practices. He mainly argued that neither the government nor Shell had appropriate regulation to protect land, and none of the wealth taken from it was returned to the people whose land it was. He was able to organize the largest political organization in the region to protest the destructive behavior and call for equal wealth distribution. His actions would result in a campaign by the Nigerian military to respond to his claims with violence. Saro-Wiwa, along with eight other leaders, were arrested on trumped up charges and executed by the Nigerian government. Because many government officials benefitted from the petroleum industry they had a strong incentive to ignore the people’s protests and put an end to the movement. It is for this reason that they initiated this campaign. Shell certainly played a role in the execution of Saro-Wiwa. Not only did they claim to be steering clear of the politics of the issues that they were causing, they were accused of bribing soldiers who ultimately carried out human rights violations. These soldiers also played a significant role in the capture and execution of Saro-Wiwa. Shell was eventually sued for their actions and settled out of court. This incident had an impact on the image of Shell and the African oil industry. It ignited world-wide protests and criticisms of the industry. Financially Shell was not burdened by the lawsuit, but the light that was shed on what was going on would ultimately cause Shell increase investment to the community. Today Shell makes efforts to contribute to small businesses and education in Nigeria.
3. Was Shell taking advantage of weak local regulation?
Shell was taking advantage of weak local regulation and using third party companies to funnel bribes to the Nigerian government. These bribes bought them many sources of preferential treatment including using government manpower to move ships, rigs, workboats, and other equipment throughout the country. Shell was also able to exploit the military and secured the use of military aircraft for quick movement of special goods. Bribes also allowed Shell to circumvent visa inspections and avoid having their employees deported for over-staying their visas. Many precautions were taken to cook the books and hide these bribes in case of an audit. One such precaution included drawing up fake invoices to create line items on the balance sheet to mask certain bribes. All of these actions taken by Shell are clear examples of how they took advantage of the weak government. A strong government with proper checks and balances would be much harder to manipulate. Bribery and other forms of corruption would be treated harshly in order to deter them from happening.
4. What can a company do to ensure that it operates ethically in societies with weak institutions?
To ensure that a company is operating ethically in a society with weak social institutions the company must first reinforce their own ethical code of conduct. If a company is not ethically accountable in their home country, chances are problems will be worse in a less developed, easily manipulated country. Top management must stress the importance of proper ethics both formally and by setting good examples. An ethics department with employees who retain knowledge of the local country should be a norm when setting up shop in another country. Another way to ensure ethics are adhered to is to use ethical practices to the company’s advantage. In this day and age, ethical practices can be used as a selling point and a way to differentiate your company and positively shape your brand image. Investing in the local community can also have the effect of both ensuring ethical practices and benefitting all parties in the long run. By investing in local communities, infrastructure, and education the company helps develop weak incumbent social institutions. Stronger institutions will reduce opportunities for unethical actions and increase penalties for violations. In the long run this will strengthen the economy and increase business opportunities for your company. A good relationship with an emerging market is a valuable asset to any company. The text offers six guidelines to ensure multinational corporations are meeting basic ethical standards. These guidelines include respecting basic human rights and freedoms, maintaining high standards of local political involvement, allowing the transfer of technology, protecting the environment, following consumer protection laws, abiding by proper employment practices. Holding a company to these basic standards is a good start to ensuring ethical practices abroad.