East Texas Baptist University Union Carbide India LTD and MIC Case Study Read the case, Bhopal Case Study (outside reading provided in Blackboard) Compose

East Texas Baptist University Union Carbide India LTD and MIC Case Study Read the case, Bhopal Case Study (outside reading provided in Blackboard)

Compose a short analysis of the case (no more than 500 words) using the general criteria provided in Carroll’s frame work described on page 612 (as modified for our class, see below).

What is the issue?
Facts and Assumptions?
Stakeholders?
CSR Analysis
Economics
Law
Ethics
Philanthropy and other factors: altruism, power, politics, self-interest, incentives, etc.
Evaluation
Recommendations

Submit your analysis as your Union Carbide Corporation and Bhopal
John F. Steiner and George A. Steiner
On December 3, 1984, tragedy unfolded at the Union Carbide pesticide plant in Bhopal, India.
Water entered a large lank where a volatile chemical was stored, starting a violent reaction.
Rapidly, a sequence of safety procedures and devices failed. Fugitive vapors sailed over plant
boundaries, forming a lethal cloud that moved with the south wind, enveloping slum dwellings,
searing lungs and eyes, asphyxiating fated souls, scarring the unlucky.
Bhopal is the worst sudden industrial accident ever in terms of human life lost. Death and injury
estimates vary widely. The official death toll set forth by the Indian government for that night is
5,295, with an additional 527,894 serious injuries. Greenpeace has put the death toll at 16,000.1
The incredible event galvanized industry critics. “Like Auschwitz and Hiroshima,” wrote one,
“the catastrophe at Bhopal is a manifestation of something fundamentally wrong in our
stewardship of the earth.”2 Union Carbide was debilitated and slowly declined as a company
after the incident. The government of India earned mixed reviews for its response. The
chemical industry changed, but according to some, not enough. And the gas victims endure a
continuing struggle to get compensation and medical care.3
UNION CARBIDE IN INDIA
Union Carbide established an Indian subsidiary named Union Carbide India Ltd. (UCIL) in
1934. At first the company owned a 60 percent majority interest, but over the years this was
reduced to 50.9 percent. Shares in the ownership of the other 49.1 percent traded on the Bombay
Stock Exchange. This ownership scheme was significant because although UCIL operated with
a great deal of autonomy, it gave the appearance that Union Carbide was in control of its
operations. By itself, UCIL was one of India’s largest firms. In 1984, the year of the incident, it
had 14 plants and 9,000 employees, including 500 at Bhopal. Most of its revenues came from
selling Eveready batteries.
Union Carbide decided to build a pesticide plant at Bhopal in 1969. The plant formulated
pesticides from chemical ingredients imported to the site. At that time, there was a growing
demand in India and throughout Asia for pesticides because of the “green revolution” a type of
planned agriculture that requires intensive use of pesticides and fertilizers on special strains of
food crops such as wheat, rice, and corn. Although pesticides may be misused and pose some
risk, they also have great social value. Without pesticides, damage to crops, losses in food
storage, and toxic mold growth in food supplies would cause much loss of life from starvation
and food poisoning, especially in countries such as India. Exhibit 1 shows a Union Carbide
advertisement from the 1960s that describes the company’s activities in India.
The Bhopal plant would supply these pesticides and serve a market anticipated to expand
rapidly. The plant’s location in Bhopal was encouraged by tax incentives from the city and the
surrounding state of Madhya Pradesh. After a few years, however, the Indian government
pressured UCIL to stop importing chemical ingredients. The company then proposed to
manufacture methyl isocyanate (MIC) at the plant rather than ship it in from Carbide facilities
outside the country. This was a fateful decision.
EXHIBIT 1: This Union Carbide Advertisement appeared in Fortune magazine in April 1962.
Source: Courtesy of Union Carbide Corporation.
Methyl isocyanate, CH3NCO, is a colorless, odorless liquid. Its presence can be detected by
tearing and the burning sensation it causes in the eyes and noses of exposed individuals. At the
Bhopal plant it was used as an intermediate chemical in pesticide manufacture. It was not the
final product; rather, MIC molecules were created, then pumped into a vessel where they reacted
with other chemicals. The reaction created unique molecules with qualities that disrupted insect
nervous systems, causing convulsions and death. The plant turned out two similar pesticides
marketed under the names Sevin and Temik.
In 1975 UCIL received a permit from the Ministry of Industry in New Delhi to build an MIC
production unit at the Bhopal plant. Two months before the issuance of this permit, the city of
Bhopal had enacted a development plan requiring dangerous industries to relocate in an
industrial zone 15 miles away. Pursuant to the plan, M. N. Buch, the Bhopal city administrator
tried to move the UCIL pesticide plant and convert the site to housing and light commercial use.
For reasons that are unclear, his effort failed, and Buch was soon transferred to forestry duties
elsewhere.
The MIC unit was based on a process design provided by Union Carbide’s engineers in the
United States and elaborated by engineers in India. The design required storage of MIC in big
tanks. An alternative used at most other pesticide plants would have been to produce small
amounts of MIC only as they were consumed in pesticide production. The decision to use large
storage tanks was based on an optimistic projection that pesticide sales would grow dramatically.
Since an Indian law, the Foreign Exchange Regulation Act of 1973, requires foreign
multinationals to share technology and use Indian resources, detailed design work was done by
an Indian subsidiary of a British firm. Local labor using Indian equipment and materials built
the unit
In 1980 the MIC unit began operation under UCIL’s management. During the five years of
design and construction, densely populated shantytowns sprang up nearby, inhabited mainly by
impoverished, unemployed people who had left rural areas seeking their fortunes in the city. A
childlike faith that the facility was a benevolent presence turning out miraculous substances to
make plants grow was widespread among them.
In fact, when the MIC unit came on line the plant began to pose higher risk to its neighbors; it
now made the basic chemicals used in pesticides rather than using shipped-in ingredients. One·
step in the manufacture of MIC, for example, creates phosgene, the lethal “mustard gas” used in
World War I. The benighted crowd by the plant abided unaware.
In 1981 a phosgene leak killed one worker, and a crusading Indian journalist wrote articles about
dangers to the population. No one acted. A year later, a second phosgene leak forced temporary
evacuation of some surrounding neighborhoods. Worker safety and environmental inspections
of the plant were done by the state Department of Labour, an agency with only 15 factory
inspectors to cover 8,000 plants and a record of lax enforcement.4 Oversight was not vigorous.
Meanwhile,· the Indian economy had turned down, and stiff competition from other pesticide
firms marketing new, less expensive products reduced demand for Sevin and Temik. As
revenues fell, so did the plant’s budget, and it was necessary to defer some maintenance, lessen
the rigor of training, and lay off workers. By the time of the incident, the MIC unit operated with
six workers per shift, half the number anticipated by its designers.
– – – – – – – – – – – – EXHIBIT 2: Union Carbide’s Organization Structure as Related to the Bhopal Plant
UNION CAHBIDE’S RELATIONSHIP WITH THE BHOPAL PLANT
What was the organizational relationship of Union Carbide Corporation in the United States to
its subsidiary, Union Carbide India Ltd., and ultimately to the Bhopal plant? How much
direction and control did the corporate parent half a world away in Danbury, Connecticut,
exercise over the facility?
The Bhopal plant fit into the Union Carbide management hierarchy as shown in the chart in
Exhibit 2. Although Carbide employees from the United States managed the plant in its early
years, in 1982, under pressure from the government, it was turned over to Indian managers. The
experience of colonial rule in India created a strong political need for leaders to put on shows of
strength with foreign investors. Indians felt a burning desire to avoid any appearance of
subjugation and demanded self-sufficiency. This is what has led to passage of the law requiring
foreign investors to use Indian firms and workers in certain ways–and to put pressure on Union
Carbide to turn the plant completely over to its Indian subsidiary.
The Bhopal plant was but one of 500 facilities in 34 countries in the Union Carbide Corporation
universe. There was no regular or direct reporting relationship between it and Union Carbide’s
headquarters in Connecticut. At the request of UCIL, employees of Union Carbide had gone to
India twice to perform safety inspections on the plant. Other than those occasions, managers in
the United States had received information or reporting about the plant only infrequently and
irregularly when major changes or capital expenditures were requested. Thus, the Bhopal plant
was run with near total independence from the American corporation. In litigation to determine
where victims’ lawsuits should be tried, a U.S. court described its autonomy in these words:
[Union Carbide Corporation’s] participation [in the design and construction of the
plant] was limited and its involvement in plant operations terminated long before the
accident… [It] was constructed and managed by Indians in India. No Americans were
employed at the plant at the time of the accident. In the five years from 1980 to 1984,
although more than 1,000 Indians were employed at the plant, only one American was
employed there and he left in 1982. No Americans visited the plant for more than one
year prior to the accident, and during the 5-year period before the accident the
communications between the plant and the United States were almost nonexistent.5
Thus, the Bhopal plant was run by UCIL with near total independence from the American
corporation. Despite this, shortly after the gas leak Chairman Warren M, Anderson said that
Carbide accepted “moral responsibility” for the tragedy.
THE GAS LEAK
On the eve of the disaster, tank 610, one of three storage tanks in the MIC unit, sat filled with
11,290 gallons of MIC. The tank, having a capacity of 15,000 gallons, was a partly buried,
stainless-steel, pressurized vessel. Its purpose was to take in MIC made elsewhere in the plant
and hold it for some time until it was sent to the pesticide production area through a transfer
pipe, there to be converted into Sevin or Temik. At about 9:30 p.m. a supervisor ordered an
operator, R. Khan, to unclog four filter valves near the MIC production area by washing them
out with water. Khan connected a water hose to the piping above the dogged valves but
neglected to insert a slip blind, a device that seals lines to prevent water leaks into adjacent pipes.
Khan’s omission, if it occurred, would have violated established procedure.
Because of either this Careless washing method or the introduction of water elsewhere, 120 to
240 gallons of water entered tank 610, starting a powerful exothermic (heat building) reaction.
At first, operators were unaware of the danger, and for two hours pressure in the tank rose
unnoticed. At 10:20 p.m. they logged tank pressure at 2 pounds per square inch (ppsi). At 11:30
p.m. a new operator in the MIC control room noticed that the pressure was 10 ppsi, but he was
unconcerned because this was within tolerable limits, gauges were often wrong, and he had not
read the log to learn that the pressure was now five times what it had been an hour earlier.
Unfortunately, refrigeration units that cooled the tanks had been shut down for five months to
save electricity costs. Had they been running, as the MIC processing manual required, the heat
rise from reaction with the water might have taken place over days instead of hours.
As pressure built, leaks developed. Soon workers sensed the presence of MIC. Their eyes
watered. At 11:45 p.m. someone spotted a small, yellowish drip from overhead piping. The
supervisor suggested fixing the leak after the regular 12:15 a.m. tea break. At 12:40 the tea
break ended. By now the control room gauge showed the pressure in tank 610 was 40 ppsi. In a
short time it rose to 55 ppsi, the top of the scale. A glance at the tank temperature gauge brought
more bad news, The MIC was 77 degrees Fahrenheit, 36 degrees higher than the specified safety
limit and hot enough to vaporize. Startled by readings on the gauges, the control room operator
ran out to tank 610. He felt radiating heat and heard its concrete cover cracking. Within
seconds, a pressure-release valve opened and a white cloud of deadly MIC vapor shot into the
atmosphere with a high-decibel screech.
Back in the control room, operators turned a switch to activate the vent gas scrubber, a safety
device designed to neutralize escaping toxic gases by circulating them through caustic soda. It
was down for maintenance and inoperable. Even if it had been on line, it was too small to handle
the explosive volume of MIC shooting from the tank. A flare tower built to burn off Toxic gases
before they reached the atmosphere was also off line; it had been dismantled for maintenance
and an elbow joint was missing. Another emergency measure, transferring MIC from tank 610
to one of the other storage tanks, was foreclosed because both were too full. This situation also
violated the processing manual, which called for leaving one tank empty as a safeguard.
At about 1:00 a.m. an operator triggered an alarm to warn workers of danger. The plant
superintendent, entering the control room, ordered a water spraying device be directed on the
venting gas, but this last-resort measure had little effect. Now most workers ran in panic,
ignoring four emergency buses they were supposed to drive through the surrounding area to
evacuate residents. Two intrepid operators stayed at the control panel, sharing the only available
oxygen mask when the room filled with MIC vapor. Finally, at 2:30, the pressure in tank 610
dropped, the leaking safely valve resealed, and the venting ceased. Roughly 10,000 gallons of
MIC, about 90 percent of the tank’s contents, was now settling over the city.
That night the wind was calm, the temperature about 60°, and the dense chemical mist lingered
just above the ground. Animals died. The gas attacked people in the streets and seeped into their
bedrooms. Those who panicked and ran into the night air suffered higher exposures.
As the poisonous cloud enveloped victims, MIC reacted with water in their eyes. This reaction,
like the reaction in tank 610, created heat that burned corneal cells, rendering them opaque.
Residents with cloudy, burning eyes staggered about. Many suffered shortness of breath,
coughing fits, inflammation of the respiratory tract, and chemical pneumonia. In the lungs, MIC
molecules reacted with moisture, causing chemical burns. Fluid oozed from seared tissue and
pooled, a condition called pulmonary edema, and its victims literally drowned in their own
secretions. Burned lung tissue eventually healed, creating scarred areas that diminished
breathing capacity. Because MIC is so reactive with water, simply breathing through a wet cloth
would have saved many lives. However, people lacked this simple knowledge.
UNION CARBIDE REACTS
Awakened early in the morning, CEO Warren M. Anderson rushed to Carbide’s Danbury,
Co1mecticut, headquarters and learned of the rising death toll. When the extent of the disaster
was evident, a senior management committee held an urgent meeting. It decided to send
emergency medical supplies, respirators, oxygen (all Carbide products), and an American doctor
with knowledge of MIC lo Bhopal.
The next day, Tuesday, December 5, Carbide dispatched a team of technical experts to examine
the plant. On Thursday, Anderson himself left for India. However, after arriving in Bhopal, he
was charged with criminal negligence, placed under house arrest, and then asked to leave the
country.
With worldwide attention focused on Bhopal, Carbide held daily press conferences. Christmas
parties were canceled. Flags at Carbide facilities flew at half-staff. All of its nearly 100,000
employees observed a moment of silence for the victims. It gave $1 million to an emergency
relief fund and offered to turn its guesthouse in Bhopal into an orphanage.
Months later, the company offered another $5 million, but the money was refused because Indian
politicians trembled in fear that they would be seen cooperating with the company. The Indian
public reviled anything associated with Carbide. Later, when the state government learned that
Carbide had set up a training school for the unemployed in Bhopal, it flattened the facility with
bulldozers.
CARBIDE FIGHTS LAWSUITS AND A TAKEOVER BID
No sooner had the mists cleared than American attorneys arrived in Bhopal seeking litigants for
damage claims. They walked the streets signing up plaintiffs. Just four days after the gas leak,
the first suit was filed in a U.S. court; soon cases seeking $40 billion in damages for 200,000
Indians were filed against Carbide.
However, the Indian Parliament passed a law giving the Indian government an exclusive right to
represent victims. Then India sued in the United States, Union Carbide offered $350 million to
settle existing claims (an offer rejected by the Indian government) and brought a motion to have
the cases heard in India. Both Indian and American lawyers claiming to represent victims
opposed the motion, knowing that wrongful death awards in India were small compared with
those in the United States. However, in 1986 a federal court ruled that the cases should be heard
in India, noting that “to retain the litigation in [the United States]… would be yet another
example of imperialism, another situation in which an established sovereign inflicted its rules, its
standards and values on a developing nation.”6 This was a victory for Carbide and a defeat for
American lawyers, who could not carry their cases to India in defiance of the government.
In late 1986 the Indian government filed a $3.3 billion civil suit against Carbide in an Indian
court.7 The suit alleged that Union Carbide Corporation, in addition to being majority
shareholder in Union Carbide India Ltd., had exercised policy control over the establishment and
design of the Bhopal plant. The Bhopal plant was defective in design because its safety
standards were lower than similar Carbide plants in the United States. Carbide had consciously
permitted inadequate safety standards to exist. The suit also alleged that Carbide was conducting
an “ultrahazardous activity” at the Bhopal plant and had strict and absolute liability for
compensating victims regardless of whether the plant was operating carefully or not.
Carbide countered with the defense that it had a holding company relationship with UCIL and
never exercised direct control over the Bhopal plant; it was prohibited from doing so by Indian
laws requiring management by Indian nationals. In addition to the civil suit, Carbide’s chairman,
Warren Anderson, and several UCIL executives were charged with homicide in a Bhopal court.
This apparently was a pressure tactic, since no attempt to arrest them was made.
On top of its legal battle, Carbide had to fight for its independence. In December 1985, GAF
Corporation, which had been accumulating Carbide’s shares, made a takeover bid. After a
suspenseful month long battle, Carbide fought off GAF, but only at the cost of taking on
enormous new debt to buy back 55 percent of its outstanding shares. This huge debt had to be
reduced because interest payments were crippling. So in 1986 Carbide sold $3.5 billion of
assets, including its most popular consumer brands–Eveready batteries, Glad bags, and Prestone
antifreeze. It had sacrificed stable sources of revenue and was now a smaller, weaker company
more exposed to cyclical economic trends.
INVESTIGATING THE CAUSE Of’ THE MIC LEAK
In the days following the gas leak, there was worldwide interest in pinning down its precise
cause. A team of reporters from The…
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