Union Carbide Corp. and Bhopal

1. © De Vee E. Dykstra, J.D., 2004 1 Union Carbide Corp. and Bhopal De Vee E. Dykstra, J.D., M.B.A. with Marc Boothby and Greg Rustand

2. © De Vee E. Dykstra, J.D., 2004 2 Union Carbide in India Union Carbide India (UCIL) – subsidiary of Union Carbide established in 1934 50.9 percent interest with parent company 49.1 percent owned by UCIL and traded on the Bombay Stock Exchange Bhopal pesticide plant built in 1969 Solely managed by Indian managers since 1982 Chemicals were originally imported Started production of Methyl Isocyanate (MIC) in 1975

3. © De Vee E. Dykstra, J.D., 2004 3 Union Carbide in India (Cont) MIC properties Odorless, colorless liquid Lethal in gaseous state Disrupts nervous systems of insects and humans Detected by tearing and burning eyes and noses

4. © De Vee E. Dykstra, J.D., 2004 4 Key Management Decisions Original plant location in Bhopal – tax incentives Government pressured UCIL to stop importing MIC UCIL gets permit to build MIC production unit MIC production unit Fought by city leaders – development plan required dangerous industries to relocate UCIL still chose current plant site Shantytowns sprang up nearby (before unit is completed)

5. © De Vee E. Dykstra, J.D., 2004 5 Key Decisions Cont’d Industry practice was to produce small amounts of MIC and consume it immediately in process Process design provided US Union Carbide engineers with Indian engineer augmentation Decided to use large storage tanks due to projections of increased growth of pesticide industry Operation under UCIL management began in 1980 Governmental oversight – not vigorous Economic downturn causes tight budget Maintenance deferred, training reduced, employees laid off

6. © De Vee E. Dykstra, J.D., 2004 6

7. 7 The BHC store was used to store methyl isocynate (MIC) imported from the USA; later, when Union Carbide began manufacturing MIC in Bhopal it stored coke fuel. Now it contains piles of sacks of materials estimated to total over 100 tons.

8. © De Vee E. Dykstra, J.D., 2004 8 Initial Problems Phosgene (Mustard Gas) Neighbors – unaware of risk and danger 1981 – first leak killed a worker 1982 – second leak forced temporary evacuation Production continues and ignored warnings of population proximity to the plant

9. © De Vee E. Dykstra, J.D., 2004 9 Fateful Event 9:30 pm - employee cleaned filters by connecting water hose to line with no safety device 120 - 240 gal. of water introduced into MIC tank Pressure builds in tank Several safety devices were disabled for repair (simultaneously) Attempt to drain water failed, pressure builds 1:00 am – alarm is triggered MIC gas released into atmosphere 4,037 people die; 60,000 receive serious injuries; animals die

10. 10 The Sevin structure is the location where the deadly MIC was reacted to produce the pesticide Sevin, also known as carbaryl. The reaction vessel was full when the plant was abandoned and during 1999 it split, spilling its contents onto the ground.

11. © De Vee E. Dykstra, J.D., 2004 11 Investigation New York Times – large volume of water entered tank 610 causing the accident “Water Washing Theory” - Employee violates policy and fails to use slip blind Union Carbide – large volume of water entered tank 610 causing the accident Accident Deliberate connection Reveals several cover ups and possible sabotage by disgruntled employee Indian Government – similar to New York Times

12. © De Vee E. Dykstra, J.D., 2004 12 Legal Proceedings First Law suit filed in U.S. four days after incident - asked for $40 billion in damages for 200,000 victims U.S. Courts ruled (1986) - Indian courts should handle the suits $3.3 billion suit filed in Indian court in 1986

13. © De Vee E. Dykstra, J.D., 2004 13 Settlement 1989 settlement $470 million to Indian Government 43.5 for 3000 deaths 50 for 2000 severely injured 156 for 30,000 permanently disabled 64.3 for 20,000 temporarily disabled 140.6 for 150,000 minor injuries 15.6 for treatment and rehabilitation

14. © De Vee E. Dykstra, J.D., 2004 14 Further Settlement and Consequences Union Carbide sells 50.9% interest for $90 million (1994) Built a $20 million hospital $54 million went for local hospitals and clinics Union Carbide merges with Dow Chemical Employees laid off Bhopal plant never reopens Litigation continues (Dow defends) – for illness caused by groundwater contamination

15. 15 The cycle shed contains in excess of 20 tones of Sevin residues, a solid black tar in rusting barrels. Other wastes are stored in sacks. Amongst the contaminants found here were HCHs, chlorobenzenes including hexachlorobenzene and other chlorinated and non-chlorinated hydrocarbons

16. 16 The formulation shed, in the northern corner of the Union Carbide site, is where pesticides were mixed into final products for sale. This stockpile probably comprises fifteen to twenty tons. The most contaminated waste found so far came from this location.

17. 17 The soapstone shed, close to the formulation shed, contains a mixture of barrels and sacks of material, probably exceeding twenty tones. Sacks in this shed contain carbaryl, and 30 other toxic chemicals including HCHs were identified.

18. 18 The "small shed", a short distance northwest of the BHC store, contains around two or three tones of toxic waste in sacks. A sample from this site contained carbaryl, alkyl benzenes and linear aliphatic hydrocarbons.

19. © De Vee E. Dykstra, J.D., 2004 19 More Consequences Congressional action – chemical companies required to disclose presence of dangerous chemicals & create emergency evacuation plans, federal regulators get more authority Industry – Responsible Care Initiative Improve safety and public image

20. © De Vee E. Dykstra, J.D., 2004 20 Question 1 Who is responsible for the Bhopal accident? How should blame be apportioned among parties involved, including Union Carbide Corporation, UCIL, plant workers Governments in India, or others? UC was responsible for damages. UCIL was responsible for the accident. Indian Government.UC was responsible for damages. UCIL was responsible for the accident. Indian Government.

21. © De Vee E. Dykstra, J.D., 2004 21 Question 2 What principles of corporate social responsibility and business ethics are applicable to the actions of the parties in question? UC was irresponsible and reactive in their social responsibility programs. UC was combative in following laws and government regulation. UC was irresponsible and reactive in their social responsibility programs. UC was combative in following laws and government regulation.

22. © De Vee E. Dykstra, J.D., 2004 22 Question 3 How well did the legal system work? Do you agree with the decision to try the lawsuits in India? Were the victims fairly compensated? Was Carbide sufficiently punished? We both feel that the legal system worked. It was the right decision to try the case in India. Settlements were unfair, but by what standard. UC was sufficiently punished—but!We both feel that the legal system worked. It was the right decision to try the case in India. Settlements were unfair, but by what standard. UC was sufficiently punished—but!

23. © De Vee E. Dykstra, J.D., 2004 23 Question 4 Did Union Carbide handle the crisis well? How would you grade its performance in facing uniquely difficult circumstances? UC did not handle the situation very well. Tried to blame others. Acted reactively Ran D+ UC did not handle the situation very well. Tried to blame others. Acted reactively Ran D+

24. © De Vee E. Dykstra, J.D., 2004 24 Question 5 Does Dow Chemical Company have any remaining legal liability, social responsibility, or ethical duty to address unresolved health and environmental claims of Bhopal victims?

25. © De Vee E. Dykstra, J.D., 2004 25 Question 6 What lessons can other corporations and countries learn from this story? Be more adherent to government policies and regulations. Be more proactive in crises management—crisis drills More involvement Opportunity for creating social responsibility programs (DOW) Be more adherent to government policies and regulations. Be more proactive in crises management—crisis drills More involvement Opportunity for creating social responsibility programs (DOW)

26. © De Vee E. Dykstra, J.D., 2004 26 Reference Page “The Facts about Union Carbide Corporation and the Bhopal Tragedy” http://www.bhopal.com/facts.htm “Union Carbide Bhopal—Plant Tour” http://www.mad-dow-disease.com/tour/main.htm Kunreuther, H., and Bowman, E. “A Dynamic Model of Organizational Decision Making: Chemco Revisited Six Years after Bhopal.” Organization Society, Vol. 8-4 July 1997.