A Study of Shell Oil and its Stakeholders in Nigeria
Part 1 (Week Six)

A Review of Basic Issues Regarding the Background and Interests of Stakeholders of
Shell Oil Company in Nigeria

Chapter 1
Introduction
The complexity of understanding the Shell Nigeria oil spill and applying critical analysis and leadership theories to the problem is a challenging debate. A reader would tend to assume that Shell is at fault and should take all the blame for this corporate and ecological mess. Therefore, the introduction needs to provide the reader with sufficient historical information and background of stakeholders such as Royal Dutch Shell Company, Nigeria (country), Niger Delta (province of Nigeria) and its directly affected tribal communities of the oil spill. The introduction is thorough as to avoid explaining in other key elements of this research paper.

The Royal Dutch Shell was ranked No1 as the largest organisation in the world in 2012 by Global 500. Shell has boosted its first quarter earnings of 2012 by 11% compared to that of 2011. Shells long term projects that have just commenced creating; a gas to liquids plant in Qatar and further projects in Canadian oil sands, have in part contributed to these revenues. Royal Dutch Shell has 87000 employees globally (Global 500, 2012)

The first Shell Company in Nigeria was started in 1936 by The Royal Dutch/Shell Group. The Royal Dutch/Shell Group then founded Shell D’Arcy. Two years later in November 1928, Shell D’Arcy was afforded an Exploration license to analyse and search Nigeria’s vast landscape for the possibility of oil. In January 1956, Shell D’Arcy successfully drilled the first oil well at Oloibiri. Several months later, on April 1956, Shell D’Arcy changed its name to Shell-BP Petroleum Development Company of Nigeria Limited. In February 1958, the first barrels of oil left the shores of Nigeria via sea.

Today, Shell continues to create gas and oil from swamps and land in the area of the Niger Delta. Taxes and royalties from Shell companies in Nigeria are their largest financial contributions to Nigeria.

Shell claim that the energy that is created as well as a personal commitment to uphold, develop and finance initiatives in the communities of the Niger Delta are still in place. Shell-BP Petroleum Development Company of Nigeria Limited is the most successful and most established petroleum company in Nigeria. Shell maintains it has a long standing view of developing relationships and a commitment to Nigeria, the economy and its cultural people. (Shell, 2013)

Currently Nigeria is the most populated country on the African continent with an approximate 135 million people. Nigeria has stood in the face of continued political disturbances and financial problems since securing independence in 1960. Currently, Nigeria has genuine economic and social problems and challenges. Though it is commonly known that Nigeria has large and well established gas and oil reserves, their financial revenue is currently estimated over $40 billion per annum. However, human upliftment and development measures are amongst the lowest in the world. Strangely, a large majority of Nigeria’s population experience severe poverty. Nigeria is a relatively stable country despite common religious and ethnic confrontations. Nigeria is a key strategic partner of the United States (Ploch, 2008).

The Niger Delta has played a significant role in the Nigerian and world economy due to the slave, palm oil and now oil trade for over 400 years. The Niger delta region is also commonly known as “Oil Rivers” because it was previously a large producer of palm oil. The Niger Delta expands over nine states and has an estimated population of 40 million. This area is interestedly made up of ten tribes and has more than two hundred and fifty dialects. This delta region was a producer of palm oil and fish before the commercial exploration of fossil fuels.

Sadly, it has been estimated by the Department of Petroleum, that over two million barrels of oil have been spilt since 1976. This totals over 4800 different incidents over twenty years. The consequences of these spills cannot be overstated and the Niger Delta terrain, fauna and forna have been gradually been destroyed and taking away the natural income of the communities. It is fact that more oil is spilled from the Niger Deltas pipes, network of terminals, pump stations and platforms each year than that that has been spilled or lost in the Gulf of Mexico, which is a site of huge ecological calamity created by oil that spewed from a leak caused by a explosion that destroyed BP's Deepwater Horizon (Guardian, 2013).

On November 10, 1995 Ken Saro Wiwa a activist and eight of his peers from a Movement for the Survival of the Ogoni People (MOSOP), were executed. The accused of the travesty were the Nigerian military and Shell. Kristen Saloomey from Al Jazeera on 3 Jun 2009 reported that Royal Dutch Shell is to go to court on allegations of murder in the US. Shell is accused of financing and encouraging a terror campaign by Nigerian government forces that led to the death Ken Saro-Wiwa (activist) with eight others in 1995. In June 2009, Shell conceded to settle this dispute for US$15.5 million. Shell always maintained these accusations are false and said that it requested the Nigerian Government to display compassion on humane grounds to Ken Saro-Wiwa and MOSOP members.

A member of the Ogoni tribe said; oil companies are just ignoring the pollution. Lawmakers couldn’t care about the tribal people and we must continue to live in pollution on a daily basis. This situation is worse than 30 years ago. When I hear and see the attempts made in cleaning up Americas oil spills, I am saddened by the dual standards. The international community seems so uninterested to assist or respond the many cries of the Delta. (Neal, 2011)

It is my aim and objective to highlight the basic but sever issues of the oil spill and point out the perceptions and responsibilities of direct or indirect stakeholders of Royal Dutch Shell in Nigeria. In achieving this, the objective is to redirect the negative impacts and outcomes by making sense of this wicked problem through collaborative stakeholder involvement. It’s important to compare the leadership theories that abound to the activity of the CEO of Shell and verify if or if not the methods of leadership and sensemaking, transactional and transformational leadership was applied throughout the oil spill crisis. Finally, we will align these agreed stakeholder outcomes to Royal Dutch Shell corporate business model and confirm if this was or is aligned to its corporate governance.

Chapter 2

A Brief Organizational and Historical Background

Introduction

In this chapter I will discuss the organizational and historical background of Royal Dutch Shell Company. It will start with the early years and how the creation of their global operations took flight and conclude with business ethics and social responsibility.

Organizational and historical background

Shell oil was established in 1907 by a merger of Royal Dutch Petroleum (established in 1890) and British Shell Transport and Trading Company (STTC) (established in 1897). It is known that the petroleum industry is a business of two diverse halves, which is spilt between upstream operations of exploration and productions (E&P) and the downstream operations of refining, transportation, distribution and marketing. The decision to merge the two businesses’ made sense as Royal Dutch specialised in the upstream operations, all the while STTC the latter.

Until 2005, Shell which measured itself and competed against Jersey Standard (now Exxon Mobil) for the world’s largest oil company. Shell was a business group developed from two different holding companies. Between the two companies, they owned close to 2000 global operating companies. However, Royal Dutch has always remained with 60% shares and the senior partner in this relationship. The two companies finally merged in 2005 into one company, Royal Dutch Shell plc, a British company with an Anglo Saxon corporate structure and with is headquarters in the Hague. They still have a 60% share in place. (Heller, 2009)

Shell’s globalization

Royal Dutch Shell p.l.c. is a global group of energy and petrochemical companies that operate in more than 80 countries. Shell is incorporated in England and Wales, UK, with headquarter in The Hague, The Netherlands.

Shell is a PLC that is permitted to offer shares to the public market. Shell’s current market capex $213.14 billion as of May 2013. Shell turned over $467.15 B in 2012. Shell has 87,000 employees in more 80 countries. These countries include; Japan, Nigeria, Mexico and the United States. The current CEO of Shell is Peter Voser (Shell, 2013)

Shell on a global scale is separated between upstream and downstream operations:

• Exploration & Production

• Gas & Power

• Oil Products

• Chemicals

• Oil Sands

Shell ethics

Shell General Business Principles (SGBP) make it clear that all Shell employees are judged by how each individual behaves and acts. Shells’ reputation is upheld by how they live and strive to core values; integrity, honesty and respect for people. Shells’ 8 business principles are solely based on these values and identify how Shell encourage trust, teamwork and professional behaviour with pride in what we do.

Shell corporate social responsibility

Shell has contribution to long term sustainable development is vital to the manner business is conducted and influences their choice of product and portfolios. As Shell works to help meet the global needs of energy, Shell aim to provide benefits to rural communities and reduce the impact of its operations. Shells core values of integrity, honesty and respect for people have been advertised in SGBP for over 30 years.

Chapter 3

Literature Review

Introduction

In this chapter I will discuss the various leadership theories within an organization. The theories in particular will be leadership and sensemaking (Baran and Scott, 2010), transformational and transactional leadership theory (Lai, 2011). These theories will be used to develop a conclusion on the leadership abilities of the CEO of Shell Nigeria.

Leadership does matter. It is believed by some that business success is governed by historical, skeletal and environmental influences. Research has determined the link between leadership effectively and conclusive business outcomes (Kaiser, 2008).

When leaders are seated in volatile and reliable organizational positions such as law enforcement and fire fighting, they more than often are faced with making sense of their environments that are highly dangerous and quickly changing. Themes linked to the knowledge of the situation, situational awareness, direction setting and trust are key categories. Further insight of the data revealed categories of framing, adjusting of the social process of leadership in dangerous situations. Findings address and identify clearly that leadership is a unified sensemaking process in which uncertainty is removed and resilience increased in the situation of danger.

Transformational and transactional theory is a measure of which the acts and behaviours of leaders can be characterised and assessed. Transformational leaders display more charisma and collective visions with the led while promoting followers to deliver extraordinary work. Transactional leadership is more of give and take working relationship. The rapport or harmony between the leader and follower is created through a process of exchange i.e. rewards for achieving certain goals.

In 2003 a study 45 studies were conducted making a comparison of male and female leaders. The study showed that female leaders were transformational and displayed reward behaviour. In contrast to woman, male leaders displayed more management by exception (link to transactional leadership) (Eagly and Carli, 2003). Considering that woman have proven to outscore their male counterparts on various components of leadership (linked to leadership effectiveness), some have put forward their suggestions that there may be a mild female leadership advantage. (Smith and Smits, 1994; Eagly and Carli, 2003)

Chapter 4

Stakeholders at Shell

Introduction

In this chapter we will discuss the stakeholders of Shell oil in this wicked problem. What is a stakeholder? Donaldson and Preston (1995) explain that a stakeholder is “anything influencing or influenced by a firm”. It is important to remember that stakeholders are normative with various intrinsic motivators, personal interests and values. Shell is known by researchers and practitioners as a leader amongst oil companies for its development to combine stakeholder management ethics into daily business practice. This can be seen in early attempts to develop systems in order to respond to various stakeholder demands in the role of the Nigeria controversies

Due to the enormity of the Shell Nigeria’s oil spill in the Niger Delta, I will list only three primary stakeholders.

CEO

Shell CEO is established as a leader with fiduciary duties at the head of the organization. Leading through an oil spill will offer great adversity and challenges and any developments and/or issues are overseen and presented to the CEO i.e. managing stakeholder needs and concerns. The CEO will need to apply resilient questioning as presented by Anne Cunliffe (2004) while this process continues. Its clear that the CEO will need and able to make sense of various key and strategic issues and consult a direction forward that makes sense to all stakeholders. Therefore, sensemaking is ongoing throughout this wicked problem and becomes an active part of this management of meaning. The management of meaning and sensemaking through directing and receiving information of his stakeholders is paramount to the success of increased profits and reducing tribal and environmental impacts negatively. The Shell CEO should, considering applying the Donaldson and Preston (2005) “stakeholder model” and Pye (2005) sensemaking in action creates increased solution driven opportunities. The CEO may focus on the initial depth of the matter and discuss all concerns and suggestions from stakeholders. Through this process resilient questioning should be applied in order to determine common ground for direction and action. Shell could take responsibility for the mess and act before all external direct or indirect stakeholders raise concerns. This would raise social responsibility and live up to the core values as stipulated in SGBP.

Nigerian Shell employee

The local Shell employee should be proud to work for a global brand that has offered and provided a increased financial contribution and way of living.. The employee would have a dedicated interest in working for Shell as their contribution would be measured by transactional leaders. However, though the employee is motivated by rewards only through increased productivity, they may be in cognitive dissonance due to the environmental impact they are contributing to. The long standing consequences of taking a stand of these tribal and environmental injustices may be monetary reduction or retrenchment. Many locals would stand to benefit from this retrenchment if they do not live with values that uphold the environment. Should this not be the case, it is sure that the local community will be chastising a Shell employee for the devastation and only by association. Should this continue it may eventuate in productivity, performance and ultimately loyalty?

Shell investor

Any shareholder of Shell would be directly implicated in the environmental impacts of the oil spill. As the cliché is said, “Guilty by association”. This would cause great concern as the investor would need to ensure the growth of his investment, but how? Long term consequences of oil spills globally would weaken investor interest and the investor and Shell would loose substantially. Only the CEO can influence this share growth. Should the CEO provide meaning and sensemaking of this situation in a timely manner, investor sentiment may be restored. Immediate meaning and sensemaking for an investor or potential investor would be to “clean up” this mess. This could potentially return increased share price by acting swiftly and communicating openly the age and stage of the clean up process to all stakeholders.

Chapter 5

Conclusions/Recommendations

Shell with over 100 years of operating the group has gone through vast changes. The last notable corporate restructuring took place in May 2009. This change brought in a new CE Peter Voser, to help manage the problems caused by the drop in oil prices which put at risk 24,000 jobs.

It is evident that the manner that stakeholders make sense of the same situation has a impact on the actions they take. This address and covers the leadership theories brought forward Donaldson and Preston (2005), Pye (2005) and Cunliffe (2004). The CEOs ever increasing sensemaking attributes and resilient questioning has become a turning point to manage meaning for stakeholders interests. His ability to consider and meet to a lessor or greater degree all stakeholders point of view i.e. needs and concerns, the CEO is able to provide direction away from the wicked problem. This problem would have provided a new destination but greater clarity and experience for all stakeholders.

More importantly, the CEO must take further responsibility for brand reputation; current and in the foreseeable future. Social responsibility principles need to be met on the global stage as to avoid the activists and media concerns that Shell is not delivering on their core values.

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