International Business Issues and Ethics
Exxon Mobil Corp. is a multinational gas and oil company whose headquarters are in Texas United states (Tillerson, 2012). Royal Dutch Shell plc. Incorporation was done in U.K but headquartered in Netherlands and is an Anglo-Dutch multinational gas and oil company (Shell Global, 2012). These two companies share similar challenges that relate to both legal and ethical issues. The large economic contribution that these companies have to a lot of national economies make the continuity of future operations very essential in the global economy. Despite their instrumental role that they play in mobility and economic transformation the companies face very profound challenges that relate to political, social, ethical and legal environment. However, due to their varying magnitude of operations, and geographical locations the companies face some different challenges which are determined by the local laws, the surrounding communities that are affected by their operations and the ethical standards expectation in different social culture environments. These challenges are normally in terms of gaining trust for the governments and the overall community (Sarbu, 2014).
The political environment plays a huge role in the operations of these companies. The increased competition for available national resources has made these companies to engage in exploration and production in very remote, harsh and hostile places where even the most logical task may be very costly and difficult. These companies thus face the political risks that refers to the stability of the government systems that grant them the long-term leases to operate in their oil fields (EY, 2015). The discovery of gas and oil in many countries end up being a curse or a blessing for the people, the strength of institutions and the stability of these countries. Most of the world countries where these companies operate, and where most oil and gas is found in large quantities are featured in the geopolitical risk index of Fraser’s Institute. In countries like Nigeria where Shell Company has its operations, the threat of political unrest due to militia terrorist groups makes the government unable to retain national stability. This makes the host governments less empowered in the regulation of gas and oil industry which result to higher production revenue and export taxes and a lot of strict employment and operating laws (EY, 2015). Revenue obtain from oil and gas production contribute to development of a few powerful elites and corruption in institutions that siphon the funds from public projects that would have helped in promoting well-being and political stability of these countries. This lead to decreased trust between the community and these state institution that include the judiciary , police and elected officials, which contributes towards the political instability (Sarbu, 2014).
These companies earn profit from sovereign gas and oil resources which brings about the possibilities of causing resentment among the local community. This goes hand in hand with the ethical codes that these firms are expected to observe while carrying out their drilling and production activities. The challenge arises where the firms and their managers fail to provide effective communication with their workers who may feel the wages and salaries they is not sufficient which may result to further unrest. Given that social factors refers to the companies association with the surrounding people in the community, any constraint on them and other personal factors can lead to further resentment. People’s decisions can be made out of influence of prejudice and revenge or the sense of greed among the business institutions. These can serve as catalysts for social and political unrest especially where the oil companies fail to show an ethical attitude in their operations (Sarbu, 2014). The issue of environment pollution and lack of social responsibility may present a huge challenge to these companies. The presence of these companies in many countries across the globe means that they are faced with many challenges that related to environmental degradation through oil spillage and emission of carbon gases. This put the companies in a situation where they can face a lot of legal pressure aimed at forcing the company to provide compensation for environmental degradation. This also has the possible effect of making the social environment to be unconducive due to resistance form the public. The community can be drawn protests and separatist movements due to their longing to have a say in something. A good example is the eruption of unrest in Nigeria, promoted by the Movement for the Emancipation of Niger Delta (MEND) that has targeted gas and oil facilities belonging to western companies. The represented a big challenge to Shell Company that has its operations in that country. People are thus an important factor in the social challenges that face these companies and their reaction can have a big effect on the companies’ business operations (EY, 2015).
These companies however face different level of political, social and ethical challenges. Shell Company in Nigeria has thus faced a lot of resentment from the community due to effects of its operations on the environment due to the above mentioned oil spills. This has seen the company experience a lot of vandalism, theft and attack on its oil infrastructure resulting to big losses Shell (Shell Global, 2012). While ExxonMobil in Chad has little challenges on environment issues, it faces challenges various legal requirements put in place by the government that is aimed at ensuring the larger share of the oil profits goes to the infrastructural development in the country (Hicks, 2015). The bigger challenge then is to conform to environmental social challenge standard, and ethical transparency in ensuring that revenues from oil are channelled to public projects (Tillerson, 2012). While Shell in Nigeria faces huge political turmoil in the Niger Delta, the Exxon Mobil firm experiences fair political stability after the country managed to quell rebel uprising. The above mentioned challenges thus affect the two countries in different measure in accordance to the community in which their operations are based and the political and legal structures established by the host governments. Ethical challenges arise when the management and employees of these companies disregard the policies and rules that are in place in respective countries, which puts them at loggerhead with the communities and the governments. These challenges have made the companies to result to predefined risk and challenge frameworks to help them develop plans for their investment and decision making. The frame works include geopolitics that confirm that the challenges are huge consideration for the companies in decision making (EY, 2015).
Conclusion and recommendations
Shell Company and Exxon Mobil face similar challenges, but these challenges are differentiated by their magnitude and effects they have in respective host countries. They approach those challenges in different ways depending on the possible risks they present to their decision making and operations. Given that these challenges have elements that are either predictable or unpredictable, the companies should adopt sophisticated but flexible strategies and prepare to change quickly any course they take when faced with uncertain future occurrences.
References
Sarbu, B. (2014).Ownership and Control of Oil: Explaining Policy Choices across Producing Countries. 68-73.
EY, (2015).Navigating geopolitics in oil and gas Business solutions for a complex world.5-20. Retrieved from. http://www.ey.com/Publication/vwLUAssets/EY-navigating-geopolitics-in-oil-andp-gas/$FILE/EY-navigating-geopolitics-in-oil-andp-gas.pdf
Shell Global, (2012).Global legal challenges facing the petro-chemical industry. Retrieved from: http://www.shell.com/media/speeches-and-articles/2012/global-legal-challenges.html
Hicks, C. (2015).Is Chad managing to beat the 'oil curse'? .retrieved from: https://www.theguardian.com/global-development/2015/apr/14/chad-oil-curse-africa-challenge-negative-impact
Tillerson, R. (2012). Our greatest strength is developing the technology and techniques that maximize value while increasing safety, efficiency, and environmental performance.” EXXON MOBIL CORPORATION. 10-44.Retrieved from: http://cdn.exxonmobil.com/~/media/Global/Files/Corporate-Citizenship-Report/news_pub_ccr2011.pdf
