Weller International Business School

WELLER INTERNATIONAL BUSINESS SCHOOL

MR. JOSIN JOY CROSS CULTURAL MANAGEMENT ACADEMIC YEAR 2008– 2009 DATE: 26 /05/09 WELLER MBA10

WELLER INTERNATIONAL BUSINESS SCHOOL PROFESSOR: BARAK

BEN -A VINOAM

T UESDAY , MAY 26, 2009

The given is a research report about the western oil companies performing operations in Nigeria for oil discovery, exploring, mining, retrieving and refining and finally which raises the violation of ethical principles for the sake of organizational goals.

History Royal Dutch is Netherlands based Oil Company founded in 1890 by Aeilko Jans Zijlker after the discovery of oil and continue its operations by specializing in oil discovery, refining, production operations. Shell is a UK based company specializes in transport, storage (warehouses) and marketing are certain operations of the shell. In 1907 the two different companies were merged with the stake of 60 and 40 percent with single name called SHELL Corporation. The merge has the basic and hidden reasons number one the threat of under capitalization of royal Dutch by standard oil corporation due to that reason royal Dutch corporation makes the decision for collaboration with shell. After the collaboration the two organizations emerged as the market leaders because of good production, refining, transport, and marketing strategies, which plays vital roles. During the World War II Shell Corporation supplied the oil to Adolf Hitler on credit. At the organizational level two companies has there own chairman and operating officers which answers to committee of managing directors which is consist of people from both the companies to make the final decisions. After the merge it has became one of the most profitable and fast growing companies. After the World War II the combined companies emerged as the market leaders by expanding its operations to different nations for the discovery of oil. Global warming Oil companies choose to burn the gas instead of reinjecting the gas into the ground or selling it, saying this is the most economic option. The Nigerian government wants flaring to be stopped by 2010, as it wastes energy and contributes to global warming. Shell is committed to ending its flaring by 2008, but is backsliding on this commitment due to expense, says Friends of the Earth.

In 1959 the two companies merged as the single company and at all levels of management because of the Mckinsey & company’s consultants suggestion. The purpose is to make more

fast decisions with autonomy and speed. By 1991 the revenues has reached to $103 billion, which resembles one of the fast moving organization with effective management. In 1994 SHELL corporation ranked third place by financial times survey of Europe under most respected companies. Shell Corporation is operating in more than 130 countries with 101,000 employees. Working efficiently through out the century shell has reached at the peak position where it reflects as the most successful company in generating revenues and expanding the business to other countries. But at the beginning of mid 90’s there is steep decrease in revenues by7.9%, which makes the top management to overview the organizational structure and design strategies to overcome the slight decrease in revenues. But in 1995 shell found itself in the producing environmental hazards, which puts oil on fire of slow revenues. Basically when the oil extracted or refine from the crude form it produces huge hazardous pesticides waste, which is very dangerous for the human life. The pesticides are aldrin, dieldrin, endrin which altogether may considered as BRENT SPAR for its disposal company had faced long time problems with the environmental groups for the organizational practices.

Highly flammable

About 10,000 barrels of oil were spilt in the nine states that make up the Niger Delta last year. A leaking oil head (left) spews oil and gas in Ogoniland. The oil heated by the sun becomes highly flammable. In 1995 shell found itself in the environmental controversy for the disposal of the Brent spar in the north sea and unethical utilization of the Nigeria natural resources after the long time of experiments and research geologists has gave the permission to sank the waste in the north sea’s deep waters. The Green peace organization had worked behind the protest and action against the shell for producing environmental hazards. When the information came to public it results in the hatred, protest and boycott of the shell products and reflects in the decrease of revenues to 50%. SHELL IN NIGERIA

Shell entered Nigeria in 1937 for the discovery of oil pools with British petroleum with the equal share. After the hard work of twenty years in 1958 it discovered in the Niger Delta in the south of Nigeria. The discovery oil gave a hint to proceed for the searching team to find more pools in the specified location. Burst pipe Local people are compelled to cope with oil spill after oil spill. A rusting network of pipes and a slow response from oil companies to leaks are blamed. A high pressure oil pipeline ruptured in December last year in Rukpokwu, an hour's drive from Shell's headquarters in Port Harcourt.

In 1973 shell entered in the three-way joint venture with British petroleum and government with each holding 35% stake in the profits and expenses. For the Nigerian government it is a lucrative opportunity for the development of the nation after the long colonisation of the British Empire. And for British petroleum it is an opportunity for reducing the cost of investment in search of oil in Nigeria. But shell corporation emerged as SPDC stands for Shell petroleum development company Nigeria limited which has gave a new image to shell corporation throughout the world and for shell it is another mile stone of success which has been achieved through hardworking dedication and perfect planning. In 1995 NNPC stands for Nigeria National Petroleum Corporation owns 55% of the SPDC and shell own 30% and rest ELF and AGIP owns 10 and 5 percent each. On the other hand after the decolonisation of Nigeria government thought that it was a cash call means earning of wealth for the nation through the natural resources, which will improve the stability. In oil 1991 oil prices were calculated approx $12 to $23. Three way joint venture by BP and shell where NNPC has 35 percent of stake which is varied by the time means at the beginning of the contract NNPC holds 35% varied to 80% since 1974 to 1988. The oil explored through the operations each party is responsible for its own stake of oil. The government is charging the royalties and direct taxation of the oil revenues of the participating oil companies. During the 90’s Nigerian oil revenues at the highest in the

world compare to other governments. At that time Shell is not the only company, which are exploring the oil in Nigeria. The others are U.S. oil firm’s chevron, Mobil and Texaco in the late 60’s and the early 70’s. There are certain companies still in operation in 1995.

Forest destroyed The Rukpokwu fires took six weeks to extinguish and destroyed much farmland and a local forest.

Beside the other oil companies are exploring the oil resources and the government had it own role and share. SPDC is the major among all are operating in Nigeria because from the figures of operations means 60% of the ventures are controlled by shell employing nearly 5000 people nationals and 270 non Nigerians. The shocking figures i.e. producing 930,000 barrels per day from nearly 94 oil fields. Shell has developed its network of distribution supply and retrieving with pipeline of 6200 kilometre. If we focus on shell’s net income it comes around $235 million from SPDC.

NIGERIA Nigeria is an African country located in the north of the continent. The country has very rich natural resources. It consists of more than 240 ethnic groups i.e. tribal groups. The information indicates that each group id different from the other in traditions. According to a survey in 1995 there were 100 million population. And 50 percent of population is growing at the rate of 3 percent, which means that the growth is very slow, which is important for the nation’s development. Nigeria consist of 50 percent Muslims and 40 percent of Christians. In 1960 after the decolonisation of England analyst thought that this country will be major player in oil production because already many companies are existing in the country who are producing the oil and have the evidence of more oil in the fields which attract many companies to start there operations.

According to a survey during the mid of 90’s Nigeria considered as the 10th largest oil producer in the world and 7th largest oil exporter. Beside they have many other resources for occupation like agriculture many of the tribes main occupation is agriculture, producers of palm oil and exporter of yam. Most of the people are uneducated means after the independence of the nation the governments main intension is to increase the wealth of nation through natural resources i.e. petrol. Due to that many of the occupations has been neglected and results in the export of the food product mainly the non oil sectors such agriculture has been affected because lack of literacy rate to adopt and change according to requirement. Results in the improvement of poverty, illiteracy, unemployment, crime and corruption. In 1996 Nigeria is considered as the most corrupt and dangerous place to travel. As the discovery of high quality of oil in Nigeria brings the wealth for the nation producing $10 billion in that year as the revenues for the government and overall accounted 90 percent of the country’s foreign exchange. NIGERIAN GOVERNMENT

The Nigeria government has entered in the three-way joint venture considering the equal share of profits with others. But when there is oil price shock in 1972-73 the government has significantly increase its share in the venture and which results in the evolution of the Nigerian economy through the oil revenues but the government is unable to manage the oil revenues in the development of nation and the development of other non oil resources for the development of the nation’s standard in terms of living and literacy. Government paid less attention to second major occupation of the nation i.e. agriculture results in major exporter of the foodstuff for the survival. And finally Nigeria becomes the net importer of the food products reflecting on the Nigerian economy, which one has become; the super developing currency of the world unfortunately faces the problem importing the food products improper utilization of the revenues. While the currency value has increase at the same time other export sectors prices also increased implementing more dependency oil resource.

A fighter in the Movement for the Emancipation of the Niger Delta at the militia's creek camp in the Niger Delta in 2008. Nigeria's main rebel group said it destroyed several major oil pipelines in southern Nigeria early on Monday in response to a military offensive. http://news.yahoo.com/nphotos/Movementfor-the-Emancipation-of-the-NigerDelta/photo//090525/photos_wl_afp/f1a6218d88 b247757210d5c026267155//s:/afp/20090525/wl_ afp/nigeriaoilunrest

At the national level government is unable to control the differences among the states basically there are 4 states at the beginning of independence but it splits in 30 and by 1999 it has became 36. As we have discussed above there are more than 240 ethnic groups this was the basic reason for the split of states. The central government tried to control and maintains the stability over the economy but every states demanding for its own infrastructure, universities and other basic amenities. As a result focus on the oil leaves Nigerian GDP backward comparing to world oil prices and finally the country totally depending on the oil revenues. Which has improved the rate of crime and unemployment. A survey conducted in 1996 claims that Nigeria is most corrupt country in the world. Results in the deployment of the foreign forces for the security purposes. Shell has hired a German based security agency. Foreign companies are obliged to hire the special forces and companies are the sole responsible for the training equipments and has the authority to dismiss the official they called as supernumerary police force which is totally operating on the companies funds. POLITICAL SITUTION Nigeria is colonized in 1861 and gave the designation of Crown Colony of Lagos by British the geographical boundaries has been designed in 1914 and defined in 1995. Nigeria is the part of the common wealth. After the independence differences in the ethnic groups erupted and results into the riots and that had taken shape of civil war and end s with the assignation of the prime minister. Military took the whole control of the nation and the civil war which last till 1970’s. The improper balance of the political infrastructure results in the lack of economic development in the

nation. An Ibo general considered, as rightful candidate for the presidency but this was the beginning of the second revolt and another military government. Many of the small tribe groups in Niger delta joined the Ibo and this led to serious civil war ended with dead of more than one million. But the fact is Nigeria is led by military for most of the duration headed by Hausa Fulani’s directly or indirectly.

Dirty water Nigeria earns some $10bn every year from oil but Niger Delta residents remain mired in poverty. Less than 20% of the region is accessible by good roads, even in the dry season, and hospitals and schools are seriously underfunded. Poor sanitation and pollution means that access to safe drinking water is a major problem facing local communities.

Again another General Sani Abacha seized the power in 1993 and destroy the democratic form of government system and minimize the powers of the state government and jailed the winner of 1993 presidential election Moshood Abiola. The total system of the government has been disturbed and were trying to overcome from the problems. Externally Nigeria is considered as the wealth for foreign without any system a land without rules and regulation to extract the oil from the fields on the negligible price because already the system is corrupt. NIGER DELTA The Ogoni is a tribe located in Niger delta the group is consist of 20 other minority group consist of 500,000 population surrounding 404 square kilometre of land in the Niger delta The tribes mainly dependent on the farming and fishing. There are very few jobs and hospitals and illiteracy rate is high.

Living on oil

The production of oil, discovered in the Niger Delta 40 years ago, is having a devastating effect on Nigeria's largest wetland region.

Niger delta is considered as the home of the oil exploration because most of the oil pools were located in this region. The main occupation of the tribal people is production of palm oil. After the colonization in the eighteenth century there were business of slaves which has taken the spark and leaders of the tribes were neglected. And most of the palm oil business was captured by the English government but the existence of the leaders as the middleman for the transaction this leader look for more autonomy and power. But in the beginning of the nineteenth century British expeditionary forces face tough resistance from these tribes. Earlier ogoni land is considered as the middle kingdom and leader wants to restore their importance in the country after the discovery of oil in early nineteenth century. OGONI and SHELL By 1995 the ogoni land is house for more than 100 oil wells where 96 belongs to shell and some to chevron. Beside of these figures there is petrochemical plant, fertilizer plant and two refineries belongs to Nigerian government. According to the figures the output of the ogoni land d has fallen to 1.5% compare to total production in Nigeria. The oil produced from ogoni generated $5.2 billion dollars as revenues and out this shell has received only 4% major player is the government who received 79% of the revenues and other oil companies has received 2% and operating cost has calculated as 15% of $5.2 billion. A percentage of the oil revenues should be distributed among the ogoni region the rules has been established and decided 1.5% of the revenues generated by the oil of ogoni should be given for the development of the infrastructure and other development projects the scheme came into act by 1983. But pressure from the top management of the companies to increase the percentage of the amount from 1.5 to 3% worked and came to act. At the government level new organization were established to monitor the funds utilization. The results were

disgusting incomplete projects and the situation of poverty is worsen year after year the government claims that the local corruption and poor investments. The local government claims to the central government for insufficient supply of money. At the public level people thinking that they are not retrieving the benefits from the oil explored from their region. Principally the three-way joint venture has invested in various community development programs such as agriculture, health and education in delta. Under agricultural development providing free seeds, fertilizers, cutting and cultivation equipments, training for the agriculture, for health the venture has developed hospitals, small clinics to fight against the children diseases provides supplement salaries to doctors and nurses, provide development funds schools, colleges and universities with learning scholarships, salaries to teachers and other staffs. According to sources in late 80’s shell and venture invested $4 million in the community development, which is further increased to $13 million in the early 90’s and further increased to $ 22 million by 1995. But the amount is insufficient due to that shell begins the mission to search NGO non-governmental organizations for help in terms of funds for the community development.

ECOLOGICAL DISASTER In may 1995 shell found itself in the controversies of producing environmental pollution. Most of the agencies claim that shell is producing hazardous pesticides like Aldrin, dieldrin, Endrin. And the matter of disposal of Brent spar in North Sea taken the shape of protest against the shell company. Due to that reason shell started looking for the safest way to sink the disposal in deep waters. Green peace organization plays the vital role in terms of protesting against the company decision to sink the Brent spar in North Sea. The company faces the anger in Germany and the sales has been dropped to 50%. But these situation doesn’t remain for the long time shell company manage to overcome from the crisis. Beside Royal Dutch /Shell and others are operating in Nigeria from more than a half century and the equipment that the companies are using are outdated and produce huge sound and pollution in the air mean while the exploration of the oil it produces dangerous gases which are very hazardous and harmful for the human health. Basically in Niger delta or in Nigeria there are three basic problems 1. Oil spills 2. Drainage of contaminated water into the waterways 3. Flaring of natural gases. The problems indicates the improper infrastructure and careless practices results into this type of situation which makes the remark on the company’s image. After the completion of 100years in Nigeria shell company utilize the same infrastructure for the retrieval of oil. They doesn’t focus on measurements of flaring of natural gas.

Environmentalist claims that the oil spill and oil water separation causes the dangerous problems this process destroyed the natural life of the Niger delta means almost the plants life destroyed fishing is affected due to oil spills and drainage of contaminated water. Furthermore environmentalist claims that oil companies are the leading contributor to global warming. According to a journalist who travelled Nigeria during 1995 claims that the flaring of natural and burning of that gas produces huge heat and moreover destroying the nature results in the form of acid rains. According to a survey during 1975-84 figures of 111 oil spills. Moreover the native people ogoni’s land surviving to overcome from the problems that shell and other companies are created for the benefit of the organizational goals. According to journalist of Harper’s magazine travelled to Nigeria claims that huge pipes are snaked in village, fields, yards of yam tree people are climbing over to reach there destination and the spills are destroying the cultivated crops. When the program aired Shell Company faces the environmental legislation, prior to 1992 Nigeria doesn’t have any law of environmental misconduct and many of the evidences were misplaced. And finally Nigeria introduce legislation according to US and European standards. According to the American Institute Of Petroleum most of the oil infrastructure will the validity of at least 15 years. And after that SPDC claims the it was working on $100 million a year series of projects to met environmental standards much of its infrastructure is of late 70’s and the company doesn’t want to invest in building with heavy amount while the revenues of the oil reduced due to that reason they doesn’t want any investment. From the survey it came out that most of the flaring gas could be safe by re injecting it in the oil reservoir. If the flaring controlled properly than it has the capability to provide energy to a nation like Belgium. But the lack of proper equipments and investors these project was neglected for long time. In 1995 Nigerian government agree to co invest $3.8 billion with shell, elf and Agip for LPG liquefied Petroleum gas. Through the estimation and calculation shows that the project will take four years and will not show any profit till 2007.

MOSOP MOVEMENT FOR SURVIVAL OF PEOPLE The purpose of the MOSOP is to gain rights of the people of ogoni against the multinational companies. The movement has been started by ogoni’s chief son ken saro wiwa. He was born in 1941 educated in missionary school and completed his further education by winning a scholarship to the university of Ibdan near Lagos. During the civil war of Bifran he served as the administrator in the late 1960’s. Saro-wiwa also served as the administrator of the Bonny oil depot. In 1968 he started operating as regional educational commissioner. After that he started his own business of real estate and grocery. Later he founded a publishing company and was a successful writer. He wrote number of novels and autobiography of Bifran war. He produces a TV series how to get rich quick and fast which has viewer ship of 30 million people.

http://www.foe.co.uk/imgs/ken_saro_wiwa.jpg

Saro-Wiwa joined the MOSOP for the drafting of Ogoni’s bill of rights. According to MOSOP there $100 billion dollar oil has explored from the ogoni land and in return they have didn’t receive anything for their native place. As per MOSOP the federal government of Nigeria has misconduct with the people of ogoni and the right that they should have to receive they didn’t due to that reason MOSOP made a bill of rights directed to central government claiming that the Ogoni land problems. According to MOSOP they are demanding for Ogoni representation in the central government in any institution whatsoever. They also have the demand for basic amenities for proper electricity, pipeline, drainage system, schools, hospitals, universities, small clinics, no new job opportunities in public or private sector companies. SPDC has only 88 people who belongs to Ogoni. The bill also demands for autonomy for the ogoni as a unit within the central government.

The protest has taken its shape by 1993 when 300,000 people came on the road to protest against the multi national companies. SARO WIWA with talent of speech and eventually representing the truth SARO WIWA emerged as the leading leader of the MOSOP and he has received international prominence after leading the peaceful protest against the multibillion companies. In November 1992 MOSOP sends a letter to SPDC demanding $6 billion dollar as

the damage cause to Ogani region and $4 billion dollar as the share of the revenues from the oil has been explored. The protest continues by April it has taken the shape of violence and SPDC declares the No-go Area because of danger to local field workers. Further improving the protest Saro-Wiwa and the group started protestation, demonstrations and moving further stopped the construction of trunk line in Ogoni. On may 21 1994 police stopped Saro Wiwa on his way to a reception honour to number of ogoni elected leaders. And finally in a car accident the founder of MOSOP , Saro Wiwa where died. Most of the private rumours tells that they had been killed.

But overall there should be a international monitoring system to control the multinational companies before exploiting the human ethics for the sake of personal or organizational goals Nigeria is an example of poor countries but very rich with resource lack of proper education most of the companies exploit the principle by corruption which leads to unemployment and crime.

HOFSTEDE GRAPHS OF CULTURAL MANAGEMENT

Nigeria

UK

Comparison by Hofstede Five dimensions theory Shell is UK based organization and performing operations in Nigeria due to that hofstede theory of five dimensions is used to understand people. The five dimensions are Comparing very first point PDI of Nigeria is very high compare to UK because the power is unequally distributed at organizational or the family level all the societies are treated as to each other unequal. Individualism is very high in UK as compare to Nigeria due to lack of resources availability of fund and education which increase unemployment, hunger and crime. Masculinity is less compare to England. The level of uncertainty avoidance is very high in Nigeria because people are very curious about the availability of chances to get success or to survive are very less in other word opportunities are very high in UK compare to Nigeria. Under long term orientation, people are very dependable on the government and other non profit organization operation to meet the basic needs of the survival, whereas in UK people are more independent and highly educated.

SOURCES REQIRED READING GIVEN CASE www.bbc.co.uk www.nigeria.com http://www.geert-hofstede.com/hofstede_west_africa.shtml http://www.globalissues.org/article/86/nigeria-and-oil http://allafrica.com/stories/200012200004.html http://news.bbc.co.uk/1/shared/spl/hi/picture_gallery/04/africa_polluting_nigeria/html/1.stm