CASE STUDY Union Carbide Corporation and Bhopal: A Case Study of Management Responsibility On December 3, 1984, operations went awry at a Union Carbide pesticide plant in Bhopal, India. Rapidly, a sequence of safety procedures and devices failed. Fugitive, lethal vapors crossed the plant boundaries, killing 2,347 and seriously injuring 30,000 to 40,000 more. The gas leak has been called the worst industrial disaster ever. It created enormous pressures on the Indian government and the management of Union Carbide. Industry critics were galvanized. “Like Auschwitz and Hiroshima,” said one, “the catastrophe at Bhopal is a manifestation of some- thing fundamentally wrong in our stewardship of the earth.” UNION CARBIDE BEFORE BHOPAL In 1984, the year of the tragic events in Bhopal, Union Carbide was the na- tion’s thirty-fifth-largest industrial corporation. The giant firm, founded in 1886, had grown from a small dry-cell battery company into the nation’s third-largest chemical producer, with a net profit of $199 million on $9.5 bil- lion in sales. It employed 98,366 “Carbiders” at 500 facilities in thirty-seven countries, and foreign sales were 31 percent of total sales. The company had a variety of product lines, including petrochemicals, industrial gases, weld- ing equipment, and popular consumer products such as Prestone antifreeze, Eveready batteries, Glad bags, and Simoniz wax. Although the third-largest U.S. chemical producer, Carbide ranked only sixteenth in profitability. Its petrochemical sales were 28 percent of total sales in 1984 but only 23 percent of operating profits; Carbide, a low-cost producer of petrochemicals such as ethylene, had been slow to divert its resources to more profitable business lines. To make matters worse, the entire chemical ® David Weir, The Bhopal Syndrome, San Francisco: Sierra Club Books, 1987, p. xiiCHAPTER 6: INSTITUTIONALIZING SOCIAL CONCERNS IN BUSINESS 181 industry was in a three-year slump. And new Saudi Arabian petrochemical plants were scheduled to come on-line in 1985 and 1986. Chemical companies worldwide faced formidable competition from those Saudi plants, which had access to low-cost crude oil, the primary raw material in petrochemical pro- duction. In anticipation of Saudi production, chemical manufacturers the world over were reducing capacity. Hence, by 1984, Carbide’s strategy was to emphasize growth segments in its other operating divisions. Union Carbide had a reputation as a socially and environmentally con- cerned company; a 1983 Fortune magazine survey ranked Carbide in the up- per half of the chemical industry for environmental responsibility. In 1977, Carbide added Russell E. Train, former head of the EPA, to its board of di- rectors and, shortly thereafter, set up a corporate department of health, safety, and environmental affairs. UNION CARBIDE'S BHOPAL PLANT Union Carbide first incorporated in India in 1934 to make batteries. It oper- ates through an Indian subsidiary in which it owns a 50.9 percent majority interest, and Indian investors own a 49.1 percent minority interest. Among, Indian investors, the Indian government predominates; it owns roughly half the 49.1 percent minority interest. This jointly owned subsidiary, named Union Carbide India Ltd. (UCIL), trades its shares on the Bombay Stock Ex- change and is operated entirely by Indians. In 1984, UCIL had fourteen plants and 9,000 employees, including 120 at the Bhopal plant in central In- dia. Although UCIL contributed less than 2 percent to Carbide’s revenues, it was the fifteenth-largest in sales among all Indian companies in 1984. Most of its revenues came from sales of Eveready batteries. Union Carbide elected to build a pesticide plant in Bhopal in 1969. At that time, there was a growing demand in India and throughout Asia for pesti- cides, due to the burgeoning “green revolution,” a type of planned agricul- ture that requires intensive use of pesticides and fertilizers in the cultivation of special strains of food crops such as wheat, rice, and corn. Although pes- ticides may be misused and pose some risk, they also have great social value. Without pesticides, damage to crops, losses in food storage, and toxic mold growth in food supplies would cause the loss of many lives from starvation and food poisoning in developing countries such as India. It has been esti- mated that pesticide use increases India’s annual crop yield by about 10 per- cent—enough to feed roughly 70 million people. In India, about half the na- tion’s population of 750 million lives below a minimum caloric intake established as a poverty line by the government. An overall assessment of mortality risk would conclude that an Indian citizen is far more likely to die of starvation than of pesticide poisoning or a Bhopal-type disaster. In the early 1970s, the small Bhopal plant formulated pesticides from chemical ingredients imported to the site. The plant was encouraged by the government of the city of Bhopal and the state of Madhya Pradesh with tax incentives. In 1975, however, UCIL was pressured by the Indian government182 PART2: BUSINESS SOCIAL RESPONSIBILITIES to stop importing chemical ingredients. The company proposed, therefore, to ‘manufacture methyl isocyanate (MIC) at the plant rather than ship it in from Carbide facilities outside the country. This was a fateful decision. ‘Methyl isocyanate, CHsNCO, is a colorless liquid with a sharp odor. At the Bhopal plant it was used as an intermediate chemical in pesticide manu- facture. It was not the final product. Rather, MIC molecules were created and then pumped into a vessel to react with other synthetic organic chemicals. ‘The reaction process created uniquely shaped molecules that interfere with the natural chemistry of insect nervous systems and thus act as chemical weapons within pests. The two pesticides made by an MIC reaction process at Bhopal, with the trade names Sevin and Temik, are carbamate pesticides that disable a critical enzyme in the nervous systems of pests, leading to con- vulsions and deaths. In 1975, Carbide received a permit from the Ministry of Industry in New Delhi to build a methyl isocyanate unit at the Bhopal plant. Two months prior to approval of this permit, the city of Bhopal enacted a development plan that required relocation of dangerous industries to an industrial zone fifteen miles outside the city. Pursuant to the plan, M. N. Buch, the Bhopal city administrator, tried to relocate the UCIL pesticide plant and convert the site to use for housing and light commercial activity. This effort failed for rea- sons that are unclear, and Buch was shortly thereafter transferred to forestry duties elsewhere. Between 1975 and 1980, the MIC unit was constructed from a design pack- age provided by Union Carbide’s engineering group in the United States. De- tailed design work was done by an Indian subsidiary of a British firm. The unit was built by local labor using Indian equipment and materials. The rea~ son for such heavy Indian involvement with the plant was an Indian law, the Foreign Exchange Regulation Act of 1973, which requires foreign multina- tionals to share technology and use Indian resources. Tn 1980, the project was finished, and the MIC unit began operation. Dur- ing construction, large, unplanned slums and shantytowns called jhuggis had grown up near the plant, peopled mainly by manual laborers and unem- ployed people seeking work. Of course, the plant had become far more dan- gerous, for it now manufactured the basic chemical ingredients of pesticides rather than simply making them from shipped-in ingredients. One step in the manufacture of MIC, for example, involves the production of phosgene, the lethal mustard gas” used in World War I, The slum dwellers outside the plant had little knowledge of its dangers. It was simplistically understood that its product was a kind of mysterious yet benevolent elixir that helped plants grow Tin 1981, a phosgene gas leak at the Bhopal plant killed one worker, and a crusading Indian journalist wrote a series of articles about the plant and its potential dangers to the population. No one took any action. In 1982, a sec- ‘ond phosgene leak forced temporary evacuation of some surrounding slum areas. Also in 1982, a safety survey of the plant by three Carbide engineers from the United States cited approximately fifty safety defects, most of them(CHAPTER 6: INSTITUTIONALIZNG SOCIAL CONCERNS IN BUSNESS 183 minor, and noted “no situation involving imminent danger or requiring im- mediate correction.’"* Subsequently, all suggested changes in safety systems and procedures were made (except one troublesome valve outside the acci- dent area). Worker safety and environmental inspections of the plant were carried out by the Department of Labor in Madhya Pradesh. The agency had only fifteen factory inspectors to cover 8,000 plants and had a record of lax enforcement.”* This was typical of the generally low commitment to pollu- tion control in India by regulators at all levels. A recent downturn in the Indian economy and stiff competition from other pesticide firms marketing new, less expensive products soon caused the Bhopal plant to lose money for three years in a row. As revenues fell, its budgets were cut, and it was necessary to defer some maintenance, lessen the rigor of training programs, and lay off some workers. At the time of the accident, the MIC unit was operating with a reduced crew of six workers per shift rather than the normal twelve—a condition some process-design engi- neers thought unsafe. UNION CARBIDE’S RELATIONSHIP WITH THE BHOPAL PLANT ‘The Bhopal pesticide plant fit into the Union Carbide management hierarchy as depicted in the organization chart in Exhibit 6-1. Although some Ameri- cans had staffed the plant and had conducted safety inspections in its early years, Carbide turned the plant completely over to Indian personnel after 1982, It did so under Indian government pressure to increase national self- sufficiency. Plant safety inspections after 1982 were the responsibility of the Indian subsidiary, UCIL. At the time of the accident, therefore, line respon- sibility for the day-to-day operations and safety of the plant rested with the plant manager, an Indian employee of UCIL. The plant operated with a great deal of autonomy. But Union Carbide had majority ownership of UCIL and, in addition, was represented by five members on the UCIL board of direc tors, four from Union Carbide Eastern, Inc., and the fifth from the interna- tional headquarters group. The Bhopal plant was also in close contact with the management of Union Carbide Agricultural Products Company, Inc., which was Carbide’s arm for the production and marketing of pesticides. ‘Top management at Union Carbide’s Danbury, Connecticut, headquarters, received monthly reports from the Bhopal plant and approved major finan- cial, maintenance, and personnel decisions. Carbide engineers also provided UCIL and the Bhopal plant with the processing manual on MIC that was sup- posed to guide plant operations. In the reporting relationship, Union Carbide’s top management in Con- necticut had ultimate, formal responsibility for the operation of the Bhopal plant. Shortly after the accident, Chairman Warren M. Anderson stated in *L, A. Kal, J. M, Poulson, and C; 5. Tyson, Operational Safety Survey, COIMICISevin Units, Union Carte Init Ltd, Bhopal Pant, South Charleston, West Virginia: Union Carbide Corpora tion, July 28, 1982, p. 1 “S Sheila Jasanotl, "Managing India’s Environment," Environment, October 1986, p. 33. =a184 Pant 2: BUSINESS SoC RESPONSIBILITIES Board of Directors Warren M. Anderson Chairman and CEO. ‘Neo Fame President ‘Services & Products Group usa, Union Carbige Agricultural Products Union Carbide ‘Company, In, Eastem, Ine USA Hong Kong Board of Directors ‘Union Carbide Inia Ud Bombay ‘Bhopal Pesticide Plant EXHIBIT 6-1 Union Carbde's organization structure a related to the Bhopal plant. interviews that Carbide accepted “moral responsibility” for the tragedy. Nev- ertheless, the Bhopal plant was but one of hundreds of sites worldwide in Which the company had an equity interest. For this reason, and because of the vast physical distances separating the two sites, Carbide's U.S. manage- ment team delegated considerable authority over operations to UCIL's man. agement team on the spot. The exact nature of this shared authority remains unclear, since the gas victims’ claims have never come to trial THE GAS LEAK On the evening of December 2, storage tank 610, one of three storage tanks at the MIC unit, was filled with 11,290 gallons of MIC. The tank, which had & capacity of 15,000 gallons, was a partly buried, stainless steel, pressurized vessel. The purpose of Tank 610 was to store large batches of MIC. MIC was Produced elsewhere at the plant and routed through pipes into Tank 610. At eeeCHAPTER 6: INSTITUTIONALIZING SOCIAL CONCERNS IN BUSINESS 185 an appropriate time, operators in a control room would open and close valves to move one-ton batches of MIC through a transfer pipe to the area where pesticides were made.”* The MIC would then be converted to Sevin (or Temiky. ‘At about 9:30 p.m., a supervisor ordered R. Khan, an operator in the MIC complex, to unclog four filter valves near the MIC production area by wash- ing them out with water. Khan connected a water hose to the piping above the clogged valves, but neglected to insert a slip blind above the point of wa- ter entry. A slip blind is a simple device that seals lines to prevent water leak- age into adjacent pipes. Khan’s omission violated instructions in the MIC processing manual, the technical manual which sets forth procedure estab- lished by the chemical engineers who set up the plant. Either because of this careless washing procedure or the introduction of water elsewhere, 120 to 240 gallons of water enteréd Tank 610, initiating a powerful exothermic (heat building) reaction. Initially, operators were un- aware that the reaction was proceeding that night. At 10:30 p.m., tank pres- sure was logged at 2 pounds per square inch. Then, at 10:45, a new shift ‘came on duty. At 11:30 p.m., a new operator in the MIC control room no- ticed that the pressure in Tank 610 was 10 pounds per square inch, but was unconcerned because this was within tolerable limits, the gauges were often wrong, and he did not read the log to discover that pressure was five times ‘greater than it had been one hour earlier. ‘ As the reaction continued, the temperature in Tank 610 rose. Unfortu- nately, the refrigeration units that cooled the tanks had been shut down for five months as an economy measure. Had the tanks been refrigerated, as the MIC processing manual required, the heat buildup from the reaction with the water might have taken place over several days instead of several hours. ‘As pressure built in the tank, a leak developed. At about 11:30, workers smelled MIC, and their eyes watered. At 11:45, one operator spotted a small, yellowish drip of MIC from some high piping and informed his supervisor. ‘The supervisor suggested fixing the leak after a tea break scheduled for 12:15 a.m, on December 3, ‘At 12:40, the tea break ended. But by this time a gauge in the control room. showed that the pressure in Tank 610 was 40 pounds per square inch. It rose ina short time to 55 pounds per square inch, the top of the scale. A glance at the tank temperature gauge brought more bad news: the MIC was vaporizing, at 77°F, 36° higher than the safety limit specified in the MIC processing man- ual. After reading the gauges, an operator ran out to look at Tank 610. He felt hheat radiating from the tank and heard the concrete over it cracking. Within % Some other companies used a different production process to make carbamate pesticides in Which MIC was manifactured in small amounts and then immediately reacted to produce the pesticide, The advantage? Storage of large batches of MIC was unnecessary. After the accident, Carbide was criticized for using a production process that required storage of tens of thousands ‘of gallons of MIC for long periods. Some process chemists thought it particularly inappropriate to use the method in @ Tess developed country lacking experience with high-risk production technologies.186 PART 2: eustiess SOCIAL RESPONSteLES Seconds, a pressure-release valve opened, and a white cloud of deadly MIC ‘vapor shot into the atmosphere with a high-decibel screech Operators back in the contr ol room tured a switch to activate the vent gas scrubber, a safety device desi they escaped into the atmosphere was also off-line; it had been disassembled for maintenance, and an elbow joint Tank 610 es, Another emergency measure, the transferring of MIC fram EXHIBIT 62 The tank storage area and safety qu refrigeration unit was of and te S23 lalled to prevent disaster. The service dop in tho loner lh cermer a ossble Source of the waler that caused the reacton (Couneyof Unees Carbide(CHAPTER|€: INSTITUTIONALIZING SOCIAL CONCERNS IN BUSINESS 187 At about 1:00 a.m., an operator turned on an alarm to warn workers of danger from escaping gas. The plant superintendent, who had arrived in the control room, directed that a water spray be turned on the escaping MIC va- por to knock it down, but this had little effect. At this time, most workers in the plant ran in panic, ignoring four parked buses, which they were sup- posed to drive through the surrounding area to begin evacuation of resi- dents. Only two workers stayed in the MIC control room. They shared the only available oxygen mask when the room filled with MIC vapor. Finally, at about 2:30 a.m., the pressure in the tank dropped, the leaking safety valve resealed, and the MIC leak stopped. Over a two-hour period, roughly 10,000 gallons or about 90 percent of the MIC in Tank 610, vaporized and blew out in a white cloud. The cloud spread for miles across the sleeping city. That night the wind was calm, the temper- ature about 60°, and the heavy chemical mist lingered just above the ground. The gas attacked people in the streets and seeped into their homes. Those who panicked and ran into the night air suffered higher doses of toxic vapor. Because MIC is so reactive with water, simply breathing through a wet cloth would have saved many lives. But people lacked this simple knowledge. An- imals died. Trees were stripped of leaves. Crowds of Bhopal residents fled the city. As the poisonous cloud enveloped victims, MIC reacted with water in their eyes. This reaction created heat which burned corneal cells, render- ing them opaque. Residents with cloudy, burning eyes staggered into aid sta- tions, permanently ot temporarily blind. Many victims suffered shortness of breath, coughing fits, inflammation of the respiratory tract, and chemical pneumonia. In the lungs, MIC molecules reacted with moist tissues, causing chemical burns. Fluid oozed from seared lung tissue and pooled, a condition called pulmonary edema, and many vic- tims literally drowned in their own secretions. When they did not suffocate from edema, chemical burns destroyed cells that facilitate the exchange of gases in breathing and the clearing of foreign matter from the lungs. In sur- vivors, the burned tissue eventually healed over with a tough protein sub- stance called fibrin, which created areas of pulmonary fibrosis that dimin- ished breathing capacity. There is no known antidote for MIC exposure. Treatment consisted of ad ministration of oxygen, mechanical ventilation of the lungs, the use of diuret- ics to maintain fluid balance, and the short-term use of steroids to decrease lung inflammation. Unfortunately, many residents of the slums around the plant were already in poor health from living in poverty and suffered from malnutrition, tuberculosis, and a variety of infections. These chronic condi- tions worsened the effects of MIC injury. How many died at Bhopal? The Indian government issued 1,450 death cer~ tificates, but many families built funeral pyres without consulting local au- thorities. The local police department estimated 1,900 deaths. Bhopal’s ‘mayor said 3,000. Other Indian officials suggested a toll as high as 7,000 to 10,000. Finally, in November 1986, the Indian government established an of- ficial death toll of 2,347. About 200,000 of Bhopal's roughly 700,000 residents,188 Pant 2: busmess Soci. nEsPoNSionmes were exposed to the gas, and the governmen Were seriously injured.” Victims continue to die ar hospitals from gas-related injuries long after exposure, and visitors to Bhopal describe sounds of cough- ing and wheezing wherever people congregate UNION CARBIDE REACTS Unprecedented management problems faced Warren M. Anderson, age Sixty-three, chairman and CEO of Union Carbute Awakened early in the moming on Monday, December 3, he rush necticut, headquarters and learned of the morning hours, when the In the early extent of the disastet was evident, an emer, ager. Only two phone Ridernation in Danbury about events there, Ukon Anderson was arrested, charged the guest house at the Bhopal plant, flown to Nee Delhi, leave the country. cee aanae Error cen and Teo at Meco lence, reports of cessive numberof bk dele among Bhopal residents ae‘CHAPTER 6: INGTITUTIONALIZING SOCAL CONCERNS IN BUSINESS 189 climate was 30 hostile that anything associated with Carbide was reviled. Later, when the government discovered that Union Carbide had set up a training school for the unemployed in Bhopal, the facility was bulldozed. In the days following the disaster, Anderson assumed responsibility for management problems related to Bhopal. Alec Flamm, president and chief operating officer of Carbide, assumed responsibility for normal business op- erations. A five-member board of directors’ committee, chaired by former EPA head Russell E. Train, was set up to oversee Bhopal-related actions. Investor confidence in Carbide was shaken. Carbide’s stock fell from about $49 at the time of the disaster to a low of $32.75. As lawsuits were filed fon behalf of the victims, with a potential payout exceeding Carbide’s net worth, Standard & Poors, a rater of securities, lowered Carbide’s debt rating, an action that made it more difficult and costly for the company to raise money. Anderson, as spokesperson for Carbide, had to undertake the deli- cate task of assuring investors that the company would continue to make profits while appearing not to show callous disregard for the human tragedy in Bhopal. ‘CARBIDE FIGHTS LAWSUITS AND A TAKEOVER BID No sooner had the MIC vapor cleared than American attorneys arrived in Bhopal seeking litigants for damage claims against Union Carbide. They walked the streets signing up plaintiffs. Some confused gas victims signed up with more than one attorney. Just four days after the gas leak the first suit was filed in a U.S. court; soon cases seeking $50 billion in damages for 200,000 Indians were filed against Carbide. But soon after these filings the Indian Parliament passed a law giving the Indian government the exclusive right to represent victims.” A week later India filed a suit in the United States. Union Carbide offered $350 million to settle existing daims (an offer rejected by the Indian government) and brought a motion to have the cases heard in India. Both Indian and American lawyers claiming to represent victims opposed the motion, knowing that ‘wrongful death awards in India were small compared to those in the U.S.” In May 1985, a federal court ruled that the cases should be heard in India rather than in the U.S., noting that “to retain the litigation in [the U.S.]...would be yet another example of imperialism, another situation in which an established sovereign inflicted its rules, its standards and values on % Indian Parliament Aet No. 21 of 1985, exered into force Feb. 20, 1985, GAZETTE OF INDIA (EXTRAORDINARY), pt. 2, sec. 2, March 29, 1985 Indian cours rarely awarded more than $10,000 for a wrongful death, and families of In dians killed by buses usually received $100-$200. By contrast, in U.S. courts there have been hundveds of awards exceeding $1 malin, James Rargan, “Bhopal a Hard Lesson in Vale of Safety Rules,” Los Angeles Times, February 15, 1988. There had never been a wrongful death judgment in India grater than $40,000. R. Clayton Trotter, Susan G. Day, and Amy E. Love, "Ghopal, India and Union Carbide The Second Tragedy,” Journal of Business Edis, June 1989, paw.190 PART 2: BUSINESS SOCIAL RESPONSIBILITIES a developing nation.”™ This was a victory for Carbide and a defeat for Amer- ican lawyers, who could not carry their cases to India in defiance of the gov- ernment. In September 1986, the Indian government filed a $3.3 billion civil suit against Carbide in the Indian court system. The suit alleged that Carbide, while engaged in the hazardous act of making pesticides, had breached du. ties to (a) protect the environment, (b) protect human life, (c) utilize effective safety practices, and (4) disclose the full risks of the Bhopal plant. The suit was brought only against Union Carbide Corporation, U.S.A., not against Union Carbide India Ltd., the Indian subsidiary. It was based on a novel “theory of multinational enterprise liability.” The traditional law of parent corporation responsibility holds that except in cases where the affairs of par- ent and subsidiary are so commingled as to be indistinguishable, the parent cannot be held liable for acts of a subsidiary. But the Indian government's brief held that “key management personnel of multinationals exercise a closely-held power which is neither restricted by national boundaries nor ef- fectively controlled by international law;” hence, for justice to be done, the parent firm must be held responsible for acts of the subsidiary.” In addition to the civil suit, Carbide’s chairman, Warren Anderson, and several other ex. ecutives were charged with homicide in Bhopal Criminal Court. However, Ro attempt to arrest them has ever been made. Carbide’s lawyers believe the Bhopal court has no jurisdiction over them and that the charges were a pres- sure tactic. In addition to its legal battle, Carbide had to fight for its independence when in August 1985 GAF Corporation started to buy Carbide shares for a Possible takeover bid. In December, this takeover effort materialized. In a month-long war of wills, Carbide successfully repelled GAF, but only at the cost of taking on enormous new debt to buy back 55 percent of its outstand- ing shares. In 1986, after the takeover battle, Carbide’s debt-to-capitalization ratio exceeded 80 percent. This huge debt load had to be reduced, because interest payments were crippling. So in 1986, Carbide sold $3.5 billion of as- sets, including its most popular consumer brands—Eveready batteries, Glad bags, and Prestone antifreeze. The company also sold more than a dozen other businesses and restructured into three tightly focused business groups—chemicals and plastics, industrial gases, and carbon products. It had become a smaller, weaker company. > Ine Union Carbide Corporation Gas Plant Disaster, 634 Supp. 867. This opinion was upheld ‘on appeal tothe U.S. Court of Appeals, Second Circ, on Jantary 1, 1987 The appeals court is Romever se sever procedural condtans inp os titer eae nat ee ey, parallel jurisdiction, and satisfaction of eventual judgment. Let inact wes an order that Union Carbide wave defenses based onthe state of limitations. Nos. o 7517 86-7589, Se 7698, In Qaaber 7 th US,Sprme Cour tout comet et he jg stand roguotedin Rober Auer, “chime Again Fae Corporation fem the Perspective of Inttouse Counsel,” paper presented to the Practicing Lave Insttate Program on "Responsibly ofthe Corporate Parent for Activites ofa Subsidiary.” New York, June 10,1985, pr 20,CHAPTER 6; INSTITUTIONALIZNG SOCIAL CONCERNS IN BUSINESS 191 INVESTIGATIONS INTO THE CAUSE OF THE MIC LEAK In the days following the disaster there was worldwide interest in pinning down the precise cause of the gas leak, A team of reporters from the New ‘York Times visited Bhopal and interviewed plant workers. Their six-week in- vestigation led to publication of lengthy newspaper accounts which con- cluded that the accident was caused by a large volume of water entering Tank 610 and reacting with the MIC. The water entered because the oper- ator who had washed out piping earlier in the evening violated procedure and failed to use a slip blind. So water from the hose simply backed up and eventually flowed about 400 feet into the MIC storage tank. The Times ac- count was widely accepted as authoritative, and this theory, called the “wa- ter washing theory,” gained wide currency. Media audiences found it a plau- sible explanation that satisfied their curiosity. Immediately after the accident, Union Carbide also rushed a team of in vestigators to Bhopal, including scientists, chemical engineers, attorneys, and accident investigation experts from the independent consulting firm of Arthur D. Little. But the team was severely hampered by lack of cooperation from Indian authorities, who were under political pressure from anti-Carbide protest groups and anti-American public feeling in the wake of the tragedy. It was denied access to plant records and blocked from interviews with work- ers by the Indian Central Bureau of Investigation, which was conducting a criminal inquiry into the incident. In accident investigation, early debriefing, of witnesses is critical because memories of minor detail fade and stories tend to alter and harden over time.*® But Carbide was denied this advantage and ‘was unable, in the short run, to counter the image of inept management and blundering projected in the New York Times stories. ‘The Carbide investigative team was, however, given access to Tank 610 and took core samples from the bottom residue. These samples were sent to the ULS., where over 500 experimental chemical reactions were undertaken to explain their chemical composition. In March 1985, Union Carbide finally re- leased its first report of the accident. The short, twenty-five page Carbide re- port concluded that the accident had been caused by the entry of water into the tank, but did not accept the water washing theory. It stated that “the source of the water is unknown” but focused attention on the possibility of entry through misconnection of a water line at a utility station near the tank. Utility stations (or “service drops,” as they are sometimes called) are lo- cated throughout chemical plants and provide needed services. Typically, ® Stuart Diamond, “The Bhopal Disaster: How It Happened" New York Times, January 28, 1985; Thomas J. Lueck, “Carbide Says Inquiry Showed Errors But 1s Incomplete,” New York ‘Time, January 38, 1985; Stuart Diamond, "The Disaster in Bhopal: Workers Recall Horror,” New York Times, January 30,1985, and Robert Reinhold, "Disaster in Bhopal: Where Does Blame Lie?” [Nev Yor times, January 31,1985. “Ted. Ferry, Madern Accident Investigation and Analysis, nd ed., New York: John Wiley & Song, 198, p. 32 3% Bhopal Methyl Isocanate Incident Investigation Team Report, Danbury, Connecticut: Union Carbide Corporation, March 1985, p.182 panT2: BUSINESS SOCIAL RESPONSIBILITIES they contain headers for compressed air, water, nitrogen, and steam—all es. ential for chemical plant operation. At the utility station nese Tank 610, the the government of India was suing Carbide, yet also Fano Carbide from ac- nvestgatiatl evidence that might prove its innocence. Carbide wncned its view piation, Sending a team of interviewers to India to seck out aad ee jeserted. At this time an operator who had been angry for sess days about his falure to get a promotion stole into the area, He uneetaea the local turned the Cato” gauge on Tank 610, hooked up a rubber water hove, act ia a SU isthe Ras ac Re Bhp Tos Cas Lage Bombay: ether poo Sete and Indust Resear Oacember os te ese BONES: iene the para ater ey ito Tank 60, tacktow om he vee ese irda at eae MBN concertos of adm inthe rnd of Pek ioe indeat (at wae ad med wth the casts the crakearaaa ea (CHAPTER 6: INSTITUTIONALIZING SOCIAL CONCERNS IN BUSINESS 193 duces tearing; they did not regard it as a lethal hazard. Indeed, there had been no prior experience with fatalities from release of vaporized MIC and, after the venting of Tank 610 into the air, operators in the MIC control room felt some relief. They believed the threat had passed and informed town au- thorities there was no danger to life ‘A few minutes after midnight, MIC operators noted a strong pressure rise in Tank 610. Walking to the tank, they found the hose connected and re- ‘moved it, then informed their supervisors. The supervisors tried to prevent a catastrophic pressure rise by draining water from Tank 610. Between 12:15 a.m, and 12:30 a.m., just minutes before the major gas release, they trans- ferred about one metric ton of MIC from Tank 610 to a holding tank in the Sevin manufacturing area. Water is heavier than MIC and the transfer was accomplished through a drain in the bottom of Tank 610; thus, the supervi- sors hoped to remove the water. They failed. At 12:45 a.m. the gas leak oc- curred. Union Carbide investigators had physical evidence to support this sce- nario. After the accident, the local pressure gauge hole on Tank 610 was still open and no plug had been inserted as would have been normal if it was removed for normal maintenance. When written records for the MIC unit were examined, a crude drawing of the hose connection was found on the back of one page from that night's log book. Also, operators outside the MIC unit told the investigation team that MIC operators had told them about the hose connection that night. Log entries in the MIC unit had been falsified, causing the Carbide team to conclude that the operators engaged in a crude cover-up. The major falsifi- cation was an attempt to hide the transfer of MIC from Tank 610 to the Sevin production area. The operators on duty that night made clumsy efforts to show that the transfer had come from Tank 611 instead and had been done more than an hour earlier, before the shift change. But the entries were out of chronological sequence and in the handwriting of operators who did not come on until the night shift, Further, analysis of the contents of the MIC transferred into the Sevin area showed it to be contaminated with reaction byproducts. The MIC in Tank 611, from which the operators claimed to have made the transfer, was found to be on-specification and untainted. The transfer had to have come from Tank 610 Why did the supervisors and operators attempt a cover-up? One Carbide investigator has written this explanation Not knowing if the attempted transfer had exacerbated the incident, or whether they could have otherwise prevented it, or whether they would be blamed for not having notified plant management earlier, those involved decided on a cover-uj They altered logs that morning and thereafter to disguise their involvement. As is rot uncommon in many such incidents, the reflexive tendency to cover up simply took over." > Ashok 8, Kalekar, “Investigation of Large-Magnitude Incident: Bhopal as a Cace Study, paper presented at The Institution of Chemical Engineers Conference on Preventing, Major ‘Chemical Accidents, London, England, May 1988, p. 27194 PaRT2: BUSWESS SOCAL RESPONSIEIIMES Tovent Mic storage 928 sevubbe tank 610, MIC storage tank 61T MIC storage tank 819 Fiter pressure safety vai lines "theory Indian government, water wasintoduced through er prossure safety valve ines. As hose kept running, water valve in thatareaand ose upintothe relief vaivevantheades tur atthe jumper line. 6, andl moved into the process vey line PUK) fling itin the reverse direction ‘Sompletel fille, water rosea line Dand proceeded into MIC storage tank to Oe foe JO88, two months after the leak, India's Central Bureau of Investigation celles ago the FVHtine atpoint Etodrain any water leftin thin. Ne water Casrree Corte this fact alone dproves the water-washing theory. The fact that varoue eahene ake pathway tothe tank were closed also disproves the theory, according to artes eaten, siguges.analtorate theory: The company says thas poof that water woniniecuece cy 2 igaruntled employee” wo removed presture gauge F,atached a hece en soe, biping, and ran water ‘escaped through a rupture dish ang roceeded through the RVVH and out the vent pas seatons EXHIBIT 6-3 Two thorios clash on water entry ino MAIC tank. (Source: Wi Lepkowsti, shin Carbide Presses Bhopal Sebolage Theo,” Chemical & Engioeing ‘News, July 4, 1968, p. 10.) This theory of deliberate sabotage became the centerpiece of Carbide’s lex gal defense. The Indian goverment made no public comment, but Cinivason Varadarajan, lead investigator in the 1985 study by the Indian Council of Scientific and Industrial Research, commented: “We have other evidence showing the likelihood that water came in by the water washing. I don’t think we'll have any dit ing it.’” And some observers fara that the sabotage theory failed to mitigate management responsibility for equipment failures and procedures inadequate to contain the MIC reac, tion. 1 Lepkowali “Union Carbide Press BhoplSsbolge Theory” Chia & Engin News, July 4, 1988, p. 11,(CHAPTER 6: INSTITUTIONALIZING SOCIAL CONCERNS IN BUSINESS 195 ‘A SETTLEMENT IS REACHED [At last, on February 14, 1989, a settlement was reached. Carbide agreed to pay $470 million. In return, India dropped all pending lawsuits and indem- nified Carbide and its officers against any further legal action, Carbide's in- surers paid approximately $200 million. The Washington Post estimated that Carbide had also paid over $100 million in legal fees since 1984." Carbide ‘was pleased with the settlement. It was affordable and required only a $0.50 per share charge against 1988 profits of $5.31 a share. The case was a fester- ing political sore for Indian Prime Minister Rajiv Gandhi, who feared that op- position candidates in the next general election would pillory him for his fail- ture to force Carbide into paying restitution. Thus, the Indian government was anxious to settle Victims’ groups such as the Bhopal Poison Gas Struggle Front were imme- ately upset. Some estimated the needs of Bhopal victims in the billions of dollars, and many Indians had demanded a harsher punishment for the ‘American company. Shortly after the settlement was announced, victims of the gas leak gathered outside UCIL Offices in New Delhi shouting “Killer Carbide, quit India.” About 50 stormed the offices, breaking windows and furniture. In parliament opponents of Prime Minister Gandhi walked out upon learning of the settlement, and his party was later defeated at the polls. Several legal challenges to the settlement were made, but by early 1990 most had been rejected by the Indian Supreme Court.”” ‘Because the case has not come to trial, the water washing theory and the sabotage theory have never clashed in a legal forum. The world does not know which would be more persuasive to a jury. QUESTIONS 1 Who is responsible for the Bhopal accident? How should blame be apportioned ‘among the parties involved, indluding Union Carbide Corporation senior manage- ment, UCIL managers, workers at the MIC unit in Bhopal, government in India that issued permits and provided incentives for the plant, slum dwellers who ‘moved near the plant in illegal settlements, Indian environmental and safety in- spectors, and others? 2 What principles of ethics and responsibility are applicable to the actions of the par- ties in question? 3 How well did the legal system work? Do you agree with the decision to try the lawsuits in India? Were victims fairly compensated? Was Carbide sufficiently pun- ished? 4 Did Union Carbide handle the crisis well? No company has ever been faced with @ similar situation, How would you grade Carbide's performance? Maleolm Gladwell, “Bhopa's Final Chapter,” Washington Post National Weely Estion, Feb- ruary 20-26, 1989 Sec Stephen J. Adler, “India’s Justices Uphold Bhopal Settlement.” Wall Steet Journal, Jar wary 2, 1900; and Richard Koenig and Stephen J. Adler, “Experts Doubt India’s Abiity to Push Catbide,” Wall Stet Journal, January 23, 1990