Business Ethics - BHP’s Deadly Dam Collapse - Case Study Assessment Answer

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Question : Business Ethics Case Study

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Business Ethics Case Study Assignment

Assignment Task

Please explore uploaded links on BHP’s deadly dam collapse on November 2015, in Bento Rodrigues, Brazil.

Case Study 1 – Questions

  1. Briefly explain the ethical problem(s) in the case study.
  2. Also explain how do you face this ethical problem as a shareholder of the BHP Billiton? Compare and contrast utilitarian, deontological, and virtue ethics and discuss their relevance in explaining your situation.
  3. Identify, explain and justify an ethical perspective that you think would help provide a solution to the problem – you may want to use a combination of ethical perspectives.

You must answer these question either as an essay or as a report.

Hints:

  • Do some additional research on the detail of the case
  • Use journal articles to support your arguments
  • You might want to combine two perspectives – but take care to make sure they are compatible. You must make some good arguments that are supported by the literature.

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Solution:

BHP Billiton operates a mining company in the region of Bento Rodrigues in Brazil, and the mine has a dam that holds waste products from the mining activity. In November 2015, the dam collapsed causing massive environmental destruction, loss of human lives, property and livelihoods. The company had decided to increase production at the mine to increase profits as a result of the weak global iron ore prices but did so without placing proper environmental safeguards at the dam. The following is an ethical look at the negligent actions of the company.

Introduction

Business ethics looks and questions whether individual business decisions, activities or practices are acceptable. It comprises the organisational principles, values, and norms that originate from individuals, corporate statements, or from the laws that primarily guide individual and group behaviour in the business world. Any objective of a profit driven organisation is to earn and maximise profit, but the profit should not come at the expense of ethical behaviour.

The following is an ethical look at a case study of BHP Billiton Brazilian Dam collapse in November 2015. It explains the ethical problems present; facing the moral problem as a shareholder of the company and a comparison of the utilitarian, deontological and virtue ethics and discussing their relevance to the case study; finally, identifying and explaining an ethical perspective that would provide a solution to the problem.

Ethical issues in the case study

BHP Billiton through its jointly owned Brazilian Mining Company Samarco operated an iron ore mining company in the town of Bento Rodrigues. In November 2015, the dam that was constructed to hold mining waste from its plants burst to cause an environmental disaster to the town which resulted in the death of 19 people, damage to property, and environmental degradation (Knight, Hichens and Tozer 2016). There are various ethical problems that are evident in this scenario. For example:

Environmental pollution

BHP Billiton ignored Brazilian environmental regulations because of its mining activities which led to environmental pollution, water pollution and environmental destruction. BHP Billiton chose to focus on maximising profit from the production of iron ore as opposed to environmental protection. The company ramped up its mining activities at the mining site to increase its overall price of the product and increase its profits. Due to its profit-driven ambitions and increased mining operations of the company, it failed to maintain properly and repair the dam before the increase. Unfortunately, this resulted in increasing the waste products released to the dam increasing the pressure causing its collapse polluting the environment with toxic waste (Maiden 2016). The executives of the mining company opted to grow profits without proper consideration to environmental integrity – an apparent ethical problem. A consequence of the dam collapse was the destruction and the damage of towns downstream, the pollution of river waters and the killing of fish and wildlife. An ethical business organisation cares and protects the environment in which it operates.

Violations of health and safety regulations

Through the company’s mining activities and its failure to adequately maintain the dam, the company led to the violation of health and safety regulations. The mining activities of the company led to the rivers having arsenic levels that were between ten and twenty times the permitted levels in Brazil. Such a lack of environmental pollution also speaks of health and safety violations. Furthermore, the resultant deluge of toxic waste on the towns and villages which led to the death of nineteen people and the death of an unborn child was a direct consequence of the health and safety violation (Knight, Hichens and Tozer 2016). Thus, it was a failure by BHP Billiton to ensure the health and safety regulation by focusing instead on profit maximising without proper due process and putting necessary safeguards in place. The negligence of its duties to health and safety of the community led to the dam collapse which resulted in the environmental destruction that submerged Bento Rodrigues in wastes which placed the lives of the villages in danger and ultimately destroyed the environment

Endangering the lives of the community

The mining company endangered the lives of the community with an unethical and negligent mining activities. It is reported that the dam collapse disaster led to the death of nineteen people and others injured (Maiden 2016). An activity of an ethical organisation promotes the welfare and the protection of the community, clients, employees and any interested stakeholder (Shaw, et al. 2013). BHP Billiton failed to maintain its ethical duty through its need to maximise profits as a result of the falling iron ore prices because it not only led to the death of the people but resulted in the destruction of their livelihood, damaged to property and houses, destroyed their way of life and the economic life.

Other ethical issues facing BHP Billiton is its lack of disclosure concerning the weakness of the dam which could have protected the communities from harm. Its lack of transparency and honesty in its lack of disclosure to the community and the government placed the lives of the people and the environment in harm. An ethical business maintains and upholds its obligations of full disclosure to the community and the government (Driver 2013).

Facing the ethical problem as a BHP Billiton shareholder

As a shareholder of the Company facing the ethical problems of BHP Billiton represents a challenge that involves redeeming its image, regaining public trust and creating safe mining practices that bring back public confidence. Firstly, as a shareholder, we should repair the environmental damage that resulted in wanton destruction. Repairing the environmental damage will involve environmental clean-up activities to all the areas damaged, the river and trying to replenish the fish and wildlife lost.

Secondly, offering compensation to the lives lost, damage to property, loss of income and the disruption of life. Even though such an action will be expensive and will reduce company’s bottom line, it will show we care about the welfare of the affected people and their quick return to normal life. Thirdly, instituting safe mining practices in all our operations to ensure that the damage was a one off and establishing environmental compliance department that enforces safe mining prices, environmental consciousness, and sustainable development. Such a measure will reclaim image and increase public confidence in the company.

Finally, we should invest in the community of those affected by building schools, health facilities and other corporate socially responsibility measures. Such an action will show that we care about the wellbeing of the community through giving back, and it will also reclaim public confidence.

Utilitarian, deontological and virtue ethics

Utilitarian Ethics

Utilitarian ethics is concerned with the ethics for the greater good. At the core of this ethical view is whether actions are morally right or wrong is dependent on their consequences or effects (Shaw, et al. 2013). Utilitarians believe the primary purpose of morality is to make life better by increasing the number of positive things in the world and decreasing the number of negative things. Fundamentally, an action that is being assessed, we need to opt for the one that will produce the best result – the option that maximises the utility (greatest number of good). In an organisation context, decision makers need to judge what is best not only for themselves, but also what is best for groups (Williams 2012). Thus, according to this ethical perspective, the rightness of an action as related to the outcome and the consequences that it produces, and it is interested in the greatest good for the greatest number (Driver 2013).

BHP is a utilitarian organisation because it creates profits and it pays its employees’ wages and salaries. In BHP Billiton’s actions in Bento Rodrigues, the company chose to sacrifice its environmental policy with its negligent policies for the greater good which is increasing revenue and maximising profits (Knight, Hichens and Tozer 2016). Furthermore, the company also opted to ignore or sacrifice the welfare of the environment and people for higher profits. Going forward, the Company should aim to sacrifice the company’s revenues and profits for the sake of the community, environment and redeeming its image. Therefore, the company should sacrifice its organisational objective for the greater public good.

Deontological ethics

Deontological ethics considers the duty of the organisation. It judges the morality of an action based on the action’s adherence to a rule (Bazerman and Gino 2012). To make correct moral decisions, we have to understand our moral duties and the correct rules that exist to regulate those duties. In following our duties, we are behaving morally, and the inverse is also true. The ethical perspective stresses the reasons why certain actions are performed and simply following the correct moral rules is often not sufficient. Instead, we have to have the correct motivation as well. Nevertheless, a correct motivation or intention alone is never a justification for any action in this ethical perspective (Driver 2013). The duties and obligations must be objectively and absolutely determined. It is based upon absolutes.

In BHP Billiton’s case, it can be seen that the actions violated various standards and regulations of the Brazilian government. For example, the action resulted from ramping up the production of iron ore mining without proper maintenance of the waste dam. This was after numerous warning by its structural engineer to repair the dam and to ensure it is maintained (Knight, Hichens and Tozer 2016). The company was negligent in its operations which can be said that it did not adhere to the mining rules. Furthermore, the company neglected its duty in environmental protections, protection of human life and using safe practices.

Virtue ethics

Virtue ethics emphasises the role of a character in morality rather than either doing one’s duty or acting in order bring about a good consequence. In any situation, a person is supposed to act as a virtuous person act in the same situation (Driver 2013). This is because a virtuous person is seen as someone who has ideal character. The traits derive from some natural internal tendencies that need to be nurtured. However, once they are established, they become stable. For example, a virtuous individual is someone who is kind across all situations over a lifetime because that is the individual’s character and not because they want to maximise utility or gain some favour.

Virtue ethics considers whether the actions represent the kind of organisation that it wants to be and whether the actions represent the institution's reputations and the visions of what it hopes to achieve (Dowling and Moran 2012). The organisation undertaking the mining effort wants to be associated with an ethical duty that guarantees work and human rights right, respecting the well-being of communities and regions where it operates and promoting sustainable development, and allowing sustainable environmental operations. However, the actions of the organisation went against its vision, mandate and objective because of the disaster. Therefore, the ultimate actions of the organisation contradicted its virtues.

Ethical Perspective that provides a solution to the problem

The ethical dilemma faced by BHP Billiton in its operations can be solved by applying a variety of ethical perspectives. For example, going forward the company needs to reclaim its image, redeem public confidence and trust and be a responsible corporate citizen respecting the wellbeing, welfare and the livelihood of the community. Therefore, it needs to apply the ethical utilitarian perspective as a means of providing a solution. The ethical utilitarian perspective sees the purpose of morality as making life better by increasing the number of good things around us and decreasing the number of bad things (Driver 2013). Any action can be justified in this perspective if it brings a positive contribution to human beings. The view in producing a solution to BHP Billiton’s ethical dilemma will only consider ‘doing what produces the best consequences’ through answering the ethical perspective three questions. These questions are what things are good and bad; whose good we should aim to maximise; and whether the actions, policies are made right or wrong by their actual consequences or the foreseeable consequences.

Consequently, in determining what good things are and what are bad, the company should aim to do those things that will increase the positive outcomes to the community (Williams 2012). Such actions will include environmental reclamation, cleaning the environment, compensation of those affected through loss of life, livelihood and damage to property, and finally undertaking corporate social responsibility efforts through community investments in schools, and hospitals among others. The second question is whose good the company should maximise. The company needs to forego its corporate goal of profit maximisation by implementing measures that increase the positive outcome of the villages, and downstream towns that were adversely affected. The people of these towns need to have the greater good. Finally, the actions of the organisation will be made right because of the greater good it has achieved for the community and in reclaiming its shattered image (Dowling and Moran 2012). Strategically, it is a win-win strategy for the company, even though, at the moment it will invest heavily to compensate and recover the environment.

Alternatively, the company may wish to apply the deontological perspective because it is the duty of the company to protect the environment, apply sustainable mining practices, compensate the villagers, and be a socially responsible citizen. The company may apply this ethical perspective as its ethical duty to the community, the government and the environment.

Conclusion

Ethics in business has been gaining notoriety because of the increase in business being seen a good corporate citizen. Ethics in business has numerous benefits to the organisation, for example, it attracts new clients to the organisations which will boost the sales and profits of the company. Ethics in business entails businesses making decisions that are morally right, justifiable and lead to an overall good. The above case study has looked at the ethical dilemma of BHP Billiton following the collapse and eventual environmental disaster brought on by its dam in Bento Rodrigues in Brazil. The paper has looked at the ethical problems it faces such as environmental destruction, endangering human life and failing to implement environmental safeguards. It has also assessed the issue from three ethical perspectives namely the deontological, virtue and utilitarian perspectives while explaining the problem of the company. Finally, the paper has provided a solution based on the utilitarian perspective aiming to create the greatest good for the greatest number of people, mainly the community of the villages.

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