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Union Carbide's Bhopal Catastrophe

In 1984, there was a disaster at a Union Carbide chemical plant located in Bhopal, India. While the company had learned some important lessons from Ohio Valley (see chapter 11, above) and was far more caring and responsive in the wake of the disaster, there remain questions of how culpable the company was in the incident, and whether it could have been proactive in preventing it.

Background

The nature of the disaster was that a large chemical tank that stored a cyanide compound for pesticide manufacture failed, and a chemical fog rolled through a low-income residential district, causing injury to over 300,000 and the deaths of over 2,500, plus the widespread death of livestock (over 20,000 cattle) and economic devastation of the city. The cost of dealing with the disaster (medical aid, ongoing support, compensation for deaths) came to over $40 million, and was borne by the Indian government.

A bit of background: when the plant was constructed, it was in a secluded location, but people moved closer to the plant in the seventeen eyars since its construction. Ownership of the plant was 51/49 between UC and the Indian government, and there were ongoing struggles over control of operations.

The cause of the accident remains a matter of controversy, but some of the factors are:

UC's initial reaction was to cry sabotage, that the systems were intentionally disabled, and the influx deliberately initiated, by a disgruntled worker whose intention was presumed to be to ruin the batch. The Indian government contended that the company was negligent in its maintenance and safety procedures in order to save costs.

In the wake of the disaster, UC's priorities were to aid the victims, analyze the problem to prevent recurrence, assure investors and dcreditors that the impact would be small, and to protect the company from precipitating lawsuits. The company immediately dispatched medical aid to assist the victims, then a team of technical experts to examine the plant.

When the company's president came in person, the Indian government arrested and deported him, and the company rejected all offers of aid made by the company. The government also detained the technical team, denied them access to the facility, seized all the plant's records, and arrested the supervisors.

Consequences

In the wake of the disaster, nervous investors dumped their holdings, which caused the price of the stock to plummet, and the media jumped on the incident and immediately vilified the company, in the absence of any evidence.

Personal injury attorneys flocked to India, seeing the disaster as an opportunity to represent the victims, whether as individuals or as part of several class-action suits. Though the attorneys sought to have the cases heard in the United States, the courts ruled that it was in India's jurisdiction, which was favorable to the company, in that the costs of settling litigation were much more modest ($425 million, whereas one of the [many] class-action suits sought $15 billion)

Beyond this, the incident led to an update to international standards for the design and operation of facilities that processed hazardous materials, and these standards were readily adopted by a number of courtiers to which American firms outsourced manufacturing operations.

Analysis

One of the questions raised is whether the technology was "too complex" for an undeveloped country, where the employees' low level of education and technological sophistication rendered them unable to fully understand the technology with which they were working.

There is also the matter of corruption within the Indian government, particularly in the form of favoritism, in granting desirable positions of authority to people who are incapable of handling the responsibility.

Another issue is that manufacturing firms often move plants overseas to be proximate to raw materials and engage cheaper labor, but also to escape the costly safety regulations in the United States.

In general, it is concluded that the incident was "a terrible accident" and that UC did not deliberately disregard safety measures - but at the same time it did not exercise close enough monitoring and control to ensure procedures were being followed and systems were in working order.

Lessons Learned

A company should have plans in place to deal with a worst-case scenario, that include not only the actions to be taken by the company itself, btu the relationships it needs with local authorities to deal with an incident.

There is some argument that multinational corporations should implement the same safety standards overseas as they are held to in the United States - even if they are not legally required to do so, the damage to a company in the court of public relations can be just as severe.

Safety measures should be a required cost, and not addressed as an optional expense. In particular, the funds for maintaining safety systems should be separated from the maintenance budget for operational systems, such that plant management is not in a position to discount safety for the sake of operations.

Companies should take an active role (rather than a hands-off approach) to their facilities in foreign countries, especially in instances where safety or environmental impact are concerned.


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