Carroll (1998) argues that the good corporate citizen has to go beyond just legal obligations to include ethical issues, which includes engagement with stakeholders. However, the primary concern is the bottom line where the most ethical practice to preserve this aim is required. Thus, in Shell as it maintained the laws and the primary abuses were by the state (i.e. Shell merely failed to prevent state actions of gross human rights abuses) means that within this definition the company was a good corporate citizen. However, Matten & Crane (2005) argue that there is an extended obligation in respect to such influential companies, which means that when there is a weak rule of law for human rights and environmental protections (as in Nigeria) they should supplant the state. Thus, Shell should have used its influence to prevent the unsustainable actions of the state, in order to be a good corporate citizen. This paper will argue that the latter is the correct approach and Nigeria fails to meet this norm.
The Nigerian oil and gas industry has been fraught by controversy, which in part stems from the country’s ownership of all natural resources. As s. 1 of the Petroleum Act 1969 (PA 1969) states:
“The entire ownership and control of all petroleum in, under or upon any lands to which this section applies shall be vested in the State”.
This means that all oil and gas reserves extracted must be orchestrated through a state corporation (as provided for under s. 44(3) of the Nigerian Constitution). In the extraction of these ‘state-owned’ reserves, the Nigerian state-owed petroleum company (Nigerian National Petroleum Company (NNPC)) engages in joint ventures with petroleum giants such as Royal Dutch Shell (Nwapi, 2010). The consequence of the joint venture model is that the state will be liable for any tortious breaches, as well as contractual risks (Nwaokoro, 2011). This would indicate that the state needs to ensure that its partners act in a manner that is consistent with the legal framework. The problem is that the history of Nigeria illustrates a patchy track record in the balancing of interests (Marong, 2010). The problems of balancing interests is the main problem that Royal Dutch Shell has had in its recent past within Nigeria because it could be deemed as permitting, if not supporting, unsustainable human rights abuses against local communities.
The case of Ken Saro-Wiwa v. Royal Dutch Petroleum Co Case Co., 226 F.3d 88, 92–93 (2d Cir. 2090). The facts of the case concerned the death of Ken Saro Wiwa and other human rights protestors at a Royal Dutch Shell facility in Nigeria that was perpetrated by state security forces. In Nigeria the courts refused a just outcome for the bereaved families and the local communities harmed by the unsustainable actions of Shell and the state. In response these individuals sought justice through the USA’s Alien Tort Law to seek justice. Thus, it is clear that the losers in Nigeria are generally the local communities, which were meant to be the ‘winners’ under the state-owned framework (Uwafiokun & Ite, 2006). The state-ownership may not be the problem in Nigeria, as long as the system is capable of providing sufficient protections to local communities through responsible and effective local community communication from oil giants, such as Shell, who ensure that state complies with these requirements.
The purpose of the Nigerian nationalization of petroleum is to benefit the whole country, as opposed to centering on the interests of landowners. Marong (2010) argues that:
“[T]he legal regime governing Nigeria’s petroleum sector has evolved in response to changes in the political system. The shift from colonial rule to independence led to changes in the legal regime that were meant to underscore the control of Nigerians over the country’s economic destiny… [T]he Nigerian government sought to assert sovereignty over the country’s natural resources by enacting laws that vested the ownership and control of all Natural Resources in the State” (p. 131).
The purpose of this development illustrates that the local communities (the citizens of Nigeria) were meant to benefit from the nationalization of petroleum. However, power of determining accountability in the Nigerian legal framework is at the hands of the Minister of Petroleum Resources (Petroleum Decree s.9 (1)(b)(iii)). This power is unchecked and elements are delegable in the provision of oil and drilling licenses, which means there are no legal minimums in the model (Ayodele , 1985). The consequence of this has been widespread corruption, which has had a significantly negative effect on local communities (Hill, 2010). This is because licenses are given to an elite few, as opposed to creating a model where there is a minimum set of undertakings and public consultation between oil giants, such as Shell, and local communities over the terms, obligations and rights that these communities hold in respect to the oil and gas licenses and joint ventures (Okonta & Douglas, 2001).
The alien tort cases pursued in the US Supreme Court illustrate the local communities are being harmed by the state and/or the oil companies in the region without legal recourse (Kiobel v. Royal Dutch Petroleum Co., 132 S.Ct. 1738 (2012)). Resultantly, large oil companies are being forced to change because of legal action and protest that is damaging the reputation of their actions in Nigeria (Kames, 2012). The purpose of the legal was to ensure that the local communities (i.e. the citizens of Nigeria) received the benefits that they were meant tot from the nationalization of petroleum.
The alien tort cases have been allowed in the US Supreme Court because it has been recognize that local communities are being harmed by the state and/or the oil companies in the region without legal recourse or access to justice (Kiobel v. Royal Dutch Petroleum Co). These actions have harmed the reputation of Shell, which means that it is essential that the company engages with these communities, as opposed to examining the bottom line (i.e. human and environmental value must be ethically examined). This is exacerbated in Nigeria because peeling back the layers of corruption will take significant reforms over a period of time (Hill, 2010), which means that it is likely that the highest bidders in the oil and gas industry will need to ensure that local communities are engaged with and treated in an ethical manner (Idemudia, 2009). This is due to the power (and money) of the large oil companies and corruption within the Nigerian oil and gas licensing structure has created a situation where the local communities are the losers (Abrahamsen, 2009). Ethically, is necessary for Shell to engage with these communities, admit fault and provide reparation for the harm done either through positive acts or omissions. Some developments have been made through local community engagement recently (Uwafiokun & Ite, 2006). Nonetheless, the past harms are being denied and reparation is not being provided, which questions Shell’s commitment to ethical oil and gas excavation in the vulnerable state of Nigeria. Therefore, Shell is failing in its enhanced obligations of being a good corporate citizen under Matten & Crane’s thesis; whereas they are fulfilling and surpassing their obligations under Carroll’s model.
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