BUS 4474 Alabama a & M Union Carbide Corporation and Bhopal Case Analysis Read the Union Carbide Corporation and Bhopal case that begins on page 384 of you

BUS 4474 Alabama a & M Union Carbide Corporation and Bhopal Case Analysis Read the Union Carbide Corporation and Bhopal case that begins on page 384 of your Business, Government, and Society textbook. In lieu of answering the questions that follow the case, you will respond to the prompt below;

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.

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 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 accounts for 10% of your overall grade in the course.

If you can complete this assignment according to the trevino framework, it is better. 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.
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.” 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.
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.
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 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. 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 online the plant began to pose higher risk to its
neighbors; it now made the basic chemicals used in pesticides rather than using shippedin 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. 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?
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
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.
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 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. 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.” 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. 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
charged with homicide in a Bhopal court. This apparently was a pressure tactic, since
no attempt to arrest them was made.
On top of its legal battle, Carbide had to fight for its independence. In December
1985, GAF Corporation, which had been accumulating Carbide’s shares, made a
takeover bid. After a suspenseful monthlong battle, Carbide fought off GAF, but only
at the cost of taking on enormous new debt to buy back 55 percent of its outstanding
shares. This huge debt had to be reduced because interest payments were crippling. So
in 1986 Carbide sold $3.5 billion of assets, including its most popular consumer
brands—Eveready batteries, Glad bags, and Prestone antifreeze. It had sacrificed stable
sources of revenue and was now a smaller, weaker company more exposed to cyclical
economic trends.
INVESTIGATING THE CAUSE OF THE MIC LEAK
In the days following the gas leak, there was worldwide interest in pinning down
its precise cause. A team of reporters from The New York Times interviewed plant
workers in Bhopal. Their six-week investigation concluded that a large volume of water
entered tank 610, causing the accident. The Times reporters thought that water had
entered when R. Khan failed to use a slip blind as he washed out piping. Water from his
hose simply backed up and eventually flowed about 400 feet into the tank. Their
account was widely circulated and this theory, called the “water washing the…
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