Exxon-Mobil is the world’s largest privately owned multi-national oil and gas company (Skjaerseth 2003). For companies as large as ExxonMobil, which possess considerable capital resources and are able to exert considerable power and influence, society is increasingly demanding that they behave in a socially responsible manner (Diara, Alilo, and McGuire 2004).
There is a growing expectation that companies will adopt a business approach that illustrates responsibility to society above and beyond the economic function and legal performance of the firm (Gibbs 2009). This expectation can be understood as an implicit social contract. One of the underlying concepts of social responsibility is stakeholder management (Davidson 2006).
This involves balancing the claims of stakeholders against the decisions a corporation makes (Maloney 2009). The consequences for companies that are judged as not taking into consideration the expectations and needs of stakeholders are varied, but may include reputational damage and loss of market share (Baker n.d.; Smith 2007) as consumers switch their brand preferences on the basis of ethical considerations (Gueterbock 2004).
This paper will review the social performance of ExxonMobil in terms of the way the corporation manages their relationships with two groups of stakeholders: the communities in which ExxonMobil conducts its business operations and the corporation’s shareholders. While it is recognised that there are other stakeholders in ExxonMobil’s operations these are beyond the scope of the current paper.
The most commonly accepted objective for business activities in the finance and accounting fields is to maximise profit and shareholder wealth (Cooper 2004). In doing so, a critical concern is whether or not the company has behaved in a socially acceptable manner particularly when dealing with stakeholder groups directly impacted by their business operations. Diara et al.
(2004) observes that ExxonMobil has been proactive in stakeholder management and has a long tradition of addressing community challenges and opportunities through partnering with non-profit organisations around the world in communities within which they operate. For instance, in African countries in which ExxonMobil operate they have partnered with the Academy for Educational Development to work on the NetMark project (Diara et al. 2004), a need which has been identified by local community stakeholders.
The aim of NetMark is “to reduce the impact of malaria in sub-Saharan Africa through the increased use and sustainable supply of insecticide-treated mosquito nets (ITNs), and insecticide treatment kits for nets” (p. 70 Diara et al. 2004). In particular, the partnership has worked to facilitate ITN access to pregnant women through a discount voucher system that is distributed by health agents delivering antenatal care (Diara et al. 2004).
The pilot intervention in Zambia achieved a 75% redemption rate, and it is believed that through distribution efforts (built on existing commercial networks including ExxonMobil gas stations), there are opportunities to reach more than 250,000 pregnant women in Zambia, Ghana and Nigeria (Diara et al. 2004). The benefits from this initiative have included an improved corporate image (for both partners), additional resources for public health interventions and improved client loyalty (Diara et al. 2004). This demonstrates that through developing a relationship with local community stakeholders they have upheld their social contract to support the communities within which they make a profit at little cost to their shareholders.
Similarly, in Nigeria, ExxonMobil’s efforts have focussed on the improvement to “host” communities. These efforts have been concentrated on areas of health care, road construction, electricity and water supply and have included the construction and renovation of health centres and the donation of medical equipment and medicines (Idemudia 2009). ExxonMobil has also supported education through the construction of classroom blocks, the donation of science equipment and the provision of financial incentives for teachers that agree to teach in riverine areas (ExxonMobil 2002 and 2003 as cited in Idemudia 2009).
Other activities have included the provision of training in areas such as business entrepreneurship, management skills and record keeping, plus practical training on farming techniques and livestock care (MPNCN as cited in Idemudia 2009). From this perspective, it can be seen that the corporation has endeavoured to improve “host” communities in a number of instances. Such examples provide evidence that ExxonMobil’s efforts have been aimed at increasing (local) community capacity and sustainability. By engaging with communities in this way ExxonMobil are able to present themselves as part of the community.
As a consequence there is less likelihood of negative outcomes for the company’s operations including concerns for worker safety and damage to worksites (Idemudia 2009). Thus, the benefits for the corporation are wide reaching but include an improvement to corporate reputation through improved relationships with local stakeholders as they come to accept and identify with the corporation. In addition, to ExxonMobil’s credit, they show a concern for the community beyond that of wealth generation for shareholders.
While ExxonMobil’s engagement with communities that are proximal to their operations can often be described as proactive and positive, this has not always been the case. Following the Exxon Valdez Oil Spill (EVOS) which occurred in Prince William Sound, Alaska on March 24, 1989 (Graham 2003), ExxonMobil appears to have shown a greater concern for shareholders and minimising expenses as opposed to realising positive outcomes for community stakeholders (e.g. commercial fishermen and recreational users) impacted by the disaster. In the legal aftermath of the spill ExxonMobil had little choice in making settlement with the state and federal governments.
This included a civil settlement of US$900 million to restore the natural resources, criminal restitution of US$100 million, and a criminal plea agreement of US$25 million (Cleveland 2008). This settlement was necessary in order to continue business in the USA and therefore to continue to generate profit for shareholders. However, through successive appeals and oral arguments in various US courts, the corporation has managed to considerably delay individual and class action settlements with a number of community stakeholders.
These include stakeholders across a wide range of community interests: commercial fishermen, Alaska Native corporations, land owners, area businesses, municipalities, tenderers, cannery workers, processors, recreational users among others (Hirsch 1996). Through their access to extensive legal resources, the corporation has been able to significantly diminish the monetary awards for actual and punitive damages to these parties (Egelko 2006), while recovering US$250 million for cleanup expenses and acquiring US$161.1 million in interest through insurance claims
This outcome has ensured that the financial resources that were not lost or indisposed in this incident were available for use by the corporation in other business operations that would fulfil shareholder expectations. However, the delay in access to monetary awards for community stakeholders has served to exasperate the emotional, financial and ecological crises they have had to face (Hirsch 1996; McCammon 2003; Rodebaugh 2009). The loss of recreational sports, fisheries and reduced tourism, plus a decrease in the “existence value” of the Prince William Sound region, were significant to the communities involved with the livelihood of many stakeholders suffering as a result (Exxon Valdez Oil Spill Trustee Council 1990).
As shown above, the approach utilised by ExxonMobil in reaction to the EVOS is quite different from its usual dealings with “host” communities and needs to be understood in the context of the spill which was unplanned with unintended consequences. The evidence above demonstrates that the course of action taken by the corporation was to pursue the minimisation of expenses. As the EVOS was an accident with little if any opportunity for ExxonMobil to realise profit as an outcome, limiting environmental and social expenses can be considered a legitimate financial objective (The Economist March 15, 2003).
From this perspective, ExxonMobil’s actions in dealing with the multitude of individual and class action lawsuits against them can be understood if we look at it from a shareholders needs point of view. To compensate all the stakeholders that were impacted by the EVOS would not necessarily be a financially reasonable outcome and would not serve shareholder expectations of decreasing costs when profit was unattainable. In this circumstance, it would be better for the company to fulfil their obligations to those stakeholders that matter the most.
By immediately addressing the compensation payments of the state and federal governments, ExxonMobil was able to facilitate their continued future operations in this community. Of course by doing so, the corporation acknowledged the power and legitimacy of these bodies to directly impact their business activities and consequently their profit. At the same time, however, they also negated the legitimacy of the claims being forwarded by the less salient stakeholders in the “host” communities. The message that this approach has sent is arguably that less powerful stakeholders are also less important.
In using the waterways of Alaska to transport oil, ExxonMobil was subject to an implicit social contract: that there should be no harm inflicted on the environment (including the human communities) (Diaro et al. 2004).This ‘contract’ would logically include an understanding that in the event of a crisis, the corporation would be ready to effectively remedy harmful outcomes to the communities affected both at the time of the incident and into the future.
From this perspective, the issue of whether less powerful stakeholders are also of less concern is rhetorical. The company has a moral obligation to fulfil the needs of these communities irrespective of the financial expectations of shareholders (internal stakeholders) or others that may facilitate future profit.
This obligation is based on the premise that the profit upon which the corporation maintains itself is facilitated by the natural and social resources through which ExxonMobil’s operations are conducted. In other words, the communities which host these operations represent a salient (external) stakeholder body that needs to be acknowledged as they serve to legitimise the corporation’s activities both presently and for the future.
ExxonMobil’s response to community stakeholders clearly favours the corporation’s shareholders, a powerful internal stakeholder group. While the company has not been entirely negligent in the broader community, and has done some work towards addressing the crisis (e.g. settlement with state and federal governments), the question remains as to whether they have done this to an acceptable level for the “host” stakeholders. From the perspective of the advocacy groups and other external stakeholders whose livelihoods were irrevocably affected, the answer is no (ExxonExposed n.d.).
In contrast, when examining ExxonMobil’s relationship with community stakeholders in non-reactive situations, the evidence presented demonstrates that they have been able to adequately meet the needs of these groups of (external) community stakeholders, and uphold their social contract whilst maintaining a healthy balance sheet for shareholders. With respect to the comparisons drawn in the current paper, the positive and proactive relationships that ExxonMobil has developed with some community stakeholders have been overshadowed by the way in which they responded to the EVOS.
It is by critical and urgent episodes like the EVOS that society ultimately determines whether or not an organisation has performed in a responsible manner. In light of this, the current discussion has found that although ExxonMobil have consistently met the needs of their (internal) shareholders, their social performance in terms of the way they manage their relationships with (external) communities in times of crisis is wanting.
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