Case Study #20
A case study published by the Carnegie Council on Ethics and International Affairs
Shell in Nigeria: Corporate Social Responsibility and the Ogoni Crisis by Bronwen Manby
Case Study Series Carnegie Council on Ethics and International Affairs
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SHELL IN NIGERIA: CORPORATE SOCIAL RESPONSABILITY AND THE OGONI CRISIS
Bronwen Manby Case Study for the Carnegie Council on Ethics and International Affairs
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On November 10, 1995, Ken Saro-Wiwa, a well-known Nigerian author and spokesperson for the Movement for the Survival of the Ogoni People (MOSOP), was hanged in Port Harcourt, in the heart of the oil-producing region of southeast Nigeria, together with eight other Ogoni activists all involved in protests against the oil industry. The “Ogoni Nine” had been tried and convicted by a special tribunal appointed by the military government, whose procedures blatantly violated international standards of due process. The international outcry was immediate, even from governments not known for an activist stance on human rights. Britain’s Conservative Prime Minister John Major referred to the executions as “judicial murder.” Commonwealth heads of government, whose biannual summit was taking place at the time of the executions, suspended Nigeria from membership of the usually uncontroversial club of states sharing a British colonial heritage. Other sanctions followed from the European Union, United States, and United Nations, including bans on selling weapons to Nigeria and on granting visas to members of the Nigerian government. Activists’ calls for an oil embargo on Nigeria, heavily dependent on its petroleum resources, were, however, resisted. The Saro-Wiwa case brought into the international headlines a debate over the role played by the oil multinationals in Nigeria that had already been raging for several years. Even before the executions, the oil industry had been criticized for its alleged support for successive military governments that had annulled programs of transition to civilian rule and cracked down on protest against the oil industry. Shell in particular, the largest producer in Nigeria, had been targeted for attack by MOSOP, in a campaign that successfully closed down Shell’s production in Ogoniland—a small proportion of its Nigerian total—in 1993. In turn, Shell was blamed both locally and internationally as the government first brutally suppressed protests by MOSOP, and finally tried and executed the core of the organization’s leadership. In a world where transnational corporations often have revenue and capital that dwarfs that of the world’s smaller states, the concept that companies have responsibilities to the community at large other than to make money has gained increasing currency. However, international law, the framework of principles developed over the last few centuries to govern relations between states, is only just beginning to address the behavior of nonstate actors such as transnationals. Consumers, activists, and concerned shareholders have begun to put pressure on the major transnationals to pay more than lip service to ideas of good corporate citizenship, calling for international regulation of corporate activities. Public concern in the developed world over the activities of multinationals in developing countries has focused on two main areas: labor conditions in the apparel industry; and the environmental, development, and human rights consequences of oil and mining operations in poor countries. During the 1990s, Nike, PhillipsVan Heusen, Shell, British Petroleum, Mobil, Rio Tinto Zinc (RTZ), and others all faced public criticism of their activities in developing countries. Human rights and environmental activists alleged that wages and working conditions in the garment industry’s factories in the developing world were unacceptable, and that the companies working in the extractive sector applied lower environmental standards than they did in Europe or North America and were complicit in human rights violations committed by the security forces of the countries where they operated, abuses often committed against those protesting the companies’ own activities. The response of Shell to the attacks on its record in Nigeria forms an interesting study of the way in which 1
one transnational corporation has reacted to the challenge of demands that it take on responsabilities beyond maximizing profit. Initially brushing off the idea that issues of sustainable development and human rights were of any concern to an oil company, Shell went on to become something of a sectoral leader in developing policies of corporate social responsibility. THE OIL INDUSTRY IN NIGERIA Nigeria is the largest oil producer in Africa and the eighth largest in the world. The first discovery of commercial quantities of oil in Nigeria was in 1956; by the end of the century the country produced approximately two million barrels per day of crude oil. The discovery of oil transformed Nigeria’s political economy, and since the 1970s oil has provided approximately 90 percent of foreign-exchange earnings, and 80 percent of federal revenue. Nigeria also has huge reserves of natural gas yet to be fully exploited. As in the case of many other “petro-states,” the windfall income from oil has proved in many ways to be a curse rather than a blessing. Instead of turning Nigeria into one of the most prosperous states on the African continent, its natural resources have enriched a small minority while the vast majority have become increasingly impoverished: with a per capita gross national product of only US$260 a year, Nigeria is one of the poorest countries in the world. At the same time, the struggle among the elite to gain access to the profits of the oil boom was a factor in sustaining the rule of successive military governments that ran Nigeria for all but ten of the years between independance in 1960 and the inauguration of civilian president Olusegub Obasanjo (himself a former military ruler) in May 1999. Under military rule, power and money became ever more concentrated in the hands of fewer and fewer people. Politics became an exercise in orgazined corruption--a corruption perhaps most spectacularly demonstrated around the oil industry itself, where large commissions and percentage cuts contracts enabled individual soldiers and politicians to amass huge fortunes, while the majority sank deeper into poverty. Anger among ordinary Nigerians at this poverty in the midst of wealth has been exacerbated by the lack of cohesive sense of national identity, and by southern resentment over northern control of the army, and hence the federal government and oil revenues, for most of the years since independance. The boundariesof the territory now known as Nigeria were first defined in 1907. Nigeria was brought under the government in 1914 by the amalgamation of two British colonial protectorates. Although the country was in theory ruled as a single unit, in practice the northern and southern parts of the country were administered by the British as distinct entities with little attempt at coordination. Only in 1954, six years before independance, did Nigeria became a true federation with a central government and three consituent components with a large degree of autonomy in all other matters: Northern, Western and Eastern Regions. In each of these three regions, a majority ethnic group constituted about two-thirds of the population, the Hausa-Fulani in the north, the Yoruba in the west, and the Igbo in the east; the remaining third was made up of various minority groups, of which there may be 250 or more in Nigeria. The peoples living in the oil-producing communities of the southeast largely belong to these minority ethnicities, and they speak a diverse range of languages and dialects from at least five major language groups. Since independance the three original regions have been broken down into an increasing number of states, in an attempt to satisfy minority demands for recognition (36 in total as the civilian government took office in 1999). But this fragmentation of goverment has been, paradoxically, paralled by increasing centralization in practice , as individual states have become less and less viable without federal financial support and oil revenues have supplanted all others as the foundation of the Nigerian economy. According to the Nigerian constitution, all mineraks, oil, and gas belong to the Nigerian federal government, which negotiates the terms of oil production with international oil companies. Most exploration and production activities in Nigeria are carried out by European and U.S. oil companies operating joint ventures in which the Nigerian National Petroleum Corporation (NNPC), the state oil company, owns 55 or 60 percent, S
The 1999 constitution provided for a substantial increase of funding to the delta, with a 13 percent allocation of revenue on a derivation basis (up from 2 percent derivation, plus 3 percent for the development of oil-producing communities and 1 percent to respond to ecological problems caused by oil production, under the formula in operation immediately prior to the handover of power). By the end of 1999, the new formula had yet to be applied in practice. 2 Saro-Wiwa’s best-known novel internationally is Sozaboy: A Novel in Rotten English, an account of the Nigerian civil war of 1966 to 1970 written in the voice of a young soldier from the delta. In Nigeria, he was best known as the writer of Basi and Company: A Modern African Folktale, a story of Lagos life that was turned into a serial on Nigerian television. 1
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haps 6,000 square kilometers are mangrove forest, the rest freshwater swamp, dryland forest areas now largely cleared for agriculture, and coastal barrier islands. In this sensitive environment, the oil companies operating in Nigeria maintain that their activities are conducted to the highest environmental standards; but Nigerian environmental laws, though in most respects comparable to their international equivalents, are poorly monitored and enforced. There are surprisingly few good-quality independent scientific data on the overall or longterm effects of hydrocarbon pollution on the delta, yet available evidence does indicate that oil-led development in general has seriously damaged the environment and the livelihood of many of those living in the oil-producing communities, and that poor environmental standards in relation to oil spills, gas flaring, and the construction of roads and canals have contributed to these problems. Compensation for damage caused by the oil industry is inadequate, and—in the absence of a properly functioning court system—there is no effective recourse to an independent arbiter to determine the value of the damaged property. The oil companies state that many spills are caused by sabotage, and, in accordance with Nigerian law, they pay no compensation in such cases; but the determination that sabotage has occurred is largely left in their own hands, increasing the chances that spills caused by corrosion will be misattributed to criminal damage. At the same time, in an area of Nigeria where there is a great need for cultivable and habitable land, land is expropriated for oil production under laws that allow no effective due process protections for landholders and only inadequate compensation for the loss of livelihood of those affected. Although the amount of land used for oil production is small by comparison with the total area of the Niger Delta, the effect on individual landholders can be devastating. Such compensation as is paid seldom reaches those who have suffered most. While the minority ethnic groups living in the oil-producing communities of the Niger Delta have faced the adverse effects of oil extraction, they have in general also failed to gain from the money generated. Despite the vast wealth produced from the oil found under the delta, the region remains poorer than the national average; and though in the north of Nigeria poverty is more extreme, the divisions between rich and poor are more obvious in the areas where gas flares light up the night sky. The “derivation principle” in the federal budget, under which a share of the revenue generated from oil had been paid to the states where the oil was produced, was reduced to insignificant levels, and only partially restored in 1999.1 Although other structures have been created to bring development to the delta, these in practice have largely been a means for enrichment of those administering them rather than a mechanism for poverty alleviation. Nevertheless, oil production itself and oil-based industrial expansion have transformed the local economy, and some in the oil-producing communities have benefited greatly from oil production. Those with full-time employment in the oil industry are paid high wages for skilled work, but they are a well-paid minority surrounded by a mass of un- or under-employed; most oil workers do not come from the oil-producing communities in any event. Contractors to the oil industry, often traditional leaders or those with close links to the administrations of the oil-producing states, also have the potential to make large amounts of money, often increased by the widescale corruption surrounding the award of contracts for construction and other oil industry projects—from which those in the oil companies in charge of the choice of contractor also benefit. Development spending by the oil companies has also brought schools, clinics, and other infrastructure to remote parts of the country that might otherwise be far more marginalized by the Nigerian government; but many of these projects are inappropriate for the needs of the communities where they are sited. Others, because of incompetence or corruption, are never completed or shoddily carried out. In any event, development spending by the oil companies has only reached significant levels since protests began to threaten oil production. Although a minority of politicians, traditional leaders, and contractors have become rich on the spoils of oil, and hence support the oil industry’s activities, the great majority of people from the minority ethnic groups of the oil-producing areas have remained impoverished, sometimes as a direct result of environmental damage 3 Ken Saro-Wiwa, “My Story,” text of statement to the Civil Disturbances Tribunal, reprinted in Ogoni: Trials and Travails (Lagos: Civil Liberties Organisation, 1996), p.42B43. 4 SPDC, Nigeria Brief: The Ogoni Issue (Lagos: SPDC, January 1995). 5 Ken Saro-Wiwa, Genocide in Nigeria: The Ogoni Tragedy (Port Harcourt: Saros, 1992), p. 81. 6 One leading jurist concluded: “The judgement of the Tribunal is not merely wrong, illogical or perverse. It is downright dishonest. The Tribunal consistently advanced arguments which no experienced lawyer could possibly believe to be logical or just. I believe that the Tribunal first decided on its verdicts and then sought for arguments to justify them. No barrel was too deep to be scraped.” Michael Birnbaum Q.C., A Travesty of Law and Justice: An Analysis of the Judgment in the Case of Ken Saro-Wiwa and Others (London: Article 19, December 1995), p. 2.
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caused by oil production; at the same time, the potential benefits of links to the oil industry have exacerbated conflicts within and among the oil-producing communities, and violent clashes between competing interest groups have become increasingly common.
The Ogoni Crisis and Shell In 1990, leaders of the Ogoni ethnic group founded the Movement for the Survival of the Ogoni People, of which Ken Saro-Wiwa, an internationally known author, became the eloquent and effective spokesperson.2 MOSOP, a coalition of pre-existing Ogoni organizations, such as the Federation of Ogoni Women’s Associations, the Conference of Ogoni Traditional Rulers, and the National Union of Ogoni Students, was the first really successful effort to organize people in the oil-producing areas specifically to highlight their grievances in relation to oil production on a national and international stage. As such, the organization directly threatened the foundations of the Nigerian military government, which unleashed a violent and repressive response. The Ogoni are a small ethnic group of about half a million people who mostly live in a compact territory of dry land cleared for farming less than one hour by road from Port Harcourt, the main city in the oil-producing region. SPDC and its joint venture partners have five major fields in Ogoniland dating from the 1960s and 1970s, each with its own flowstation (where gas is separated and flared from the oil collected from different individual wells and the oil pumped on to terminals for export). In 1993 the total production potential from SPDC’s Ogoni fields was roughly 28,000 barrels a day, approximately 3 percent of SPDC’s overall production at that time. Chevron Nigeria Ltd also operated in Ogoniland until 1993, but on a smaller scale. As in other parts of the oil-producing regions, the environment in Ogoniland has been damaged by oil production, though the extent of the damage is subject to dispute and no independent, scientific, and comprehensive study has been carried out. Ken Saro-Wiwa maintained that the environment in Ogoniland had been “completely devastated by three decades of reckless oil exploitation or ecological warfare by Shell.” 3 Shell, on the other hand, stated: “Allegations of environmental devastation in Ogoni, and elsewhere in our operating area, are simply not true.”4 In August 1990, MOSOP adopted an “Ogoni Bill of Rights,” which listed the grievances of the Ogoni people and demanded “political autonomy to participate in the affairs of the Republic as a distinct and separate unit,” including “the right to the control and use of a fair proportion of Ogoni economic resources for Ogoni development.” MOSOP’s political demands were targeted at the Nigerian federal government, but it also accused Shell of “full responsibility for the genocide of the Ogoni.” 5 In October 1990, MOSOP sent the Ogoni Bill of Rights to then–military head of state General Ibrahim Babangida, but received no response. In December 1992, MOSOP sent its demands to Shell, Chevron, and NNPC, together with an ultimatum that they pay back royalties and compensation within 30 days or quit Ogoniland. On January 4, 1993, a date afterwards known as “Ogoni Day,” MOSOP held a mass rally in Ogoniland attended by tens of thousands of people. Mobilization continued during the year, and MOSOP delegations met both with officers representing the military government of General Ibrahim Babangida, and, following the annulment of June 1993 elections that were to have led to the installation of a civilian government, with the interim government of Ernest Shonekan. Saro-Wiwa used the media effectively to spotlight the MOSOP case, and traveled abroad soliciting assistance from the international environmental movement and others. MOSOP’s official policy was one of nonviolent protest, and most demonstrations were disciplined; however, there were also disturbing allegations of harassment of those who did not agree with MOSOP’s views, especially by its youth wing. Shell withdrew its staff from Ogoniland in January 1993 and ceased production at its facilities there in mid-1993, citing intimidation and attacks on its staff. This demonstration of organized political opposition to both government and oil companies provoked a military crackdown in Ogoniland. Ken Saro-Wiwa and other MOSOP leaders were detained several times during 1993. Following a new military coup in November 1993, which placed General Sani Abacha in power, this repression became more severe. The Rivers State Internal Security Task Force, a military unit, was created in Shell International Limited letter to Human Rights Watch, January 13, 1995. Shell International Limited letter to Human Rights Watch, November 5, 1996. 9 “Clear Thinking in Troubled Times,” SPDC Press Release, October 31, 1995. 10 “Statement by Mr Brian Anderson, Managing Director, Shell Petroleum Development Company of Nigeria Limited,” SPDC Press Release, November 8, 1995. 11 “Execution of Ken Saro-Wiwa and His Co-Defendants,” SPDC Press Release, November 14, 1995. 7 8
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January 1994 specifically to deal with the Ogoni crisis. Human rights groups documented detentions, harassment, and extrajudicial executions of MOSOP activists, as well as security force involvement in promoting violent clashes between the Ogoni and neighboring ethnic groups. In May 1994, four prominent Ogoni leaders were brutally murdered by a mob of youths. These men had been associated with a faction of MOSOP that had differed with Saro-Wiwa on the organization’s tactics and strategy and had been regarded by some in MOSOP as government collaborators. Ken Saro-Wiwa and several other Ogoni activists were immediately arrested on charges of murder and incitement to murder, despite a lack of credible evidence to connect them to the deaths. Sixteen members of the MOSOP leadership were put on trial, and nine, including Ken Saro-Wiwa, were eventually convicted and sentenced to death by a special tribunal established for the case, whose procedures blatantly violated international standards of due process. Without the right to an appeal, the Ogoni Nine were executed on November 10, 1995.6 Twenty other former activists in MOSOP, who were detained at various times in 1994 and 1995, were charged with murder in connection with the May 1994 killings and held in Port Harcourt prison, in deteriorating health, until September 1998. Dozens of other Ogonis were held in detention without charge for periods ranging from a few hours or days to several months. Many other leadership figures fled into exile. Nevertheless, protests continued at a lower pitch, and Ogoni activists continued to organize events to coincide with January 4, Ogoni Day, and November 10, the anniversary of the executions. Only with the death of General Abacha in June 1998 was the level of repression in Ogoniland reduced and MOSOP once again able to organize freely. During the height of the Ogoni crisis, MOSOP and other local activists regularly made allegations that Shell colluded with the military, even after the company ceased production in Ogoniland. A document alleged to be a leaked internal government memorandum from May 1994 stated that “ruthless military operations” were needed for oil production to resume, and that the oil companies should be pressured to be contribute toward the cost. The government claimed that this document was a forgery; Shell also raised questions about its authenticity and disassociated itself from the contents. The head of the Rivers State Internal Security Task Force several times publicly claimed to be acting so that Shell’s oil production could resume, complaining to three detained environmental activists that he had been “risking his life and that of his soldiers to protect Shell installations.” Community members reported that the Task Force coerced individuals to sign statements “inviting” Shell to return. Former Ogoni members of the Shell “supernumerary police” (members of the Nigerian police force permanently attached to Shell facilities and paid for by Shell, under a system common to all the oil companies) claimed that they were involved in deliberately creating conflict between different groups of people, and in intimidating and harassing protesters during the height of the MOSOP protests in 1993 and 1994; Ogoni detainees also alleged that they were detained and beaten by Shell police during the same period. Shell denied all such allegations, and distanced itself from statements by government or security officials calling for repressive responses to protests, while stating: “Our Chief Executive in Nigeria has repeatedly—both publicly and privately—expressed our concerns over the violence and heavy handedness both sides on the Ogoni issue have displayed from time to time, and is doing what he can to counsel the authorities not to do anything which will tend to increase the likelihood of violence either to persons or property.”7 Shell also denied any collusion with the authorities. However, Shell later admitted having made direct payments to the Nigerian security forces, on at least one occasion in 1993. Local groups alleged that such payments were—and remain— a routine practice among oil companies in Nigeria. The company made no public protests in relation to individual cases in which security forces carried out human rights violations at Shell facilities. In early 1996, newspaper investigations revealed that Shell had recently been in negotiation for the import “If we’re investing in Nigeria you have the right to know why,” advertisement on behalf of Shell placed in the Guardian (London), November 17, 1995. 13 “Execution of Ken Saro-Wiwa and His Co-Defendants,” SPDC Press Release, November 14, 1995; “Shell Reaffirms Support for Human Rights and Fair Trial,” Shell International Limited Press Release, January 30, 1996. 14 “Fair Trials for the Ogoni 19,” Shell International Limited Press Release, May 17, 1996. 15 Shell Petroleum Development Company of Nigeria Limited, “PAGE [Public Affairs, Government and the Environment] Fact Book 1993,” unpublished internal document (Lagos, 1993), section 6.6; Shell Petroleum Development Company of Nigeria Limited, People and the Environment: Annual Report 1998 (Lagos: SPDC, May 1999), p.5. Other oil companies operating in Nigeria also have community development programs which have similarly increased in value in recent years; Shell’s remains the biggest program. 16 Shell Petroleum Development Company of Nigeria Limited, People and the Environment: Annual Report 1998 (Lagos: SPDC, May 1999), pp.15–16. 17 MOSOP Press Release, November 10, 1998. 12
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of arms for use by the Nigerian police. In response to these allegations, Shell stated that it had in the past imported side arms on behalf of the Nigerian police force, for use by Shell “supernumerary police” against general crime. The last purchase of weapons by Shell was said to be of 107 hand guns, 15 years before. But court papers filed in Lagos in July 1995 revealed that Shell had as late as February 1995 been negotiating for the purchase of weapons for the Nigerian police. Shell acknowledged that it had conducted these negotiations but stated that none of the purchases had been concluded. However, the company stated: “[We] cannot give an undertaking not to provide weapons in the future, as, due to the deteriorating security situation in Nigeria, we may want to see the weapons currently used by the Police who protect Shell people and property upgraded.”8 Shell came under great public pressure, both inside and outside Nigeria, to intervene on behalf of the accused during the trial and following the conviction of the Ogoni Nine.” Initially, Shell stated that it would be “dangerous and wrong” for Shell to “intervene and use its perceived ’influence’ to have the judgement overturned,” stating that “a commercial organisation like Shell cannot and must never interfere with the legal processes of any sovereign state.”9 Shell called on “those who currently advocate public condemnation and pressure . . . to reflect on the possible results of their actions. . . . What is needed from all parties is quiet diplomacy.” 1 0 Nevertheless, as pressure mounted, CAJ Herkströter, the president of the Royal Dutch Petroleum Company, one of the parent companies of the Royal Dutch/Shell group of companies that owns SPDC of Nigeria, sent a personal letter to General Abacha on November 9, 1995, pleading for commutation of the death sentences against Ken Saro-Wiwa and his co-accused on humanitarian grounds. At the same time, Shell explicitly denied that this intervention was a “comment on the proceedings of the tribunal,” restating that “as a multinational company . . . to interfere in such processes, whether political or legal, in any country would be wrong.”1 1 Following the executions of the Ogoni Nine, SPDC announced, on December 15, 1995, that the construction contract for the Nigerian Liquefied Natural Gas (LNG) project, of which Shell is a 25.6 percent shareholder, had been signed—a diplomatic coup for the Nigerian government. In an advertisement placed in many newspapers, Shell defended this decision: Some say we should pull out. And we understand why. But if we do so now, the project will collapse. Maybe forever. So let’s be clear about who we’d be hurting. Not the present Nigerian government, if that’s the intention. . . . The people of the Niger Delta would certainly suffer— the thousands who will work on the project, and thousands more who will benefit in the local economy. . . . Whatever you think of the Nigerian situation today, we know you wouldn’t want us to hurt the Nigerian people. Or jeopardise their future.1 2 Despite such statements, Shell faced mounting pressure from campaigns to boycott its products in Europe and the United States. At the same time, calls for the adoption of an international embargo on Nigerian oil, in order to force the military government to step down, also threatened Shell’s Nigerian operations. Apparently realizing that its image had been damaged by statements asserting that human rights concerns are not for business to get involved with (though its share price never wavered), the company adjusted its public position. In early 1996 the company affirmed on several occasions its commitment to the Universal Declaration of Human Rights, while continuing to state that it could not comment on particular cases. 1 3 In May 1996, in response to concerns about the trial facing 19 (later 20) more Ogonis before the same civil disturbances special tribunal that sentenced Saro-Wiwa, Shell stated: “The Nigerian Government has a duty to investigate the murder of the four Ogoni leaders. And if those investigations lead to the arrest and trial of suspects, then no-one has the right to oppose due legal process. But trials must be fair. And they must be seen to be fair.”1 4 Shell resumed funding of development projects in Ogoniland, including the refurbishment of a hospital and a training scheme for Ogoni youths. Shell’s development spending in Nigeria generally also increased: SPDC’s community development budget was US$330,000 in 1989, but rose to US$43 million by 1998. 1 5 In 1998 the
18 In February 1995, the British government gave Shell a license to dispose of its Brent Spar platform by dumping it in the Atlantic Ocean. Greenpeace, among other environmental groups, led a Europe-wide campaign against this decision, leading to significant consumer boycotts of Shell products in Germany in particular. In June 1995, Shell announced that it had reversed its decision to dump the platform, though not until January 1998 was its final fate decided: to be reused to extend a quay at Stavanger in Norway. Further information available from and . 19 Royal Dutch/Shell Group of Companies, Statement of General Business Principles, 1997.
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company also held the first of a series of planned workshops to discuss environmental and development issues in relation to its Nigerian operations with community representatives and other interested parties. In May 1999, Shell stated that it had engaged in “meetings and consultations . . . with a range of Ogoni groups and organizations” with the objective of building “trust and understanding as a basis for addressing substantive issues of development and environmental management. . . [but that] the company has no plans to resume oil production in Ogoni in the short term.”1 6 Local environmental and human rights groups asserted, however, that in practice there had been no change in Shell’s behavior on the ground, despite public statements of a change of heart. MOSOP remained opposed to the reopening of Shell’s production in Ogoniland, stating on the third anniversary of Ken Saro-Wiwa’s execution that the company should “clean up or clear out” by Ogoni Day, January 4, 2000.1 7 Despite the inauguration of a civilian government in Nigeria on May 29, 1999, direct talks between Shell and MOSOP to resolve the complaints over Shell’s activities had yet to take place by the end of the year.
Shell’s Internal Review Following the international focus on its Nigerian holdings in 1995, and the simultaneous furor over the company’s plans to dispose of its North Sea Brent Spar platform by dumping it in deep ocean, the Royal Dutch/Shell group of companies—of which the ultimate holding companies are the U.K.-based Shell Transport and Trading PLC (40 percent) and the Netherlands-based Royal Dutch Petroleum Company (60 percent)—undertook a major review of its position on issues of human rights and sustainable development, including an extensive internal and external consultation on the content of the group’s Statement of General Business Principles. 1 8 In March 1997 the group adopted a new Statement of General Business Principles, which recognized five “areas of responsibility,” to shareholders, to customers, to employees, to those with whom they do business, and to society. As regards their responsibilities to society, Shell companies are now committed “to conduct business as responsible corporate members of society, to observe the laws of the countries in which they operate, to express support for fundamental human rights in line with the legitimate role of business and to give proper regard to health, safety and the environment consistent with their commitment to contribute to sustainable development.”1 9 This was the first time that the group had included a general commitment to human rights principles or sustainable development in such a document. At the 1997 shareholders meetings of the Dutch and British parent companies of the Royal Dutch/Shell group, the company published the first annual report on the operations of SPDC looking at issues of environmental standards and human rights, and the first group-wide report on health, safety, and the environment. The group’s management also said that it agreed in principle with a policy of external verification of environmental information but rejected this approach for the time being. At the same time Shell took steps to integrate its commitment to “express support for fundamental human rights” into its internal management procedures, requiring directors of Shell group companies to make annual statements to Shell headquarters indicating that they have complied with the requirements of the Statement of General Business Principles, in the same way that they have to make statements of compliance with financial and other standards. Shell also produced a “management primer” on human rights issues for distribution throughout the group. At its 1998 annual shareholders meeting, Shell International published its first social responsibility report, “Profits and Principles—Does There Have to Be a Choice?” It “describes how we, the people, companies and businesses that make up the Royal Dutch/Shell Group, are striving to live up to our responsibilities—financial, social and environmental.” The report examined the company’s performance under its new business principles, and considered the case of Nigeria, repeating many of its previous statements. “Shell’s approach” to the “issues and dilemmas” surrounding human rights was stated as follows: We support the Universal Declaration of Human Rights, and have made specific reference to it in our Business Principles. This is what we have done to ensure we act in the best possible way when confronted with human rights issues.
20 Milton Friedman, “The Social Responsibility of Business Is to Increase Its Profits,” New York Times Magazine, September 13, 1970. This famous article is reprinted in a number of books on business ethics, including, for example, Thomas I. White, B u si n ess E t h ics: A Philosophical Reader (Upper Saddle River, N.J.: Prentice Hall Humanities, 1993).
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• We speak out in defence of human rights when we feel it is justified to do so. • We included specific references to human rights in our Business Principles when they were updated in 1997. This followed widespread consultation with many different interest groups, including those defending human rights. • We engage in discussion on human rights issues when making business decisions. • We have established a regular dialogue with groups which defend human rights. • We are setting up Social Responsibility Management Systems designed to help in the implementation of our Business Principles, and therefore our stated support for human rights. • We are developing awareness training and management procedures to help resolve human rights dilemmas when they arise. This includes a guide to human rights for managers. In its 1999 report, “People, Planet & Profits: An Act of Commitment,” the second on issues surrounding sustainable development, Shell described the “Sustainable Development Management Framework” it had developed since the previous year and indicated that the company was developing a set of “key performance indicators” on these issues to enable stakeholders to compare the relative performance of companies in relation to environmental and social indicators as well as financial ones. None of the other oil companies operating joint ventures with the Nigerian government has engaged in a similar examination of their response to issues surrounding corporate social responsibility generally or human rights issues specifically. Internationally, BP-Amoco—which has itself faced fierce criticism of the security arrangements for its facilities in Colombia, targeted by guerrilla forces fighting against the government—is the only oil company that has engaged with the issues to a similar extent. None of the U.S. companies or other European companies, including U.S.-based Mobil, Chevron, and Texaco, French Elf, and Italian Agip, which operate joint ventures in Nigeria, have begun to think along the same lines. Chevron’s Nigerian subsidiary, which allowed its boats and helicopters to be used by the Nigerian military on at least two occasions in 1998 and 1999 in operations against unarmed protesters or villagers, has begun to face public pressure to ensure that it is not complicit in future human rights violations. As of late 1999, however, the company continued to maintain that it had no responsibility or role in relation to human rights issues. It did, however, announce increased development spending in the communities where it operated in Nigeria.
The Debate on Corporate Social Responsibility In 1970, free-market economist Milton Friedman wrote that “the one and only social responsibility of business” is to increase its profits.2 0 While this view is less prevalent today than it was 30 years ago, many business leaders and economists still take the view that the best way for companies to promote social development in a particular country is simply by increasing the overall level of economic activity through trade and investment. In this view, the manner in which the revenue generated is administered, the environmental standards that are tolerated, or respect for human rights in the country generally are simply irrelevant, and regard for them may even be harmful to the company’s main business—and also, in the long run, to the social development of the country itself. If the same standards are applied to developing countries as to the developed world, they will never catch up: even below-market wages and dangerous conditions of work for third-world employees can be justified as being better than no job at all. Shareholders could justifiably complain if directors paid attention to anything that might impact negatively on the financial bottom line. Increasingly, however, this attitude is changing, as companies have come under pressure from consumers and activists worried about the effects of the globalization of the economy on the poor people of the world, but also as company directors have themselves come to see that wider issues of social development can affect their own operations. The new buzz phrase is the “triple bottom line” of economic, social, and environmental outcomes. A good corporate reputation is increasingly seen as a valuable asset in attracting customers and recruiting employees. Good community relations promoted by properly administered development programs can, just like good labor relations, minimize shut-downs caused by protests about the way the company operates. 21 For example, the U.S. government gave extensive diplomatic backing to the Enron Corporation in the face of substantial criticisms of a major project the energy company was undertaking in India. See The Enron Corporation: Corporate Complicity in Human Rights Violations (New York: Human Rights Watch, 1999).
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Although low wages and low environmental standards can be useful to a company in the short term, activists and some managers and economists argue that a company will make more money in the long term in a country marked by good governance, the rule of law, low levels of corruption, an educated population, and the sort of stable political and economic framework that is only achieved when a government is accountable to its own people. Studies have found no correlation between foreign direct investment in itself and respect for human rights in the developing world; in Nigeria, it seems that the presence of the oil multinationals may rather have strengthened the hold on power of successive military regimes that violated human rights and stole the money supposed to promote development. Companies therefore have an interest in taking positive steps to promote social development and minimize negative environmental effects, as well as to maximize profits. International law, historically focused on relations between states, is also adapting to the new climate. Human rights groups and others have long argued that states have an obligation not only to respect human rights themselves but also to enforce human rights law against private actors, including companies. The increasing power of transnational corporations within the global economy has brought with it a corresponding awareness of the need for an international regime that places direct responsibilities on these companies. When the global resources of a transnational corporation are substantially larger than those of the country where it is operating, the government of that country may not be in a position to enforce international, or even domestic, law against the company at all; especially when the company often receives the diplomatic support of the firstworld state where it has its corporate headquarters.2 1 As far back as 1948, the Universal Declaration of Human Rights, the founding document of international human rights law, called on “every individual and every organ of society” to promote respect for human rights. In the 1970s, at the height of discussion about the establishment of a “new international economic order,” two other documents adopted by international bodies explicitly referred to companies. In 1977 the International Labor Organization (ILO), a tripartite organization with representatives of governments, business, and labor having access to its decision-making organs as members of national delegations, adopted a Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, which committed all parties concerned by the declaration to “respect the Universal Declaration of Human Rights and the corresponding International Covenants adopted by the General Assembly of the United Nations as well as the Constitution of the International Labor Organization and its principles according to which freedom of expression and association are essential to sustained progress.” In 1976 the Organization for Economic Cooperation and Development (OECD) adopted a Declaration and Guidelines on International Investment for Multinational Enterprises, though this document, applicable only among the rich states of the OECD, made no explicit reference to human rights or social responsibility. The U.N. Commission on Transnational Corporations, established in 1974, also developed over many years a draft U.N. Code of Conduct on Transnational Corporations, finally submitted in 1990, which provides that “transnational corporations shall respect human rights and fundamental freedoms in the countries in which they operate.” The code was never formally adopted by the United Nations, because of opposition from rich countries to some of its provisions, especially those relating to treatment of transnationals by host countries. Efforts to place direct responsibilities on transnational corporations at the international level picked up in the late 1990s. The U.N. Commission on Human Rights Subcommission on Prevention of Discrimination and Protection of Minorities decided in 1998 to establish a working group on the relationship between human rights and the activities of transnational corporations. The World Bank, often involved in financing large infrastructure projects in which transnational corporations are involved, set up a working group to develop guidelines on best international practice for investment in the oil sector. Various branches of the U.S. government have taken steps to impose obligations on U.S. businesses operating abroad with respect to human rights, as well as, more commonly, economic objectives. The most significant legislative initiative in this regard was the Comprehensive Anti-Apartheid Act (CAAA) of 1986, since repealed, designed to limit investment in South Africa under the apartheid regime. In 1996 the United States passed legislation, partially modeled on the CAAA, giving the president authority to prohibit new investment by U.S. citizens or companies in Burma (Myanmar) if the Burmese military government physically harmed, rearrested, or exiled opposition leader Aung San Suu Kyi, or committed large-scale oppression against the political opposition. In May 1995, President Clinton announced a set of “model business principles,” a voluntary code of ethics to be used by U.S.-based multinational companies, which supports respect for fundamental human and labor rights, though without sufficient detail to give clear guidance. The Reverend Leon Sullivan, author of the “Sullivan Principles” on U.S. investment in South Africa before the CAAA came into force, put forward a new 10
set of “Global Sullivan Principles” in February 1999; this voluntary code commits those companies that signed it to a set of somewhat vague principles, including “support for universal human rights.” Within the European Union, the European Parliament Committee on Development and Cooperation adopted a report in December 1998 proposing the establishment of an independently monitored E.U. code of conduct for multinationals. Although these initiatives have yet to place legally binding responsibilities on transnational corporations in relation to issues of social responsibility, it seems that it will be only a matter of time before they do so— though resistance can be expected from the business sector. In the meantime, at least some companies are finding it to be in their interests to take their own initiatives to address these questions. While environmental and human rights activists have given a guarded welcome to these efforts, they note that statements of intent are not worth the paper they are written on without strategies to ensure their implementation, and without independent auditing of environmental and human rights performance. No oil company, including Shell, has yet allowed such an audit. Meanwhile, by the end of 1999 overall relations between Shell and the oil-producing communities of the Niger Delta (not only the Ogoni) had, if anything, worsened since the execution of Ken Saro-Wiwa, despite Shell’s efforts to improve community relations, in particular by increasing development spending and professionalizing the management of its development projects. Although much of this deterioration could be attributed to the government’s failure to respond to the demands of the peoples in the delta, rather than to Shell’s own activities, the continuing problems also illustrate the difficulty of putting the fine words of the Statement of General Business Principles into practice.
Discussion
Discussion Issue 1: Do companies have a responsibility to do more than maximize profits and returns to shareholders? If they do, how far does it extend? Does it include the provision of good wages and working conditions for employees; maintenance of the highest environmental standards; development spending in communities where they operate; concern over the manner in which the government to which they pay tax and other revenues spends the money; actions to ensure that their own security guards do not abuse people with whom they come in contact and that those who object nonviolently to their activities are not victimized by the government? Are these responsibilities greater if a company is one of a dominant few in the country where it is operating?
Discussion Issue 2: Do companies have responsibilities in relation to abuses by government security forces in countries where they operate? What if abuses are concentrated in a region where they dominate the local economy? What if they have called for security force protection, for example against protesters at their facilities? If they do have responsibilities, does it extend to making private representations to the government? Public representations? Insisting on screening security officers posted to their facilities to ensure that abusive individuals are not included? Offering legal or other assistance to the victims? Taking steps to avoid or defuse situations where similar abuses could occur in future?
Discussion Issue 3: Should companies withdraw from countries ruled by military dictatorships or where serious human rights violations are systematic and widespread?
Discussion Issue 4: Is it permissible for companies to take advantage of the absence of or failure to enforce local laws on pay and conditions, the environment, compensation, and the like? Or should companies follow best international prac-
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tice in their operations, whatever local laws may be, so that the standards they follow are the same all over the world?
Discussion Issue 5: If a government states that it has the right to set its own priorities and that, in its case, rapid industrial development is more important than environmental protection, should outsiders respect that view? Does the type of government make a difference? If it is a democracy, should the interests of citizens affected by environmental damage outweigh those of the people benefiting from development, or vice versa?
Discussion Issue 6: Should there be an international legal regime governing the rights and responsibilities of transnational corporations? What should it include? Who should monitor and enforce compliance?
Further Reading The Ogoni Crisis and the Niger Delta Human Rights Watch, “The Ogoni Crisis: A Case-Study of Military Repression in Southeastern Nigeria”: A Human Rights Watch Short Report (New York: Human Rights Watch, July 1995). Human Rights Watch, The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities (New York: Human Rights Watch, February 1999), available at . Michael Birnbaum Q.C., Fundamental Rights Denied: Report of the Trial of Ken Saro-Wiwa and Others (London: Article 19, June 1995), and Michael Birnbaum Q.C., A Travesty of Law and Justice: An Analysis of the Judgment in the Case of Ken Saro-Wiwa and Others (London: Article 19, December 1995). Amnesty International, Nigeria: The Ogoni Trials and Detentions (London: Amnesty International, September 1995). Statements and reports from Shell are available on the Shell web sites , and . A summary of a World Bank report on the environment of the Niger Delta is available at .
International Law The U.N. Rio Declaration on the Environment and Development is available at . The OECD Guidelines for Multinational Enterprises are available at . The ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy is available at .
General books and articles on Nigeria, on the oil industry, and on corporate responsibility:
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Tom Forrest, Politics and Economic Development in Nigeria (Boulder, Col.: Westview Press, 1995). Terry Lynn Karl, The Paradox of Plenty: Oil Booms and Petro-States (Berkeley: University of California Press, 1997). Truth and Reconciliation Commission of South Africa Report (Johannesburg: October 1998), Volume Four (Institutional and Special Hearings), chapter two (Business and Labour), available at [a discussion of the role of business in supporting the apartheid government]. Christopher L. Avery, “Business and Human Rights in a Time of Change,” paper presented to the Colloquium on the Liability of Multinational Corporations Under International Law, organized by Erasmus University in Rotterdam, May 1999, available at . Barbara A. Frey, “The Legal and Ethical Responsibilities of Transnational Corporations in the Protection of International Human Rights,” Minnesota Journal of Global Trade 6, (1997), p.153.
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Author’s Biography Bronwen Manby is a researcher in the Africa Division of Human Rights Watch, where she is responsible for the work of the organization on Nigeria and South Africa, as well as advocacy work on other African countries. She is the author of the Human Rights Watch book-length report “The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities.” She has a B.A. in Modern History from Oxford University, and an M.A. in International Affairs from Columbia University.
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