Managerial ethics - Texaco in the Ecuadorean Amazon
BUS 520a – MANAGERIAL ETHICS
Case Study #2
Texaco in the Ecuadorean Amazon
Submitted by: Aaron Rogers
On: October 29, 2004
To: Dr. Gary Barfoot
Case Study #2: Texaco in the Ecuadorean Amazon
Recent lawsuits filed by various Ecuadorean and Peruvian natives to make ChevronTexaco Corporation financially responsible for its alleged involvement in Ecuadorean and Peruvian rainforest pollution have been denied by a U.S. District judge. The plaintiffs allege that ChevronTexaco has violated both oil industry contamination standards and international environmental standards such as the 1972 Stockholm Declaration on the Human Environment to the tune of more than $600 million worth of cleanup costs.
Answers to Questions
When the Ecuador contract was originally negotiated, Texaco officials surely would have had to have been aware of the political situation in the country. If then, does the awareness of a weak and corrupt government undermine the fact that Texaco followed the laws they were instructed to follow? They answer is “no”. Texaco’s actions in the Ecuadorean region, though reprehensible, were morally justifiable because they met the “moral minimum” of obeying the law.
This is a preview of the whole essay
While Texaco was within the bounds of Ecuadorean law in their practices, they should extend a helping hand in cleaning up the mess they made and they should provide medical care for the residents in the effected regions. The reason is financial. It is in Texaco’s best financial interest to appear to the world to be a caring and environmentally sensitive organization. The money spent cleaning up the effected areas and providing medical care to the residents will be far less, in the long run, than the potentially devastating media aftermath and of taking the “low road” and fighting with natives on every clean-up dollar to be spent.
The fact that the military is essentially the dominating political force in Ecuadorean government is mostly irrelevant to this case. Regardless of whoever runs the country, the rules were the rules and Texaco followed them. It was not Texaco’s job to evaluate the effectiveness of Ecuador’s environmental legislation.
This case brings up an interesting question of whether Texaco’s actions in Ecuador should prompt tighter international laws regarding environmental protection. The short answer to the question is “yes”. While Texaco’s actions were within the bounds of the law, I don’t think they realized the extent of the damage they were causing. When they saw how bad the situation was getting, they should have been proactive in the cleanup efforts irregardless of whether the law mandated them to do so or not. The effect of this action in the public’s eye would have been much more positive, and Texaco share prices would have risen because of the increased level of consumer confidence in the company. They did take the aforementioned action; instead, they have fought almost every attempt to make the clean up their mess. There should be international laws governing environmental pollution so what happened in Ecuador does not happen in other countries because, in the long run, companies will financially benefit from being good environmental citizens.
Opinions & Conclusions
I think Texaco’s actions in the Ecuadorean rainforest area are tragic and short-sighted. Company officials should have realized, years ago, that what it was doing in that part of the world was wrong and harmful to the surrounding regions and its people. There is no excuse for what Texaco did, and they should be made to compensate the effected people’s for the damages they have caused. Company’s often like to play the “we were within the law” card, but being within the law is not always enough! In Texaco’s case, being within the law was short-sighted on their part, and has ended up costing them millions of dollars in court battles. They would have been better off taking responsibility up front for the damages they caused and, in doing so, would have instilled a great sense of confidence in the company which would, in turn, positively affect their share price.
Arnold, D. G. (2004). Case 6 Texaco in the Ecuadorean Amazon. In T. L. Beauchamp &
N. E. Bowie (Eds.), Ethical Theory and Business (pp. 252-254).
New Jersey: Pearson Prentice Hall.