The below case study. Assess whether from a utilitarian, rights, justice and caring perspective, Unocal did the right thing in deciding to invest in the pipeline and then in conducting the project as it did. In your view, and using your utilitarian, rights, justice and caring assessments, did Unocal do the right thing?

house gas emissions." energy consumption and green- . Minutes of the 92nd Annual General Meeting of the Share- 4. Are Traidos Bank's ethical standards set too high? holders of Roche Holding Ltd, Basel, held at 10.30 A.M. on March 2, 2010 at the Convention Centre, Basel Trade Fair Complex, Basel; accessed January 12, 2010 at www.roche.com/ Notes annual_general_meeting_2010_en.pdf 1. Traidos Bank web site, accessed January 14, 2010 at www.triodos. 7. Liu Zhen and Emma Graham-Harrison, "Organ Trafficking com/en/about-triodos-bankewsewslettersewsletter- Trial Exposes Grisly Trade," Reuters, May 19, 2010. 8. 2 . sustainability-research/pharmaceutical-company Shan Juan, "Organ Trafficking Ring to Go on Trial," China Daily, March 17, 2010; accessed January 15, 2011 at http:// Traidos Bank web site, accessed January 14, 2010 at www. www.chinadaily.com.cn/china/2010-03/17/content_9599832.htm triodos.co.uk/en/about-triodos/who-we-are/mission-principles/ business-principles/ 9. David Matas and David Kilgour, Bloody Harvest: Organ 3 . Harvesting of Falun Gong Practitioners in China, (Woodstock, Traidos Bank web site, accessed January 14, 2010 at www. ON, Canada: Seraphim Editions, 2009). triodos.com/en/about-triodos-bankewsewslettersewsletter- sustainability-research/pharmaceutical-company 10. "Chinese Accused of Vast Trade in Organs," The Washington Times, April 27, 2010. CASES Unocal in Burmal Explore the Concept on mythinkinglab.com Union Oil Company of California, or Unocal, was founded in 1890 to develop oil fields around Los Angeles and other stood to net an estimated $200-$400 million per year for parts of California. By 1990, Unocal had operations in the life of the project. A portion of these revenues would be all aspects of the oil business, including extraction, refin- paid to the companies that partnered with Burma. ing, distribution, marketing, and even retail (the company MOGE, the government-owned company, signed owned a chain of Union 76 gas stations). With most oil a contract with Total agreeing to "assist by providing fields in the United States nearing depletion, the company security protection and rights of way and easements as may had turned to investing in energy projects outside the be requested by" the companies with which it partnered.4 country. Unocal's strategy was to market itself to govern- While its partner companies would actually construct the ments as a company that had expertise in all aspects of oil project, Burma would provide security through its army, and gas production. According to Roger C. Beach, CEO which would also ensure that land was cleared and rights of of the company, "What every government likes about way secured for the passage of the pipeline through Burma. Unocal is one-stop shopping-one group able to take the The Burmese project appealed to Unocal. Burma was whole project from development to the marketing end." attractive for several reasons. First, labor was cheap and One of the international projects that attracted the relatively educated. Second, Burma was rich in natural gas company's attention was a natural gas field called the resources, and its many other untapped resources presented "Yadana Field" that belonged to Burma. The Yadana Field major opportunities. Third, Burma was an entry point into is located in the Andaman Sea beneath 150 feet (46 meters) other potentially lucrative international markets. Burma not of water off Burma's shore. Estimates indicated the field only offered a potentially large market itself, it also occur pied a strategic location that could serve as a link to markets contained more than 5 trillion cubic feet of natural gas, in China, India, and other countries in Southeast Asia. Fi- enough to produce natural gas continuously for approxi- nally, the Burmese government maintained a stable political mately 30 years.' In 1992, the government of Burma had climate. With the military to maintain law and order, the formed a state-owned company named the Myanmar Oil political environment was extremely dependable. and Gas Enterprise (MOGE) to find private companies to Before committing itself to the project, Unocal evalu- help it develop the Yadana Field. In 1992, it signed a con- ated its risk position by conducting research on the social- tract with Total S.A, a French company that gave Total the political environment of the country. Burma is a Southeast right to develop the field and build a pipeline to transport Asian country with a population of 42 million and land the gas from Yadana to Thailand, where the government mass about the size of Texas. Burma is bounded by India of Thailand would buy the gas. The government of Burma to the northwest, China to the north and northeast, LaosBASIC PRINCIPLES to the east, Thailand to the east and southeast, and the and other supplies-or mine-clearing work." Responding Andaman Sea to the south. The majority of the popula- to these reports, the U.S. Congress on April 30, 1994 vo? to place Burma on a list of international "ou al "outlaw" states, and tion, some 69 percent, is Burmese, while Karens, Kachins, Shans, Chins, Rakhines, Indians, and Chinese are minori- in 1996, President Bill Clinton b Clinton barred Burmese government officials from entering the United States. ties in the nation. The Karens, clustered in rural parts of To check the situation for themselves, Unocal man. Southern Burma, had periodically fielded rebel groups against the government. Burma as a country is poor. agers hired a consulting firm, the Control Risk Group. Economically, Burma's per capita gross domestic product The report of the consulting firm warned: "Throughout is approximately $200-$300, and inflation is above 20 per- Burma the government habitually makes use of forced cent. Socially, Burma suffers a high infant mortality rate labor to construct roads. ... In such circumstances Unocal (95 deaths for every 1,000 live births) and a low life expec- and its partners will have little freedom of maneuver."8 tancy (53 years for males and 56 for females). The natural Despite the risks, Unocal decided to invest in the proj- gas project could provide much-needed revenues and sig- ect. S. Lipman, a Unocal vice president, later stated that nificant benefits to the people of the impoverished nation. Unocal managers had discussed with Total the "hazards" The only real problem the company saw with its in- that were involved in having the Burmese army provide "se- volvement in the project was that the government of Burma, curity" for the project: "we said that .. . having the military with which it would be a partner, was a military dictator- provide protection for the pipeline construction ... might ship accused of continually violating the human rights of proceed ... not in the manner that we'd like to see them the Burmese people. In 1988, after crushing major coun- proceed, I mean, going to the excess." Nevertheless, the trywide prodemocracy demonstrations, Burma's military company felt that the benefits, both to itself and to the seized power and made the 19-member State Law and people of Burma and Thailand, outweighed the risks. Order Restoration Council (SLORC) head of the govern- Moreover, the company would later assert, "engagement" ment. The SLORC, which was made up of senior military rather than "isolation" was "the proper course to achieve officers, imposed martial law on the entire country. The social and political change in developing countries with re- U.S. State Department, in its annual "Country Reports on Human Rights Practices, 1991," wrote that the army of the pressive governments."10 The company stated that "based SLORC maintained law and order through "arrests, harass- on nearly four decades of experience in Asia, [Unocal] ment, and torture of political activists. ... Torture, arbitrary believes that engagement is by far the more effective way detentions, and compulsory labor persisted. .. . Freedom of to strengthen emerging economies and promote more speech, the press, assembly, and association remain practi- open societies."11 cally nonexistent."5 In December, 1992, Unocal, through a wholly owned Many groups, including the U.S. State Department, subsidiary, paid $8.6 million to Total, S.A. for part of Total's accused the SLORC of numerous human rights abuses, stake in the project. Unocal became one of four investors particularly against Burmese minority groups. In its in the Yadana Field project, each of whom would contrib Country Reports on Human Rights Practices, 1995," the ute financially in proportion to their stakes in the project. Department wrote: Unocal held a 28.26 percent stake in the project as a whole; Total had a 31.24 percent stake; Thailand's PTT Explora- The [Burmese] Government's unacceptable tion & Production Public Co. had a 25.5 percent stake; and record on human rights changed little in 1994. ... the Burmese government (MOGE) had a 15 percent stake.12 The Burmese military forced hundreds of thou- It was agreed that Total would be responsible for over- sands, if not millions, of ordinary Burmese (in- cluding women and children) to "contribute" their all coordination of the project, would develop the wells at the labor, often under harsh working conditions, to Yadana field, and extract the gas. Unocal would construct construction projects throughout the country. The the 256-mile pipeline that would carry the gas from Yadana forced resettlement of civilians also continued. ... to Thailand. Most of the pipe would lie under the ocean, but The SLORC continued to restrict severely basic the final 40 miles would cross over southern Burma through rights to free speech, association and assembly." the region inhabited by the Karen, the minority ethnic group most hostile to the Burmese government. The military, it nnesty International, in an August, 1991 report on Burma, appeared, might have to use force to secure the area before ote that the ruling Burmese army "continues to seize ar- construction could begin. It would also have to build roads rarily, ill-treat and extrajudicially execute members of and other facilities such as base camps, buildings, barracks, fences, airplane landing strips, river docks, and helipads. nic and religious minorities in rural areas of the country. victims ... include people seized by the [army] and com- The period between 1993 and 1996 was devoted to preparing the way for construction of the pipel ed to perform porterage-carrying food, ammunition e pipeline, include ing clearing land and building roads, camps, housing, and other facilities. Actual construction of the pipeline began inETHICAL PRINCIPLES IN BUSINESS 147 196 and was completed in 1998. Throughout the time of preparation and construction of the pipeline, human rights Work on the project continued and commercial groups-including Human Rights Watch and Amnesty In- natural gas production in the Yadana project began in ternational-issued numerous reports claiming that the Bur- 2000. The companies by then had instituted a number of mese army was using forced labor and brutalizing the Karen social-economic programs to benefit the people around population as it provided "security" for Unocal workers and the pipeline. Unocal claimed that it provided 7,551 paid equipment. Roads, buildings, and other structures, these crit- jobs to Burmese workers during construction and that ics claimed, were being built with the use of forced labor re- while production continued it would continue to employ cruited from local Karen groups by the Burmese military, and 587 Burmese workers. By 2004, the project was deliver- hundreds of Karen were being forced to clear the way for the ing 500-600 million cubic feet of gas per day to Thailand, pipeline and to provide slave labor for the project. Moreover, benefitting that nation's rapidly expanding economy, pro- they claimed, Unocal was aware of this and aware of the bru- viding an efficient and reliable source of energy, and en- tal methods the army used to provide "security" for Unocal abling Thailand to use cleaner-burning natural gas to fuel workers and equipment. Several human rights groups, in- its electrical plants instead of fuel oil. Revenues from sales cluding Greenpeace, Amnesty International, and Human to Thailand yielded several hundred million dollars a year Rights Watch, met with Unocal executives in Los Angeles to the Burmese military government. Unocal reported and informed them that forced labor and other violations of that besides its initial investment of $8.6 million, it spent human rights were taking place in the pipeline region. a total of $230 million constructing the pipeline. It is es- In May, 1995, Joel Robinson, a Unocal official who timated that it costs Unocal $10 million a year to operate monitored the Yadana project for Unocal, spoke with the project. In return, Unocal's share of gas revenues was U.S. Embassy officials stationed in Burma. The Embassy $75 million a year, which would continue for the course reported that: of the 30-year contract. Unocal's total gain is expected to reach approximately $2.2 billion dollars. On the general issue of the close working rela- The benefits that the people in the region around the tionship between Total/Unocal and the Burmese pipeline were deriving from the programs that Unocal and Military, Robinson [of Unocal] had no apologies the other companies had initiated in that area were sum- to make. He stated forthrightly that the compa- marized by Unocal: nies have hired the Burmese military to provide security for the Project and pay for this through An extensive, multimillion-dollar socioeconomic the Myanmar Oil and Gas Enterprise (MOGE). development program associated with the proj- He said Total's security officials meet with their ect has brought real and immediate benefits to military counterparts to inform them of the thousands of families who live in the pipeline next day's activities so that soldiers can ensure region. These benefits include significantly the area is secure and guard the work perimeter improved health care, improvements in educa- while the survey team goes about its business. ... tion, new transportation infrastructure and small Total/Unocal uses [aerial photos, precision sur- business opportunities. The impact of these pro- veys, and topography maps] to show the [Bur- grams has been enormous. Infant mortality in the pipeline region, for example, had dropped to mese] military where they need helipads built 31 deaths per 1,000 live births by the year 2000, and facilities secured. "14 compared to 78 deaths per 1,000 live births for Unocal hired another consultant in 1995 to investigate Myanmar overall. In 2002, the infant mortality conditions on the Yadana project. The consultant reported rate in the pipeline region declined again to just 13 deaths per 1,000 live births (national figures in a letter to Unocal officials: not yet available). 16 My conclusion is that egregious human rights These claims were corroborated by the Collaborative for violations have occurred, and are occurring now, Development Action, Inc. (CDA), an independent group in southern Burma . .. the most common [of headquartered in Massachusetts and funded by the gov- which] are forced relocation without compensa- ernments of the Netherlands, Denmark, Canada, and tion of families from land near/along the pipe- Germany and by the World Bank. After three visits to the line route; forced labor to work on infrastructure pipeline region, the CDA reported in February, 2004 that "the number of people benefitting from the Socio-Econ this gove projects supporting the pipeline (SLORC calls n't service in lieu of payment of government servic Program is steadily increasing."17 Although "the pro- taxes); and imprisonment and/or execution by gram has mainly benefitted the middle class," this "middle the army of those opposing such actions. 15 class has grown, relatively, wealthy" and the program was148 BASIC PRINCIPLES refocusing on "programs for the poorer people in the cor- Questions ridor." The CDA noted, however, that "the educated mid- dle-class" still wanted "freedom" and a government "based 1. Assess whether from a utilitarian, rights, justice, and on a constitution."18 Moreover, it appeared that benefits caring perspective, Unocal did the right thing in de- from the Yadana project were not benefiting the people of ciding to invest in the pipeline and then in conduct- Burma outside the pipeline region, with the exception of ing the project as it did. Assuming there was no the military government, whose stake in the project gave it change the outcome of this case and that the outcome a steady stream of income. was foreseen, was Unocal then justified in deciding to Not all Burmese citizens were pleased with the devel- invest in the pipeline? opment of the Yadana Field. In October, 1996, 15 mem- 2. In your view, is Unocal morally responsible for bers of the Burmese Karen minority group, who alleged the injuries inflicted on some of the Karen people? that they or their family members had been subjected Explain. Is Chevron? to relocation, forced labor, torture, murder, and rape 3. Do you agree or disagree with Unocal's view that on the Yadana pipeline project, filed class action suits in "engagement" rather than "isolation" is "the proper U.S. courts against Unocal: one suit in U.S. federal court course to achieve social and political change in (Doe vs. Unocal) and a second in California state court. developing countries with repressive governments." Both suits argued that Unocal should be held responsible Explain. for the injuries inflicted on hundreds of Karen by the Bur- mese military because the activities of the military were Notes conducted on behalf of the pipeline project in which Unocal held a major stake and from which Unocal benefitted. The 1. This case was coauthored with Matthew Brown, former law suit in federal court was based on the federal 1789 Alien student at Santa Clara University. Tort Statute, which has been interpreted to authorize civil 2. A. Pasztor and S. Kravetz, "Unocal is Shifting Strategy to International Operations," The Wall Street Journal, suits in U.S. courts for violations of internationally recog November 20, 1996, p. B4. nized human rights. On June 29, 2004, the U.S. Supreme 3. Unocal, "Background: The Yadana Project & The Activ- Court upheld the right of foreigners to use the statute to ist Lawsuits," December 2, 2003, accessed May 26, 2003 at seek compensation in U.S. courts for violations abroad. On http://www.unocal.com/myanmar/suit.htm December 20, 2004, Unocal announced it would settle the 4. Doe vs. Unocal, 110 F. Supp. 2d 1294 (2000); accessed Febru- federal lawsuit, compensate the Karen villagers, and pro- ary 22, 2003 at http://www.earthrights.org/unocal/index.shtml; vide funds for social programs for people from the pipeline also available as 2000 U.S. Dist. Lexis 13327. region. The terms of the settlement were not revealed. 5. Accessed on April 2003 at http://www.state.gov/www/globall Four months after the settlement, Chevron Corpora- 6. Ibid. human_rights/brp_reports_mainbp.html tion, announced it would purchase Unocal for $16.2 billion and so assume Unocal's stake in the Yadana project. Chev- 7. Amnesty International, "Myanmar (Burma): Continuing ron now was accused of complicity in continuing human Killings and Ill-treatment of Minority Peoples," August rights abuses in the pipeline area. EarthRights International 1991, accessed May 20, 2004 at www.web.amnesty.org/library! index/engasa160051991 (ERD), an NGO that had helped the villagers win their law- 8. Doe vs. Unocal suit, claimed in a series of reports that the Burmese army 9. Ibid. still provided security for the oil companies and while doing 10. Unocal statement accessed June 20, 2004 at http://www. so engaged in human rights abuses "including torture, rape, unocal.com/myanmar/index.htm murder, and forced labor." In 2007 the military regime bru- 11. Ibid. tally suppressed nationwide demonstrations against its rule, 12. Unocal, "Background: The Yadana Project & The Activists shooting and killing dozens of Buddhist monks who led the Lawsuits," December 2, 2003, accessed June 5, 2004 at http:// peaceful protests, and imprisoning thousands of others. ERI www.unocal.com/myanmar/suit.htm claimed that revenues from the Yadana project financed 13. U.S. Department of Labor, Bureau of International Labor these and other brutalities of the military regime. In a 2009 Affairs, "Report on Labor Practices in Burma," accessed April report, Total Impact, ERI calculated that the regime's share 20, 2004 at http://purl.access.gpo.gov/GPO/LP$5259 of the Yadana revenues was $1.02 billion in 2008. Since 14. Doe us. Unocal. 15. Ibid 2000, according to a 2010 ERI report, Energy Insecurity, the project gave the regime $9 billion. ERI claimed much 16. Unocal, "Background: The Yadana Project," loc. cit. of that money went into offshore bank accounts owned by 17. Luc Zandvliet and Doug Fraser, "Corporate Engage Burmese generals, while public expenditures on health and ment Project, Field Visit Report, Third thisit education remained the lowest in the region and poverty Third Visit, Yadana Gas Transportation Project," (Cambridge, MA: Collaborative to was widespread. Development Action, February 2004), p. 5; accessed 2004 at http://www.cdainc.com/cep/publications.php 18. Ibid, p. 13