British Petroleum: Business and Corporations Law

Introduction

This paper is based on the topic of business and corporate law. In the paper, I have discussed three academic concepts that I discovered from the assigned chapters for the course. The concepts include corporate structure (from the forms of business organizations chapter), corporate ethics (from the ethics and the law chapter), and dispute resolution (from the courts, sources of law, and dispute resolution chapter). The concepts are based on the experience I gained from reading about the organization called British Petroleum (BP). The thesis statement of the paper, therefore, is “Rigid corporate structure leads to conflicts between management and employees as well as to poor adherence to corporate ethics”

Discussion

Corporate Structure

Corporate structure refers to how an organization is structured, how power and authority to make decisions are distributed along with the structure, and who should take what instructions from whom and when. In organizational structures that are highly rigid, the corporate culture is likely to be poor in terms of employees’ commitment and motivation while in less rigid structures; the culture is likely to be strong in terms of employees’ commitment and motivation.

The rigidity of corporate structure also applies to the ethical climate of organizations. Many organizations usually have some elements of bureaucratic structure, which is characterized by rigidity in practices and strict adherence to rules and regulations. This leaves the employees with little or no room to express their opinions in regard to any practice within the organizations where they work.

In terms of organizational structure, BP is vertically structured with the CEO at the top. The structure is very rigid in that decisions are made on the top-down approach. Employees are not allowed to be innovative or to make minor decisions that pertain to their work. The case of BP therefore illustrates that corporate chiefs are the most influential when it comes to making decisions touching on ethical conduct for corporations. The main reason behind this is that ethical decisions are intertwined with financial costs which many corporations wish to avoid. The senior managers of BP only think of using the funds meant for environmental safety as capital. This is not only unethical but also paints a bad image of the company to the outside world.

My view of BP’s approach to corporate ethics is that the approach is not one of the best because it does not encourage employee’ creativity nor does it give the employees an opportunity to give their views and suggestions regarding their safety as well as the safety of the environment. This is very detrimental because the employees do not feel like part of the organization, which leads to lowered motivation and commitment.

Corporate Ethics

This refers to the code of conduct by corporations. The ethical climate of organizations constitutes adherence to principles of ethical behavior and conduct. It also constitutes how an organization relates to its internal and external environments. The ethical climate, therefore, touches on things like working environment, the safety of employees, care and conservation of the environment and practices which promote the interests of consumers like adhering to the rules of manufacturing of products and putting the correct ingredients on labels of products (Harrison, 2007).

The ethical conduct of corporations is also intertwined with what is referred to as corporate social responsibility. This concept is generally used to refer to the relationship between businesses and their environment. All businesses operate in social, political, economic, and natural environments. The concept, therefore, takes into account how businesses interact with these environments, either positively or negatively. The topic of corporate social responsibility can be broken down into four main components namely the ethical, economic, philanthropic, and legal components (Aras & Crowther, 2010).

The ethical component of corporate social responsibility comprises the requirements or expectations of any business by the society. Such requirements or expectations include things like doing what is just, fair, and right, using the law as the basis of organizational behavior, avoidance of questionable practices, and doing business in a manner that is above the minimum requirements.

The nature of the ethical component of corporate social responsibility appears to be more deterministic than it is a matter of choice, that is, the ethical conduct of corporates touches on decisions which the corporates must make on how to relate with their employees, clients, and the general business environment.

BP is a London-based oil company dealing with the exploration, refinery, production, distribution, and marketing of oil and gas products. With its operations in over 80 countries worldwide, BP is the third-largest oil and gas company with over 22,000 oil service stations worldwide and daily oil production of over 3 billion barrels. One of the main challenges facing the oil corporation is oil spillage.

Many of BP’s critics have attributed the occasional oil spills to the culture of profit maximization. This culture affects the operations of the organization because it seems to be inclined towards utilitarianism, a concept which connotes the maximization of profits in total disregard to any negative effects to the environment and the customers of the organization.

For instance, the organization has been accused of discouraging workers from reporting safety and environmental problems. This information was based on a 2004 report of the Vinson and Elkins law firm, which warned that employees who reported any environmentally-related problems faced severe disciplinary actions. This is an ethical issue because the employees are discouraged from doing what is right for their good and for the good of others. If they are allowed to report for example a leaking or a corroded pipe, actions could be taken to repair it, which would prevent any accident. If they do not report, the end result would be an accident which would affect them and others as well. The utilitarian consideration in this ethical issue is that the company seems to be focused mainly on the maximization of profits regardless of any consequences which may accompany the maximization. In business ethics, utilitarianism is about considering several courses of action, considering the costs involved, and choosing the course of action which produces maximum good for the maximum number of people, irrespective of the negative effects of the maximization of the good, in this case, profits.

My reaction to the ethical conduct of BP is that the company needs to reconsider its utilitarian approach to business ethics. The reason is that this approach is not only selfish but it’s also dangerous since it has the potential of ruining the reputation of the company in the eyes of its customers. The negligence which leads to oil spills may make the company lose many customers which can lead to reduced profit margins.

Dispute Resolution

In the corporate sector, a dispute refers to a disagreement between two or more parties over issues that are of interest to them. Disputes usually arise between employees on one side and management or employers on the other. Disputes may be as a result of poor remuneration, poor working conditions, promotion and demotions, transfers, leaves among other issues. In most cases, employees are allowed to join trade unions. A trade union is defined as a group of workers who come together so as to push for their interests. Trade unions are therefore primarily concerned with the welfare of workers and especially improving the employer-employee relationships. Workers join trade unions either by choice or by default. The membership in workers’ unions gives workers a psychological sense of security from intimidation and abuse of their rights by their employers (Banfield & Kay, 2008).

Trade unions are sometimes associated with disputes and confrontations between employers and employees. Trade unions are therefore a nobble idea with noble intentions of instilling discipline and respect between employers and employees. Trade unions are not only concerned with the welfare of the workers but also with the rights of the employers and what they should expect from their employees.

Trade unions aim at giving workers what is referred to as collective bargaining, which is a social process aimed at turning disagreements into agreements in a decent manner. Collective bargaining aims at establishing through negotiations and discussions agreed on rules and decisions on matters of mutual concern to unions and employees and the criteria for regulating the terms of employment (Bratton & Gold, 2007).

When disputes arise in the corporate sector, the management and the employees or trade unions may use various channels of dispute resolution. One of them is mediation, which is defined as the process whereby a third neutral party helps a trade union or employees and the management to reach an agreement. The third-party, also known as a mediator takes an active but neutral role in suggesting alternatives for the parties to consider. He or she assists the parties to identify the causes and the extent of their differences. The process may be initiated by one or both parties. However, whatever decision is reached through the mediator is binding.

Another dispute resolution mechanism is arbitration, which is the process by which a dispute is resolved by an impartial third party after hearing all the facts pertaining to the issues and then recommending a solution. It is normally used to settle disagreements arising from the administration of the labor contract known as the Collective Bargaining Agreement (CBA). The provisions governing the arbitration process are contained out in the CBA and they generally describe the issues that may be arbitrated on. Examples of such issues for arbitration include dismissals and disciplinary actions, health and welfare benefits, holidays and holiday pay, promotions and transfers, wages, and working hours.

In my organization of choice BP, workers in some countries are rarely given the opportunity to belong to unions. However, the practice is in the decline following the increased campaign on employees’ rights protection. My reaction to BP’s practice is that it should realize that employees are its most essential assets and therefore allowing them to belong to unions may motivate them to work even better.

Conclusion

A rigid corporate structure leads to conflicts between management and employees as well as to poor adherence to corporate ethics. The case of BP is a good example to illustrate how the top management makes decisions without consulting the junior employees. Due to this rigidity, the organization has incurred huge losses due to oil spills. If the organization could rethink its utilitarian approach to corporate ethics, its problems with employees and other stakeholders would be a thing of the past.

References

Aras, G & Crowther, D. (2010). A handbook of corporate governance and social responsibility corporate social responsibility series. Farnham GU9 7PT: Gower Publishing, Ltd.

Banfield, P., & Kay, R.(2008). Introduction to Human Resource Management. Oxford: Oxford University Press.

Bratton, J., & Gold, J.(2007). Human Resource Management: Theory and Practice.(4th Ed.). Palgrave: Macmillan.

Harrison, E. (2007). Estate planning under the Bush tax cuts. National Tax Journal, 60(3).371-384.