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Friday, August 2, 2013

Halliburton: Organizational Culture and Ethics

Human beings are moral agents. Generally speaking, we have consciences and a sense of ought, which according to David Hume is not derived from what is. In other words, ethical principles are not obtained from describing some object or situation. Organizations consisting of human beings do not have consciences; nor are companies able to have a sense of ought that is not reduced to monetary terms. Such terms being empirical, they cannot get to ought anyway. The illusion that corporations are themselves moral agents comes from the failure to distinguish an organization itself from not only its human members, but also its culture. While it may seem that an organizational culture is distant from the people who inhabit the organization, as if culture were somehow based at the organizational level, culture is simply a way of saying that most people in a group share certain basic beliefs, values and ways of behaving. Beliefs, values and conduct pertain to persons. Physiologically, the brain thinks, values, and conducts the rest of the body. There is no “organizational brain.” Rather, culture refers to a critical mass proportion of persons having something in common. This does not mean that the “something” exists apart from, or "above," the persons.
For example, if enough employees of a company believe that breaking the law on the job is not a big deal, it might be tempting to conclude that the company is a criminal. If most employees do not value behaving ethically, it might seem obvious that the company is unethical. I submit the following as a general principle: Only human beings can be criminals or make unethical decisions. Even in the case of a group decision, the members of the group can be identified and held accountable.
Enron is an obvious example of a company whose executives did not value being ethical very much. Nor did they value being law-abiding. Just because many of the managers fit these characteristics does not mean that the company itself was a criminal or unethical.
          As if contributing to this disaster were not enough, people at Halliburton intentionally destroyed test results and other documents to minimize legal liabilities.
 Likewise, when Halliburton pleaded guilty to a criminal charge that the company destroyed documents after the BP Deepwater Horizon disaster in the Gulf of Mexico, in actuality particular employees were the guilty parties. Halliburton did not order workers to destroy simulations that showed little effect from BP going with fewer metal centralizing collars to stabilize the cementing of the well than a manager at Halliburton had recommended. Rather, a particular manager (or a group of managers) gave the order (so BP would be found more liable), and particular employees destroyed the simulations. Furthermore, someone at Halliburton decided to cover up the fact that the cement mix had been unsuitable for the job. The presidential commission that investigated the accident reported that Halliburton officials knew before the explosion that the cement mixture they planned to use to seal the bottom of the well was unstable but still went ahead with the cementing. According to the commission’s report, “There is no indication that Halliburton highlighted to BP the significance of the foam stability data or that BP personnel raised any questions about it.”[1] In short, people at Halliburton were motivated to maximize the civil judgment against BP while minimizing what cash Halliburton would have to pay out in damages.

Longitudinally, a company such as Halliburton can continue to consist of, and attract, a certain kind of person. Again, I am referring to person-characteristics rather than to something intrinsic to the organization itself. As stated by a reporter at the New York Times, “in the not-to-distant past, Halliburton found itself under scrutiny over accusations that it performed shoddy, overpriced work for the United States military in Iraq, bribed Nigerian officials to win energy contracts and did business with Iran at time when it faced sanctions.” The tolerance for unethical conduct within Halliburton may even have been “outsourced” when one of its former CEO’s, Dick Cheney, turned a blind eye as U.S. Vice President to his being personally involved in the Iraq no-bid contract decisions at the White House. Years later, Fadel Gheit, a senior oil analyst at Oppenheimer, could lament, “It’s another bad day for Halliburton.”[2] This should have come as no surprise to the public, given the effect of organizational culture in making it easier to stomach making unethical choices and acting unethically in an organization. This effect of culture is really individuals hinting or saying outright, "don't worry about it." 

1 Clifford Krauss, “Halliburton Pleads Guilty to Destroying Evidence After Gulf Spill,” The New York Times, July 25, 2013.
2. Ibid.