TOPIC: TITANIC/BHOPAL DISASTER AND

CORPORATE GOVERNANCE

Professor: A. Kuppuswamy

Indian Academy School of Management Studies (IASMS)

Submitted by: Priyabrata bhattacharjee

Abstract

Scandals have always been part and parcel of corporate world as in any other walk of life.
Unfortunately no other walk of life continuously and consistently propagates ethics and
transparency as much as corporate do. Generally business is set up with the motive of making
money. It should follow some specific principles, rules and guidelines which are widely accepted
for carrying on a healthy business activity. The history is an evidence of many disasters which
resulted as a result of violation of ethics in the business. Some of the examples that we can state
here are the disasters of Hiroshima and Nagasaki, Bhopal tragedy, titanic sink and many more.
The topic revolves around the dreadful incidence of Bhopal tragedy and the Titanic sink. The
ethics if was sincerely followed would not have resulted in such misfortunes.

It is the responsibility of every organization to see that it is not indulging in any unethical
activities to make profit and is instead beneficial to everyone.
Business Ethics

Business ethics is the branch of ethics that examines ethical rules and principles within a
commercial context; the various moral or ethical problems that can arise in a business setting;
and any special duties or obligations that apply to persons who are engaged in commerce. Those
who are interested in business ethics examine various kinds of business activities and ask, "Is the
conduct ethically right or wrong?"

Business ethics is a form of applied ethics, a branch of philosophy. As such, it takes the ethical
concepts and a principle developed at a more theoretical, philsophical level, and applies them to
specific business situations. Generally speaking, business ethics is a normative discipline,
whereby particular ethical standards are assumed and then applied. It makes specific judgments
about what is right or wrong, which is to say, it makes claims about what ought to be done or
what ought not to be done. While there are some exceptions, business ethicists are usually less
concerned with the foundations of ethics (met ethics), or with justifying the most basic ethical
principles, and are more concerned with practical problems and applications, and any specific
duties that might apply to business relationships.

Good business ethics should be a part of every business. There are many factors to consider.
When a company does business with another that is considered unethical, does this make the first
company unethical by association? Some people would say yes, the first business has a
responsibility and it is now a link in the chain of unethical businesses.
Importance of business Ethics

For a business to achieve long-term profits, customer relationship is of utmost importance. To

gain a long-term relationship with customers and achieve customer return for the business, the
business needs to be based on ethics. The trustworthiness of a business, its customer service, its
customer care, its way of dealing with customers and its urge to retain their old customers, is a
part of the business ethics. Business ethics leave a long-lasting impression on the customers and
the impression on their minds builds trust, fetching a business more customers while retaining
the older ones.
People who seek motivation behind being ethical should understand that they are ethical by
definition. Ethics is an integral part of running a business and hence ethical values accompany
business by default. Without following certain ideals in business, one cannot become successful.
Success that is attained without a foundation of strong ethics is bound to be short-lived. A
business cannot continue to prosper without an ethical base. A few successes can be
coincidences or flukes but persistent success can only be a result of a strong foundation of ethics.
The benefits given by the business organization should not be used in an unfair manner. The use
of company resources for personal benefits and taking an undue advantage of business resources
is completely unethical. Using the wealth of the business for personal reasons is not ethical.
Using company funds for personal reasons is unethical. A thoughtful and a careful utilization of
company resources is a part of business ethics. A vigilant and a prudent use of resources is an
essential component of ethics in business.
Accepting bribes, pleasing the so-called 'important' clients, favoring a part of the customers
while being unfair towards the others is against business ethics. The primary aim of business is
not just to maximize profits. It is rather to cater to the needs of society and work towards
benefiting the masses.
Experts in business management and researchers have endorsed the need for businessmen and
company professionals to study ethics. They have asserted the importance of founding business
on ethical values and following them. They have urged management professionals to adhere to
ethics and accept it as a part of business. Ethics remain being important in business and strong
ethical values shall take the business a long way!
Titanic Disaster

An Overview

This paper describes the cause in the part of the crew member and the inadequacies in part of
shipping company to follow unethical practices which lead to the legendary Titanic disaster.

RMS Titanic was the largest passenger steamship in the world when she set off on her maiden
voyage from Southampton, England to New York City on 10 April 1912. Four days into the
crossing, at 23:40 on 14 April 1912, she struck an iceberg and sank at 2:20 the following
morning, resulting in the deaths of 1,517 people in one of the deadliest peacetime maritime
disasters in history.

An Olympic-class passenger liner, RMS Titanic was owned by the White Star Line and
constructed at the Harland and Wolff shipyard in Belfast, Ireland. She set sail for New York City
with 2,227 people on board. The high casualty rate when the ship sank was due in part to the fact
that, although complying with the regulations of the time, the ship carried lifeboats for only
1,178 people. A disproportionate number of men died due to the women and children first
protocol that was followed.

“After crossing the English Channel, the Titanic stopped at Cherbourg, France, to board
additional passengers and stopped again the next day at Queenstown (known today as Cobh),
Ireland. As harbor facilities at Queenstown were inadequate for a ship of her size, the Titanic had
to anchor off-shore, with small boats, known as tenders, ferrying the embarking passengers out
to her. When she finally set out for New York, there were 2,240 people aboard.”

Titanic was designed by some of the most experienced engineers, and used some of the most
advanced technologies available at the time. It was a great shock to many that, despite the
extensive safety features, Titanic sank. The frenzy on the part of the media about Titanic's
famous victims, the legends about the sinking, the resulting changes to maritime law, and the
discovery of the wreck have contributed to the interest in Titanic.

The ship was doomed and it was slowly sliding into its watery grave. But why did the largest,
most advanced ship of the century sink?
It was Captain Smith's fault

This was Captain E. J. Smith's retirement trip. All he had to do was get
to New York in record time. Captain E. J. Smith said years before the
Titanic's voyage, "I cannot imagine any condition which would cause a
ship to founder. Modern shipbuilding has gone beyond that." Captain
Smith ignored seven iceberg warnings from his crew and other ships. If
he had called for the ship to slow down then maybe the Titanic disaster
would not have happened.

It was the shipbuilder's fault

About three million rivets were used to hold the sections of the Titanic together.
Some rivets have been recovered from the wreck and analysed. The findings show
that they were made of sub-standard iron. When the ship hit the iceberg, the force
of the impact caused the heads of the rivets to break and the sections of the Titanic
to come apart. If good quality iron rivets had been used the sections may have
stayed together and the ship may not have sunk.

It was Bruce Ismay's fault

Bruce Ismay was the Managing Director of the White Star Line and he
was aboard the Titanic. Competition for Atlantic passengers was fierce
and the White Star Line wanted to show that they could make a six-day
crossing. To meet this schedule the Titanic could not afford to slow down.
It is believed that Ismay put pressure on Captain Smith to maintain the
speed of the ship.

It was Thomas Andrews' fault

The belief that the ship was unsinkable was, in part, due to the fact that the
Titanic had sixteen watertight compartments. However, the compartments
did not reach as high as they should have done. The White Star Line did
not want them to go all the way up because this would have reduced living
space in first class. If Mr Andrews, the ship's architect, had insisted on
making them the correct height then maybe the Titanic would not have
sunk.

It was Captain Lord's Fault

The final iceberg warning sent to Titanic was from the Californian.
Captained by Stanley Lord, she had stopped for the night about 19 miles
 north of Titanic. At around 11.15, Californian's radio operator turned off the radio and
went to bed. Sometime after midnight the crew on watch reported seeing rockets being
fired into the sky from a big liner. Captain Lord was informed but it was concluded that
the ship was having a party. No action was taken by the Californian. If the Californian had
turned on the radio she would have heard the distress messages from Titanic and would
have been able to reach the ship in time to save all passengers.

Enquiries:

Both America and Britain held inquiries into the disaster. Both reached the almost identical
conclusions.

The American inquiry concluded that Captain Smith should have slowed the speed of the
boat given the icy weather conditions.

The British inquiry, on the other hand, concluded that maintaining speed in icy weather
conditions was common practice.

Both inquiries agreed on who was most at fault - Captain Stanley Lord of the Californian.
The inquiries stated that if Lord had gone to Titanic's assistance when the first rocket was
seen then everyone would have been saved.

Both inquiries made recommendations:

All ships must carry sufficient lifeboats for the number of passengers on board.
Ship radios should be manned 24 hours a day.
Regular lifeboat drills should be held.
Speed should be reduced in ice, fog or any other areas of possible danger.

Ethical issues for Titanic Disaster

 The ship was considered to be one of the largest, luxurious and used most advanced
technologies of the time. But the steel that was used for its construction was not fit for the
temperature in the Atlantic Ocean. As the water came in contact with the keel i.e; the
bottom part of the ship, it started becoming brittle and as the time passed by the degree of
weakness grew stronger and stronger. Finally when the ship collided with the iceberg it
broke down as chandelier hit by the stone.

 Secondly, the numbers of lifeboats were insufficiently less which counted only 20 which
could accommodate around 1178 people. Whereas the capacity of Titanic was 3600
passengers, but carried about 2227 of them during its voyage. It proves that the ethics
was not at all followed by its ship building company i.e. White star line.

 The third and the most important issue for the disaster were the crew members of her.
Titanic was headed by Captain Edward J. Smith along with Jack Phillips and Harold
Bride. On the second day of the voyage captain had got signals of iceberg on his wireless
on the next day as they got the message of numerous icebergs but they termed it as” non
essential messages” and hence did not inform it to the bridge . The very next day while
sailing they spotted a large iceberg directly ahead of the ship. The Iceberg, right ahead!”
It was too late by that time and the accident had to happened, the legendary titanic struck
in the iceberg taking the life of around 2000 precious humans.
The Bhopal gas tragedy 1984

Introduction:

This paper describes the inadequacies in the response of the Union

Carbide Corporation to the accidental release of the highly toxic gas, methyl
Isocyanate, from its plant in Bhopal, India in 1984. Over 20,000 people are estimated to have
died from exposure to this gas since 1984, with some 120,000 chronically ill survivors. Union
Carbide fought to avoid compensation or to keep it very low. The long, much delayed process of
distributing compensation focused on minimizing payouts to victims. The corporation tried to
blame the accident on a disgruntled employee, whereas key parts of the safety equipment
designed to stop the escape of the gas were not functioning or were turned off.
The corporation has always sought to underplay the health effects and has refused to release its
research on the health impacts of the gas (which could have helped develop more effective
treatment). In addition, the medical services in Bhopal have failed to develop a health care
service that offers sustained relief and treatment to the communities most affected. This paper
also describes the work of the Sambhavna Trust, a charitable body set up to work with the
survivors, and its programme to develop simple, more effective, ethical and participatory ways of
carrying out research, monitoring and treatment. Its programmes combine traditional and western
systems for health care and it ensures that individuals and communities are actively involved in
all aspects of public health.

An Overview

The Bhopal disaster (also referred to as the Bhopal gas tragedy) is the world's worst industrial
catastrophe. It occurred on the night of December 2–3, 1984 at the Union Carbide India Limited
(UCIL) pesticide plant in Bhopal, Madhya Pradesh, India. A leak of methyl isocyanate (MIC)
gas and other chemicals from the plant resulted in the exposure of several thousands of people.
Estimates vary on the death toll. The official immediate death toll was 2,259 and the government
of Madhya Pradesh has confirmed a total of 3,787 deaths related to the gas release. [ Other
government agencies estimate 15,000 deaths. Others estimate that 3,000 died within weeks and
that another 8,000 have since died from gas-related diseases. A government affidavit in 2006
stated the leak caused 558,125 injuries including 38,478 temporary partial and approximately
3,900 severely and permanently disabling injuries.

UCIL was the Indian subsidiary of Union Carbide Corporation (UCC). Indian Government
controlled banks and the Indian public held 49.1 percent ownership share. In 1994, the Supreme
Court of India allowed UCC to sell its 50.9 percent share. The Bhopal plant was sold to McLeod
Russel (India) Ltd. UCC was purchased by Dow Chemical Company in 2001.

People were terrified, as they woke up to find themselves surrounded by dense poison clouds.
Neither Union Carbide nor the local authorities provided direction, support, help or guidance that
night or in the following days. In the intervening years, victims’ organizations have fought
relentlessly for justice, recognition and support.
They have received little either through the legal process or from the Indian government.
The fact behind the incident is that MIC is a highly volatile gas which must be stored at zero
degrees centigrade. Yet the refrigeration unit in the factory had been shut down to cut costs as
per directions from Union Carbide headquarters in Danbury, USA. Any escaping MIC should
have entered a caustic-soda scrubber to be neutralized. The scrubber was not operating on the
night of the disaster. Escaping toxic gases were supposed to go to the flare tower, where a pilot
flame would burn off the gas. The pilot flame was off and the pipeline to the flare tower
disconnected. Water sprayers designed to take care of leaks in the atmosphere did not have
sufficient pressure to reach the required height. The sabotage claim, therefore, is unsustainable.
But even if it were credible, the hazardous design of the plant and the blatant lack of safety
systems as well as reckless cost-cutting are sufficient to underline the liability of the US
Corporation.

Ethical Issues For Bhopal Gas Tragedy:

 The corporation has always sought to underplay the health effects and has refused to
release its research on the health.
 The medical services in Bhopal have failed to develop a health care service that offers
sustained relief and treatment to the communities most affected.
 The corporation and its chairman, Warren Anderson, were charged with manslaughter,
grievous assault and other serious offences. The Indian government did not take serious
action against it.
 Neither Union Carbide nor the local authorities provide supportive
help or guidance to the needy.
  Proper preventive measures were not taken care of, which resulted in leakage of MIC
which is a very toxic and volatile in nature leading to loss of many lives.
 UCC to make profit violated all legal rules and regulation and did not offer
Corporate Social Responsibility.

As corporate and businesses gain importance worldwide and in India, corporate social
responsibility is becoming a key component of company policy. Shareholders, consumers,
unions, employees, the government, NGO’s, and the local community are all showing an
increasing interest in the measure of social responsibility demonstrated by the corporate sector.
But what exactly is Corporate Social Responsibility (CSR)?

A generally accepted statement about CSR could be that it is the responsibility of the business
towards the society that it takes from. It is the management of the business in a manner such that
it produces a positive impact on society. Critics of CSR say that the primary purpose of a
business is to make profit, and that it has no additional duty as long as it complies with all rules
and regulations. Not doing anything negative might seem easy, but it could actually go a long
way.

It would mean that the company pays all its employees right from management to manual labour
fair wages, provides everyone sick leave, insurance, and good working conditions with safety
regulations in place. It does not use child labour, and gives reasonable compensation toward
those who might be negatively affected by the company’s actions. It would mean that it protects
the environment to the best of its ability within the sphere of its operations, pays all taxes and
never makes false claims to the consumers or shareholders.

Could all of the above actually be included as a part of CSR? Some would say that it is all a
business has to do, and nothing more is required. A business is not an entity which is supposed to
directly serve the people; it only has to make money according to fair means.

If you look into the policies of Indian corporate, almost all the major companies have well-
formed CSR policies. These include community development programmes, upliftment of the
underprivileged through health, education, etc. It would seem like the corporate are all putting a
fair amount of their profit into actively doing something positive for society.

At the same time, of course, we hear of labor unions, strikes, coercive land acquisitions,
destruction of the environment, and so on. What is more important – that a business should do
something positive, or that it should not do anything negative?

Perhaps one of the starkest examples of the failure of a corporate to do its duty is the incident of
the Bhopal Gas tragedy of 1984, when gas leaked from a Union Carbide plant, which resulted in
the death of over 10,000 people and is acknowledged as the worst industrial disaster in history.
Some say CSR is taken up by companies in an effort to detract the attention of the public from
activities which are unethical, like in the case of cigarette manufacturers, or companies which
make use of child labour. In these cases, it is important to remember that doing something
positive does not cancel out the effect of negative consequences of their actions that emanate
from the core business itself.

So perhaps, CSR is not an obligation upon a business. But these days, all consumers like to feel
that the enterprises they support are doing ‘their bit’ toward society. Shareholders look into CSR
policies before investing. Even fresh graduates are keenly interested in a prospective company’s
CSR mandate. Not being socially responsible, it seems, is starting to become taboo in the
corporate world.

Ultimately, it is more beneficial to the company to have CSR activities than not. They are the
ones who gain goodwill; they are the ones who make more profit. This is, after all, the aim of
any business enterprise. And nobody is complaining, for we seem to have reached a win-win
situation.

Corporate Governance

Corporate governance is the set of processes, customs, policies, laws, and institutions affecting
the way a corporation (or company) is directed, administered or controlled. Corporate
governance also includes the relationships among the many stakeholders involved and the goals
for which the corporation is governed. The principal stakeholders are the shareholders, the board
of directors, employees, customers, creditors, suppliers, and the community at large.

Report of SEBI committee (India) on Corporate Governance defines corporate governance as

the acceptance by management of the inalienable rights of shareholders as the true owners of the
corporation and of their own role as trustees on behalf of the shareholders. It is about
commitment to values, about ethical business conduct and about making a distinction between
personal & corporate funds in the management of a company.” The definition is drawn from the
Gandhian principle of trusteeship and the Directive Principles of the Indian Constitution.
Corporate Governance is viewed as business ethics and a moral duty. See also Corporate Social
Entrepreneurship regarding employees who are driven by their sense of integrity (moral
conscience) and duty to society. This notion stems from traditional philosophical ideas of virtue
(or self governance) and represents a "bottom-up" approach to corporate governance (agency)
which supports the more obvious "top-down" (systems and processes, i.e. structural) perspective.

Bhopal Gas Tragedy

The recent court verdict on the Bhopal gas tragedy delivered after 26 years is a classic story of
how India as a nation succumbs to the mighty corporate power of the Multi National
corporations. The tragic episode also reveals the double standards of the United States
government and the multinational corporation’s .The Indian government, judiciary, political
system, large sections of civil society could only further the interests of the MNC’s at the cost
of the poor victims of the horrifying gas tragedy.

But, the Supreme Court diluted the case by altering the charge from culpable homicide to
criminal negligence. The culpable homicide attracts ten year punishment while criminal
negligence invites only two year imprisonment. .This is the travesty of justice. .After 26 years,
the accused got only two year imprisonment and was immediately released on bail. Not a single
American was punished. The CEO of the MNC, who is the prime accused is still not punished.
The United States even now rejects any request for extraditing Warren Anderson, the CEO of the
MNC. He was declared as a proclaimed obscandor. The Indian government and the United
States claim that Anderson is not found though the TV channels show us the house of this prime
accused in the affluent suburbs of New York. The US government cannot find someone who is
very much living in the country under full media glare. But is involved in an incessant war in
Afghanistan to locate Bin Laden and Mullah Omar. The US double standards in this regard are
very clear.

In fact, Anderson came to India few days after the tragedy. He was arrested at the Bhopal
Airport. But, he was escorted to the company guest house. He was released on bail within two
hours. Then he was taken in the government car to the Airport. He was taken back to Delhi in
Madhya Pradesh state government aircraft. The state government aircraft cannot be provided
unless there is an explicit order from the state chief minister. He happily went to United
States .Now, the ruling congress party is busy in defending the dubious role of the then chief
minister Arjun Singh and the then prime minister Rajiv Gandhi. It is shocking to note that the
congress government has now appointed Group of Ministers GOM to look into the matter and
submit a report in ten days. The judicial system took 26 long years to deliver too little
punishment after too long time. The government was in a deep slumber all these years. Not just,
the congress, the BJP led NDA government and the United Front governments were Luke warm
in their response and did precious little to get Anderson extradited. The then CBI official even
publicly stated now that the premier investigating agency got written instructions from the
ministry of External Affairs to go slow on the efforts to get Anderson extradited.

The political system simply crawled before the MNC to protect the corporate chief. The victims
of the Bhopal Gas tragedy got on an average compensation of a meager Rs. 12,000 per
individual. This is less than what US president demanding for marine life due to oil leak in the
Gulf of Mexico. The lives of Indians are not worth even the marine life.

Notwithstanding the travesty of justice in Bhopal, the central government is moving heaven and
Earth to enact the civil nuclear liability bill. This bill is aimed at ensuring that the foreign
equipment suppliers do not have any liability if a nuclear accident occurs. The U S companies
want full protection from any liability as they are all set to export nuclear equipment worth
billions of dollars. The central government in an unabashed manner is determined to harm the
interests of Indian people to protect the profits of US companies. The civil nuclear liability bill
should be dropped immediately at the back drop of the experience of Bhopal verdict. Otherwise,
the victims of nuclear accidents cannot even file cases and get even this negligible compensation.

Titanic

The calamity of the ship which was thought too big to sink did not capsize the company that
owned it. But the White Star Line, which had roamed the seas through wars, depressions and
revolutions since the mid-1800s, was unable to survive the greed, hubris and deceit of one man.
It is an experience that carries some valuable lessons for today’s financial empires and Wall
Street titans as well.

On a crystal-clear, star-filled April evening in 1912, what had been to that point an astonishing
triumph of human imagination and engineering suddenly changed into a tragedy on a horrific and
incomprehensible scale. It was 11:30 pm on the night of April 14th when the ship’s lookout
called down to the bridge. What took millions of words in plans, designs, work orders, contracts
and printed material was about to be undone by a mere three: “Iceberg right ahead.” The second
officer then made the fateful, and, by most later accounts, calamitous, decision to stop and
reverse propellers. Less than three hours later, in the early morning of April 15th, RMS Titanic
descended to the bottom of the Atlantic Ocean, taking 1,517 souls with her.

One who did not perish that night was the chairman of the Titanic’s owner, White Star Lines. J.
Bruce Ismay’s survival was not exactly miraculous. Fulfilling Montaigne’s aphorism, Ismay did
not enjoy the reputation of a hero because of his escape that night, either to the general public,
who tended to vilify him as coward, or to his valet, Richard Fry, who was not as fortunate as his
master in avoiding the cold clutch of the cruel sea. William Henry Harrison, Ismay’s secretary,
also went down with the other 1,516 men, women and children.

The disaster, and all the morbid press it generated, along with hundreds of lawsuits, did not end
the White Star Line, however. It steamed on for some years, until it was bought up in 1927 by
Lord Kylsant of Carmarthen, becoming a part of the Royal Mail Steam Packet Company, the
largest shipping empire of the time.

Lord Kyslant had a well-deserved reputation as something of the “Napoleon of the seas” for his
ability to conquer his competitors and impress investors. Like Conrad Black -or Lord Black of
Crossharbour, as he prefers to be known even while residing at the Coleman Correctional
Facility in Florida- he steered a course of deference-producing success until it was halted by an
encounter with prison-confining deceitfulness.

He was a larger-than-life figure in London’s business and social circles, acquiring many honors
along the way. He financed his empire through massive amounts of debt and the generous use of
other people’s money. The Royal Mail was a darling of the stock market at the time and both its
fortunes and Kylsant’s own lavish life style required that the shares of the company be kept high.
Like others before and after him, Kylsant made a decision at some point that if his business could
not be made to look good on its own merits, a little fudging with the figures might help. So it was
in 1931 that Kylsant found himself charged with accounting fraud and was later sent to prison for
a year. Lord Kylsant’s long fall from grace shocked the world and led to the disintegration of the
company, including the fabled White Star Line. There was a British government-forced merger
with Cunard, but White Star never sailed again or operated under under its own flag.

In an irony as large as the name Titanic itself, the calamity of the ship which was thought too big
to sink did not capsize the company that owned it. But the White Star Line, which had roamed
the seas through wars, depressions and revolutions since the mid-1800s, was unable to survive
the greed, hubris and deceit of one man.

Somewhere in all of this, even without the benefit of the binoculars that the Titanic’s lookouts
did not have (they were locked in a cabinet and the key was misplaced during the ship’s test
runs), one might discover a lesson about the recent financial disaster that has been unleashed
upon the stock market and the global economy. Its cause was not natural or celestial; it was not
preordained or the result of an asteroid hitting the earth. It was brought on by more common
suspects: everyday greed, a giddy sense of intoxication induced by fast money that made a whole
crew of business decision-makers and investors laugh at the unfashionable attire of risk, an
obliviousness to duty (and even common sense) on the part of directors and regulators, and an
epidemic of self-delusion afflicting too many CEOs and Wall Street titans that they, also, were
too big to fail and too smart to ever encounter the sudden reversal of the propellers of fortune.
Conclusion:

The participation of individuals in a community is crucial for the success of any community-
based health program and avoiding such misfortunes. Through educational campaigns and
meetings awareness among the people can be generated. The trust perceives its work as part of
the survivors’ struggle in Bhopal and works closely with the survivors’ organizations.
The legendary Titanic sink would not have come to realty if business ethics would
have been followed carefully. Thus from the above disasters we can draw the conclusion that if
business and ethics don’t go hand in hand leads to disasters.