Bhopal Gas Tragedy
Reaction of the UCIL
Role of government in granting permission
Failure of safety measures
Delay in Justice
The case examines the corporate governance issues at the India based IT services company, SatyamComputer Services Limited (Satyam). In mid-December 2008, Satyam announced acquisition of twocompanies - Maytas Properties and Maytas Infrastructure owned by the family members of Satyam'sfounder and Chairman RamalingaRaju (Raju). Due to adverse reaction from institutional investorsand the stock markets, the deal was withdrawn within 12 hours. Questions were raised on thecorporate governance practices of Satyam with analysts and investors questioning the company'sboard on the reasons for giving consent for the acquisition as it was a related party transaction.After the deal was aborted, four of the prominent independent directors resigned from the board of the company. In early January 2009, Raju revealed that the revenue and profit figures of Satyam hadbeen inflated for past several years. The revelation further deepened concerns about poor corporategovernance practices at the company. The case describes the corporate governance structure atSatyam, its code of conduct, roles and responsibilities of different committees under the board,whistle blower policy etc.The resignation followed the announcement the previous day by B. RamalingaRaju (Raju), Founderand Chairman of India's fourth largest IT services company, Satyam Computer Services Limited(Satyam), that the company had been inflating the revenue and profit figures for past several years.In his resignation letter, Rao, who had recently resigned as independent director on the Satyamboard.Another independent director, Mangalam Srinivasan
(Srinivasan), had resigned from the Satyamboard a few days earlier, on December 25. The resignations of these directors were the result of anaborted deal by Satyam to acquire two companies run by Raju's sons, Maytas Properties Pvt. Ltd(Maytas Properties) and Maytas Infrastructure Limited (Maytas Infra) for US$ 1.6 billion.Satyam'sboard of directors had given its consent for the acquisition. However, when the acquisition wasannounced publicly, it received flak from the investor community
Case Study: Union Carbide/Bhopal
On December 3, 1984, more than 3,000 people were killed and over 15,000 injured when the chemical methyl isocynate (MIC) was inadvertently released from a Union Carbide Chemical Plant in Bhopal, India. The scale of the tragedy, the loss of life and the implications for industrial/chemical manufacturing, made the story an instant worldwide headline (Kurzman, 1987).
The cause of the MIC release is still a matter of some debate and controversy. However, it is clear (Shrivastava, 1987) that human, organizational and technological factors to include safety procedures, maintenance operations, reduced staffing, and low morale may all have been involved in the sequence of events leading to the chemical release. The Company maintained that sabotage was also a possibility (p. 50-51).
Initial news coverage centered on: the events at the plant; the loss of life; and rescue efforts by the Indian Government. Subsequent coverage also focused on the cause of the accident, the economic effect on Union Carbide and its collective corporate response to the tragedy (Wilkins, 1987).
Primary Evidence. There was considerable debate within the Union Carbide leadership regarding what tactics and responses to take to the Bhopal tragedy (Kurzman, 1987). Initially, Union Carbide's corporate communications staff strongly recommended the company be as open as possible with all the information they had at hand. However, Union Carbide had traditionally been reticent in dealing with the media (p. 89). In addition, the company's attorneys recommended that information should be withheld that may possibly implicate or confirm the company's responsibility for the Bhopal leak and hence increase its potential legal liability (p. 174).
The Corporation's leadership was divided between attempting to distance itself from the events in Bhopal (Avoidance Strategy) and providing maximum information about the event, as well as direct support to the victims and full cooperation with the Indian Government (Attachment/Forgiveness Strategies). The decision was made in favor of openness and a crisis communication team was established and instructed to conduct daily press briefings at a minimum.
Union Carbide CEO, Warren Anderson felt it was important for him personally to go to Bhopal to demonstrate the commitment the company had to the rescue effort and to the investigation. Most of his executives, and the U.S. State Department (p. 114) advised against his going. Corporate attorneys for Union Carbide were adamant that Anderson's presence in Bhopal would only serve to tighten the connection between Union Carbide and the Bhopal tragedy.
They and several senior executives continued to advise that, seeing how the Bhopal Plant was actually operated by a subsidiary of Union Carbide (Union Carbide India Limited) (Shrivastava, 1987, p. 51) and that the U.S. based corporation only owned about half the publicly traded stock in the Indian operation, the best strategy would be to distance Union Carbide' leadership in the U.S. from the events in Bhopal. This might serve to limit future liability as the inevitable flood of lawsuits started to roll in and protect the corporation's stock price.
Warren Anderson rejected this advice (Kurzman, 1987, p. 115). He felt the scope of the tragedy was so significant and already connected in the mind of the public with Union Carbide that efforts to distance the Company from the tragedy were futile. Anderson traveled to India and was promptly arrested by Indian authorities upon arrival (Kurzman, p.108).
The Company also experienced severe difficulties in getting accurate information from the plant in India regarding the specifics of the incident (Kurzman, p.89) Phone lines were scarce and already packed with calls. The Indian Government was not forthcoming with information, as they intended to shift blame away from themselves to Union Carbide (Shrivastava, p.97). As a result, the company's first formal release regarding the Bhopal incident came one week after the tragedy (Smith, p. 154).
The Company's efforts were also hampered by the often conflicting interests of the various stakeholders in the tragedy. The Indian Government saw events one way; it wanted to ensure, (1) that it was not held accountable for the events in Bhopal, (2) that it was seen as a victim of Union Carbide's lax safety and maintenance procedures, (3) that it visibly demonstrated that the Indian Government could handle the disaster and medical relief response and (4) that the local government retained its credibility with the population (Shrivastava, p. 118-120). This strategy placed the Indian Government at odds with Union Carbide and led to the arrest of the CEO when he arrived in India.
Secondary Evidence. The impression derived from mass media coverage of the incident focused on the drama of the initial event rather than on in-depth coverage of its possible causes (Wilkins, 1987). More than 85% of the print and television news stories on the Bhopal incident centered on the events themselves (i.e. the chemical release, number of deaths/injuries, immediate relief efforts, etc.) while approximately 15% focused on the larger framing of the event (i.e. industrial hazards, corporate responsibility, the survival of Union Carbide, etc.). Initial coverage, particularly television, also focused on images of the human tragedy experienced by the people of Bhopal.
Union Carbide's initial crisis communication strategy centered on the financial costs of the tragedy, limiting its legal/financial responsibility for the deaths of thousands of innocent people, the future of the corporation, the stockholders and Wall Street analysts who valued the company's stock and pressure from worldwide consumer and environmental groups (Higgins, 1985, p.14).
The difficulty in getting accurate information from India severely hampered Union Carbide's ability to get information out quickly to the media. This led to an overall impression of "stonewalling" by the company and thus reduced the effectiveness of their overall attachment strategy (Shrivastava, p. 101).
Scholarly Journals. Communication scholars and those who study crisis management remain divided about the overall effectiveness of Union carbide's communication strategy regarding the Bhopal incident (Wilkins, 1987; Higgins, 1987). Some note that given the horrific nature of the tragedy, Union Carbide's strategy was about as effective as could be expected under the circumstance, (Higgins, 1987).
Others however, point to Union Carbide's lack of preparation in planning for a crisis (Shrivastava, p.99) which led to a lack of available information and a perception that the company was unsympathetic to the victims.
Discussion. Union Carbide's leadership was faced with what could be described as a mix of crisis types (Coombs, 1995, p. 455). The Bhopal incident contained elements of both an accident in that the events at the plant were beyond the company's ability to entirely control and transgression in that allegations of the plant's lax safety and maintenance standards directly contributed to the deadly chemical leak. Union Carbide's executives were, at first, divided between emphasizing avoidance strategies and attachment strategies in response to the Bhopal tragedy. Although, the company initially decided it would adopt an attachment strategy toward the crisis, its execution of the communication plan was hampered and resulted in mixed impressions in the media and among the general public (Shrivastava, 1987).
Union Carbide's communication's staff clearly intended to adopt a strategy of publicly accepting moral (if not legal and financial) responsibility for the incident and focused the company's efforts on the human cost of the accident. This was widely perceived to be the correct strategy (Kurzman, 1987).
However, the Communication staff of Union Carbide was quickly overwhelmed by the complexity of the issue and the number of media inquiries were received. Despite their best efforts, they lacked the manpower to respond to a crisis of this magnitude. Failure to have a Crisis Communication Response Team (on-call) was a major factor in the media's immediate perception that Union Carbide was not forthcoming with information (Higgins, 1987).
Union Carbide failed to account for the fact that the Government of India might have substantially different communication goals than the corporation had. The Indian government had a vested interest in doing all it could to shift blame and responsibility for the accident to Union Carbide in order to divert attention away from the government's failure to properly monitor safety conditions at the plant (Shrivastava, 1987).
Union Carbide had no means of established communication with its plant in India. When the accident occurred they were reliant on a small number of phone lines in and out of Bhopal. This compounded the company's inability to get accurate information out to the public. Union Carbide's first formal news release to the media came a full week after the accident (Higgins, 1987).
The fallout from the Bhopal tragedy forever changed Union Carbide.
The corporation was soon the target of a hostile takeover, was forced to divest itself of many of its most profitable divisions, and never fully recovered its public image (Wilkins, p. 130-134).