Problems California’s Union Oil Company is facing

Thomas Bard and Lyman Stewart established the oil and gas corporation Union Oil Company of California (Unocal) in 1890. El Segundo is where the company is headquartered in the US. Its activities center on petroleum exploration and marketing. Unocal manages both local and international projects. This business stopped operating independently in 2005 and became a wholly owned subsidiary of the Chevron Corporations. Its oil and gas-related operations continued as part of this firm, albeit under the name Chevron Company.

Because a competent team of management has been monitoring every transaction involving the company facilities since its founding in 1890, the company has been able to prosper in its operations. Professional leaders head various departments making up the company, due to whom it has been successful irrespective of common challenges. The company statement is “Improving People’s lives wherever we work” (Nicolian, 2015). This has always been the uniting and the propelling spirit taking priority of all the policies and works done by the company. Everything done is basically for the service in favor of the humankind. Ethics and codes of conduct guiding the company workers as well as the leaders provide a protection of human rights regardless of the cost. Ethical conduct in this connection ensures respect for fellow humankind as well as the environment.

The stakeholders making up the entire company include the employees, consumers, customers, business competitors, the local community as well as the immediate environment (Maldonado & Vera 2014). The local community is surrounding mostly the original headquarters of the company and form part of the important stakeholders that the company stands and hold reputation from. When the company structures were first put up in Los Angeles, most of the members of that community were forced to relocate to accommodate the project. When the oil fields in Los Angeles were depleted the company chose to invest in its energy projects in other parts of the world outside the United States. Doing this the company creates a larger family of stakeholders. First, Yadana natural gas field in Burma is one of the resources now owned by the Unocal. The workers, customers, and the members of the community of Yadana form another stakeholder family of the Union Oil Company of California.

Just like any other organization, Unocal has been experiencing ups and downs in its operations but has been to triumph all along. Challenges are inevitable, and whenever they occur, the management is charged and expected to take an initiative to identify them and then address accordingly. Professionalism and experience play a significant role in handling challenges affecting the routine as well as new operations of the organization. This paper, therefore, aims at looking into one of the most felt challenges that once affected Union Oil Company of California. It also gives detailed information on how the challenge was overcome and possible alternative approaches that would still have worked to address the issue at hand. Otherwise, it is the role of the management in an organization of handle all problematic issues affecting the organization either directly or indirectly.

The original objective of Unocal was to develop the oil fields located in Los Angeles by operating on all dimensions of oil business such extracting, refining, distributing marketing, and selling the oil products (Buchanan, 2014). With time, the oil fields got depleted in the region and to remain in business the company chose to move to other parts of the world outside the United States. In 1992, the company was lucky to secure gas resource grounds in Burma, a place known as Yadana. The company joined the already working investors in Yadana fields and owned up to 28.26% of the facility shares (Buchanan, 2014). This was about 13% more than what the Burmese government owned in the project. Thailand’s Exploration and Production Public Company was part of the stakeholders holding up to 25.5% of the project shares.

The challenge came in as the dilemma to the Unocal leaders as to whether it was rightful for the company to in this pipeline project after having been accused as a company of being complicit in abusing the Burmese military’s human rights. Of cause, there were benefits associated with investing in this project. There was relatively cheap and educated labor readily available in the natural resource area. Burma also has geographic location significances since it is an entry point to the international gas markets especially in India, China, and the enterprising countries in Southeastern parts of Asia. To Burma, the project was beneficial in the sense that it was supposed to raise the low economic status of the country typified by high rates of inflation and mortality as well as reduced expectancy of life. Despite the associated benefits, the natural gas project being an investment by Unocal to the Burmese government it was going to violate the rights of the Burmese natives, especially those living in Karen, the natural gas-rich zones (Buchanan, 2014). Local citizens were forced to vacate the place to give room for the establishment of the pipeline facility. The same people were also forced by the Burmese government to take the offer of slave labor to the project. If Unocal had not invested in this project, Burma, as well as Thailand, would not have had the opportunity to develop and use a pure natural gas which if clean regarding the environment. Likewise, Unocal would have lost the oversea opportunity to expand its market and maximize profits.

The controversial challenge is now the inflicted injuries befalling the Burmese natives inhabiting Karen. Injuries range from the loss of ancestral land to the slave labor the government is subjecting them to as a result of the presence of Unocal in the region. From the knowledge and principles of ethics still existing as far as Unocal and its operations are concerned, it is wrong to create an opportunity for the government of a particular country to oppress its citizens for the sake of economic gain. The Burmese government, in this case, is using military force to continually abuse the rights of its citizens by forcing them to work for the Unocal project. The company officials were also conversant with the report from the Burmese Human Rights practice that thousands of the Burmese civilians were forced by military to offer the labor while working under very harsh conditions in the Unocal project. The challenge was then how the company would balance between the suffering civilians of Burma and their flourishing profits. The leadership team of the company understood the human rights and were aware of the problems facing the natives. Unraveling this challenge to reach a compromise became a great problem for a very long time.

Since the early 1990s, Unocal has been making efforts to access the situation the region and find out possible solutions to the menace. In October 1991, around the company picked a consulting firm review international report. The report documented the details about the manner in which the national army was torturing the Burmese civilians. In 1995 subsequently, the company sent another consultant to investigate on the social situation in Yadana area. The feedback still talked about the continued mistreatment and violations of human rights.

The issue of human rights and how to safeguard them, in this case, became a challenge that the Unocal leadership had to look into to solve the problem. Having received a full information in 1995 about the conditions on the ground, the management team of the Unocal began embarking on the strategic plans to contain the situation. The company accepted the fact that they were responsible for the injuries inflicted on the Burmese natives, but then, it was a real dilemma. If human rights were to be revived concerning respect then the company had to stop the project and it also meant the growing economy of Burma would go back to the status characterized by poverty, high inflation rates, and almost stagnant economic growth.

The management came up with some suggestions concerning the problem while maintaining the ongoing gas resource business. Out of myriads of ideas, two of them became the center of interest. The first one was to engage the Burmese government asking them to stop forced labor through the military in the pipeline facility. The other was the meant which involved putting sanctions on the government of Burma. The second suggestion came from the U.S. Department of Foreign Affairs.

In 1994, the US Congress debated on the issue, and on 30th of April the same year, a vote was moved to have Burma as one of the countries appearing on the international list of states considered to be outlawed. The company borrowed the idea, and in 1996, the U.S President Bill Clinton banned the Burmese government officials from having their way into the United States (Santos, et al. 2014). This was an isolation technique making Burmese government stop the military expeditions in the country. These sanctions went on for a while, and the reports that Unocal received from the field were that the country would soon be isolated from not only the United States but also from other world countries which would include the immediate neighbor Thailand to break ties with it. The Asian countries that were active pipeline business partners would also be isolated from Burma.

The company officials opted for the engagement approach to handle the crisis on the ground. The engagement policy was better compared to the isolation because the technique would improve the economic status of the country and at the same time promote the welfare of the Burmese civilians by creating more opportunities for the oppressive government (Santos, et al. 2014). To enact this policy, the Unocal leaders reviewed the policies in the place of work in their facility in Burma. The Burmese leaders that occupied various positions in the facility were replaced y foreign personal and some capable individuals from the oppressed population. Taking advantage of protection by the international law, the Unocal officials demanded that military soldiers are exempted from the facility unless at the time of need only. The company also constructed apartments with proper conditions for living so that the workers could live therein. Working conditions were also improved to ensure that the workers did not need to use much of their effort or time in the facility. The company also threatened to withdraw its shares from the facility if the government would not respect human rights (Wagner, 2014).

With a few reviews and implementations, a lot of improvement was witnessed in the company. Some of the government officials were moved in heart and saw the need to quit the authoritarian government for the sake of the poor citizens. The idea of putting sanctions on the country could stop oppression from the government but could not improve the economy as well as human welfare in Burma (Wagner, 2014). It was also an issue to do with the international law and the global relationships as opposed to the relations between the company and the stakeholders. The engagement policy materialized, and many citizens who had suffered being deprived of their rights due to the presence of Unocal in the country were set free, and their welfare improved. Unocal constructed roads in Burma, built schools and the pipeline. Small businesses developed along the facility and employment opportunities increased.

The approach was very effective as there were no other alternative means. The only thing remaining is for the company officials to take a preliminary study of the region, the state or the country they intend to set up a business plan. Unocal in these cases should have reviewed the place first and measured the impact of their presence in the place on the people and the environment. If this study had been done the company would have out measures to curb possible arising challenges like those that happened. As an organization, therefore, it is crucial to think beyond the benefits and direct risks of a project and investigate the adverse impact of a project on the people and the environment. It is also essential to abide by the predefined principles, the code of conduct and ethics (Nicolian, 2015). The Unocal ethics clearly stated that the company would engage transactions that harm human life, but then it took almost a decade before the company acted to save the situation at hand. In future also, the leaders ought to respond to the arising problems with the deserving urgency.

In a nutshell, Unocal has been doing quite well all along since inception. The challenges have not been that major because they affected the company alone. The challenge at hand meant tampering human rights. The code of conduct and the natural demanded that the company officials should have acted immediately for the sake of the Burmese civilians. The measures taken by the company were effective, and a real-time change was witnessed. The challenge was attributed to the failure of the enterprise to carry out a preliminary study of the place before embarking on starting a business project. This also calls for a change. Otherwise, the leadership held high their role to look into problems and offer solutions. For every organization the leaders are charged with the responsibility to identify and address issues facing the company.

References

Buchanan, J. (2014). Free Burma: Transnational Legal Action and Corporate Accountability.

Maldonado, T., & Vera, D. (2014). Leadership skills for international crises: The role of cultural intelligence and improvisation. Organizational Dynamics, 43(4), 257-265.

Nicolian, N., Welch, C. E., Read, M. J., & Roberts, M. (2015). Critical organizational challenges in delivering business value from IT: In search of hybrid IT value models. The Electronic Journal Information Systems Evaluation, 18(2), 130-146.

Santos, N. J., Sealey, J., & Onuoha, A. G. (2014). Shareholder engagement and Chevron’s policy 520 on human rights: The role played by the United States Jesuit conference’s ”national Jesuit committee on investment responsibility”. In Socially Responsible Investment in the 21st Century: Does it make a Difference for Society? (pp. 43-63). Emerald Group Publishing Limited.

Wagner, C. Z. (2014). Corporate Social Responsibility and the Multinational Enterprise.