J Bus Ethics (2015) 129:1–25

DOI 10.1007/s10551-014-2142-7

Royal Dutch Shell in Nigeria: Where Do Responsibilities End?

Esther Hennchen

Received: 4 February 2013 / Accepted: 7 March 2014 / Published online: 22 May 2014
 Springer Science+Business Media Dordrecht 2014

Abstract This case study discusses the scope of respon- Keywords Corporate legitimacy
Corporate social
sibilities and the basis of legitimacy of multinational cor- responsibility
Political role of multinational companies

porations (MNC) in a complex operating environment. In Public responsibility deficit
Public responsibility
January 2013 a precedent was set when Shell was held strategy
Sustainability
liable in The Hague for oil pollution in the Niger Delta.
The landmark ruling climaxed the ongoing dispute over the Abbreviations
scope of Shell’s responsibilities for both the company’s CD Community development
positive and negative impact. Shell’s was considered a CEO Chief Executive Officer
forerunner in corporate social responsibility and had even CSR Corporate social responsibility
assumed public responsibilities in a context of a public ECCR Ecumenical Council for Corporate Social
responsibility void. However, the company remained a Responsibility
regular target of civil society activism and legal proceed- EITI Extractive Industry Transparency Initiative
ings concerned with malpractice. The court case attracted FDI Foreign direct investment
international attention for its novelty and increasing media GDP Gross domestic product
and civil society pressure required immediate action. How GGFR Global Gas Flaring Reduction Partnership
can Shell respond to this negative publicity to keep its GMoU Global Memorandum of Understanding
license to operate? What is the scope of the company’s GRI Global Reporting Initiative
responsibilities in such a controversial human rights con- HDI Human Development Index
text? Students are expected to discuss these questions HRCA Human Rights Compliance Assessment
going beyond a simple moralistic or liability thinking. HSSE Health, Safety, Security, the Environment
They are encouraged to take into account the complex LNG Liquefied natural gas
structural processes that connect persons and institutions in MDG Millennium development goals
very different social and geographical positions. The MNC Multinational corporation
experiences of Shell are an excellent case in point since MOSOP Movement for the survival of the Ogoni
attention is drawn to the background conditions of globally people
operating companies, in which the isolation of perpetrators NGO Non-governmental organization
based on causality is not realistic. The case also reveals the NLNG Nigeria Liquefied Natural Gas Company
particular challenges, which MNCs face in the context of NNPC Nigerian National Petroleum Corporation
increasing demands to take on public responsibilities while PIB Petroleum Industry Bill
respecting their economic mandate. RDS Royal Dutch Shell
SCD Sustainable community development
SIR Shell international renewables
E. Hennchen (&)
SNEPCO Shell Nigeria Exploration and Production
Institute for Social Innovation, ESADE Business School,
Barcelona, Spain Company
e-mail: [email protected] SNG Shell Nigeria gas

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2 E. Hennchen

SP Social performance scientific assessment by the United Nations Environment

SPDC Shell Petroleum Development Company of Program in 2011 criticized Shell over its inadequate oilfield
Nigeria infrastructure and clean-up of oil spills, a practice which
UNCTAD United Nations Commission on Trade and did not meet local regulatory requirements, SPDC’s own
Development procedures, or international best practices.
UNEP United Nations Environment Program However, it was also true that Shell operated in an
UNESCO United Nations Educational, Scientific and extremely complex environment. Heavily-armed militant
Cultural Organization groups involved in large-scale oil theft and sabotage were
VP Voluntary Principles on Security and Human responsible for most of the oil spills and pollution. And the
Rights Nigerian Government was neither able to establish the rule
of law nor to satisfy the basic socio-economic needs of its
poor population. What is more, Royal Dutch Shell (RDS)
had to step in this public responsibility deficit and assume
traditional government responsibilities that went beyond
legal requirements and traditional corporate social
Introduction
responsibility (CSR)1 programs. What is the scope of
Shell’s responsibilities in such a complex operating envi-
The biggest change […] for an international corpo-
ronment? Is it making things too easy when blaming and
ration is this extension of responsibility […] beyond
shaming Shell alone when a multiplicity of actors are
just paying your taxes and beyond just relating
connected to the social and environmental injustices in the
effectively to communities around your factory fence
Niger Delta? Does Shell have a higher degree of respon-
(Shell’s Sir Mark Moody-Stuart in Valente and Crane
sibility given the company’s privileged position, power,
2010, p. 62).
interest, and collective ability? Does the company even
In a landmark ruling on January 30th in 2013, Shell was have a political responsibility? If so, what does this
held liable in The Hague for oil pollution in the Niger responsibility entail?
Delta. The district court found Shell’s subsidiary Shell Shell was put in a spotlight for a novel challenge facing
Petroleum Development Company of Nigeria (SPDC) many MNCs operating in a complex environment. No
guilty of neglecting its duty of care in that the company benchmark was set, but increasing global media and civil
failed to take reasonable steps to stop a foreseeable society pressure required immediate attention. How can the
sabotage from occurring on their crude oil wellhead company revise its CSR strategies in line with the
(Standard 2013). A precedent was set. It was the first time increasing demand for responsibilities while respecting its
that a company established in the European Union was held economic mandate? How can Shell respond to this negative
responsible in its own country for abuses committed publicity to keep its license to operate? Should Shell even
elsewhere (ibid). The case was of considerable interna- stop operating in the Niger Delta and give up its assumed
tional significance since it stirred up a hot controversy over public responsibilities? If so, on which legal and ethical
the scope of responsibilities of multinational corporations grounds?
(MNCs) operating in a controversial human rights context
and a public responsibility void for both their negative and
positive impact. Paradoxically, today, MNCs are not just Royal Dutch Shell: A Company Overview
considered the ‘‘bad guys,’’ causing social and environ-
mental harm. They are at the same time considered the The Multinational Corporation
solution of global regulation and public goods problems at
both, the global level and the local level where public RDS2 was created in 1907 after the merger of British-based
institutions are neither able nor willing to administer Shell Transport Trading Company with and the Nether-
citizenship rights or contribute to the public good. lands-based Royal Dutch Petroleum Company. Both parent
It was true that the court case eclipsed prior accusations
over the Shell’s operations in the Niger Delta. Shell had an 1
The literature on CSR is very diverse, and there is no consensus on
inconvenient past in Nigeria. In 2009 Shell agreed to pay the precise definition of CSR. Thus, we refer to CSR as an umbrella
US$15.5 million to settle a lawsuit it was facing in the US term, which includes concepts such as corporate citizenship, corpo-
for alleged human rights abuses in the Ken Saro-Wiwa rate sustainability, stakeholder theory, and business ethics.
2
Royal Dutch Shell plc. and the companies in which it directly or
case. In 2011, the company had to accept, in the first case
indirectly owns investments are separate and distinct entities. But in
of this kind, legal liability in the UK for two massive oil this study, the collective expression ‘‘Shell’’ may be used for
leaks in 2008/2009 as a result of equipment failure. Also, a convenience where reference is made in general to these companies.

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Shell’s Public Responsibility Strategies in Nigeria 3

companies traced their origins back to the Far East in the CSR and Nigeria: Key Parts of Shell’s Overall
1890s when they seized the opportunity to supply kerosene Governance Structure
from the newly developing Russian oilfields to markets in
the Far East and China, thus satisfying the growing demand Shell’s overall control framework included CSR policies
for oil for the automobile industry and oil-fueled ships. In such as the such as the Health, Safety, Security, Environ-
2005, RDS became the single parent company for the two ment and Social Performance Executive (HSSE & SP), the
former public parent companies. The company was head- company’s Statement of General Business Principles and
quartered in The Hague (Netherlands) and registered in Code of Conduct (see Appendix 1). Corporate responsi-
England and Wales. In 2012 Shell was Europe’s largest oil bility governance structures were located at the Board of
producer and the most profitable company worldwide in RDS. The overall accountability for sustainable develop-
terms of revenue (US$484 billion) (CNN Money 2012). ment within Shell lay with the Chief Executive Officer
The company also employed over 101,000 people and (CEO) and the Executive Committee. They set priorities
operated in over 90 countries. and standards in sustainable development, which defined
RDS and the companies in which it indirectly or directly standards and accountabilities at each level of the organi-
owns investments were distinct and separate entities from a zation. Thus, CSR policies were cascaded down from
legal perspective (Shell Nigeria 2012b). Yet, RDS acted as headquarters to the business units and the supply chain.
the financial and strategic centers for the company as a Yet, the accountability for running Shell’s projects and
whole and applied a single overall control framework (see facilities responsibly lay with the company’s business
Appendix 1) to all wholly-owned Shell companies and to managers and each business unit level decided on the
those ventures and other firms in which the company had a individual scope and funding of CSR projects. The Board
controlling interest. The aim was to manage the risk of also monitored compliance. The Corporate and Social
failure to achieve its business objectives (Shell 2010a). Responsibility Committee assists the Board of Directors in
reviewing policies and performance, visiting facilities and
Nigeria: A Cornerstone of Shell’s Operations meeting with government officials, community represen-
tatives, and local non-governmental organizations (NGOs)
Shell commenced oil production in Nigeria in 1958. In (Royal Dutch Shell 2012c, p. 5)
2009 SPDC contributed around 9 % of Shell’s global oil Due to the importance of Nigeria for Shell in terms of
and gas production (Royal Dutch Shell 2009a, p. 22). The complexity of the local operating environment and the
wholly-owned Shell Company was Nigeria’s largest volume of oil production, a permanent Nigeria team was
onshore producer controlling around 39 % of the nation’s installed at headquarter level.3 The team existed of four
oil production. SPDC operated oil and gas production on people with either local knowledge and networks due to
behalf of the partners in an unincorporated joint venture their previous (senior) positions within SPDC in external
between the government-owned Nigerian National Petro- affairs and/or community relations or European back-
leum Corporation (NNPC) (55 %), Shell (30 %), Elf ground and networks within the international society. The
Petroleum Nigeria Ltd (10 %), and Agip (5 %) (Royal team was responsible for partnerships management and
Dutch Shell 2012a). Through NNPC, the Nigerian gov- external engagement with local and international stake-
ernment was the major shareholder with a controlling stake holders such as Nigerian (local) government institutions,
and power over changes in production policy. The com- academics, United Nations, NGOs, etc. The team also
pany’s mission included being committed to ensuring initiated and coordinated international initiatives such as
‘‘strong economic performance to every aspect of sustain- Extractive Industry Transparency Initiative (EITI) with the
able development’’ (Shell Nigeria 2012a). Nigerian government and engaged with academics on
Shell-owned companies also dominated gas production in human rights issues related to their business on interna-
the country. In 2011, the company produced 707 million tional conferences (Jacoba Schouten 2010, p. 223).
cubic feet per day (MMcf/d) of gas (US Energy Information
Administration 2012). Shell Nigeria Gas Ltd (SNG) was set up
in 1998 and operated a gas transmission and distribution Shell’s CSR Activities
pipeline network. The Nigeria Liquefied Natural Gas Com-
pany (NLNG) was set up in 1989 and ran one of the world’s Shell was a front-running company in the CSR area and
largest liquefied natural gas (LNG) plants. Shell held a 25.6 % became the first among oil multinationals in 1997 to pub-
share in NLNG, together with NNPC, Total LNG Nigeria Ltd, licly declare its support for the Universal Declaration of
and Eni. A fourth company, Shell Nigeria Exploration and
Production Company Ltd (SNEPCO), was created in 1993 to 3
Note, that no such team is installed for other countries at the group
develop Nigeria’s offshore energy resources. level.

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4 E. Hennchen

Human Rights. The Canadian magazine, Corporate people, displacing over 20,000 more, and destroying
Knights, ranked RDS the world’s 20th most sustainable property using planes, boats and weapons paid for by the
corporation in 2010 due to its proactive management of company (Evans et al. 2013).4
environmental, social, and governance issues (Corporate On the other hand, Shell was also accused of shirking its
Knights 2010) and in 2011 the company was awarded the responsibilities to speak out against the trial of the Ogoni
British-American Business Channing Corporate Citizen- men given the company’s undisputed position of power in
ship Award. Also, the company’s community development the country. Shell persisted on the apolitical nature of the
projects in Nigeria were presented as a positive case study company. SPDC stated in a press release that it would be
of CSR by the World Business Council for Sustainable ‘‘dangerous and wrong’’ for Shell to ‘‘intervene and use its
Development, and SPDC was voted ‘‘Best Company in perceived ‘influence’ to have the judgment overturned’’
most Innovative CSR’’ in 2011 at the Nigerian Social (Human Rights Watch 1999). Furthermore, the company
Enterprise Report and Awards. Corporate Affairs Officer, insisted that it was wrong for ‘‘a commercial organization
Tony Attah, commented that ‘‘the award is a strong like Shell […] to interfere with the legal processes of any
acknowledgement of the work we’re doing in the Niger sovereign state’’ (ibid.). However, the way Shell handled
Delta, positively touching lives and helping to develop the situation created for many the impression that the
communities. And we are encouraged to do more’’ (Shell company was conspiring with a corrupt government. As a
Nigeria 2012c). Shell’s summarized its approach toward consequence, Shell faced increasing pressure from all
sustainability as follows: sides: consumer boycotts in Europe and North America,
shareholder activism through formal resolutions in Europe,
The world needs to produce enough energy to keep
increasing levels of community disruption in the Niger
economies growing, while reducing the impact of
Delta, falling share prices, and hemorrhaging staff
energy use on a planet threatened by climate change.
(Pendleton et al. 2004).
Shell works to help meet rising energy demand in a
responsible way. That means operating safely, mini-
Shell’s Response: Engaging in Enlarged (Political)
mizing our impact on the environment and building
Responsibilities
trust with the communities who are our neighbors. If
we fall short of the standards society expects of us,
Shell executives realized that the company had grown out
we learn from our experiences to improve the way we
of touch with societal expectations. Mark Moody-Stuart,
operate (Royal Dutch Shell 2012c, p. 2).
then Managing Director, stated that ‘‘[in this situation] we
had to take a good look at ourselves and say ‘Have we got
The Ogoni Case: The Origin of Shell’s CSR Agenda it right?’’’ (Guyon 1997, pp. 121–125). Secret documents
that came to light during the Wiwa versus Shell lawsuit
On May 22nd, 1994, the Nigerian military arrested all of described the company’s ‘‘crisis management strategy and
the Movement for the Survival of the Ogoni People’s plan’’ (Lubbers and Rowell 2010) in the wake of Saro-
(MOSOP) leaders, including Saro-Wiwa. The latter led a Wiwa’s death. Shell considered leaving the country, but
nonviolent campaign against the environmental degrada- eventually decided in favor of ‘‘milking the cow’’ (ibid)
tion of Ogoniland’s land and water by the multinational and embarked on a comprehensive review of its attitude
petroleum industry, especially RDS. The activists were and activities at different levels.
hastily tried and found guilty on all charges by a special
military tribunal, ordering that they be hung in 1995. Their Revising Corporate Values and Processes
trial and execution were widely seen as having been
politically motivated and completely unfounded. In March 1997, Shell rewrote its 1976 Statement of Gen-
The case provoked a global outcry with Shell in the eral Business Principles into the statement of General
spotlight. One the one hand, the company was accused of Business Principles based on the core values honesty,
collaborating with the military government to capture and integrity, and respect for people (see Appendix 1). The
hang the Ogoni men. In 1996 the families of the ‘‘Ogoni eight principles integrated economic, environmental, and
Nine’’ even initiated a lawsuit in a federal court in New social considerations into business decision-making and
York which ‘‘was one of the first cases to charge a multi-
4
national corporation with human rights violations’’ (Pil- In 2009, this case was settled out of court with Shell paying
kington 2009). Court documents from this Wiwa v. Shell US$15.5 million as compensation to the plaintiffs. The company
maintains that it ‘‘was falsely alleged to have been complicit in the
case also alleged that RDS, acting through its subsidiary
men’s death’’ and agreed to a settlement because they felt ‘‘it was
SPDC, supported the Nigerian military as it attacked vil- time to draw a line under the past and assist the process of
lages from August to October 1993, killing over 1,000 reconciliation’’ (Royal Dutch Shell 2009b, p. 25).

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Shell’s Public Responsibility Strategies in Nigeria 5

described five inseparable areas of responsibility to share- community development initiatives underwent significant
holders, customers, employees, business partners, and change from ad hoc ‘‘assistance’’ to developmental part-
society (Royal Dutch Shell 2012b). These principles nerships with government agencies and NGOs. In 1998,
committed the company to adopt an apolitical role and SPDC shifted from unilaterally providing Community
stated that Shell ‘‘companies should endeavor always to act Assistance (CA) Programs to a Community Development
commercially, operating within existing national laws in a Approach (CD), grounded in community participation as
socially responsible manner and avoid involvement in well as partnering with the public sector and civil society
politics’’ (Royal Dutch Shell 2010a). Shell also developed organizations. In 2004, SPDC launched its Sustainable
Human Rights Compliance Assessment (HRCA) tools, Community Development (SCD) program with an
which provided a step-by-step approach to assess all increased focus on partnering as a mechanism to provide
potential risks of human rights violations. Shell offered CD projects and coordinate with the government’s strategic
training to its employees on the company’s Business development plans and objectives. In 2006, SPDC intro-
Principles and Code of Conduct and a special course for duced a new way of working with communities called the
managers to understand their responsibilities and take Global Memorandum of Understanding (GMoU). This
action to support human rights (Jacoba Schouten 2010). GMoU represented an important shift in the company’s
approach, placing emphasis on more transparent and
Partnering with Governmental and Non-governmental accountable processes, regular communication with grass-
Organizations roots organizations and greater sustainability and conflict
prevention (Shell 2012). Sunmonu explained that this
At the local level in Nigeria, Shell increased its community community development program, ‘‘managed through a
development budget of the early 1990s from US$300,000– Community Interface Model, is providing social infra-
US$400,000/year to US$25 million/year in 1996 (Pendl- structure, promoting public health and connecting commu-
eton et al. 2004). Stakeholder engagement via dialog and nities to electricity for the first time’’ (ECCR 2010, p. 59).
partnering became a cornerstone of Shell’s strategy ‘‘of
being a good neighbor.’’ In 2000, Shell set up the Shell Joining Global Governance Initiatives
Foundation, an independent charity focused on poverty and
environmental charities. Community development projects At the global level, the company initiated a crusade on
were channeled indirectly through the Foundation and transparency and business integrity. In October 1996, Shell
directly through national programs. SPDC’s Managing awarded Shandwick Interactive a contract to develop the
Director Sunmonu disclosed that the company spent in www.shell.com Website (Pendleton et al. 2004). In 1998,
2010 about US$56.8 million on community development Shell presented its first sustainability report that outlined a
projects in Niger Delta, which ‘‘is one of the biggest cor- Road Map of how the company planned to integrate sus-
porate social responsibility portfolios operated by a private tainable development into its business and published
company in Sub-Saharan Africa’’ (Shell Nigeria 2011). reports in accordance with the Global Reporting Initiative
Sunmonu explained, (GRI) and in line with the International Petroleum Industry
Environmental Conservation Association (IPIECA) guide-
We also do a lot for our host communities in the area
lines.5 To ensure the credibility of its reports, the company
of education, health, and employment generation. For
established both internal controls such as audit trails and
example, we have at least 17,000 students on a Shell
statistical checks and external controls with the help of an
scholarship every year. We have a number of eco-
external review committee and well-established auditing
nomic empowerment schemes aimed at improving
firms such as KPMG (Royal Dutch Shell 2009b). The
the lives of the people in Niger Delta. SPDC currently
company also incorporated a commitment to business
supports 27 health facilities in Niger Delta. Another
integrity and transparency in its General Business Princi-
important benefit relates to the indirect employment
ples and Code of Conduct in 2006. Furthermore, Shell
we create through contracts (SPDC 2011a, b).
supported EITI and international human rights initiatives
The company also cooperated with national development such as the Global Compact, the United Nation Special
programs. In 2010, SPDC and SNEPCO gave more than Representative on business and human rights, John Ruggie,
US$161 million (Shell’s share was US$59.80 million) to and the Voluntary Principles on Security and Human
the Niger Delta Development Commission (as required by
Law). Sunmonu stated that the company’s ‘‘largest contri-
bution is through the taxes and royalties we pay to 5
In 2009, GRI confirmed Shell’s A? reporting level. This included
government. In general terms, 95 % of our revenue after the Sustainability Report, the Royal Dutch Shell plc Annual Report
tax goes back to government’’ (SPDC 2011a, b). SPDC’s and Form 20-F 2009, and www.shell.com.

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6 E. Hennchen

Rights (VP). With regard to the latter, Shell introduced a respect to the Business Principles, Code of Conduct, HSSE
clause based on these principles to all new and renewed & SP standards, and major issues of public concern (Royal
security contracts and expected these contractors to apply it Dutch Shell 2009a, p. 6).
by 2012 (Royal Dutch Shell 2009b). In 2002, Shell joined
the Global Business Coalition on Health to work in part-
nerships to help combat the AIDS epidemic in the societies Nigeria: A Complex Operating Environment
where the company operates. The company also signed the
2002 World Bank-initiated Global Gas Flaring Reduction Nigeria had come to exemplify the ‘‘resource curse.’’ Five
Partnership (GGFR), it joined the Environmental Defense’s decades of oil extraction in the country had resulted in
Partnership for Climate Action and committed itself to failed development, poverty, corruption, environmental
reduce emissions to 1990 levels by 2010. Shell and BP degradation, ethnic and gang violence, kidnappings, and
were the only companies listed in KLD Research and the like. The World Bank ranked Nigeria only 147th (out of
Analytics’ Global Climate 100 Index, the first investor 189 economies) among the best places for doing business
index comprised of companies focusing on solutions to for 2014. And in 2013 Nigeria was ranked 16th (out of 177
global warming (Utting and Ives 2006, p. 19). The com- countries) in the Failed States Index. Nine of the twelve
pany also provided information to the Dow Jones Sus- indicators have worsened since 2008, with the most sig-
tainability Indexes, FTSE4Good, and the Carbon nificant in refugees/internally displaced persons, economic
Disclosure Project throughout the year. decline, and human rights (Messner et al. 2013) (see
Appendix 2).
Incorporating CSR into Corporate Governance Structures
A Paradox of Want in the Midst of Plenty: Oil Wealth,
At the corporate level, Shell made the first significant Poverty and Violence
corporate governance restructuring efforts after a broad
inquiry of stakeholder perceptions of Shell’s reputation and In 2011, Nigeria had the second largest oil reserve in
trust from 1995 to 1996. It primarily involved a shift from a Africa and was the continent’s primary oil producer. Crude
geographically based to a business sector-based structure. oil production averaged close to 2.13 million barrels per
The central feature was the dismantling of the three-way day (bbl/d), and total oil production in Nigeria was slightly
matrix and the strengthening of the executive authority of over 2.53 million bbl/d. In the wake of the discovery of
the Committee of Managing Directors by providing a high-quality oil in the Niger Delta and the prospect of ever-
clearer line of authority to both the business organizations increasing oil prices, the oil industry became central to
and the operating companies (Grant 2002, p. 10). Also, a Nigeria’s economy. In 2010, the oil sector accounted for
permanent Nigeria team was installed at headquarter level approximately 25 % of the country’s Gross Domestic
to defend the company’s position in Nigeria and in July Product (GDP), 95 % of its export earnings, and 80 % of
1996 the company took on four new inhouse senior PR the government’s revenue (Center for Global Development
executives (Pendleton et al. 2004). In May 1996, the 2010). Also, Foreign Direct Investment (FDI) inflows were
company employed Shandwick, one of the world’s largest heavily focused on the oil industry. For example, the
PR firms, to repair both its public image and its ability to United Nations Commission on Trade and Development
lobby effectively. In 1999, Shell introduced in a second (UNCTAD) reported that US$16 billion of the US$26
corporate governance restructuring effort a new Sustain- billion increase in FDI investments to the West African
able Development Management Framework which made region from 2007 to 2008 were exclusively the result of an
sustainable development an integral part of the company’s increase in new projects in Nigeria’s oil industry (UNC-
daily business. The framework was implemented at the TAD 2009, p. 44). Also, FDI investments in Nigeria
Group level and in key areas of the businesses. Senior chief increased from US$2.484 billion in 2002 to US$4.659
executives from each of our five core businesses and the billion in 2008 (World Bank 2010).
heads of the corporate centre directorates formed a Sus- Oil wealth also had a dark side. The government’s
tainable Development Council to monitor progress across dependence on oil broke the link between authority and
the Group (Shell 1999, p. 20). The latest corporate gover- territoriality, leading to neo-patrimonial governance and
nance reform in 2009 sought to embed more sustainability- corruption. Nigeria became a synonym of a ‘‘rentier state’’
related roles at the core of the company’s operations to in which state revenues accrued from taxes or ‘‘rent’’ on
improve its sustainable development performance and production rather than from productive activity. As a
engage earlier with stakeholders. Thus, on behalf of the consequence, the government failed to establish a robust
Board of RDS a Corporate and Social Responsibility tax system and did not thus develop a system of formal
Committee assesses Shell’s policies and performance with accountability to secure domestic legitimacy. Instead, the

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Shell’s Public Responsibility Strategies in Nigeria 7

government focused its efforts on controlling these 2007 Nigeria’s Human Development Index (HDI) was as
resource rents by resorting to state-imposed violence low as 0.511, ranking the country 158th out of 182
through an undisciplined military, police, and security countries and rendering it unlikely to achieve any of the
forces and securing elite compliance with instrumental Millennium Development Goals (MDGs) by 2015. Simi-
benefits including public goods and services, employment larly, Nigeria suffered from a high adult illiteracy rate, poor
opportunities, and lucrative government contracts, among quality of education and serious health challenges. Malaria
others. This patronage system was essentially established was considered the most significant public health problem,
along ethnic and religious lines and thus marginalized and and the country was the second most affected by the global
excluded mostly southern groups and non-Muslim northern HIV/AIDS health crisis. In addition, the International
minorities (Khan 1994, p. 8). Energy Agency informed that over 49 and 65 % of the
As a consequence, corruption was rife in Nigeria. population in 2009 continued to live without access to
Independent corruption indexes corroborated its perva- electricity and clean cooking facilities, respectively (Inter-
siveness in Nigeria. For example, Transparency Interna- national Energy Agency 2011, p. 472).
tional ranked Nigeria as low as 143rd (out of 183 countries) The grievances due to exclusion and marginalization
with a score of 2.4 (out of 10) in its 2011 corruption per- and unmet goals of peaceful struggle (i.e., the Ogoni
ception index.6 Nigeria’s Anticorruption Chief claimed, for movement’s non-violent protests) became central to the
instance, that 70 % of the country’s wealth was stolen or emergence of a new sort of youth politics and militant
wasted in 2003 (Carbonnier et al. 2011). Also, Shell’s groups in which a new generation of young leaders took up
former Senior Vice President, Ann Pickard, voiced her the struggle for regional resource sovereignty. Their frus-
concern to US Ambassador Robin R. Sanders, indicating trations were further propelled by undisciplined violence
that, among state security forces to protect ‘‘national oil assets’’
even after the return to civilian rule in 1999 (Watts 2008).
Corruption in the oil sector was worsening by the
As a consequence, a kind of Robin Hood scenario emerged
day. […] Nigerian entities control the lifting of many
to take back profits from foreign oil companies and an
oil cargoes and there are some ‘‘very interesting’’
unresponsive government: initially, oil theft was used by
people lifting oil (People, she said that were not even
local militant groups as a mechanism to redistribute wealth
in the industry). As an example she said that oil
into the hands of the poor in the Niger Delta. Yet, in recent
buyers would pay NNPC General Managing Director
years, oil theft or ‘‘oil bunkering’’ proliferated in scale and
Yar’Adua, […] Chief Economic Advisor Yakubu,
violence. The sophistication of the theft has led analysts to
and the First Lady Turai Yar’Adua large bribes,
charge that senior members of the armed forces and high
millions of dollars per tanker, to lift oil (U.S.
ranking politicians were complicit. They drew upon the
Embassy Abuja 2009).
local militia to organize and protect the tapping of pipe-
The distribution of oil revenue and the lack of economic lines and move barges along creeks and rivers and ulti-
and social development in the oil producing communities mately offshore to large tankers (Watts 2008). NNPC
was one of the main issues driving political tension, theft, reported that pipeline vandalism in 2011 increased by
and sabotage in the Niger Delta. While most of the revenue 224 % over the previous year (NNPC 2012, p. 7).
went directly to the federal government’s accounts,7 the According to the Nigerian National Oil Spill Detection and
host communities suffered all the social and environmental Response Agency (NOSDRA), approximately 2,400 oil
costs of oil operations. In 2011, even more people lived in spills were reported between 2006 and 2010 that resulted
poverty than before oil was found, and the rural and oil from sabotage, bunkering, and poor infrastructures (US
producing communities were the most affected (Ikein and Energy Information Administration 2012) (see Appendix
Briggs-Anigboh 1998). The United Nations Educational, 2). Shell was hit the hardest by this instability since a large
Scientific and Cultural Organization (UNESCO) reported portion of its production was still onshore. In 2011, the
in 2010 that, even at peak production, 92 % of the Nigerian company estimated that 6 % of the country’s total pro-
population survived on less than US$2 a day. Moreover, in duction, on average, was lost to oil bunkering and spills.

6
The 183rd country on the list is perceived as the most corrupt Oil Sector Reform: Hope in Sight?
country; scores range from 0 (highly corrupt) to 10 (very clean).
7
The 1999 Constitution carved out a revenue-sharing arrangement in In more recent years, the Nigerian government started to
which 13 % of oil revenue from onshore production went directly to demonstrate a commitment to inculcate a culture of hon-
the nine oil producing states in the Niger Delta, with the remaining
esty and transparency in the public and private sectors
revenue allocated to the federal government (47.2 %), states
(31.1 %), local councils (15.2 %), and the National Priorities Services through the Corrupt Practices and other Related Offences
Fund (6.5 %). Act 2000 and the incorporation of EITI into national law in

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2007. These initiatives helped shape the quality of reforms Africa Governance Monitoring and Advocacy Project
and significantly increased the oil sector’s awareness and claimed that oil companies have the political power to
transparency. Also, Nigeria made efforts to increase reve- ‘‘actively pressure the government regarding such things as
nue transparency, and was judged to be compliant with tax laws’’ (Manby 1999, p. 283). For example, the PIB
EITI in March 2011. However, EITI also received its fair seemed to grant more favorable terms to Shell and its rivals
share of criticism from an interviewee from the Revenue than originally imagined after much internal ‘‘lobbying.’’ A
Watch Institute for it did not actually drive reforms but lawmaker who was a member of the three committees in
instead piggy-backed on other existing initiatives. Fur- the Senate handling the Bill told a Daily Trust reporter that
thermore, a 2005 audit report released in 2009 highlighted they were put under intense pressure by the Presidency to
unprecedented financial discrepancies, unpaid taxes, and accommodate some of the demands of the oil majors. ‘‘Our
system inefficiencies. intention was to pass the bill as sent to us by the late
In September 2007, the Oil and Gas Reform Implemen- President Umaru Musa Yar’adua, but these companies put
tation Committee (OGIC) proposed the most comprehensive us under intense pressure, they even got the American
review of the legal framework for the oil and gas sector in government to intervene on their behalf. Shortly after his
Nigeria since the industry began commercial operations in return from the United States early this year when he was
the 1960s. This Petroleum Industry Bill (PIB) was designed Acting President, Jonathan requested that the provisions of
to reform the entire hydrocarbon sector to increase the the bill be reviewed after which he asked the leadership of
government’s share of revenue, increase natural gas pro- the two chambers to look at the issue of tax and reduce it to
duction, streamline the decision-making process by dividing allow for ‘investment’ in the sector,’’ he said (Hassan
up the NNPC’s different roles, including the creation of a 2010). An academic researcher working at the Revenue
profit-driven company, privatize NNPC’s downstream Watch Institute in Abuja added that Shell intervened by
activities, and promote local content. The Bill would also ‘‘bribing parliament members and paying them trips to
provide a greater share of oil revenues to the producing conferences to Ghana and the US,’’ in which the new
communities and expand the use of natural gas for domestic regulatory framework governing investment (PIB) in
electricity generation. Parts of this Bill were recently Nigeria was discussed, excluding any participation from
approved as standalone laws such as the Nigerian Content civil society actors. In the same line of thought an activist
Development Bill in 2010). However, differing versions of from the NGO Social Action, claimed in an interview,
the PIB were still being debated, especially more contentious
[…] and the officers, they would rather take their
points such as the renegotiation of contracts with interna-
mother to court than confront Shell. With the bribes,
tional oil companies, the changes in tax and royalty struc-
they will give judgments in favor. So there is […] the
tures and clauses to ensure that companies used or risked
ordinary people. The voiceless people. […] Shell is
losing their assets as penalties. The multinationals’ primary
the big oil company, the company that has so much
point of dissent appeared to be the new fiscal terms which
influence on the government […].
they described as ‘‘harsh enough to stall investments’’ (US
Embassy 2009a). A recently leaked US embassy cable The political power the oil industry enjoyed in Nigeria was
revealed, the international oil companies ‘‘are quite con- also documented by recent Wikileaks revelations. In a
cerned about the ‘very flawed’ new petroleum sector energy confidential memo from the US embassy in Abuja dated
bill [and] that Shell had more exposure to the loss of acreage October 20th, 2009, Ann Pickard, Shell’s then Vice Presi-
than any other company’’ (US Embassy 2009a). ‘‘We could dent for Sub-Saharan Africa, was quoted as telling US
lose 80 percent of our acreage,’’ Ann Pickard said (ibid). diplomats that Shell had seconded people to all the relevant
ministries and that Shell consequently had access to every-
Oil Dependence, Corporate Power and Interests thing that was being done in those government offices (US
Embassy 2009b). Many civil society actors criticized these
The government heavily depended on oil revenues and tangled links between the oil firm and politicians. Ben
international oil companies dominated all aspects of Amunwa of the London-based oil watchdog, Platform,
exploration, production, and marketing (Graf 1988, p. 219). stated, ‘‘Shell claims to have nothing to do with Nigerian
‘‘The whole economy is driven by oil exploration. That is politics,’’ he said. ‘‘In reality, Shell works deep inside the
the key thing. As a result of this Shell has a lot of political system, and has long exploited political channels in Nigeria
influence. Politics cannot move without money.’’ This to its own advantage’’ (Smith 2010). Likewise, an activist
statement of a community relation officer, who is imple- from Social Action Nigeria claimed in an interview,
menting Shell’s GMoU approach, depicts how the dis-
Shell and the government of Nigeria are two sides of
covery of oil transformed the political economy and power
the same coin. […] Shell is everywhere. They have
relations in Nigeria. A Senior Program Advisor for the

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Shell’s Public Responsibility Strategies in Nigeria 9

an eye and an ear in every ministry of Nigeria. They Eye People’s Award revealed increasing public concern
have people on the payroll in every community, and awareness of the company’s adverse impacts of its
which is why they get away with everything. They operations on local communities, their livelihoods and the
are more powerful than the Nigerian government. environment. While the company has since then denied
responsibility over these accusations, more recent scientific
Shell is the Only Government We Know investigations, leaked US embassy and company reports,
and legal proceedings revealed a gap between the com-
The nature of the corrupt and irresponsive Nigerian gov- pany’s formal CSR agenda and its practices on the ground.
ernment had also inverted traditional roles and responsi- ‘‘The evidence of Shell’s bad practice in the Niger Delta is
bilities. Particularly, in the poor areas of the Niger Delta mounting,’’ said Patrick Naagbanton, Coordinator of the
Shell’s direct presence forced the company to engage in local oil watch group, Centre for Environment, Human
traditional public responsibilities. A community relation Rights and Development (Vidal 2012). Shell’s scope of
officer from NIDPRODEV described Shell’s politicized responsibility was disputed again for issues such as envi-
role in an interview ronmental degradation and human rights violations. Also,
the current lack of dialog and transparency put the com-
The Government is far away. Communities make
pany’s legitimacy in question.
direct claims to Shell to provide for their needs. Shell
is the Government for them. […] Now there are a lot
Stakeholder Engagement: Integrity or Hypocrisy?
of conflicting interests. Shell wants to go on with its
business and has to take into account the changing
Interviews with representative civil society actors in 2011
and very complex environment it is operating now.
revealed that Shell’s engagement with stakeholders was
A community relation officer who was working with an perceived as rhetorical manipulation that did not transcend
NGO implementing Shell’s GMoU approach bewailed the the company’s self-interested position. In this line of
lack of active government participation and effective thought, one interviewee from Environmental Rights
cooperation. He stated ‘‘the Government should enter the Action claimed, ‘‘they ride on the wings of CSR to gain
social contract with the communities and be more respon- access to oil.’’ In his academic research on Shell’s GMoU
sive to communities needs. Now it is confusing to work approach he found that the company focused only on
with the Government because there no clear structures and highly visible and salient projects that were consistent with
contact partners.’’ With regard to the government’s role, social expectations while leaving the essential machinery
the community relation officer furthermore stated ‘‘it is of the company’s core business (with its negative envi-
funny, because the Government is not delivering its public ronmental impact) intact. He bewailed also that the com-
responsibilities and now it only monitors what Shell spends pany had no direct contact with communities. Shell worked
on CSR. […] They just control as they fund it within the only via NGOs or community officials. Another intervie-
Joint Venture Partnership.’’ In this public responsibility wee from academia explained that this was problematic as
void, civil society is aware of Shell’s positive contribution ‘‘Shell involves NGOs as contractors and not as develop-
despite the sometimes-negative impact of its operations. A ment organizations. They represent Shell’s interests and are
member from the NGO NIDPRODEV stated in this line of only accountable to Shell.’’ Similarly, Nnimmo Bassey
thought from Environmental Rights Action insisted in an interview,
many communities also have a higher awareness of Extractive industries such as oil and gas companies
these issues and want Shell to operate so that they can must learn to listen to the complaints of the local
survive. […] Communities cannot survive without people in whose territories they carry out their busi-
Shell’s provision of socio-economic services, because ness. […] The Ogoni, the Ilaje, and their fellow
the Government is not doing anything and thus they protesters chose the best route out of the mire that the
ask Shell to stay or come back. Niger Delta has become: through nonviolent dia-
logue. This is what was demanded ten years ago. This
demand still remains to be answered (The Oil
Industry and Human Rights in the Niger Delta 2008).
Shell’s Scope of Responsibilities in Nigeria
in the Spotlight In addition, a community relation officer from one NGO
that was implementing Shell’s GMoU approach bewailed
Already in 2005 Shell’s practices in Nigeria were put in the in an interview in 2013 the little access to information.
spotlight despite the formulation and formalization of the ‘‘Communities don’t have right now enough access to
company’s CSR agenda. The nomination for the Public relevant information and facts. So it is not transparent

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10 E. Hennchen

enough. Information is power. Shell could create more members, to suppress MOSOP’s activities and that Shell
power.’’ was complicit in the commission of these abuses. The
company maintained that it ‘‘was falsely alleged to have
been complicit in the men’s death’’ and agreed to a set-
Corruption or Business as Usual?
tlement because they felt ‘‘it was time to draw a line under
the past and assist the process of reconciliation’’ (Royal
Revelations published by Global Witness in 2012 revealed
Dutch Shell 2009a, p. 25). However, civil society inter-
how in 2011 Shell and the Italian company Eni agreed to
preted the payment as an admission of guilt of the com-
make a payment of US$1.1 billion to acquire an oil con-
pany’s past and ongoing practices of human rights
cession from the Nigerian government, which landed in the
violations.
hands of a former Nigerian oil minister and convicted
Indeed, leaked US embassy cables dating from 2003 to
money launderer. Details of this opaque payment only
2006 alleged that Shell continued to pay substantial
came to light by chance through a court case in New York
amounts of money to the Nigerian army, navy, and Mobile
that focused on a different aspect of the oil deal. Since the
Police Force on a regular basis and provided transportation
court judgment and subsequent statements by the Nigerian
and accommodation for soldiers notorious for their record
Attorney General suggested that Shell and Eni must have
of human rights abuses (Browne 2006; Embassy Abuja
been aware that the money would ultimately be transferred
2003a, b; US Consulate Lagos 2003). Also in 2012, the
to the company controlled by the former oil minister, the
NGO Platform claimed that ‘‘Shell, the largest operator in
case is now the subject of a UK criminal investigation, and
the region, continues to depend on military protection
also being pursued by the House of Representatives in
much like it did in the 1990s’’ (Platform 2012a). For
Nigeria.
example, the NGO alleged that Shell’s conduct in the town
Furthermore, in an interview in 2013, the senior spe-
of Rumuekpe led to ‘‘the killing and displacement of
cialist in the field of anti-corruption of the NGO Global
thousands of local people’’ in ethnic and communal con-
Witness accused Shell of hypocrisy. Global Witness
flicts between summer 2005 and November 2008 (ibid.).
revealed that while Shell publicly advocates (voluntary)
Moreover, interviews with members from different
EITI standards to fight corruption, the company was sup-
NGOs in 2011 affirmed that Shell continued to award
porting a lawsuit that if successful would destroy US leg-
controversial ‘‘surveillance’’ contracts or one-off payments
islation designed to strengthen the EITI standard. The legal
to violent youth groups to ‘‘protect’’ their facilities. A
action was directed against Section 1504 of the Dodd-
member from the NGO Social Action explained that these
Frank Act, which required US-listed extractive companies
contracting practices created competition (and eventually
to publish the payments they make to governments on a
conflict) over contracts among the different groups. As a
project-by-project basis in each country they invest. It also
consequence, the system became a method of pay-offs for
encouraged all oil, gas, and mining companies listed in the
vandalism or theft through a legitimized contract system
US to publish their social payments (i.e., to CSR projects)
and also a ‘‘monetary’’ mechanism to empower some
voluntarily. Dominic Eagleton from Global Witness
Shell-selected community members. This essentially dis-
emphasized
torted established traditional power structures and raised
Section 1504 of the Dodd-Frank Act forces compa- questions about the new social and financial status of
nies to publish the kind of payments made by Shell ‘‘contracted personnel.’’ A Shell manager in Nigeria
and Eni in Nigeria. Without this ‘sunshine’ on natural admitted in an interview with the NGO Platform that these
resource deals, business will continue to be con- one-off contracts were ‘‘just something to keep the youths
ducted in an opaque environment that enables pay- busy during the Christmas period so that they [would] not
ments to end up in the wrong hands (Eagleton 2013). be wanting to create jobs for themselves by vandalizing
Shell or Elf facilities’’ (Platform 2012b). However, Man-
Complicity in Human Rights Violations or Providing aging Director Sunmonu saw the hiring of youths as a
Security? means to comply with their stakeholder engagement and
promise to provide employment to host communities. For
In 2009 Shell agreed to pay US$15.5 million to settle a example, he responded to questions about the incidents in
lawsuit in the US for alleged human rights abuses. This Rumuekpe as follows: ‘‘We are not directly involved in
lawsuit alleged that the Nigerian military government and killings in the areas. We focused on education, we promote
security forces committed human rights violations, skill acquisition [and] create jobs for communities’’ (Plat-
including torture and summary execution of MOSOP form 2012b).

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Shell’s Public Responsibility Strategies in Nigeria 11

Oil Spills: Rust or Sabotage? glimmer of hope and justice. We are happy with the
news that Shell could be forced to clean up the
In August 2011 a scientific assessment of the United environmental devastation it has caused and to pay
Nations Environment Program criticized the company for more than $400 m in compensation. But our jubila-
its continuing failure to operate fully in accordance with tion is overshadowed by more than five decades of
local regulatory requirements, SPDC’s own procedures, environmental and social injustice yet to be addres-
and international best practices. In detail, the study con- sed. (Naagbanton 2011).
cluded with regard to Shell’s practices that (1) control,
The coordinator Patrick Naagbanton also adverted further
maintenance, and decommissioning of oilfield infrastruc-
litigations in that the ‘‘courts may now be inundated with
ture in Ogoniland were inadequate and created public
legitimate complaints’’ (ibid.). Also, a 2012 report by the
safety issues. (2) Remediation by enhanced natural atten-
University of Essex on the changing legal landscape for the
uation (RENA) was not effective. Furthermore, SPDC
Multinational Oil Industry alluded ‘‘recent allegations that
applied this technique on the land surface layer only, while
Shell‘s spending on security to government forces and
UNEP data showed that contamination could often pene-
community groups, where there was a significant risk that
trate deeper than 5 m and had already reached the
these payments would fuel human rights abuses, could lead
groundwater in many locations. (3) Ten out of the 15
to further litigation’’ (Leader et al. 2012).
investigated sites which SPDC records showed as having
Indeed, legal pressure was mounting. Accusations over
completed remediation, still had pollution exceeding the
Shell’s operations climaxed on January 30th in 2013 when
SPDC (and government) remediation closure values. (4)
the district court in The Hague held Shell liable in one case
Shell’s new Remediation Management System from 2010
for oil pollution in the Niger Delta. The district court found
still did not meet the local regulatory requirements or
Nigeria guilty of breaching its duty of care and committing
international best practices (UNEP 2011, p. 12).
the tort of negligence as the company failed to take suffi-
While for many Niger Delta activists the UNEP report
cient measures to prevent sabotage from occurring. It was
affirmed Shell’s direct responsibilities for oil pollution,
the first time that a company established in the European
Managing Director Sunmonu emphasized the govern-
Union was held responsible in its own country for abuses
ment’s responsibility to ‘‘take concerted action to curb the
committed elsewhere. The lawsuit was part of five separate
illegal activities, in particular oil theft and refining, that are
lawsuits by four Nigerian farmers and fishermen, along
exacerbating so many of the environmental and social
with the NGO Milieudefensie, against four Shell entities
issues’’ (SPDC 2011b). Furthermore, he called upon more
and their parent company. The claimants demanded com-
concerted efforts by all stakeholders working together to
pensation for oil pollution damage allegedly caused by
drive real change in Ogoniland and the wider Niger Delta.
poor maintenance of the aging facilities and corroding
Here again, he drew on the state government’s responsi-
network of pipes. The Hague court dismissed the other four
bility to ‘‘take the lead to co-ordinate the activities of the
claims after finding that the oil contamination was caused
many stakeholders involved’’ (ibid).
by sabotage by third persons with no evidence of Shell’s
In August 2011 Shell’s admission of liability for two oil
negligence in those cases. Importantly, the court also dis-
spills in Ogoniland in 2008 and 2009 created a media
missed all claims against Shell Nigeria’s parent company
storm. This was first case of this kind in which Shell had to
RDS, referring to the general rule of Nigerian law
accept legal liability for two massive oil leaks as a result of
according to which a parent company is not obligated to
equipment failure. Also, it was the first time RDS plc and
prevent foreign subsidiaries from injuring third parties
its subsidiary Shell Petroleum Development Company
abroad.
(Nigeria) Ltd (SPDC) faced claims in the UK for damage
Shell welcomed the court’s decision. Managing Director
resulting from an oil spill from its operations in Nigeria
Sunmonu acclaimed ‘‘the court’s ruling that all spill cases
(Standard 2011). In an interview with the Guardian the
were caused by criminal activity’’ (Okonedo 2013) and
coordinator for the Centre of Environment and Human
pointed to the government’s responsibility to establish the
Rights in Port Harcourt welcomed the court ruling. How-
rule of law in the Delta to prevent further spills. Sunmonu
ever, he also voiced concern over the persisting (unjust)
added
background conditions that still need to be reformed:
oil pollution is a problem in Nigeria, affecting the
Shell’s admission of liability for two massive oil
daily lives of people in the Niger Delta. However, the
spills in 2008-09 in my village of Bodo in the Niger
vast majority of oil pollution is caused by oil thieves
Delta is a step forward in the long struggle for cor-
and illegal refiners. This causes major environmental
porate accountability. An impoverished village that
and economic damage, and is the real tragedy of the
yesterday lay in ruins has today felt a welcome
Niger Delta. SPDC has made great efforts to raise

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12 E. Hennchen

awareness of the issue with the government of (Temper 2013). Also, unpublished independent reports
Nigeria, international bodies like the UN, the media seen by the Guardian newspaper and interviews conducted
and NGOs. We will continue to be at the forefront of by Friends of the Earth Nigeria suggested that ‘‘Shell must
discussions to find solutions (Okonedo 2013). take the blame’’ for a sabotage incident in August 2011 on
the Bonny pipeline (Vidal 2011). The company withdrew
Also, Royal Dutch Shell’s vice president for environment,
contracts to monitor and protect the pipeline, which pro-
Allard Castelain, said in an interview with the Spiegel ‘‘It’s
vided in a context of extreme poverty the wrong incentives
clear that both the parent company, Royal Dutch Shell, as
in that it encouraged to ‘‘create’’ work (i.e., it incentivized
well as the local venture… has been proven right. […] The
sabotage). Livingstone J. Berebo, Secretary of the Ikarama
complexity lies in the fact that the theft and the sabotage is
Youths group, explained
part of an organized crime’’ (Der Spiegel 2013). Shell
Netherlands President, Peter de Wit, added ‘‘Shell is doing The oil spills in Ikarama are caused by Shell. The
a good job often under difficult circumstances.’’ He insisted youths of Ikarama were pushing for an upward
that the company applied ‘‘global standards’’ to its review of the wages paid [by Shell] to surveillance
operations around the world (Nwachukwu 2011). In 2011 guards and the employment of more persons in the
the company also launched an external oil spills website to community for the security of the pipelines. [But] we
demonstrate that the majority of current oil spills are due to suddenly heard that Shell has stopped the surveillance
sabotage and theft for which they refused any responsibil- contract. This is the main reason behind the series of
ity (Royal Dutch Shell 2010b, p. 18). spills experienced in the community recently (ibid).
Civil society organizations also celebrated the court
The ongoing criticism did not only cause bad publicity for
ruling. Ken Henshaw, a Niger Delta activist from campaign
Shell. The NGO Friends of the Earth International also
group Social Action, who has closely followed the case
launched an international online campaign targeting Shell.
commented ‘‘a precedent has been set, it has been made
Furthermore, local discontent was increasing and immedi-
known that Shell can be liable for damages and loss of
ately threatened the company’s license to operate. Partic-
livelihood’’ (Harvey and Hirsch 2013). In the same line of
ularly, the Ogoni called for collective action in face of the
thought, Martyn Day, the lawyer who is representing the
recent assignments of corporate guilt and the failure to
Nigerian Bodo community, said
implement the recommendations of the UNEP report. In
Over many years Shell has denied any responsibility December 2013 media reported, ‘‘Ogoni protests esca-
for these types of spills resulting from ‘bunkering’ or lated’’ (Kane 2013). In a Radio Interview Celestine
sabotage. The Dutch decision in relation to Mr Akpan AkpoBari from the Ogoni Solidarity Forum adverted
is therefore a major step forward as it makes Shell
There is no going back on the 90 day deadline ulti-
aware in no uncertain terms that they have a
matum delivered to the Nigerian Government and oil
responsibility to ensure that all steps are taken to
companies to implement the UNEP report on oil pol-
ensure the illegal sabotage does not occur (Standard
lution in Ogoniland. We are mobilizing for a series of
2013).
non-violent direct actions that will cripple economic
Furthermore, in May 2013 the NGO Milieudefensie activity. […] And it is just the start. In 1993, the Ogoni
appealed the court’s decision which absolved Shell Head- people stood up to Shell and kicked the company off
quarters in The Hague from any liability. For Milieude- their land. Shell hasn’t been able to extract oil there
fensie it is clear that the headquarters ‘‘is directly since but it doesn’t stop their land being continually
responsible: it manages the pipeline network’’ and ‘‘Shell polluted by pipelines crisscrossing the area carrying oil
Headquarters in The Hague for all intents and purposes for export. [Celestine emphasized] Once the Ogonis
directly manages its foreign subsidiaries’’ (Milieudefensie start, nobody can stop us! (ibid.).
2013). The NGO ‘‘wants Dutch companies to behave the
same abroad as they would in their own country and to take
responsibility for what happens there’’ (ibid). Shell to Blame? An Inconvenient Past—An Uncertain
Many Niger Delta activists felt reassured in their claims. Future
According to activists from several NGOs, Shell uses
sabotage as an excuse to evade responsibilities for the state The landmark ruling in The Hague in 2013 climaxed the
of its facilities and negligence to protect its pipelines. One ongoing dispute over the scope of Shell’s responsibilities
activist stated with regard to the latter that even if sabotage for both the company’s positive and negative impact in a
contributed to the spills ‘‘You can’t leave 7,000 kilometers complex operating environment. Shell’s was considered
of pipeline unguarded’’ in a poor country like Nigeria a forerunner in CSR and had assumed public

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Shell’s Public Responsibility Strategies in Nigeria 13

responsibilities that went beyond traditional philanthropy helped me improve the theoretical understanding of political CSR. I
or CSR programs. However, the company remained a furthermore gratefully acknowledge the assistance I have received
from Bimbo, Carlos and Rafsanjani (CISLAC) during my field
regular target of civil society activism and legal pro- research in Abuja.
ceedings concerned with malpractice. What is more, a
precedent was set. Shell was blamed for environmental
damage caused abroad. Appendix 1: Information About Shell
History seemed to repeat itself. Again, the relevant
question was ‘‘Have we got it right?’’ If Shell wanted to Shell General Business Principles
maintain its license to operate, the company would have to
address its public responsibilities more effectively than it Our Values
has done since the 1990s. But how can Shell redefine its
CSR strategy in the realm of public responsibilities while Shell employees share a set of core values—honesty,
balancing related challenges to its economic and political integrity, and respect for people. We also firmly believe in
role? And what is the scope of the company’s responsi- the fundamental importance of trust, openness, teamwork
bilities in such a complex operating environment? In which and professionalism, and pride in what we do.
way is the company connected to social and environmental
issues in the Niger Delta? Does Shell have more respon- Sustainable Development
sibility than other actors given the company’s privileged
position, power, interest, and ability for collective action? As part of the Business Principles, we commit to contribute to
Can Shell be held responsible for something it did not do or sustainable development. This requires balancing short- and
did not support? How can Shell respond to this negative long-term interests, integrating economic, environmental and
publicity to keep its license to operate? Should Shell even social considerations into business decision making.
stop operating in the Niger Delta and give up its assumed
public responsibilities? Responsibilities

Acknowledgments I would like to thank Josep Lozano and Jona- Shell companies recognize five areas of responsibility. It is
than Wareham for their invaluable academic and financial support
during my research project. The article benefited enormously from the
the duty of management continuously to assess the priori-
thoughtful feedback of Judith Schrempf, Jana Thiel and the two ties and discharge these inseparable responsibilities on the
anonymous reviewers. My thanks also go to Guido Palazzo, who basis of that assessment.

Area of responsibility Scope of responsibility

Shareholders Protect shareholders’ investment, and provide a long-term return competitive with those of other leading
companies in the industry
Customers Win and maintain customers by developing and providing products and services which offer value in terms of
price, quality, safety, and environmental impact, which are supported by the requisite technological,
environmental, and commercial expertise
Employees Respect the human rights of our employees and to provide them with good and safe working conditions, and
competitive terms and conditions of employment. To promote the development and best use of the talents of our
employees; to create an inclusive work environment where every employee has an equal opportunity to develop
his or her skills and talents. To encourage the involvement of employees in the planning and direction of their
work; to provide them with channels to report concerns. We recognize that commercial success depends on the
full commitment of all employees
Those with whom we do Seek mutually beneficial relationships with contractors, suppliers, and in joint ventures and to promote the
business application of these Shell General Business Principles or equivalent principles in such relationships. The ability
to promote these principles effectively will be an important factor in the decision to enter into or remain in such
relationships
Society Conduct business as responsible corporate members of society, to comply with applicable laws and regulations, to
support fundamental human rights in line with the legitimate role of business, and to give proper regard to health,
safety, security, and the environment
Source adapted from Royal Dutch Shell (2012)

123
14 E. Hennchen

Principles

Principle Content

Economic Long-term profitability is essential to achieving our business goals and to our
continued growth. It is a measure both of efficiency and of the value that customers
place on Shell products and services. It supplies the necessary corporate resources
for the continuing investment that is required to develop and produce future energy
supplies to meet customer needs. Without profits and a strong financial foundation, it
would not be possible to fulfill our responsibilities. Criteria for investment and
divestment decisions include sustainable development considerations (economic,
social, and environmental) and an appraisal of the risks of the investment
Competition Shell companies support free enterprise. We seek to compete fairly and ethically and
within the framework of applicable competition laws; we will not prevent others
from competing freely with us
Business integrity Shell companies insist on honesty, integrity, and fairness in all aspects of our business
and expect the same in our relationships with all those with whom we do business.
The direct or indirect offer, payment, soliciting, or acceptance of bribes in any form
is unacceptable. Facilitation payments are also bribes and must not be made.
Employees must avoid conflicts of interest between their private activities and their
part in the conduct of company business. Employees must also declare to their
employing company potential conflicts of interest. All business transactions on
behalf of a Shell company must be reflected accurately and fairly in the accounts of
the company in accordance with established procedures and are subject to audit and
disclosure
Political activities a. Of companies: Shell companies act in a socially responsible manner within the laws
of the countries in which we operate in pursuit of our legitimate commercial
objectives. Shell companies do not make payments to political parties,
organizations, or their representatives. Shell companies do not take part in party
politics. However, when dealing with governments, Shell companies have the right
and the responsibility to make our position known on any matters, which affect us,
our employees, our customers, our shareholders, or local communities in a manner,
which is in accordance with our values and the Business Principles
b. Of employees: Where individuals wish to engage in activities in the community,
including standing for election to public office, they will be given the opportunity to
do so where this is appropriate in the light of local circumstances
Health, safety, security, and the environment Shell companies have a systematic approach to health, safety, security, and
environmental management in order to achieve continuous performance
improvement. To this end, Shell companies manage these matters as critical
business activities, set standards and targets for improvement, and measure, appraise
and report performance externally. We continually look for ways to reduce the
environmental impact of our operations, products and services
Local communities Shell companies aim to be good neighbors by continuously improving the ways in
which we contribute directly or indirectly to the general wellbeing of the
communities within which we work. We manage the social impacts of our business
activities carefully and work with others to enhance the benefits to local
communities, and to mitigate any negative impacts from our activities. In addition,
Shell companies take a constructive interest in societal matters, directly or indirectly
related to our business
Communication and engagement Shell companies recognize that regular dialog and engagement with our stakeholders
is essential. We are committed to reporting of our performance by providing full
relevant information to legitimately interested parties, subject to any overriding
considerations of business confidentiality. In our interactions with employees,
business partners, and local communities, we seek to listen and respond to them
honestly and responsibly
Compliance We comply with all applicable laws and regulations of the countries in which we
operate
Source adapted from Royal Dutch Shell (2012)

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Shell’s Public Responsibility Strategies in Nigeria 15

Shell’s Control Framework

Note: ‘‘Foundations’’ comprise the objectives, principles, more material processes, including how authority is dele-
and rules that underpin and establish boundaries for Shell’s gated, how strategy, planning, and appraisal are used to
activities. ‘‘Organization’’ sets out how the various legal improve performance, how compliance is managed and
entities relate to each other and how their business activi- how assurance is provided. All control activities relate to
ties are organized and managed. ‘‘Processes’’ refer to the one or more of these components (Source Shell 2010a).

Overview of Shell’s Sustainable Development and Governance Structure

Source Shell Sustainability Report (2009)

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16 E. Hennchen

Appendix 2: Information About Nigeria

Dimensions of the resource curse: Nigeria in comparison with other African countries

Economic performance Governance Conflicts Environment Total

Nigeria mmm mmm mmm mmm 12

Angola mm mmm mm mm 9
Sudan m mm mm m 6
Equatorial Guinea m mmm m mm 7
Congo B. mmm mmm mm mm 10
Gabon mm mmm mm m 8
Chad mm mm mm m 7
Cameroon m mm mm m 6
Mauritania m m m mm 5
DRC m m m m 4
Ivory Coast m mm m m 5
South Africa m m m m 4
m m m = Oil has major role in problems or negative results in the domain
m m = Oil has an intermediate role in the problems or mediocre results in the domain
m = Lack of a major negative role of oil in the given domain
NB Where oil does not play a major negative role, other extraction activities (mineral resources) can still be implicated in the ‘‘resource curse.’’
Here we consider only the role of oil
Source Magrin and Van Vliet (2009, p. 119).

Oil spills due to rupture and vandalism between 2006 Appendix 3: Methodology
and 2010
Case Selection
Vandalization Rupture
4000 The company RDS is especially suitable for this research due
to its distinctive company characteristics, its operational
3500 setting, and high-quality access to data. Shell is a front-
running company in the area of CSR and has moved into the
3000 political sphere through its engagement in achieving public
goals at the global and local level. Yet, the company is facing
Number o f Incidences

2500 continuing allegations of corporate malpractice. Further-

more, the inherent social and environmental risks related to
2000
operations of the core business poses serious questions in
relation to the sustainability of its very core operations and
1500
the legitimacy of its involvement in the support or supple-
ment of public services related to its non-core operations.
While, the company’s experiences in the Ogoni and Brent
1000
Spar cases are often seen to have catalyzed international
thinking about CSR, its current challenges with regard to its
500
new political role and associated public responsibility
strategies also make an important case in point for theory and
0
praxis. The case of Shell is an extreme case which can ‘‘offer
lessons for all organizations as they face an increasingly
Year turbulent world’’ (Eisenhardt 1989, p. 573). Moreover, the
Source own elaboration based on data from (NNPC 2012, company’s complex operating environment, Nigeria, is an
p. 70) insightful research site for examining the increasing interest

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Shell’s Public Responsibility Strategies in Nigeria 17

in theory and praxis in the quasi-governmental role of private Table 1 Overview of interviews
enterprises which moves away from the assumption in much Interview group No. of Organization
of the CSR literature that the ‘‘rules of the game’’ are set interviews
through effective government policy and regulation. This
Civil Society 7 Publish What You Pay (PWYP),
context also sheds light on the global interconnectedness of
Nigeria
the oil industry and thus makes in interesting case in point
Civil Society Legislative
with regard to the concept of enlarged responsibilities Advocacy Centre (CISLAC),
(Young 2006). Here, responsibility is essentially shared Abuja/Nigeria
among various actors contributing to the structures of social Environmental Rights Action
and environmental injustice in the Niger Delta. (ERA), Nigeria
African Network for Environment
Data Sources and Economic Justice African
Center for Leadership, Strategy
and Development (LSD), Abuja/
The author applied a case study methodology with the Nigeria
primary goal of describing Shell’s unique approach to CSR Social Action, Ogoni Solidarity
and associated challenges with regard to the company’s Forum (OSF)
scope of responsibility and basis for legitimacy in a com- Bayelsa NGO Forum (BANGOF),
plex operating environment. The sources of evidence used Bayelsa/Nigeria
in this case study come from primary and secondary Global Witness UKb
sources. They are based on multiple data collection meth- Academic 2 West Africa Civil Society Forum,
Abuja/Nigeria
ods such as in-depth interviews and archival sources. The
Integrated Ecosystem
triangulation made possible by this process allowed for a
Management Project—Nigeria-
stronger substantiation of constructs and propositions (Ei- Niger Joint Commission for
senhardt 1989, p. 538) and thus increases the reliability of Cooperation
data (Barratt et al. 2011). Moreover, since the overall Civil Society and 4 Africa Center for Corporate
methodology employed ensured that relevant stakeholders Academic Responsibility (ACCR), Warri/
of corporate and civil society Nigeria were taken into Nigeriab
account, the concerns from all parties became evident. Heinrich Böll Foundation (HBS),
Nigeria
Revenue Watch Institute (RWI),
Documentary Analysis Nigeria
Centre for Democracy and
The author undertook extensive documentary analysis, Development (Abuja, Lagos,
searching annual reports, press releases, newspaper articles, Manchester)
secret documents (Wikileaks, leaked company reports), and NGO 4 Initiative for Community
other memoranda and documentary information. Press implementing Developmenta/b
Shell’s current NIDPRODEVb
releases from the company are a device to communicate key approach to CSR
messages; especially during a period of crisis where there is a Environmental Health and Safety
(GMoU)
Networkb
need for managers to provide real-time information to key
Corporate 4 SPDC, Abuja
stakeholders. Together with the company’s reports, they
formed the basis for the company’s voice for the narrative of Shell International, Den Haag
a
this story. These documents were searched several times. Two different senior experts of the organization were interviewed.
Initially the author took field notes to construct the case story, First, during the field visit in 2011 and the second time in a Skype
interview in August 2013
which formed the foundation to interview questions. The b
The interview was undertaken via Skype
author used subsequent searches to validate interviews as
well as antecedent material from secondary sources.
pressure and evaluates its role in this complex operating
Interviews environment. Prior to the interviews an advance e-Mail was
sent to selected respondents outlining the important issues
In 2011, the author undertook a two-week field visit to of the study. Questions were semi-structured. Interviews
Abuja (Nigeria) and a one day visit to Shell’s head office in lasted between 60 and 180 min.
Den Haag. The aim of the visits was to find out details on In total, there were 21 in-depth interviews. Nineteen
how civil society organizations perceive and confront were tape-recorded and subsequently analyzed. The
Shell’s actions, and on how the company reacts to this research visit to Nigeria formed an important basis for the

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18 E. Hennchen

data collection. During this time, 16 face-to-face interviews democracy to deliberative democracy (Scherer and Palazzo
were conducted. From July to October 2013 the author 2011). The authors’ politicized concept of CSR is based on
conducted a second round of interviews via Skype with moral legitimacy, which is ‘‘socially and argumentatively
NGOs cooperating with Shell in the implementation of the constructed by means of considering reasons to justify cer-
company’s approach to CSR (GMoU) (Initiative for Com- tain actions, practices, or institutions and is thus present in
munity Development, NIDPRODEV, and the Environmen- discourses between the corporation and its relevant publics’’
tal Health and Safety Network), a senior expert of the Africa (Scherer and Palazzo 2011, p. 916). As a new way for
Center for Corporate Responsibility and a senior specialist in companies of keeping their licenses to operate they have to
the field of anti-corruption of Global Witness UK. take into account criteria for input and output legitimacy
Respondents were mainly high profile individuals, (Mena and Palazzo 2012, p. 539). For the scope of respon-
including present and former directors of NGOs, renowned sibility, political CSR takes a prospective perspective based
academics, corporate governance consultants, community on the actor’s structural connectedness to an issue and
relations officer, as well as senior officials of RDS and depending on the actor’s power, interest, privilege, and
SPDC. Notably these are key stakeholders in the Nigerian ability for collective action (Young 2006).
extractive industry. Certain degrees of overall representa- Using a method similar to that of other qualitative studies
tion were achieved with participants drawn from different (e.g., Jarzabkowski 2008), the author then checked the reli-
backgrounds and functions, so as to harness a mix of dif- ability of the coding framework using a coanalyst. A doctoral
ferent perspectives (see Table 1 for an overview). Given student was trained in the coding framework (Miles and Hu-
their positions, this research benefited from their insider berman 1994) and rechecked those categorizations. Interrater
views on the research topic. While interviews with Shell’s agreement was 98 %, and we resolved remaining discrepan-
senior officials and CSR experts guided the investigation, cies via discussion and reaching consensus. The coding was
the interviewees’ statements were eventually not included then applied to the data again to revise, refine, and collapse
in this manuscript due to reasons of confidentiality. All categories to the point that maximizes mutual exclusivity.
participants were promised confidentiality to encourage
uninhibited responses. Therefore, only the name of the
organization is mentioned in the case study.
Appendix 4: Teaching Guidance
The author has well-established contacts to civil society
members in Nigeria and is in close contact with key SPDC
Suggested Questions and Brief Answers
and RDS employees in Abuja, Den Haag, and London. This
helped to alleviate some of the challenges relating to access
1. Do a stakeholder analysis. The key question for
to data and respondents. The snow-balling technique, as well
students is to think about how Shell should react to
as third party informants such as academic and civil society
increasing allegations over the company’s practices.
colleagues also proved very helpful to gain access to these
The company is operating in a very complex envi-
high-caliber respondent(s) until data saturation was reached.
ronment with many actors having a stake in the
status quo. Which stakeholders should Shell
Data Analysis
address to keep its license to operate and why? In
which way are the different stakeholders related to
In a first step, an overall chronology of events dating from
the problems in the Niger Delta? What is their
Shell’s formalization of its CSR program in the mid 1990s
stake?
was developed. This chronology visualized ‘‘who did what,
when’’ and thus gave a first overall picture of the stake- I recommend using the stakeholder analysis tool to acquire
holders involved and the evolution of Shell’s CSR agenda in a first step a reasonable overview of the interests and
(particularly the drivers and trigger events). In a second step, responsibilities of all parties involved. In a second step
the author used the computer program ATLAS to explore the students could be asked to assess each stakeholder’s
data for evidence related to the effectiveness of Shell’s CSR importance in terms of legitimacy, power, and urgency.
program, the political role of the company, and associated While Shell identifies as its key business stakeholders
challenges. Here, categories that emerged in extant theory employees, clients/customers, business partners, and soci-
served as a deductive framework. Scherer and Palazzo’s ety at large, I recommend including more actors that have a
(2011) literature review depicts five dimensions, a political mediated connection to the social and environmental issues
approach to CSR has to deal with: (1) from national to global in the Niger Delta. Thinking about which actors affect or
governance; (2) from hard law to soft law; (3) from liability are affected by the company’s operations helps students to
to social connectedness; (4) from cognitive and pragmatic grasp the complexity of making decisions when a company
legitimacy to moral legitimacy; and (5) from liberal is faced with a dilemma between its economic and political

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Shell’s Public Responsibility Strategies in Nigeria 19

role. Table 2 below provides some suggestions for guiding 2008, 2011) or ‘‘extended corporate citizenship’’ (Matten
the discussion: and Crane 2005). Here, MNCs are considered quasi-public
actors. These scholars acknowledge that many MNCs have
2. Shell’s politicized role: going beyond pure economic
started to engage in activities that have traditionally been
responsibilities? What role does Shell play? Does Shell
regarded as actual government activities (Margolis and
have even assumed a state-like role in the Nigeria?
Walsh 2003; Matten and Crane 2005; Scherer and Palazzo
These questions take note of the growing literature on the 2008) at both, the global level where neither nation-states nor
political role of companies which refers to activities aimed at international institutions alone are able to regulate the global
filling in for government absence (Valente and Crane 2010, economy or provide global public goods (Kaul et al. 2003) or
p. 55) and is closely related to concepts such as ‘‘political in countries where the state system fails (Matten and Crane
CSR’’ (Palazzo and Scherer 2006; Scherer and Palazzo 2007, 2005; Valente and Crane 2009, 2010). This engagement in

Table 2 Overview of Shell’s stakeholders and their interests

Stakeholder Interest

Shell/SPDC Management Keeping their partners happy

Creating economic value and realizing ROI for shareholders
Should have an interest in satisfying customers
Brand reputation
Nigerian government As JV Partner and mayor shareholder: profit maximization
Home government Access to justice: provide human rights victims an opportunity to seek redress and to hold
corporations which operate in the country to account for violations committed in other countries
e.g., US court case (ongoing): Kiobel v. Royal Dutch Petroleum case: The company is suit under
the Alien Tort Claims Act for alleged complicity in the torture and killing of environmentalists
in Nigeria
Energy security: global governance of extractive resources has largely been shaped by the energy-
security agenda of industrialized countries and are geared toward the specific needs of consumer
or producer countries (rather than human rights issues)
Shareholder Execution of profitable business deals to increase shareholder value
Host communities Sustainable livelihoods
Environmental justice
Access to energy
Keep Shell since social performance standards are unlikely to be met by local oil or Asian oil
companies
Civil society (e.g., Friends of the Earth, Be the public voice of minority groups or victims of human rights violations
Amnesty International) Secure human rights and environmental justice
Militants Seek a share of the oil wealth: attack oil infrastructure, kidnap staff or engage in oil theft,
commonly referred to as ‘‘bunkering
Employees Job security and continued employment: interest in the company performing well
Physical security: protection from kidnapping, attacks
Company’s reputation: interest to work for a company complying with corporate, national and
international human rights standards
International organizations (UNEP) Monitor and report compliance with international standards
Help nations work together and be a centre for harmonizing the actions of nations to achieve their
goals: some issues such as global warming, global energy security and powerful geo-ethnic
criminal networks from the Niger Delta involved in petroleum smuggling, illicit drugs
trafficking, commercial fraud and identity theft cut across the territorial boundaries of states and
pose a problem of global concern
International media Having a story
Competitors Fierce competition among local and international oil companies over revenues: keen to win
business
Local Nigerian and Asian Companies: little interest in CSR
Consumer (international Access to cheap energy and derivate products from oil
Social and environmental justice (consumer power?)

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20 E. Hennchen

public responsibilities has led to a blurring of the private and retrospective argumentation, absolution of others, and sta-
public sphere. The enlarged conceptualization of CSR stands tic background conditions. Yet today, attributing direct
in contrast with mainstream theorizing which is mainly guilt for globally operating MNCs is more difficult. Par-
confined to the economic theory of the firm (Garriga and ticularly in the globalized political economy of oil, prob-
Melé 2004; Margolis and Walsh 2003; Scherer and Palazzo lems cannot be reduced to a specific actor(s), cause(s), or
2007) and broadly agrees on business occasionally ‘‘doing’’ geographical location(s). Thus, the scope of responsibilities
political activities. Thus, the political nature of the firm—in is not clear-cut. Also, Shell has assumed public responsi-
the sense of actually ‘‘being’’ a political actor in itself—is bilities that go beyond traditional CSR programs and faces
highly contested. This economic view of CSR is based on unforeseen challenges to navigate a new set of political
four premises: responsibilities. Thus, the questions are: What is the scope
of Shell’s responsibilities in such a complex operating
(1) The nation-state has the containment power to
environment? Does Shell have a political responsibility? If
regulate business activities, to provide public goods,
so, what does this entail? Is it making things too easy when
and to compensate or avoid externalities (Sundaram
blaming and shaming Shell alone in a context of a local and
and Inkpen 2004, pp. 354–355);
global public responsibility void and the global intercon-
(2) Corporations have to focus on profit maximization
nectedness of the oil industry?
and managers on their fiduciary responsibilities to
Young (2006) took note of these challenges and presented
shareholders (Friedman 1970; Sundaram and Inkpen
an alternative understanding of responsibility—a political
2004);
responsibility—based on structural interconnectedness.
(3) Societal responsibilities can only be assumed if they
‘‘Political’’ connotes according to Young to activities
are instrumental for the long-term value of the firm
broader than a government’s, namely those ‘‘in which people
(Friedman 1970; Jensen 2002; McWilliams and
organize collectively to regulate or transform some aspect of
Siegel 2001; Sundaram and Inkpen 2004); and
their shared social conditions, along with the communicative
(4) A strict separation of private and public domains
activities in which they try to persuade one another to join
(Friedman 1962; Jensen 2002).
such collective action or decide what direction they wish to
The aim of this task is to understand how the company is take it’’ (Young 2004, p. 377). It also relates to responsibil-
positioned not only as an economic but also as a political ities beyond the corporations direct social and environmental
actor. Also, students should become aware that the driving externalities (Young 2006). Thus, ‘‘all agents who contribute
force of political CSR is the global expansion of corpora- by their actions to the structural processes that produce
tions and the consequent erosion of (primarily national) injustice have responsibilities to work and remedy these
institutions and processes of governance. Eventually, stu- injustices’’ (Young 2006, pp. 102–103). To analyze what this
dents will be able to appreciate that Shell’s engagement in enlarged or political responsibility might entail, students
global governance, self-regulation policies, and public could discuss the following based on Young’s (2006, p. 116)
responsibilities in Nigeria has offset the strict division of social connectedness model:
labor between private business and nation state governance
on which the dominant economic paradigm and many Not Isolating Perpetrators
conceptions of CSR are built. For the Shell, this implies a
conflict between the company’s economic objectives and The case study makes clear that social and environmental
responsibilities (i.e., making profit for its shareholders) and justice in the Niger Delta results from the participation of
its political role and responsibilities (i.e., providing social millions of people. Shell is operating in an extremely com-
services to poor host communities). This exercise can lead plex environment characterized by organized crime and
to an interesting discussion, in which many students violence around the issue of oil bunkering and a public
involved in the management of organizations might dis- responsibility deficit. Thus, isolating Shell for its environ-
agree with the politicized role of corporations. mental damage does not absolve those sabotaging pipelines,
or an irresponsive government not establishing the rule of
3. What is the scope of Shell’s responsibility for the
law or delivering socio-economic services among others.
social and environmental conditions in the Niger
Delta?
Judging Background Conditions
The teaching case focuses on the moment when Shell’s
scope of responsibility is put in the spotlight for the com- Accepted norms and institutional practices that constitute
pany’s legal liabilities for oil pollution. A dominating form the background conditions for social and environmental
of attributing responsibility derives from the legal context injustice in the Niger Delta are morally not acceptable.
in which fault for harm is established based on causality, Rather than considering the process that brought the harm

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Shell’s Public Responsibility Strategies in Nigeria 21

as a break-away from normal and that punishment or Collective Action

compensation will restore normality, students should
question the background conditions that set normality. For Since many actors contribute by their actions in particular
example, Shell has an economic responsibility to its institutional contexts to the processes that produce unjust
shareholders to be a profitable company and stay within the outcomes, these structural processes can be altered only if
rules of the game. Thus, the managers devote more atten- many actors in diverse social positions work together to
tion to keeping operational costs low and increase share- intervene in these processes. Students can appreciate that
holder value than to minimizing the negative externalities Shell has already engaged in partnerships at different lev-
of the company’s core operations (oil spills due to poor els—in local CSR initiatives such as the GMoU and in
maintenance of the pipelines, not paying compensation for global governance initiatives. In 1998, Shell shifted from a
oils spills caused by sabotage as required by Nigerian law). unilateral to a partnering approach to provide socio-eco-
Shell is also expected to provide employment to local host nomic services to host communities in a more effective
communities and protect its pipelines from sabotage. Yet, way. Yet, the case study reveals that collective action needs
the company’s spending on security to government forces to be improved substantially.
and community groups is alleged to fuel human rights
abuses. 4. Does Shell have a higher degree responsibility than
other actors due to the company’s privileged posi-
Forward-Looking tion, power, interest, and collective ability? Should
Shell turn into a human welfare organization or
Shell’s liability for oil pollution was established in two adopt a quasi-governmental role? Or should the
cases (UK and The Hague court ruling in 2011 and 2012, company create only value for its shareholders?
respectively). While retrospective condemnation is impor-
Students should discuss the degree of Shell’s responsibility
tant to prevent impunity, forward-looking action must be
using Young’s (2006) parameters for reasoning: power,
undertaken to stop ongoing harm. Here students can iden-
interest, privilege, and collective ability. Given Shell’s posi-
tify weak points in the institutional system that allow or
tion within the structural processes, the scope of Shell’s
encourage harm such as corruption. Even if Shell is pun-
responsibilities can range from a strong (direct) responsibility
ished or would even be forced to pull out, but the system of
(e.g., the case of oil spills) to a shared political responsibility
incentives and organizational priorities is not reformed,
based on structural connectedness. The latter implicates a turn
then it is likely that the oil company that replaces Shell
from the economic, utility-driven, and output-oriented view
simply adopts the same (mal)practices.
on CSR to a political, communication-driven, and input ori-
ented concept of organizational responsibility. Thus, Shell
Shared Responsibility
could even be held responsible for things they themselves
have not done. Since the company faced already in the 1990s
Shell’s operations extend beyond nation-state boundaries
worldwide condemnation for shirking its (political) respon-
and include globally dispersed persons as the stakeholder
sibilities to speak out against the execution of the ‘‘Ogoni
analysis revealed. All those actors have a mediated con-
Nine,’’ Shell should re-evaluate its current scope of respon-
nection to the structural injustices in the Niger Delta and are
sibilities with special care. Yet, students should not expect
thus responsible in a partial way. For example, consumers
corporations to turn into human welfare organizations or
demanding cheap energy access reinforce the status quo as
replace a government agency. They should do what they are
the company is under pressure to reduce operational costs.
best at: providing life-conducive goods and services and
Also, governance structures imply a shared responsibility.
creating value for a multiplicity of stakeholders. Based on the
While from a legal perspective Shell Headquarters could not
stakeholder analysis, students can also infer responsibilities of
be held liable for the failures of SPDC (they are considered
other actors, which are socially connected to the structural
legally separate entities), SPDC is closely connected to its
injustices occurring in the Niger Delta.
headquarters in The Hague within the overall corporate
governance structure. For example, the NGO Friends of the
5. What are the conditions for corporate legitimacy?
Earth Netherlands (Milieudefensie) submitted in May 2013
The key question of the case is how should Shell
an appeal to The Hague court, as it is clear for them that
adapt its CSR agenda to these increasing demands
Shell’s headquarter shares responsibility for the massive
to take on public responsibilities and allegations of
environmental damage in Nigeria. Also, the Nigerian gov-
corporate malpractice.
ernment holds a controlling stake and power over SPDC’s
operations being its major shareholder (the government- Students will probably propose two opposing options:
owned NNPC holds 55 % of SPDC). (1) leave the country or go offshore or (2) to continue

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22 E. Hennchen

business as usual given the company’s much-praised CSR companies can face a whole host of problems if their
agenda. Yet, from a financial point of view both options are strategies backfire and unsustainable outcomes can be (are)
not viable since Nigeria is a cornerstone of Shell’s business a reality where sustainability concepts are co-opted and
and doing nothing would affect the company’s reputation and formalized in a CSR agenda, but not implemented in
by extension its profits. Also, from an ethical point of view, praxis.
Shell has certain (political) responsibilities to stay and pro-
actively engage in CSR, which can be discussed depending Teaching the Case
on the ethical theories and concepts covered in the course.
While Shell has already engaged in activities that are Courses
regarded as traditional government responsibilities to pro-
vide public services to poor host communities, the com- The interdisciplinary character, innovative stance, and the
pany is facing continuous allegations of malpractice. This global context of the case is especially interesting for stu-
growing positive and negative impact challenges the dents studying subjects such as the global context of
company’s legitimacy and consequently its license to management, the role of business in society, business
operate for two reasons. First, the company (involuntarily) ethics, business challenges in complex environments such
assumes a political role with associated public responsi- as developing countries. It can be used in undergraduate
bilities that go beyond traditional philanthropy or CSR classes, though due to its complexity, it is especially rec-
programs. Second, the company has no democratic man- ommended for graduate, Master’s, and MBA students.
date for its engagement, and there is no regulatory influ-
ence over powerful corporations such as Shell at the local Contribution of the Case
and the global level. The question is: what should Shell do,
when, and how to keep its license to operate? How could The case is a vehicle for discussion and insight on the
Shell employ sustainability-related activities and practices crucial role of learning and adaption over time for two
to meet its public legitimacy requirements? reasons. In the first place, Shell’s experiences demonstrate
Depending on the theories discussed in the course, students that many companies still hold an apolitical self-percep-
can evaluate Shell’s options using Mena and Palazzo’s (2012) tion, but engage at the same time in activities that have
conceptualization of input and output legitimacy as a basis for been regarded as actual government activities. Yet, this
a legitimate transfer of regulatory power from traditional strategic adoption of public responsibilities to maintain
democratic nation-state processes to private regulatory their social license to operate implies unforeseen chal-
schemes. Input legitimacy is determined by (1) stakeholder lenges with regard to the company’s legitimacy and the
inclusion; (2) procedural fairness; (3) consensual orientation; scope of responsibility. In a complex operating environ-
and (4) transparency (Mena and Palazzo 2012, p. 538). Output ment such as Nigeria it requires continuous efforts from
legitimacy refers to the capacity of regulatory regimes to part of the company to identify key stakeholder’s interests
effectively take a regulatory role by ensuring (1) coverage; (2) and to go beyond current one-size-fits-all best practices.
efficacy; and (3) rule enforcement and monitoring (Mena and Even though Shell is considered a forerunner in CSR, the
Palazzo 2012, p. 539). The case study makes clear that Shell’s case points to problems of sustainability with regard to the
current approach to CSR in Nigeria (GMoU) suffers from both application of ‘‘double standards’’ and the sometimes bad
input and output legitimacy. In the course of the discussion, consequences of much-praised practices. Thus this pro-
students should develop a concern about the precarious vides input for students that allow them to think through
legitimacy of globally active corporations in general and in the scope of feasible and sustainable action if they happen
developing countries with a public responsibility deficit in to find themselves confronted with such practices. In this
particular. Also, students can go a step further and discuss the sense, this case thus also challenges in a way the ‘‘bright
basis of legitimacy of companies belonging to the so-called side’’ bias of the far more numerous ‘‘best-practice’’ cases
controversial industry sector. Students should ask themselves in the area of CSR and sustainability.
if it is possible for an organization to be sustainable when its
core operations inherently entail persistent environmental and Case Objectives
social issues? How can these organizations employ their CSR-
related practices and policies better to meet their public • Analyze and understand the economic and political role
legitimacy requirements? of MNCs like Shell in a context of a public responsi-
When addressing these questions students should realize bility void at the local and global level.
that there remains considerable controversy as to the • Become aware of the challenges for the scope of
answers. Business can provide an important contribution to corporate responsibilities and the basis for corporate
public sector resource deficits and inefficiencies. Yet, legitimacy that a politicized role entails.

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Shell’s Public Responsibility Strategies in Nigeria 23

• Familiarize students with Young’s social connectedness ECCR. (2010). Shell in the Niger Delta: A framework for change.
model. Oxford: The Ecumenical Council for Corporate Social
Responsibility.
• Find out and reason on the scope of corporate Eisenhardt, K. M. (1989). Building theories from case study research.
responsibilities and legitimacy beyond a narrow liabil- The Academy of Management Review, 14(4), 532–550.
ity model. Embassy Abuja. (2003a). Nigeria: Restarting oil production in Warri.
In U. Embassy (Ed.), Confidential communication ed. Abuja:
Wikileaks.
Teaching Plan/Timing Embassy Abuja. (2003b). Oil companies differ on restarting Warri.
In U. Embassy (Ed.), Confidential communication. Abuja:
Wikileaks.
Depending on how comprehensively the instructor wishes Evans, A. C., Merchant, P. M., Fain, N. E., & Roberts, L. K. (2013).
to discuss the case, and how extensive and lengthy is the Brief of Amici Curiae: Dr. Juan Romagoza Arce, Cecilia Santos
discussion or role play, this case can run from a single Moran, and Ken Wiwa in Support of Petitioners (amicus brief
No. 10-1491 & 11-88). San Francisco: Center for Justice and
90-min session to two such sessions. To discuss the main
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