M: Business 3rd Edition by O. C. Ferrell, Geoffrey Hirt, Linda Ferrell

Exercise 3

British Petroleum (BP) has become synonymous with the worst oil leak disaster in U.S. waters to date. Simply put, BP failed to adequately prepare for a worst case scenario. When the Deepwater Horizon oil rig exploded, killing eleven workers and pouring millions of gallons of oil into the Gulf of Mexico, BP had no effective contingency plan. The crisis immediately spun out of control.

Not only did BP underestimate the risks, but some suggest it willfully cut corners to save money. A rig technician accused BP of knowing that the rig’s blowout preventer was leaking weeks prior to the explosion. Similar accusations of risky or negligent behavior soon followed. Two months into the disaster, it was revealed that one-third of BP’s deep water oil rig designs were deemed risky by government inspectors—a higher percentage than those of other oil companies.

Effective business ethics requires firms to identify risks and educate employees to deal with issues related to the risks. BP did not adequately acknowledge the risks despite warnings from industry experts. It also had no effective crisis management plan in place. BP did have a spill-response plan; however, its plan proved ineffective to handle the situation.

The disaster has undermined BP’s reputation, and its ethics and social responsibility has been questioned by stakeholders. Many consumers responded by boycotting BP gas stations and products. The disaster has overshadowed BP’s positive multimillion dollar investments in renewable energy. BP has implemented a $20 billion Deepwater Horizon Oil Spill Trust to pay out claims and a $500 million Gulf of Mexico Research Initiative to fund the study of the impacts of the disaster, among other initiatives. BP has a long history of environmental disasters and safety violations. What will it take to improve the reputation of BP?

What are the ethical considerations that BP failed to recognize in its management of risks?

Step 1 of 2

Ethical considerations are concerned with the obligations and responsibilities of a business towards society. A business must follow the moral norms to live up to the expectations of others involved with them. BP did not take an attempt to the ethical consideration and failed in handling the crisis situation, leading to the worst environmental disaster in U.S.