Case Study #20

A case study published by the Carnegie Council on Ethics and International Affairs

Shell in Nigeria: Corporate Social Responsibility and the Ogoni

Crisis

by Bronwen Manby

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SHELL IN NIGERIA: CORPORATE SOCIAL RESPONSABILITY AND THE OGONI CRISIS

Bronwen ManbyCase Study for the Carnegie Council on Ethics and International Affairs

On November 10, 1995, Ken Saro-Wiwa, a well-known Nigerian author and spokesperson for the Movementfor the Survival of the Ogoni People (MOSOP), was hanged in Port Harcourt, in the heart of the oil-producingregion of southeast Nigeria, together with eight other Ogoni activists all involved in protests against the oilindustry. The “Ogoni Nine” had been tried and convicted by a special tribunal appointed by the military gov-ernment, whose procedures blatantly violated international standards of due process. The international outcrywas immediate, even from governments not known for an activist stance on human rights. Britain’sConservative Prime Minister John Major referred to the executions as “judicial murder.” Commonwealth headsof government, whose biannual summit was taking place at the time of the executions, suspended Nigeria frommembership of the usually uncontroversial club of states sharing a British colonial heritage. Other sanctions fol-lowed from the European Union, United States, and United Nations, including bans on selling weapons toNigeria and on granting visas to members of the Nigerian government. Activists’ calls for an oil embargo onNigeria, heavily dependent on its petroleum resources, were, however, resisted.

The Saro-Wiwa case brought into the international headlines a debate over the role played by the oil multi-nationals in Nigeria that had already been raging for several years. Even before the executions, the oil industryhad been criticized for its alleged support for successive military governments that had annulled programs oftransition to civilian rule and cracked down on protest against the oil industry. Shell in particular, the largestproducer in Nigeria, had been targeted for attack by MOSOP, in a campaign that successfully closed downShell’s production in Ogoniland—a small proportion of its Nigerian total—in 1993. In turn, Shell was blamedboth locally and internationally as the government first brutally suppressed protests by MOSOP, and finallytried and executed the core of the organization’s leadership.

In a world where transnational corporations often have revenue and capital that dwarfs that of the world’ssmaller states, the concept that companies have responsibilities to the community at large other than to makemoney has gained increasing currency. However, international law, the framework of principles developed overthe last few centuries to govern relations between states, is only just beginning to address the behavior of non-state actors such as transnationals. Consumers, activists, and concerned shareholders have begun to put pres-sure on the major transnationals to pay more than lip service to ideas of good corporate citizenship, calling forinternational regulation of corporate activities.

Public concern in the developed world over the activities of multinationals in developing countries hasfocused on two main areas: labor conditions in the apparel industry; and the environmental, development, andhuman rights consequences of oil and mining operations in poor countries. During the 1990s, Nike, Phillips-Van Heusen, Shell, British Petroleum, Mobil, Rio Tinto Zinc (RTZ), and others all faced public criticism of theiractivities in developing countries. Human rights and environmental activists alleged that wages and workingconditions in the garment industry’s factories in the developing world were unacceptable, and that the compa-nies working in the extractive sector applied lower environmental standards than they did in Europe or NorthAmerica and were complicit in human rights violations committed by the security forces of the countries wherethey operated, abuses often committed against those protesting the companies’ own activities.

The response of Shell to the attacks on its record in Nigeria forms an interesting study of the way in which

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one transnational corporation has reacted to the challenge of demands that it take on responsabilities beyondmaximizing profit. Initially brushing off the idea that issues of sustainable development and human rights wereof any concern to an oil company, Shell went on to become something of a sectoral leader in developing poli-cies of corporate social responsibility.

THE OIL INDUSTRY IN NIGERIA

Nigeria is the largest oil producer in Africa and the eighth largest in the world. The first discovery of commer-cial quantities of oil in Nigeria was in 1956; by the end of the century the country produced approximately twomillion barrels per day of crude oil. The discovery of oil transformed Nigeria’s political economy, and since the1970s oil has provided approximately 90 percent of foreign-exchange earnings, and 80 percent of federal rev-enue. Nigeria also has huge reserves of natural gas yet to be fully exploited.

As in the case of many other “petro-states,” the windfall income from oil has proved in many ways to bea curse rather than a blessing. Instead of turning Nigeria into one of the most prosperous states on the Africancontinent, its natural resources have enriched a small minority while the vast majority have become increasinglyimpoverished: with a per capita gross national product of only US$260 a year, Nigeria is one of the poorestcountries in the world. At the same time, the struggle among the elite to gain access to the profits of the oilboom was a factor in sustaining the rule of successive military governments that ran Nigeria for all but ten ofthe years between independance in 1960 and the inauguration of civilian president Olusegub Obasanjo (him-self a former military ruler) in May 1999. Under military rule, power and money became ever more concen-trated in the hands of fewer and fewer people. Politics became an exercise in orgazined corruption--a corrup-tion perhaps most spectacularly demonstrated around the oil industry itself, where large commissions and per-centage cuts contracts enabled individual soldiers and politicians to amass huge fortunes, while the majoritysank deeper into poverty.

Anger among ordinary Nigerians at this poverty in the midst of wealth has been exacerbated by the lack ofcohesive sense of national identity, and by southern resentment over northern control of the army, and hencethe federal government and oil revenues, for most of the years since independance. The boundariesof the ter-ritory now known as Nigeria were first defined in 1907. Nigeria was brought under the government in 1914by the amalgamation of two British colonial protectorates. Although the country was in theory ruled as a sin-gle unit, in practice the northern and southern parts of the country were administered by the British as distinctentities with little attempt at coordination. Only in 1954, six years before independance, did Nigeria became atrue federation with a central government and three consituent components with a large degree of autonomy inall other matters: Northern, Western and Eastern Regions. In each of these three regions, a majority ethnicgroup constituted about two-thirds of the population, the Hausa-Fulani in the north, the Yoruba in the west,and the Igbo in the east; the remaining third was made up of various minority groups, of which there may be250 or more in Nigeria. The peoples living in the oil-producing communities of the southeast largely belong tothese minority ethnicities, and they speak a diverse range of languages and dialects from at least five major lan-guage groups. Since independance the three original regions have been broken down into an increasing numberof states, in an attempt to satisfy minority demands for recognition (36 in total as the civilian government tookoffice in 1999). But this fragmentation of goverment has been, paradoxically, paralled by increasing centraliza-tion in practice , as individual states have become less and less viable without federal financial support and oilrevenues have supplanted all others as the foundation of the Nigerian economy.

According to the Nigerian constitution, all mineraks, oil, and gas belong to the Nigerian federal govern-ment, which negotiates the terms of oil production with international oil companies. Most exploration and pro-duction activities in Nigeria are carried out by European and U.S. oil companies operating joint ventures inwhich the Nigerian National Petroleum Corporation (NNPC), the state oil company, owns 55 or 60 percent, S

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1 The 1999 constitution provided for a substantial increase of funding to the delta, with a 13 percent allocation of revenue on a der-ivation basis (up from 2 percent derivation, plus 3 percent for the development of oil-producing communities and 1 percent to respondto ecological problems caused by oil production, under the formula in operation immediately prior to the handover of power). By the endof 1999, the new formula had yet to be applied in practice.

2 Saro-Wiwa’s best-known novel internationally is Sozaboy: A Novel in Rotten English, an account of the Nigerian civil war of 1966to 1970 written in the voice of a young soldier from the delta. In Nigeria, he was best known as the writer of Basi and Company: AModern African Folktale, a story of Lagos life that was turned into a serial on Nigerian television.

haps 6,000 square kilometers are mangrove forest, the rest freshwater swamp, dryland forest areas now large-ly cleared for agriculture, and coastal barrier islands. In this sensitive environment, the oil companies operatingin Nigeria maintain that their activities are conducted to the highest environmental standards; but Nigerianenvironmental laws, though in most respects comparable to their international equivalents, are poorly moni-tored and enforced. There are surprisingly few good-quality independent scientific data on the overall or long-term effects of hydrocarbon pollution on the delta, yet available evidence does indicate that oil-led developmentin general has seriously damaged the environment and the livelihood of many of those living in the oil-produc-ing communities, and that poor environmental standards in relation to oil spills, gas flaring, and the construc-tion of roads and canals have contributed to these problems.

Compensation for damage caused by the oil industry is inadequate, and—in the absence of a properlyfunctioning court system—there is no effective recourse to an independent arbiter to determine the value ofthe damaged property. The oil companies state that many spills are caused by sabotage, and, in accordancewith Nigerian law, they pay no compensation in such cases; but the determination that sabotage has occurredis largely left in their own hands, increasing the chances that spills caused by corrosion will be misattributedto criminal damage. At the same time, in an area of Nigeria where there is a great need for cultivable and hab-itable land, land is expropriated for oil production under laws that allow no effective due process protectionsfor landholders and only inadequate compensation for the loss of livelihood of those affected. Although theamount of land used for oil production is small by comparison with the total area of the Niger Delta, the effecton individual landholders can be devastating. Such compensation as is paid seldom reaches those who havesuffered most.

While the minority ethnic groups living in the oil-producing communities of the Niger Delta have faced theadverse effects of oil extraction, they have in general also failed to gain from the money generated. Despite thevast wealth produced from the oil found under the delta, the region remains poorer than the national average;and though in the north of Nigeria poverty is more extreme, the divisions between rich and poor are more obvi-ous in the areas where gas flares light up the night sky. The “derivation principle” in the federal budget, underwhich a share of the revenue generated from oil had been paid to the states where the oil was produced, wasreduced to insignificant levels, and only partially restored in 1999.1 Although other structures have been creat-ed to bring development to the delta, these in practice have largely been a means for enrichment of those admin-istering them rather than a mechanism for poverty alleviation.

Nevertheless, oil production itself and oil-based industrial expansion have transformed the local economy,and some in the oil-producing communities have benefited greatly from oil production. Those with full-timeemployment in the oil industry are paid high wages for skilled work, but they are a well-paid minority sur-rounded by a mass of un- or under-employed; most oil workers do not come from the oil-producing commu-nities in any event. Contractors to the oil industry, often traditional leaders or those with close links to theadministrations of the oil-producing states, also have the potential to make large amounts of money, oftenincreased by the widescale corruption surrounding the award of contracts for construction and other oil indus-try projects—from which those in the oil companies in charge of the choice of contractor also benefit.

Development spending by the oil companies has also brought schools, clinics, and other infrastructure toremote parts of the country that might otherwise be far more marginalized by the Nigerian government; butmany of these projects are inappropriate for the needs of the communities where they are sited. Others, becauseof incompetence or corruption, are never completed or shoddily carried out. In any event, development spend-ing by the oil companies has only reached significant levels since protests began to threaten oil production.Although a minority of politicians, traditional leaders, and contractors have become rich on the spoils of oil,and hence support the oil industry’s activities, the great majority of people from the minority ethnic groups ofthe oil-producing areas have remained impoverished, sometimes as a direct result of environmental damage

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3 Ken Saro-Wiwa, “My Story,” text of statement to the Civil Disturbances Tribunal, reprinted in Ogoni: Trials and Travails (Lagos:Civil Liberties Organisation, 1996), p.42B43.

4 SPDC, Nigeria Brief: The Ogoni Issue (Lagos: SPDC, January 1995).5 Ken Saro-Wiwa, Genocide in Nigeria: The Ogoni Tragedy (Port Harcourt: Saros, 1992), p. 81.6 One leading jurist concluded: “The judgement of the Tribunal is not merely wrong, illogical or perverse. It is downright dishonest.

The Tribunal consistently advanced arguments which no experienced lawyer could possibly believe to be logical or just. I believe that theTribunal first decided on its verdicts and then sought for arguments to justify them. No barrel was too deep to be scraped.” MichaelBirnbaum Q.C., A Travesty of Law and Justice: An Analysis of the Judgment in the Case of Ken Saro-Wiwa and Others (London: Article19, December 1995), p. 2.

caused by oil production; at the same time, the potential benefits of links to the oil industry have exacerbatedconflicts within and among the oil-producing communities, and violent clashes between competing interestgroups have become increasingly common.

The Ogoni Crisis and Shell

In 1990, leaders of the Ogoni ethnic group founded the Movement for the Survival of the Ogoni People, ofwhich Ken Saro-Wiwa, an internationally known author, became the eloquent and effective spokesperson.2

MOSOP, a coalition of pre-existing Ogoni organizations, such as the Federation of Ogoni Women’sAssociations, the Conference of Ogoni Traditional Rulers, and the National Union of Ogoni Students, was thefirst really successful effort to organize people in the oil-producing areas specifically to highlight their grievancesin relation to oil production on a national and international stage. As such, the organization directly threatenedthe foundations of the Nigerian military government, which unleashed a violent and repressive response.

The Ogoni are a small ethnic group of about half a million people who mostly live in a compact territoryof dry land cleared for farming less than one hour by road from Port Harcourt, the main city in the oil-pro-ducing region. SPDC and its joint venture partners have five major fields in Ogoniland dating from the 1960sand 1970s, each with its own flowstation (where gas is separated and flared from the oil collected from differ-ent individual wells and the oil pumped on to terminals for export). In 1993 the total production potential fromSPDC’s Ogoni fields was roughly 28,000 barrels a day, approximately 3 percent of SPDC’s overall productionat that time. Chevron Nigeria Ltd also operated in Ogoniland until 1993, but on a smaller scale. As in otherparts of the oil-producing regions, the environment in Ogoniland has been damaged by oil production, thoughthe extent of the damage is subject to dispute and no independent, scientific, and comprehensive study has beencarried out. Ken Saro-Wiwa maintained that the environment in Ogoniland had been “completely devastatedby three decades of reckless oil exploitation or ecological warfare by Shell.”3 Shell, on the other hand, stated:“Allegations of environmental devastation in Ogoni, and elsewhere in our operating area, are simply not true.”4

In August 1990, MOSOP adopted an “Ogoni Bill of Rights,” which listed the grievances of the Ogoni peo-ple and demanded “political autonomy to participate in the affairs of the Republic as a distinct and separateunit,” including “the right to the control and use of a fair proportion of Ogoni economic resources for Ogonidevelopment.” MOSOP’s political demands were targeted at the Nigerian federal government, but it alsoaccused Shell of “full responsibility for the genocide of the Ogoni.”5 In October 1990, MOSOP sent the OgoniBill of Rights to then–military head of state General Ibrahim Babangida, but received no response. In December1992, MOSOP sent its demands to Shell, Chevron, and NNPC, together with an ultimatum that they pay backroyalties and compensation within 30 days or quit Ogoniland.

On January 4, 1993, a date afterwards known as “Ogoni Day,” MOSOP held a mass rally in Ogonilandattended by tens of thousands of people. Mobilization continued during the year, and MOSOP delegations metboth with officers representing the military government of General Ibrahim Babangida, and, following theannulment of June 1993 elections that were to have led to the installation of a civilian government, with theinterim government of Ernest Shonekan. Saro-Wiwa used the media effectively to spotlight the MOSOP case,and traveled abroad soliciting assistance from the international environmental movement and others. MOSOP’sofficial policy was one of nonviolent protest, and most demonstrations were disciplined; however, there werealso disturbing allegations of harassment of those who did not agree with MOSOP’s views, especially by itsyouth wing. Shell withdrew its staff from Ogoniland in January 1993 and ceased production at its facilitiesthere in mid-1993, citing intimidation and attacks on its staff.

This demonstration of organized political opposition to both government and oil companies provoked amilitary crackdown in Ogoniland. Ken Saro-Wiwa and other MOSOP leaders were detained several times dur-ing 1993. Following a new military coup in November 1993, which placed General Sani Abacha in power, thisrepression became more severe. The Rivers State Internal Security Task Force, a military unit, was created in

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7 Shell International Limited letter to Human Rights Watch, January 13, 1995. 8 Shell International Limited letter to Human Rights Watch, November 5, 1996.9 “Clear Thinking in Troubled Times,” SPDC Press Release, October 31, 1995. 1 0 “Statement by Mr Brian Anderson, Managing Director, Shell Petroleum Development Company of Nigeria Limited,” SPDC Press

Release, November 8, 1995. 1 1 “Execution of Ken Saro-Wiwa and His Co-Defendants,” SPDC Press Release, November 14, 1995.

January 1994 specifically to deal with the Ogoni crisis. Human rights groups documented detentions, harass-ment, and extrajudicial executions of MOSOP activists, as well as security force involvement in promoting vio-lent clashes between the Ogoni and neighboring ethnic groups.

In May 1994, four prominent Ogoni leaders were brutally murdered by a mob of youths. These men hadbeen associated with a faction of MOSOP that had differed with Saro-Wiwa on the organization’s tactics andstrategy and had been regarded by some in MOSOP as government collaborators. Ken Saro-Wiwa and severalother Ogoni activists were immediately arrested on charges of murder and incitement to murder, despite a lackof credible evidence to connect them to the deaths. Sixteen members of the MOSOP leadership were put ontrial, and nine, including Ken Saro-Wiwa, were eventually convicted and sentenced to death by a special tribu-nal established for the case, whose procedures blatantly violated international standards of due process.Without the right to an appeal, the Ogoni Nine were executed on November 10, 1995.6

Twenty other former activists in MOSOP, who were detained at various times in 1994 and 1995, werecharged with murder in connection with the May 1994 killings and held in Port Harcourt prison, in deterio-rating health, until September 1998. Dozens of other Ogonis were held in detention without charge for periodsranging from a few hours or days to several months. Many other leadership figures fled into exile. Nevertheless,protests continued at a lower pitch, and Ogoni activists continued to organize events to coincide with January 4,Ogoni Day, and November 10, the anniversary of the executions. Only with the death of General Abacha inJune 1998 was the level of repression in Ogoniland reduced and MOSOP once again able to organize freely.

During the height of the Ogoni crisis, MOSOP and other local activists regularly made allegations that Shellcolluded with the military, even after the company ceased production in Ogoniland. A document alleged to bea leaked internal government memorandum from May 1994 stated that “ruthless military operations” wereneeded for oil production to resume, and that the oil companies should be pressured to be contribute towardthe cost. The government claimed that this document was a forgery; Shell also raised questions about its authen-ticity and disassociated itself from the contents. The head of the Rivers State Internal Security Task Force sev-eral times publicly claimed to be acting so that Shell’s oil production could resume, complaining to threedetained environmental activists that he had been “risking his life and that of his soldiers to protect Shell instal-lations.” Community members reported that the Task Force coerced individuals to sign statements “inviting”Shell to return. Former Ogoni members of the Shell “supernumerary police” (members of the Nigerian policeforce permanently attached to Shell facilities and paid for by Shell, under a system common to all the oil com-panies) claimed that they were involved in deliberately creating conflict between different groups of people, andin intimidating and harassing protesters during the height of the MOSOP protests in 1993 and 1994; Ogonidetainees also alleged that they were detained and beaten by Shell police during the same period.

Shell denied all such allegations, and distanced itself from statements by government or security officialscalling for repressive responses to protests, while stating: “Our Chief Executive in Nigeria has repeatedly—bothpublicly and privately—expressed our concerns over the violence and heavy handedness both sides on theOgoni issue have displayed from time to time, and is doing what he can to counsel the authorities not to doanything which will tend to increase the likelihood of violence either to persons or property.”7 Shell also deniedany collusion with the authorities. However, Shell later admitted having made direct payments to the Nigeriansecurity forces, on at least one occasion in 1993. Local groups alleged that such payments were—and remain—a routine practice among oil companies in Nigeria. The company made no public protests in relation to indi-vidual cases in which security forces carried out human rights violations at Shell facilities.

In early 1996, newspaper investigations revealed that Shell had recently been in negotiation for the import

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1 2 “If we’re investing in Nigeria you have the right to know why,” advertisement on behalf of Shell placed in the Guardian (London),November 17, 1995.

1 3 “Execution of Ken Saro-Wiwa and His Co-Defendants,” SPDC Press Release, November 14, 1995; “Shell Reaffirms Support forHuman Rights and Fair Trial,” Shell International Limited Press Release, January 30, 1996.

1 4 “Fair Trials for the Ogoni 19,” Shell International Limited Press Release, May 17, 1996. 1 5 Shell Petroleum Development Company of Nigeria Limited, “PAGE [Public Affairs, Government and the Environment] Fact Book

1993,” unpublished internal document (Lagos, 1993), section 6.6; Shell Petroleum Development Company of Nigeria Limited, People andthe Environment: Annual Report 1998 (Lagos: SPDC, May 1999), p.5. Other oil companies operating in Nigeria also have communitydevelopment programs which have similarly increased in value in recent years; Shell’s remains the biggest program.

1 6 Shell Petroleum Development Company of Nigeria Limited, People and the Environment: Annual Report 1998 (Lagos: SPDC, May1999), pp.15–16.

1 7 MOSOP Press Release, November 10, 1998.

of arms for use by the Nigerian police. In response to these allegations, Shell stated that it had in the pastimported side arms on behalf of the Nigerian police force, for use by Shell “supernumerary police” against gen-eral crime. The last purchase of weapons by Shell was said to be of 107 hand guns, 15 years before. But courtpapers filed in Lagos in July 1995 revealed that Shell had as late as February 1995 been negotiating for the pur-chase of weapons for the Nigerian police. Shell acknowledged that it had conducted these negotiations but stat-ed that none of the purchases had been concluded. However, the company stated: “[We] cannot give an under-taking not to provide weapons in the future, as, due to the deteriorating security situation in Nigeria, we maywant to see the weapons currently used by the Police who protect Shell people and property upgraded.”8

Shell came under great public pressure, both inside and outside Nigeria, to intervene on behalf of the accusedduring the trial and following the conviction of the Ogoni Nine.” Initially, Shell stated that it would be “dan-gerous and wrong” for Shell to “intervene and use its perceived ’influence’ to have the judgement overturned,”stating that “a commercial organisation like Shell cannot and must never interfere with the legal processes of anysovereign state.”9 Shell called on “those who currently advocate public condemnation and pressure . . . to reflecton the possible results of their actions. . . . What is needed from all parties is quiet diplomacy.”1 0 Nevertheless,as pressure mounted, CAJ Herkströter, the president of the Royal Dutch Petroleum Company, one of the parentcompanies of the Royal Dutch/Shell group of companies that owns SPDC of Nigeria, sent a personal letter toGeneral Abacha on November 9, 1995, pleading for commutation of the death sentences against Ken Saro-Wiwaand his co-accused on humanitarian grounds. At the same time, Shell explicitly denied that this intervention wasa “comment on the proceedings of the tribunal,” restating that “as a multinational company . . . to interfere insuch processes, whether political or legal, in any country would be wrong.”1 1

Following the executions of the Ogoni Nine, SPDC announced, on December 15, 1995, that the con-struction contract for the Nigerian Liquefied Natural Gas (LNG) project, of which Shell is a 25.6 percentshareholder, had been signed—a diplomatic coup for the Nigerian government. In an advertisement placed inmany newspapers, Shell defended this decision:

Some say we should pull out. And we understand why. But if we do so now, the project willcollapse. Maybe forever. So let’s be clear about who we’d be hurting. Not the present Nigeriangovernment, if that’s the intention. . . . The people of the Niger Delta would certainly suffer—the thousands who will work on the project, and thousands more who will benefit in the localeconomy. . . . Whatever you think of the Nigerian situation today, we know you wouldn’t wantus to hurt the Nigerian people. Or jeopardise their future.1 2

Despite such statements, Shell faced mounting pressure from campaigns to boycott its products in Europeand the United States. At the same time, calls for the adoption of an international embargo on Nigerian oil,in order to force the military government to step down, also threatened Shell’s Nigerian operations.Apparently realizing that its image had been damaged by statements asserting that human rights concerns arenot for business to get involved with (though its share price never wavered), the company adjusted its publicposition. In early 1996 the company affirmed on several occasions its commitment to the UniversalDeclaration of Human Rights, while continuing to state that it could not comment on particular cases.1 3 InMay 1996, in response to concerns about the trial facing 19 (later 20) more Ogonis before the same civil dis-turbances special tribunal that sentenced Saro-Wiwa, Shell stated: “The Nigerian Government has a duty toinvestigate the murder of the four Ogoni leaders. And if those investigations lead to the arrest and trial of sus-pects, then no-one has the right to oppose due legal process. But trials must be fair. And they must be seen tobe fair.”1 4

Shell resumed funding of development projects in Ogoniland, including the refurbishment of a hospital anda training scheme for Ogoni youths. Shell’s development spending in Nigeria generally also increased: SPDC’scommunity development budget was US$330,000 in 1989, but rose to US$43 million by 1998.1 5 In 1998 the

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1 8 In February 1995, the British government gave Shell a license to dispose of its Brent Spar platform by dumping it in the AtlanticOcean. Greenpeace, among other environmental groups, led a Europe-wide campaign against this decision, leading to significant con-sumer boycotts of Shell products in Germany in particular. In June 1995, Shell announced that it had reversed its decision to dump theplatform, though not until January 1998 was its final fate decided: to be reused to extend a quay at Stavanger in Norway. Further infor-mation available from<www.shellexpro.brentspar.com> and <www.greenpeace.org>.

1 9 Royal Dutch/Shell Group of Companies, Statement of General Business Principles, 1997.

company also held the first of a series of planned workshops to discuss environmental and development issuesin relation to its Nigerian operations with community representatives and other interested parties. In May 1999,Shell stated that it had engaged in “meetings and consultations . . . with a range of Ogoni groups and organi-zations” with the objective of building “trust and understanding as a basis for addressing substantive issues ofdevelopment and environmental management. . . [but that] the company has no plans to resume oil productionin Ogoni in the short term.”1 6 Local environmental and human rights groups asserted, however, that in practicethere had been no change in Shell’s behavior on the ground, despite public statements of a change of heart.MOSOP remained opposed to the reopening of Shell’s production in Ogoniland, stating on the third anniver-sary of Ken Saro-Wiwa’s execution that the company should “clean up or clear out” by Ogoni Day, January 4,2000.1 7 Despite the inauguration of a civilian government in Nigeria on May 29, 1999, direct talks betweenShell and MOSOP to resolve the complaints over Shell’s activities had yet to take place by the end of the year.

Shell’s Internal Review

Following the international focus on its Nigerian holdings in 1995, and the simultaneous furor over the com-pany’s plans to dispose of its North Sea Brent Spar platform by dumping it in deep ocean, the Royal Dutch/Shellgroup of companies—of which the ultimate holding companies are the U.K.-based Shell Transport and TradingPLC (40 percent) and the Netherlands-based Royal Dutch Petroleum Company (60 percent)—undertook amajor review of its position on issues of human rights and sustainable development, including an extensiveinternal and external consultation on the content of the group’s Statement of General Business Principles.1 8 InMarch 1997 the group adopted a new Statement of General Business Principles, which recognized five “areasof responsibility,” to shareholders, to customers, to employees, to those with whom they do business, and tosociety. As regards their responsibilities to society, Shell companies are now committed “to conduct business asresponsible corporate members of society, to observe the laws of the countries in which they operate, to expresssupport for fundamental human rights in line with the legitimate role of business and to give proper regard tohealth, safety and the environment consistent with their commitment to contribute to sustainable develop-ment.”1 9 This was the first time that the group had included a general commitment to human rights principlesor sustainable development in such a document.

At the 1997 shareholders meetings of the Dutch and British parent companies of the Royal Dutch/Shellgroup, the company published the first annual report on the operations of SPDC looking at issues of environ-mental standards and human rights, and the first group-wide report on health, safety, and the environment. Thegroup’s management also said that it agreed in principle with a policy of external verification of environmentalinformation but rejected this approach for the time being. At the same time Shell took steps to integrate its com-mitment to “express support for fundamental human rights” into its internal management procedures, requir-ing directors of Shell group companies to make annual statements to Shell headquarters indicating that theyhave complied with the requirements of the Statement of General Business Principles, in the same way that theyhave to make statements of compliance with financial and other standards. Shell also produced a “managementprimer” on human rights issues for distribution throughout the group.

At its 1998 annual shareholders meeting, Shell International published its first social responsibility report,“Profits and Principles—Does There Have to Be a Choice?” It “describes how we, the people, companies andbusinesses that make up the Royal Dutch/Shell Group, are striving to live up to our responsibilities—financial,social and environmental.” The report examined the company’s performance under its new business principles,and considered the case of Nigeria, repeating many of its previous statements. “Shell’s approach” to the “issuesand dilemmas” surrounding human rights was stated as follows:

We support the Universal Declaration of Human Rights, and have made specific reference to itin our Business Principles. This is what we have done to ensure we act in the best possible waywhen confronted with human rights issues.

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2 0 Milton Friedman, “The Social Responsibility of Business Is to Increase Its Profits,” New York Times Magazine, September 13, 1970.This famous article is reprinted in a number of books on business ethics, including, for example, Thomas I. White, Business Ethics: APhilosophical Reader (Upper Saddle River, N.J.: Prentice Hall Humanities, 1993).

• We speak out in defence of human rights when we feel it is justified to do so.• We included specific references to human rights in our Business Principles when they were

updated in 1997. This followed widespread consultation with many different interest groups, including those defending human rights.

• We engage in discussion on human rights issues when making business decisions.• We have established a regular dialogue with groups which defend human rights.• We are setting up Social Responsibility Management Systems designed to help in the imple-

mentation of our Business Principles, and therefore our stated support for human rights.• We are developing awareness training and management procedures to help resolve human rights dilemmas when they arise. This includes a guide to human rights for managers.

In its 1999 report, “People, Planet & Profits: An Act of Commitment,” the second on issues surrounding sus-tainable development, Shell described the “Sustainable Development Management Framework” it had developedsince the previous year and indicated that the company was developing a set of “key performance indicators” onthese issues to enable stakeholders to compare the relative performance of companies in relation to environ-mental and social indicators as well as financial ones.

None of the other oil companies operating joint ventures with the Nigerian government has engaged in asimilar examination of their response to issues surrounding corporate social responsibility generally or humanrights issues specifically. Internationally, BP-Amoco—which has itself faced fierce criticism of the securityarrangements for its facilities in Colombia, targeted by guerrilla forces fighting against the government—is theonly oil company that has engaged with the issues to a similar extent. None of the U.S. companies or otherEuropean companies, including U.S.-based Mobil, Chevron, and Texaco, French Elf, and Italian Agip, whichoperate joint ventures in Nigeria, have begun to think along the same lines. Chevron’s Nigerian subsidiary,which allowed its boats and helicopters to be used by the Nigerian military on at least two occasions in 1998and 1999 in operations against unarmed protesters or villagers, has begun to face public pressure to ensure thatit is not complicit in future human rights violations. As of late 1999, however, the company continued to main-tain that it had no responsibility or role in relation to human rights issues. It did, however, announce increaseddevelopment spending in the communities where it operated in Nigeria.

The Debate on Corporate Social Responsibility

In 1970, free-market economist Milton Friedman wrote that “the one and only social responsibility of busi-ness” is to increase its profits.2 0 While this view is less prevalent today than it was 30 years ago, many businessleaders and economists still take the view that the best way for companies to promote social development in aparticular country is simply by increasing the overall level of economic activity through trade and investment.In this view, the manner in which the revenue generated is administered, the environmental standards that aretolerated, or respect for human rights in the country generally are simply irrelevant, and regard for them mayeven be harmful to the company’s main business—and also, in the long run, to the social development of thecountry itself. If the same standards are applied to developing countries as to the developed world, they willnever catch up: even below-market wages and dangerous conditions of work for third-world employees can bejustified as being better than no job at all. Shareholders could justifiably complain if directors paid attention toanything that might impact negatively on the financial bottom line.

Increasingly, however, this attitude is changing, as companies have come under pressure from consumersand activists worried about the effects of the globalization of the economy on the poor people of the world, butalso as company directors have themselves come to see that wider issues of social development can affect theirown operations. The new buzz phrase is the “triple bottom line” of economic, social, and environmental out-comes. A good corporate reputation is increasingly seen as a valuable asset in attracting customers and recruit-ing employees. Good community relations promoted by properly administered development programs can, justlike good labor relations, minimize shut-downs caused by protests about the way the company operates.

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2 1 For example, the U.S. government gave extensive diplomatic backing to the Enron Corporation in the face of substantial criticismsof a major project the energy company was undertaking in India. See The Enron Corporation: Corporate Complicity in Human RightsViolations (New York: Human Rights Watch, 1999).

Although low wages and low environmental standards can be useful to a company in the short term, activistsand some managers and economists argue that a company will make more money in the long term in a coun-try marked by good governance, the rule of law, low levels of corruption, an educated population, and the sortof stable political and economic framework that is only achieved when a government is accountable to its ownpeople. Studies have found no correlation between foreign direct investment in itself and respect for humanrights in the developing world; in Nigeria, it seems that the presence of the oil multinationals may rather havestrengthened the hold on power of successive military regimes that violated human rights and stole the moneysupposed to promote development. Companies therefore have an interest in taking positive steps to promotesocial development and minimize negative environmental effects, as well as to maximize profits.

International law, historically focused on relations between states, is also adapting to the new climate.Human rights groups and others have long argued that states have an obligation not only to respect humanrights themselves but also to enforce human rights law against private actors, including companies. The increas-ing power of transnational corporations within the global economy has brought with it a corresponding aware-ness of the need for an international regime that places direct responsibilities on these companies. When theglobal resources of a transnational corporation are substantially larger than those of the country where it isoperating, the government of that country may not be in a position to enforce international, or even domestic,law against the company at all; especially when the company often receives the diplomatic support of the first-world state where it has its corporate headquarters.2 1

As far back as 1948, the Universal Declaration of Human Rights, the founding document of internationalhuman rights law, called on “every individual and every organ of society” to promote respect for human rights.In the 1970s, at the height of discussion about the establishment of a “new international economic order,” twoother documents adopted by international bodies explicitly referred to companies. In 1977 the InternationalLabor Organization (ILO), a tripartite organization with representatives of governments, business, and laborhaving access to its decision-making organs as members of national delegations, adopted a TripartiteDeclaration of Principles Concerning Multinational Enterprises and Social Policy, which committed all partiesconcerned by the declaration to “respect the Universal Declaration of Human Rights and the correspondingInternational Covenants adopted by the General Assembly of the United Nations as well as the Constitution ofthe International Labor Organization and its principles according to which freedom of expression and associa-tion are essential to sustained progress.” In 1976 the Organization for Economic Cooperation and Development(OECD) adopted a Declaration and Guidelines on International Investment for Multinational Enterprises,though this document, applicable only among the rich states of the OECD, made no explicit reference to humanrights or social responsibility. The U.N. Commission on Transnational Corporations, established in 1974, alsodeveloped over many years a draft U.N. Code of Conduct on Transnational Corporations, finally submitted in1990, which provides that “transnational corporations shall respect human rights and fundamental freedomsin the countries in which they operate.” The code was never formally adopted by the United Nations, becauseof opposition from rich countries to some of its provisions, especially those relating to treatment of transna-tionals by host countries.

Efforts to place direct responsibilities on transnational corporations at the international level picked up inthe late 1990s. The U.N. Commission on Human Rights Subcommission on Prevention of Discrimination andProtection of Minorities decided in 1998 to establish a working group on the relationship between human rightsand the activities of transnational corporations. The World Bank, often involved in financing large infrastruc-ture projects in which transnational corporations are involved, set up a working group to develop guidelines onbest international practice for investment in the oil sector.

Various branches of the U.S. government have taken steps to impose obligations on U.S. businesses oper-ating abroad with respect to human rights, as well as, more commonly, economic objectives. The most signifi-cant legislative initiative in this regard was the Comprehensive Anti-Apartheid Act (CAAA) of 1986, sincerepealed, designed to limit investment in South Africa under the apartheid regime. In 1996 the United Statespassed legislation, partially modeled on the CAAA, giving the president authority to prohibit new investmentby U.S. citizens or companies in Burma (Myanmar) if the Burmese military government physically harmed, rear-rested, or exiled opposition leader Aung San Suu Kyi, or committed large-scale oppression against the politicalopposition. In May 1995, President Clinton announced a set of “model business principles,” a voluntary codeof ethics to be used by U.S.-based multinational companies, which supports respect for fundamental human andlabor rights, though without sufficient detail to give clear guidance. The Reverend Leon Sullivan, author of the“Sullivan Principles” on U.S. investment in South Africa before the CAAA came into force, put forward a new

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set of “Global Sullivan Principles” in February 1999; this voluntary code commits those companies that signedit to a set of somewhat vague principles, including “support for universal human rights.” Within the EuropeanUnion, the European Parliament Committee on Development and Cooperation adopted a report in December1998 proposing the establishment of an independently monitored E.U. code of conduct for multinationals.

Although these initiatives have yet to place legally binding responsibilities on transnational corporationsin relation to issues of social responsibility, it seems that it will be only a matter of time before they do so—though resistance can be expected from the business sector. In the meantime, at least some companies are find-ing it to be in their interests to take their own initiatives to address these questions. While environmental andhuman rights activists have given a guarded welcome to these efforts, they note that statements of intent arenot worth the paper they are written on without strategies to ensure their implementation, and without inde-pendent auditing of environmental and human rights performance. No oil company, including Shell, has yetallowed such an audit.

Meanwhile, by the end of 1999 overall relations between Shell and the oil-producing communities of theNiger Delta (not only the Ogoni) had, if anything, worsened since the execution of Ken Saro-Wiwa, despiteShell’s efforts to improve community relations, in particular by increasing development spending and profes-sionalizing the management of its development projects. Although much of this deterioration could be attrib-uted to the government’s failure to respond to the demands of the peoples in the delta, rather than to Shell’sown activities, the continuing problems also illustrate the difficulty of putting the fine words of the Statementof General Business Principles into practice.

Discussion

Discussion Issue 1: Do companies have a responsibility to do more than maximize profits and returns to shareholders? If they do,how far does it extend? Does it include the provision of good wages and working conditions for employees;maintenance of the highest environmental standards; development spending in communities where they oper-ate; concern over the manner in which the government to which they pay tax and other revenues spends themoney; actions to ensure that their own security guards do not abuse people with whom they come in contactand that those who object nonviolently to their activities are not victimized by the government? Are theseresponsibilities greater if a company is one of a dominant few in the country where it is operating?

Discussion Issue 2: Do companies have responsibilities in relation to abuses by government security forces in countries where theyoperate? What if abuses are concentrated in a region where they dominate the local economy? What if they havecalled for security force protection, for example against protesters at their facilities? If they do have responsi-bilities, does it extend to making private representations to the government? Public representations? Insistingon screening security officers posted to their facilities to ensure that abusive individuals are not included?Offering legal or other assistance to the victims? Taking steps to avoid or defuse situations where similar abus-es could occur in future?

Discussion Issue 3: Should companies withdraw from countries ruled by military dictatorships or where serious human rights vio-lations are systematic and widespread?

Discussion Issue 4: Is it permissible for companies to take advantage of the absence of or failure to enforce local laws on pay andconditions, the environment, compensation, and the like? Or should companies follow best international prac-

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tice in their operations, whatever local laws may be, so that the standards they follow are the same all overthe world?

Discussion Issue 5: If a government states that it has the right to set its own priorities and that, in its case, rapid industrial devel-opment is more important than environmental protection, should outsiders respect that view? Does the type ofgovernment make a difference? If it is a democracy, should the interests of citizens affected by environmentaldamage outweigh those of the people benefiting from development, or vice versa?

Discussion Issue 6: Should there be an international legal regime governing the rights and responsibilities of transnational corpo-rations? What should it include? Who should monitor and enforce compliance?

Further Reading

The Ogoni Crisis and the Niger Delta

Human Rights Watch, “The Ogoni Crisis: A Case-Study of Military Repression in Southeastern Nigeria”: AHuman Rights Watch Short Report (New York: Human Rights Watch, July 1995).

Human Rights Watch, The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’sOil Producing Communities (New York: Human Rights Watch, February 1999), available at<www.hrw.org/reports/1999/nigeria/index.htm>.

Michael Birnbaum Q.C., Fundamental Rights Denied: Report of the Trial of Ken Saro-Wiwa and Others(London: Article 19, June 1995), and Michael Birnbaum Q.C., A Travesty of Law and Justice: An Analysis ofthe Judgment in the Case of Ken Saro-Wiwa and Others (London: Article 19, December 1995).

Amnesty International, Nigeria: The Ogoni Trials and Detentions (London: Amnesty International, September 1995).

Statements and reports from Shell are available on the Shell web sites <www.shell.com>,<www.shellreport.com> and <www.shellnigeria.com>.

A summary of a World Bank report on the environment of the Niger Delta is available at <www.worldbank.org/aftdr/findings/english/find53.htm>.

International Law

The U.N. Rio Declaration on the Environment and Development is available at <www.unep.org/unep/rio.htm>.

The OECD Guidelines for Multinational Enterprises are available at <www.oecd.org/daf/cmis/cime/mneguide.htm>.

The ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy is avail-able at <www.ilo.org/public/english/50normes/sources/mne.htm>.

General books and articles on Nigeria, on the oil industry, and on corporate responsibility:

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Tom Forrest, Politics and Economic Development in Nigeria (Boulder, Col.: Westview Press, 1995).

Terry Lynn Karl, The Paradox of Plenty: Oil Booms and Petro-States (Berkeley: University of CaliforniaPress, 1997).

Truth and Reconciliation Commission of South Africa Report (Johannesburg: October 1998), Volume Four (Institu-tional and Special Hearings), chapter two (Business and Labour), available at <www.polity.org.za/ govdocs/commis-sions/1998/trc/index.htm> [a discussion of the role of business in supporting the apartheid government].

Christopher L. Avery, “Business and Human Rights in a Time of Change,” paper presented to the Colloquiumon the Liability of Multinational Corporations Under International Law, organized by Erasmus University inRotterdam, May 1999, available at <www.multinationals.law.eur.nl>.

Barbara A. Frey, “The Legal and Ethical Responsibilities of Transnational Corporations in the Protection ofInternational Human Rights,” Minnesota Journal of Global Trade 6, (1997), p.153.

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Author’s Biography

Bronwen Manby is a researcher in the Africa Division of Human Rights Watch, where she is responsible for thework of the organization on Nigeria and South Africa, as well as advocacy work on other African countries.She is the author of the Human Rights Watch book-length report “The Price of Oil: Corporate Responsibilityand Human Rights Violations in Nigeria’s Oil Producing Communities.” She has a B.A. in Modern Historyfrom Oxford University, and an M.A. in International Affairs from Columbia University.

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