International Business: Competing in the Global Marketplace Fourth Edition Cases

ROYAL DUTCH/SHELL: HUMAN RIGHTS IN NIGERIA

SYNOPSIS

Royal Dutch/Shell has been involved in oil exploration and development in Nigeria since the 1950s. During most of this time Nigeria has been ruled by a military regime that repressed human rights and did not have a good record of returning revenues from the oil to local areas. The case allows students to consider the role multinational firms can and should play in helping the citizenry of countries in which they operate.

Some of Shell’s operations are in an area of Nigeria where the Ogoni tribe lives. The Ogoni are primarily farmers and fishermen, who have been seeking greater self-determination. They would like to receive a greater share of the revenues generated from the oil. They are also concerned about the environmental costs Shell’s activities have taken on their land. The government, however, has been unsympathetic to the Ogoni, generally ignored their requests, and executed Ogoni leaders. Thus there is pressure on Shell to improve the environmental situation and put pressure on the government to improve the social conditions of the Ogoni.

In spite of the international pressure, Shell has gone ahead with plans for further investment in Nigeria. Shell’s position is that it is better for the people that it is in the country operating and investing. It creates jobs and infrastructure for the people, and generates tax revenues - part of which end up helping people.

TEACHING OBJECTIVES

The main teaching objectives of the case are:

1. Illustrate the challenges multinational firms face when dealing with national governments that have social policies that differ from those in their home country.

2. Debate the role a multinational firm has in influencing host governments to enact various policies that may benefit the citizens.

3. Understand how international pressure can force firms to undertake positions that may not be popular with their host governments.

This case can work well after Part II to illustrate some of the challenges faced by a multinational firm. It can also be held for use after Chapter 7, when students have a better sense of the political economy of foreign direct investment.

STRATEGIC ISSUES AND DISCUSSION QUESTIONS

1. Does Shell bear some responsibility for the problems of the Ogoni region in Nigeria?

Or put another way, does a firm that operates legally in a country, totally within the law, have a responsibility for problems caused by the host government? Clearly Shell bears some responsibility for the problems in the Ogoni region. It certainly could hire more Ogoni in its operations and could have tried to develop better relations with the Ogoni. And rather than assuming the national government would take care of matters locally, it could have easily funded schools and other public projects. If it had done this, it may not have had the problems it did with the Ogoni, and the Ogoni would not have been as militant in their opposition to Shell and the national government.

2. What steps might Shell have taken to nip some of the protests against it in the bud, or even preempt them?

It certainly could have employed more Ogoni in its operations, and could have tried to develop better relations with the Ogoni. Rather than assuming the national government would take care of matters locally, it could have easily funded schools and other public projects. These all would have helped it to develop better relations with the Ogoni, minimized the likelihood of protest, and permitted Shell better access to maintain its facilities, prevent environmental accidents, and clean up existing environmental damage.

3. Could the company have done more to gain clemency for Ken Saro-Wiwa? Should it have done more?

It is hard to say if the company should or could have done more. This was clearly a political and tribal matter, and it is unclear whether threats or cajoling from Shell would have done much to detract the government from its political objectives in quashing rebellion.

4. Was the response of Western governments to the execution of Ken Saro-Wiwa about right, too excessive, or too mild? What should have been the appropriate response?

One can argue all sides of this, and one’s political views will likely affect one’s position. Embargoes and prohibitions on investment stand little chance of working even when there is widespread international support. And even if a few countries decide to ignore the embargo - which they might for cheap oil - it will likely fail. Given recent experiences with embargoes against Libya, Iraq, and Serbia, and most certainly with Cuba, it seems that embargoes are not particularly effective in pressuring governmental change and are merely symbolic. While it is true that many people believe more should be done, it is unclear that there is much that can be done that will be effective.

5. In the wake of Saro-Wiwa’s execution, was Shell correct to push ahead with the liquefied natural gas project in Nigeria?

This is clearly a matter of opinion, with the key points on each side detailed in the case. Once again, as long as some firm would undertake the project, it would accomplish little for Shell to back out.

6. Do you think it is possible for a company such as Shell to reform itself from within, or would it have been better for Shell to establish an external body to monitor its human rights and environmental policies?

This is clearly a matter of opinion, so either approach can be justified. It is not a topic that is discussed in this text. Students who have take a course on Business, Government, and Society will likely be influenced in their answer by the views presented in that course.

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