ISSUES
: Business and Trade
23
Chapter 2: Corporate responsibility
Chapter
Corporate responsibility
2
Corporate scandals and how (not) to
handle them
After a disastrous week for VW, we look back at 30 years of business disasters and their
cost in lives, money and reputations.
By David Hellier
Bhopal
Estimatessuggest up to25,000people
died and more than 550,000 people
were injured, some seriously and
permanently, after a gas leak incident
at the Union Carbide pesticide plant in
Bhopal, India, in 1984.
Dow Chemical bought Union Carbide
in 2001 and maintains that it now
has no responsibility for the Bhopal
victims, following a $470 million
settlement paid by Union Carbide in
1989. Campaigning groups protested
against Dow Chemical’s sponsorship
of the 2012 London Olympics because
of the Bhopal issue.
Rana Plaza factory
A factory building outside Dhaka,
Bangladesh, collapsed in 2013,
killing more than 1,000 workers in the
deadliest disaster in the history of the
garment industry.
Agovernmentreportfoundwidespread
fault for the disaster, blaming the
local mayor, the building’s owner
and the bosses of the five garment
manufacturers using the building.
The ILO and campaign groups raised
$30 million from retailers including
Primark, Bonmarché and Benetton,
all of which sourced garments from
the factories in the building, to help
injured workers and the families of
those who died.
Libor and other bank
scandals
Big banks have paid out a total of
$260 billion in fines, compensation
and lawsuits since
the 2007–8 financial
crisis, according to
recent research from
US investment bank
Morgan Stanley.
Former Barclays boss
Bob Diamond was one
of the first executive
heads to roll, after the
bank agreed in 2012 to
pay a £290 million fine
for trying to manipulate
Libor, the rate at which
banks lend to each
other. Former UBS and
Citigroup trader Tom
Hayes was recently
sentenced to 14 years
for conspiring to manipulate interest
rates.
Enron and Arthur Andersen
The world’s most infamous
accounting scandal was the
bankruptcy of Enron in 2001,
subsequently the subject of screen
and stage portrayals. The energy
trader’s unfathomable accounts
had obscured huge debts stashed
off its balance sheet. Once these
were revealed, the company
imploded. The pensions and jobs
of thousands of employees, and
$74 billion of shareholder funds
were wiped out. Enron’s auditor,
Arthur Andersen, also collapsed. In
his book
Connect,
former BP boss
Lord Browne says the fate of Enron,
which set great store by its corporate
social responsibility programme,
“demonstrates in dramatic fashion
just how irrelevant CSR (corporate
social responsibility) really is”.
Exxon Valdez
In 1989 the
Exxon Valdez
oil tanker
ran aground off the coast of Alaska,
releasing up to 750,000 barrels of
crude oil into the sea. Five years
later, a federal judge in Alaska
ordered Exxon to pay $4.5 billion in
damages for the spill – this was at
the time the largest such penalty in
US history. Around 250,000 birds
and other animals died as a result
of the spill.
BP Texas City and
Deepwater Horizon
BP has suffered two massive
disasters in a relatively short time.
In 2005, 15 workers were killed and
more than 170 others were injured
