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Paradoxes and Dilemmas for

Stakeholder Responsive Firms


in the Extractive Sector:
Lessons from the Case of
Shell and the Ogoni

ABSTRACT. This paper examines some of the


paradoxes and dilemmas facing firms in the extractive sector when they attempt to take on a more
stakeholder-responsive orientation towards issues of
environmental and social responsibility. We describe
the case of SheU and the Ogoni and attempt to draw
out some of the lessons of that case for more sustainable operations in the developing world. We argue
that firms such as SheU, Rio Tinto and others may
well exhibit increasingly stakeholder-responsive
behaviours at the corporate, strategic level. However
for reasons of strategy, lack of competency or institutional wiU this increasing level of corporate responsiveness may not be mirrored effectively in dealings
between subsidiary business units and their most
important direct stakeholders: for example local communities and in the developing world. We contrast

David Wheeler is Director and Erivan K Haub Chair of


Business and SustainabiUty at the Schulich School of
Business, York University, Toronto. He is also Visiting
Professor in Sustainable Enterprise at Kingston
University Business School (U.K.). Previously, he was
Executive Director of Environmental & Social Policy at
The Body Shop International. He has been a frequent
consultant to the World Health Organisation and various
development agencies working in water and sanitation
programmes in less developed countries. He is co-author
of The Stakeholder Corporation the first business
text to be endorsed by Prime Minister, Tony Blair. He
was an advisor to the U.K. Government on governance
aspects of the Company Law Review and is currently a
member of the Government Advisory Group on
Consumer Products and the Environment. He was cofounder of the U.K. business-led Committee of Inquiry
A New Vision for Business.

David Wheeler
Heike Fabig
Richard Boele

the struggles of Shell to replicate its corporate stakeholder-responsiveness at the local level in Nigeria
with the experiences of other firms that seem to have
developed managerial capabilities at a somewhat
deeper level throughout the firm with consequent
benefits both for stakeholders and the business.
KEY WORDS: corporate social responsibility. Shell,
stakeholder theory, sustainability

Heike Fabig is a Ph.D. student in corporate responsibility


at the Graduate Research Centre for the Comparative
Study of Culture, Development and Environment at the
University of Sussex. Her research examines the engagement of The Body Shop with the campaign for social
and environmental justice of the Ogoni people in
Nigeria. She worked previously as a human rights campaigner for a Flemish non-governmental organisation
focusing on the collective human rights of indigenous
peoples, as a researcher and consultant for The Body
Shop International and a tutor at the University of
Sussex School of African and Asian Studies.
Richard Boele is a founding director of the Australian
Institute of Corporate Citizenship (AICC). He works
as a corporate social responsibility consultant and social
auditor and has a range of clients including BP, the Novo
Group, BHP Billiton, the British government and
Amnesty International. He has previously held key positions at The Body Shop International (U.K.) and
human rights organisations, both in Australia and
Europe. His civil society experience ranges from work
with local communities around the world to international
organisations such as the United Nations. He also holds
an Industrial Fellowship with the Centre for
Stakeholding and Sustainable Enterprise at the Kingston
University Business School in London, U.K.

fournal of Business Ethics 39: 2 9 7 - 3 1 8 , 2002.


2002 Kluwer Academic Publishers. Printed in the Netherlands.

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David Wheeler et al.

1. Introduction
One of the most helpful conceptual frameworks
for exploring the corporate attitude of Shell and
other firms in the extractive sector towards stakeholders is that of Corporate Social Responsibility
(CSR). Along with references to stakeholders,
sustainability and "triple bottom line" thinking,
CSR terminology is employed widely by Shell
and other actors in the extractive industries who
are members of the World Business Council on
Sustainable Development (WBCSD). Consistent
with current definitions of sustainable development, WBCSD recognises "corporate responsibility" in the three domains of financial,
environmental and social responsibihty (WBCSD,
2001). The WBCSD also offers a number of
candidate definitions for CSR which it may be
assumed refiect the views of Shell and other
influential members of the organisation. One
definition is that CSR requires "the continuing
commitrhent by business to behaving ethically
and contributing to economic development
while iniproving the quality of life of the workforce and their families as well as of the community and society at large" (Watts and Holme,
1999).
The CSR literature also bridges well to practical applications of allied concepts such as stakeholder- Responsiveness on which this paper will
focus. In this paper we will not assume that "corporate responsibility" and "sustainability" are
more or less interchangeable terms for the overarching notion that business must be economically, environmentally and socially viable in the
long term. We will, however, assume that as a
subsidiary construct "corporate social responsibility" encompasses many of those ethical questions which reside in the relationship between a
firm and its stakeholders. We also recognise that
there are those who would describe CSR or
"corporate citizenship" as an overarching notion,
so we will be careful to include all of these terms
in the appropriate way in our commentary and
discussion.
The literature on corporate social responsibility has been reviewed at length by Carroll
(1999). Describing the phenomenon as centuries
old but the literature as mostly associated with

the second half of the 20th century, Carroll cites


landmark definitions of social responsibility in
business, some of which have deep salience for
companies such as Shell. For example, Keith
Davis in 1960: "some socially responsible business
decisions can be justified by a long, complicated
process of reasoning as having a good chance of
bringing long-run economic gain to the firm".
And Peter Drucker (1982): " . . . the proper
'social responsibility' of business is to tame the
dragon, that is to turn a social problem into
economic opportunity and economic benefit,
into productive capacity, into human competence, into well paid jobs, and into wealth". We
know that the rational-instrumentalist approach
to CSR is one that resonates well with firms in
the WBCSD which asserts: "a coherent CSR
strategy based on sound ethics and core values
offers clear business benefits" (Watts and Holme,
1999).
Carroll also summarised some of the more
important attempts to categorise firms'
approaches to CSR - for example Harold
Johnson's "four perspectives", one of which
explicitly presaged the rise of stakeholder theory:
"a socially responsible firm is one whose managerial staff balance a multiplicity of interests"
(Johnson, 1971). Two key texts developed three
tier models of CSR (Committee for Economic
Development, 1971; Sethi, 1975). In the first,
socially responsible activity was categorised as
(i) related to products, jobs and economic
growth; (ii) related to societal expectations; and
(iii) related to activities aimed at improving the
social environment of the firm (Committee for
Economic Development, 1971). In the second
(Sethi, 1975), the three tiers were (i) social
obligation (a response to legal and market constraints); (ii) social responsibility (congruent with
societal norms); and (iii) social responsiveness
(adaptive, anticipatory and preventive). In both
cases the second tier required an ability to recognise and internalise societal expectations and the
third tier required the competence to engage
with external stakeholders on issues and
concerns.
Later Carroll developed his own four part
definition and three dimensional model of CSR
predicated on an underlying assumption that the

Paradoxes and Dilemmas for Stakeholder Responsive Firms

first obligation of a firm is to provide the goods


and services that society wants whilst making a
profit (Carroll, 1979). Carroll's classification of
the CSR obligations of the firm may be summarised thus: economic, legal, ethical and philanthropic/discretionary. Though Carroll was
keen to point out that no sequential hierarchy is
implied, there is no doubting the pragmatic
importance of the economic base to the pyramid.
We shall explore later in the paper how these
categorisations may be applied to the experience
of Shell and other firms with respect to their
stakeholder-responsiveness.
It is well recognised that as with most of the
business ethics literature, the CSR literature is
divided between authors who assert the possibility of creating economic and social value in
well managed companies, and those who take a
more philosophically critical approach to the
juxtaposition of economics and ethics. Authors
in the latter category frequently start with a
search for a normative explanation or theory of
the firm and end with an examination of the
rights and responsibilities of business and the
various actors involved (or vice versa). This debate
is often framed in the context of stakeholder
theory and the moral obligations which a firm
owes to its various consituents (Donaldson and
Preston, 1995).
For example, Wesley Cragg has argued that
"the business case for stakeholder theory is fatally
fiawed" (Cragg, forthcoming). In essence, Cragg
believes that whilst pragmatic stakeholder
theories may attempt to effect moral neutrality
(Goodpaster, 1998), in reality they are held
captive by the dominant business model. While
accepting the increasing empirical evidence for
win-win outcomes between investors and other
stakeholders in well managed firms, Cragg
expresses caution in what this might mean in
terms of how we might ensure that the ethical
obligations of the firm and its agents are satisfactorily discharged. Cragg also searches in vain
for a coherent normative grounding for stakeholder theory. Other ethicists who acknowledge
the possibility of a positive correlation between
ethical behaviour by firms towards their stakeholders and commercial success have expressed
discomfort about the discourse this involves:

299

"The intellectual currents propelling the "ethics


pays" argument conceal a dangerous undertow
. . . Rather than being a domain of rationality
capable of challenging economics, ethics is conceived only as a tool of economics" (Paine,
2000).
However, as Edward Freeman has argued,
commentators using stakeholder theory in the
context of business critique may be overlooking
the basic premise of capitalism that the project
is essentially about trade and the creation of value
(Freeman, 2000). Refreshingly, Freeman does not
exempt himself from this criticism.
In a typically robust re-defence of a pragmatic,
approach to stakeholder theory. Freeman (2000)
offers a vision of capitalism ("stakeholder capitalism") which would be recognisable in a
number of business cultures world wide
(Charkham, 1995). According to Freeman, stakeholder capitalism is predicated on the notion of
win-win outcomes for different actors whilst
recognising the importance of understanding
complexity, the value creation process and
competition all of which create choice for
individual stakeholders. Freeman (2000) asserts
that stakeholder capitalism "sets a high standard,
recognizes the common-sense practical world of
global business today, and asks managers to get
on with the task of creating value for all stakeholders".
In advancing this vision. Freeman is providing
a partial answer to critiques of the potentially
negative effects of globalisation and the "new
economy" on wider society from infiuential
social commentators such as Robert Putnam and
Robert Reich (Putnam, 2000; Reich, 2001).
Freeman's stakeholder-inclusive model for
business has found a strong echo in contemporary European thought on the future for capitalism. The U.K. discourse on stakeholder
capitalism emerged in the mid-1990s more or less
simultaneously from economic, political and
business fields (Kay, 1995; Hutton, 1996; Plender,
1997; Wheeler and Sillanpaa, 1997, 1998). The
discourse is alive and well too in North America
(Svendsen, 1998; Cohen and Prusak, 2000).
Freeman is also in tune with the nascent
business hterature on sustainability and the "triple
bottom line". Texts in this field generally allude

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David Wheeler et al.

to the necessity of a Schumpeterian re-invention


of business and industry whilst maintaining a
balance between economic development, social
justice and environmental protection both in
the developed and the developing world
(Schmidheiny, 1992; Hawken, 1993; Hart, 1997;
Elkington, 1998; Hawken et al., 1999; Hart and
Milstein, 1999).
The fact is that the empirical evidence for a
positive correlation between stakeholder inclusive, socially responsible business practice and
business performance - as defined by growth in
sales or stock price - is now quite compelling
(Kotter and Heskett, 1992; Collins and Porras,
1995; Waddock and Graves, 1997; Roman et al.,
1999). Similar evidence is emerging with respect
to companies and their "sustainability" i.e.
combined social, environmental and financial
performance (cf. the Dow Jones Sustainability
Index and Innovest's Eco-Value Rating system,
both of which demonstrate reasonably consistent
stock price premia for firms with superior environmental and social performance).
Thus we can see how corporations and their
leaderships have developed a growing level of
confidence in concepts such as corporate sustainability, corporate social responsibility and
stakeholder-responsiveness. Increasingly, they are
argued from a pragmatic perspective, they are
grounded in business language, and - perhaps
most importantly - they are re-inforcing of the
importance of and potential for enhanced financial performance. Peter Drucker's robust vision
of CSR as a leverage opportunity for economic
advantage and societal benefit has come of age.
Meanwhile,
Freeman's
business-friendly
description of stakeholder capitalism, together
v^^ith Hawken and co-workers' and Elkington's
win-win prescriptions for environmentally sustainable enterprise provide clear direction for
turning vision into strategic intent. This explains
the increasing assertiveness of business leader
rhetoric on issues as diverse as global climate
change, social inclusion and human rights
(Wheeler et al., 2000). Here we may acknowledge the various public declarations of such luminaries as William Clay Ford (Ford Motor
Company), Carly Fiorina (Hewlett-Packard), Sir
John Browne (BP) and of course Sir Mark

Moody-Stewart (Shell). It also explains the


growing success of business membership organisations such as Business for Social Responsibility
(U.S.), Business in the Community (U.K.), CSREurope (Europe), the Prince of Wales' Business
Leader's Forum (international) and the World
Business Council for Sustainable Development
(international).
The fundamental question remains, however,
whether strategic CSR intent - if it exists - is
readily transferable to operational reality within
acceptable time scales or whether there remain
barriers: eg lack of capability or lack institutional
will which will negate this transfer in some circumstances. It is this question which lies at the
heart of the case of Shell and the Ogoni, which
we shall now examine.

2. Shell's Damascene Conversion on the


road to corporate social responsibility
Shell's approach to dealing with stakeholder
concerns came under significant pressure in 1995.
First there was the Brent Spar controversy and
then there was the hanging by the Nigerian
military regime of Ogoni writer and environmental and human rights activist Ken Saro-Wiwa
and eight of his colleagues on November 10,
1995 (Lawrence, 1999a, b; Boele et al., 2000a).
In this paper we will consider only the implications of the Ogoni case, although it is clear that
the double impact of these two incidents induced
a vaccine-like response from the firm's reputational immune system.
The Ogoni struggle is an archetypal "David
and Goliath" story with a seemingly powerless
minority ethnic group taking on one of the
world's largest and most powerful transnational
companies (Boele, 1995; Human Rights Watch,
1995; Cayford, 1996; Robinson, 1996; Boele,
2000; Boele et al., 2000a). Many environmental
and human rights groups accused Shell and its
Nigerian subsidiary, the Shell Petroleum
Development Company (SPDC) of having
degraded the Ogoni environment for 40 years
with little or no economic or social benefits
accruing to the community. Worse still, some of
those groups which had supported the Ogoni

Paradoxes and Dilemmas for Stakeholder Responsive Firms

cause since the early 1990s also accused Shell of


a vicarious role in the executions.
More radical activists argued that there was
direct complicity and as a consequence there
were direct attacks on Shell gas stations in
Europe. But the majority of commentators saw
the events of November 1995 simply as the
inevitable, tragic outcome of the company's
clumsy approach to dealing with the Ogoni community over the previous four decades. Whatever
the evidence and the merits of the accusations,
the company's reputation was severely tarnished.
World wide campaigns of disinvestment and
general vilification were launched against Shell
by actors as diverse as church groups, Greenpeace, Amnesty International and The Body
Shop International. The media were happy to
report on the anger of the communities and the
acute discomfort of Shell (Brooks, 1994;
Wheeler, 1995; Human Rights Watch, 1995;
O'Sullivan, 1995; Duodu, 1996; Lewis, 1996).
Perhaps directly as a result of its tragic
outcome, the Ogoni struggle against Shell is
arguably the quintessential case that put the
interconnectedness of business, the natural environment and human rights on the corporate
agenda. Elsewhere we have argued that the case
is also one of the most poignant examples of
"unsustainable development" involving a major
corporation (Boele et al., 2001a, b; Wheeler et
al., 2001), although we would accept that the
Bhopal incident must rank alongside in terms of
its impact on corporate thinking with respect to
the management of risks and liabilities
(Shrivastava, 1995). But what makes the Ogoni
affair almost unique is that it helped precipitate
a fundamental change in corporate strategy and
orientation towards stakeholders in one of the
world's largest companies.
As a result of the Ogoni experience. Shell
International revisited and updated its Statement
of General Business Principles, first crafted in
1976 (Shell International, 1997). The company
re-invented its corporate strategy in line with
principles of sustainable development. This latter
process involved the development of a Sustainable
Development (SD) Road Map and SD
Management Framework - both of which made
explicit reference to stakeholder interests and

301

"triple bottom hne" concepts (May et al., 1999;


Boele et al., 2001a, b; Wheeler et al., 2001).
Shell also committed itself to a level of stakeholder engagement on its environmental and
social performance that would have been
unthinkable in the early 1990s, commencing in
1998 with the first of a series of annual statements of corporate social, economic and environmental performance. The first report was
entitled Profits and Principles: Does there have to be

a choice? (Shell International, 1998).


As a result of all this corporate activity, catalysed by the vision of Chairman of the
Committee of Managing Directors Mark
Moody-Stewart and guided by a plethora of high
calibre consultants and advisors such as
SustainAbility and Arthur D. Little, Shell's corporate reputation among opinion formers started
to recover (Vidal, 1999a). By the end of the
decade environmentalists and human rights
activists who would not have dreamed of sharing
a public platform with a Shell spokesperson in
late 1995 had accepted that in London and the
Hague, at least. Shell was a different company
from that which had resisted all entreaties for
early and effective intervention in the military
trial and execution of Ken Saro-Wiwa and the
Ogoni eight.
The way in which these strategic changes
played through to operational activities in countries as diverse as Canada, the U.K. and Peru have
been described (May et al., 1999). The company
is especially proud of the processes of stakeholder
consultation and decision-making in the Camisea
Gas Project in the Peruvian Amazonas a project
which eventually did not proceed for business
reasons.
Despite all of this progress at the corporate
level and in some important countries since
1995, there remained troubling questions over
Shell's behaviours in Nigeria and specifically in
relation to the Ogoni even as late as January
2001. During the Oputa Panel hearings on
Human Rights Violations held Port Harcourt in
early 2001, local activists felt Shell's position
emerged as unrepentent and defensive (authors'
experience). SPDC's evidence to those hearings
was certainly not conciliatory (Imomah, 2001).
For their part the Ogoni questioned Shell's new

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David Wheeler et al.

im^age as the socially and environmentally responsible company portrayed in magazine advertisements and promotional videos around the world.
They pointed to what they saw as a continuing
difference between what Shell International
espoused and how Shell in Nigeria behaved. And
they reflected on their ongoing experience of
Shell in Nigeria as clumsy and unresponsive to
their needs (authors' experience).

3. The paradox of global intent versus


local reality
We will leave aside the long history of the clash
between Shell and the Ogoni which we have
documented elsewhere (Boele et al., 2001a).
Instead, we will examine the key ethical
dilemmas that the Ogoni posed to Shell during
the 1990s and we will explore the implications
of these dilemmas for Shell and others in the
extractive industry who operate in the developing world.
The fundamental question we posed earlier in
this article is whether strategic corporate social
responsibility intent is transferable to operational
reality within acceptable time scales or whether
there remain barriers (for example lack of appropriate strategy, management capability or institutional will) which will prevent this transfer in
certain operating conditions. We might also
frame this question as an inquiry, more specifically and positively from an Ogoni perspective:
what would it mean for a company like Shell to
become a stakeholder-responsive corporation in
Nigeria - for example with respect to minority
ethnic groups such as the Ogoni?
Before returning to the question of strategic
intent and potential barriers to implementation,
we will take the positively formulated question
and focus on two discrete but inter-related questions. The questions arise directly from the
stakeholder management literature that invariably
advocates or describes processes of stakeholder
mapping and inclusion in dialogue (if not always
inclusion in governance processes and decisionmaking) .
First, we will look at who defines and who
qualifies as a stakeholder; who decides which

stakeholders are legitimised and brought into


processes of dialogue?
Second, we will examine how weighting is
accorded to different stakeholders: are all stakeholders' views and perspectives assigned appropriate value and what are the implications for
stakeholder-responsiveness of the weighting of
views and perspectives?
We will address these two questions initially
with respect to specific aspects of the case of
Shell and the Ogoni and afterwards with respect
to more generic models of stakeholder-responsiveness, with particular reference to natural
resources and extractive industries.

4. Who defines and who qualifies as a


stakeholder?
A tenet of stakeholder-responsive practice and
thus corporate social responsibility requires that
companies define who they believe their stakeholders to be. Ideally this should be a flexible and
iterative process (Wheeler and Sillanpaa, 1997,
1998; Svendsen, 1998). It is not recommended;
but nonethleless typical for practitioners to take
a company-centric approach that assumes the
firm takes the initiative. However, as many companies have discovered, this approach comes with
risks. Where a social movement challenges a corporation, the members of that movement can
"self-declare" as stakeholders. Social movements
do so by launching campaigns, taking direct
action and making demands that directly impact
on the corporation. Companies may respond by
recognising they have a problem but may not
formally accept previously unrecognised stakeholders until other actors have legitimised them
and afforded them stakeholder status.
MOSOP would argue this was the case in
their clash with Shell. Initially, the company
failed to publicly acknowledge MOSOP as a
stakeholder. Instead Shell referred generally to
"the Ogoni community" in its corporate literature on the issue without articulating who they
considered their specific Ogoni stakeholders to
be. Throughout the early 1990s, as Ken SaroWiwa's charismatic leadership began to make an
impact on opinion formers around the world.

Paradoxes and Dilemmas for Stakeholder Responsive Firms

Shell questioned MOSOP's claims and went to


considerable lengths to point out that MOSOP
was not a legitimate stakeholder and that its
ability to represent the Ogoni was questionable.
This experience provides a powerful illustration
of the potentially fiawed nature of companycentric processes used to define stakeholder
groups. Sometimes inconvenient stakeholders
may be ignored in the hope they will eventually
lose their influence. The Shell experience in
Nigeria also demonstrates how a company can
undermine a group's claim to be a stakeholder.
MOSOP recognised this and drew attention to
Shell's preference for dealing with more malleable
groups, for example so-called "Shell Chiefs"
conservative Ogoni chiefs and contractors who
did not represent the majority of ordinary Ogoni
people (Boele, 2000).
MOSOP only gained recognised stakeholder
status from Shell when the organisation succeeded in attracting third party legitimation
through the internationalisation of the Ogoni
issue. When international NGOs such as
Amnesty International and Greenpeace and the
international media afforded a platform for Ken
Saro-Wiwa as the recognised MOSOP and Ogoni
spokesperson. Shell was forced to respond to
Saro-Wiwa and MOSOP as stakeholders. Shell's
failure to truly engage with MOSOP as a key
stakeholder in the early 1990s undoubtedly contributed to the later difficulties of the company
in achieving reconciliation with the Ogoni
nation in general and MOSOP in particular - a
problem that persisted throughout the 1990s.
Nevertheless, a cursory exploration of the Shell
Nigeria web site demonstrates just how much of
a presence Ken Saro-Wiwa and MOSOP have
in the consciousness of that part of Royal
Dutch/Shell today (SPDC, 2001).
We would not suggest that defining MOSOP
as a stakeholder was all Shell needed to do to
prevent their conflict with the Ogoni. MOSOP
was not and is not a single organisation but an
umbrella for grassroots Ogoni organisations
representing various parts of the community. The
grass roots groups included the National Youth
Council of Ogoni People (NYCOP), the
Federation of Ogoni Women's Associations
(FOWA), the Conference of Ogoni Traditional

303

Rulers (COTRA), the National Union of Ogoni


Students (NUOS) and the Council of Ogoni
Churches (COC). Even though these organisations could agree on many goals for the
movement, and shared a remarkably consistent
ability to articulate the grievances and aspirations
of the Ogoni struggle, there were significant
differences of views and approaches. MOSOP was
not a single stakeholder - instead it represented
a diverse set of interests which usually (but not
always) overlapped and that presented Shell with
a significant challenge in managing complexity.
MOSOP's first major split came in 1994 when
a number of the organisations' founders felt Ken
Saro-Wiwa had taken the movement in the
wrong direction by focusing on the mobilisation
of all the Ogoni people and keeping the organisation outside the mainstream political process
by calhng for electoral boycotts. Since the
execution of Ken Saro-Wiwa and his colleagues,
other divisions within MOSOP have arisen.
Unfortunately Shell has been unable to refrain
from commentary on these splits. In 2000, Shell
argued publicly that the presence of "two
factions" (sic) in MOSOP made resolving the
Ogoni question difficult for them (Achebe,
2000). As late as 2001 SPDC continued to play
on MOSOP splits in its corporate communications: "Divisions have appeared in the Ogoni
ranks with moderate factions speaking out against
the strategy of MOSOP" (SPDC, 2001).
Apparently, by the time Shell finally accepted
MOSOP as a stakeholder, it wanted MOSOP to
speak as one for the entire Ogoni people. But
even then. Shell appeared to be employing
divisive rhetoric, attempting to define the
stakeholders, and thereby potentially denying
legitimacy to Ogoni groups that could claim
status as separate stakeholders. To compound the
problem, since the removal of the military
government in Nigeria yet more stakeholders are
claiming Shell's recognition in Ogoni - the local
Ogoni government chairs, elected local government officials, and the Ogoni Development
Committee, created by MOSOP to deal with the
development of Ogoni.
This experience presents a powerful paradox
for advocates of a "managerialist" approach to
stakeholders:

304

David Wheeler et al.

Paradox i(a): How can a powerful corporation


avoid legitimation or de-legitimation of
stakeholders simply through who it chooses
to conduct dialogue with? Failure to
identify stakeholders certainly precludes
dialogue; but the very act of identifying
certain stakeholders for the purposes of
initiating dialogue may prevent from occurring those dialogues which are most necessary.
Some might argue that this sort of dilemma is
a convenient excuse for inaction since it effectively absolves the company of responsibility for
progress; how can Shell be expected to come to
an agreement with the Ogoni people when they
cannot agree amongst themselves? On the other
hand it may be argued that all nations of peoples
are diverse. A truly stakeholder-responsive
approach demands the acceptance of multiple
stakeholders and requires the company to develop
a tolerance for ambiguity together with the sensitivities and capabilities needed to inspire trust
with diverse and sometimes competing interests.
Clearly there are parts of Royal Dutch/Shell
which understand this and indeed practice it, for
example in the Camisea example (May et al.,
1999).
Of course the same paradox also plays out
from the perspective of the stakeholder when it
emerges that the company too is not a homogeneous entity. Shell International, based in
London and the Hague, is very different from
Shell in Nigeria. Within these two "Shellactors", there are individual managers and directors, and different departments, who do not
necessarily share the same understanding of the
Ogoni situation and how to resolve it. While it
seemed that, as a whole. Shell did not define
MOSOP as a stakeholder for most of the 1990s,
there were individuals within Shell who met with
Ken Saro-Wiwa and his international supporters
at different points in the story. The mixed
messages emanating from different (and sometimes the same) actors within Shell both with
respect to the Brent Spar and Ogoni cases have
been described in some detail (Livesey, 2001).
This leads us to the second paradox:

Paradox l(b): How can a stakeholder group


relate effectively to a complex multinational
corporation which exhibits contradictions
and inconsistencies in its rhetoric and
behaviours between and within the corporation and its business units? How can a
stakeholder group be simultaneously in
opposition to one part of a corporation and
in constructive dialogue with another whilst
maintaining its own integrity and internal
cohesion?

5. The weighting game: Valuing the


vieAvs and perspectives of stakeholders
and establishing effective engagement
Once stakeholders have been defined by the
company or they have self-declared and been
legitimised by other actors, companies need to
develop processes and systems for allocating
priority to different stakeholder views and perspectives and consequently to establishing the
appropriate level of engagement with stakeholders expressing those views. This is a difficult process loaded with potential for
misunderstanding because it is necessarily based
on judgements which risk favouring one group
over another. It is also about managing expectations; "responsiveness" may include a wide range
of attitudes from choosing almost to ignore a
stakeholder group altogether - MOSOP's experience in the early 1990s to allowing them
power within a company's governance structure.
In the Shell-Ogoni case questions concerning
the value assigned to the Ogoni perspective were
significantly compounded by the problem of
strongly divergent beliefs held by the main protagonists. In 2001, Shell Nigeria stiU made clear
its perspective on the nature of the MOSOP
organisation: "Mosop (sic) espouses a peaceful
approach but violence has been a feature of the
campaign" (SPDC, 2001). And for their part
MOSOP continued to question the true intentions of Shell. MOSOP Acting President Ledum
Mitee said in 1998:
Shell the company that this year promised to
balance principles with profit has not made a

Paradoxes and Dilemmas for Stakeholder Responsive Firms

single concession to help bring about the peace and


reconciliation it says it wants to see. I have a simple
question for the Directors of SheU: when will you
balance principles with practice in Ogoni
(MOSOP International Secretariat, 1998).
Thus Shell and the Ogoni ended up developing and articulating "competing truths" with
undiminished vehemence.
For proponents of stakeholder theory, this case
is especially interesting for it reveals that disagreements over rationally presented "scientific
truths" are not necessarily the cause of conflict
nor a means of resolving conflict. Husted (2000)
has argued that there are three types of social
issue: 1) disagreements between the firm and its
stakeholders over "what is"; 2) disagreement over
"what is" and "what ought to be"; and 3) disagreement over "what ought to be". The Ogoni
case adds a powerful embellishment to this
typology as it demonstrates that "type 1" issues
may play out almost entirely around beliefs and
perceptions rather than facts. Indeed facts may
be superfiuous to the discourse. This entirely
removes the potential for addressing and correcting errors of fact as a route to reconciliation.
In the Ogoni case it is different stakeholders'

305

social impacts of oil development in Ogoni since


the 1950s.

Competing truths on environmental impacts in


Ogoni

For the Ogoni the conflict with Shell was about


"environmental devastation" and the hopelessly
inadequate sharing of the benefits of the extraction of oil resources. In essence, the Ogoni took
issue with the type of development forced upon
them and the distribution of costs and benefits
of this development. The Ogoni accused Shell of
"devastating" their environment from the start of
Shell's operations in 1958. Throughout the
conflict Shell responded that the Ogoni claims of
environmental devastation were "exaggerated".
In the mid-1990s the company's response to the
environmental accusations of the Ogoni was
clear:
The company recognises there are environmental
problems associated with its operations and it is
committed to dealing with them, but these
problems do not add up to anything like devastation (Shell International, 1995b).

perceptions and beliefs or "perceptual truths"

that offer the key to understanding the causes


of confiict and therefore, the possible solutions.
This phenomenon is likely to be especially
relevant in cases where radically different world
views, such as often prevail when transnational
companies and their scientific "development"
rationale alight in relatively politically and economically isolated communities in developing
countries. Recognising this phenomenon may be
a first and vital step towards reconciling the
prevailing corporate mentality with a more ecological rationale. This may in turn free the corporation to take full advantage of the feedback
loops (positive and negative) that stakeholders
provide and perhaps to value more ambiguous
and emotionally-based "perceptual truths" as
highly as rational, scientific truths.
By way of illustration we will describe the different beliefs and perceptions between the Ogoni
and Shell with respect to the environmental and

As noted above, the gainsaying of the MOSOP


charges continued until as late as January 2001
(SPDC, 2001) despite the fact that like MOSOP,
Shell also identified the underlying issues as those
of under-development and the failure to return
adequate benefits from the oil revenues for the
oil-bearing communities. Indeed, to give tbem
full credit. Shell always positioned itself as being
sympathetic to the communities on this issue.
However, following Friedmanite notions of "the
business of business" Shell sought to defer issues
such as development, resource sharing and
politics to the Nigerian state.
In addition to the general accusation of
"devastating" the Ogoni environment. Shell
stood accused of specific instances of environmental irresponsibility. These included operational
oil spills, gas fiaring, acid rain, inappropriate land
use and poor waste management practices.
Specifically, the Ogoni pointed to out-dated
equipment most of the Ogoni oil infrastruc-

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David Wheeler et al.

ture was built in the 1960s and 1970s - which


was poorly maintained over the years and which
led to numerous spills. The company acknowledged there were environmental impacts but put
these into a wider context of development in the
Delta including a rapidly-expanding population,
over-farming, deforestation and industry (Shell
International, 1995b). Referring to the equipment problems Shell agreed that "they were
acceptable then and in line with standards of
technology then prevalent, but we would not
build them that way now" (Shell International,
1995a).
In an effort to address some of the debate
around "devastation" Shell announced its support
for the Niger Delta Environmental Survey
(NDES) process in 1995 which the company
hoped would catalogue the physical and biological diversity and natural resources of the 70 000
square kilometre delta (Shell International,
1995b). Shell's developing understanding of the
need for a more responsive approach to Nigerian
stakeholders manifested itself in this process. Shell
determined that there should be community
representation on the Survey as represented by
respected Nigerian academic Professor Claude
Ake (now deceased). Unfortunately for Shell they
decided to persist with the project for some time
even after Professor Ake resigned and the process
had lost the confidence of the communities.
Eventually Shell did withdraw from direct
involvement with the NDES - presumably
because it was failing to achieve the desired level
of stakeholder legitimacy.
Notwithstanding their good intentions it is
questionable how far scientific studies such as the
NDES are helpful in resolving such divergent
world views and clashing perceptions of the
truth. Conventional environmental impact assessments are undeniably part of a Western, rational
approach to the environment. They deliver
quantitative, scientific assessments of damage to
the environment - a conceptual approach at odds
with the communities' more emotional and
spiritual relationship with their homeland.
For the Ogoni their environment holds a
cultural and spiritual value that can only be
appreciated and felt - not measured in figures or
summarised in tables and graphs. In that respect,

conventional environmental impact assessments


may be unhelpful or distracting as they completely side-step the issue of perception and focus
on a constructed "reality". The Ogoni lived with
what they believed were dramatic changes in
their environment; first the clearing of land for
seismic testing, then the construction of well
sites, then operational pollution from gas fiares,
production waste and oil spills. These impacts
were compounded by the failure of oil exploitation to deliver real benefits to the majority of the
people. The fact that the development did benefit
an eUte within the Ogoni people was only the
cause of even greater resentment against the oil
companies and the government.
Shell's response to Ogoni perceptions said
much about their weighting of the MOSOP
view. As noted above, the company responded by
saying that the Ogoni claims were "exaggerated"
and juxtaposed this (to their mind) irrational and
emotional view with the use of rational, "scientific" evidence to refute Ogoni accusations of
environmental devastation and developmental
neglect. Naturally, these responses did nothing to
prevent their escalating international confiict
witb the Ogoni. Indeed in retrospect it probably
exacerbated the situation. The Ogoni and their
supporters became even more highly motivated
to claim, witness and prove examples of environmental damage in Ogoni - eventually through
the broadcast of television documentaries witb
titles such as " The Drilling Fields" commissioned by British television Channel 4 and by
the placing of full page advertisements in the
quality press.
How can such radically different truths be
embraced in a managerial approach to stakeholder issues, as described, for example by
Freeman (1984, 2000)? How can stakeholderresponsive practices resolve radically opposing
beliefs and perceptions that may require emotional, spiritual and other intangible (and nonmeasurable) factors being taken into account?
This leads us to our next paradox.
Paradox 2(a): Stakeholder dialogue requires
shared language and meaning. But shared
language and meaning may not be possible
when two "truths" and two world views are

Paradoxes and Dilemmas for Stakeholder Responsive Firms

opposed. Can a company give up its


"rational truths" when even the embracing
of stakeholder-responsive practices is based
on rational analysis?

Implications for engagement

Shell's first Profit and Principles report (Shell


International, 1998) publicly committed the
company to taking a more sensitive approach to
their relations with communities. Prior to that,
and indeed for several years. Shell's attempts at
re-engagement with the Ogoni did not prove
especially successful.
In a unilateral attempt to create a climate of
reconciliation, in May 1996 Shell proposed a Plan
for Action in Ogoniland. Tbe plan outlined a
number of steps towards improving the situation
in Ogoni. These included "cleaning up all oil
spills - whether or not due to sabotage - that
have happened since the company withdrew staff
in 1993, and make safe all facilities (. . .) rehabilitate its past community projects where necessary and take over their maintenance (. . .)
[and] investigate further development projects in
the area" (Shell International, 1996a).
The then Managing Director of the Shell
Petroleum Development Corporation in Nigeria
(SPDC) said "[t]hese proposals are offered in the
spirit of reconciliation. All we need to start the
process is the assurance of aU Ogoni communities that our staff can work safely in Ogoniland"
(Shell International, 1996a). Unfortunately, the
company failed to inform MOSOP of this plan
before releasing it to the press. For MOSOP
actions like these reinforced their perception of
a dismissive attitude on the part of Shell in
Nigeria towards the Ogoni. Shell countered that
it had no intention of recommencing development without the consent of the Ogoni people.
With damage of over $50 million to their
facilities, the chances of restarting significant
production - even were consent to be given were slim in any case.
SPDC claimed its engagement and support for
the communities in the wider Delta "dates back
to the 1950s and has become increasingly focused
on long term goals in partnership with the

307

communities themselves" (SPDC, 1998b). SPDC


claimed it spent more than $20 million each year
on community development in the Niger Delta
as a whole ($52 million in 1999), and formed a
new Community Programme Development Unit
in late 1997 (SPDC, 1998a, 1998b, 2000). Yet
in 1997 and 1998, Shell Nigeria recorded 150
and 325 incidents, - ranging from peaceful
invasion to violence against staff and hostage
taking - threatening the safety of staff working
on Shell field locations (SPDC, 1998c).
In Ogoni, one of the main problems identified by MOSOP was the fact that, in order to
execute planned community development. Shell
reactivated the network of Ogoni Chiefs and
contractors that local people largely saw as Shell
people. From MOSOP's perspective these were
people within the Ogoni community who had
histories of using their relationship with the
company for their own private gain often to
the detriment of the community as a whole.
This was a significant error for a company that
presented itself internationally as a practitioner of
a more sensitive and stakeholder-responsive
approach to sustainable development. The
network of "Shell Chiefs" and contractors may
have served Shell well in pre-MOSOP days when
these people represented Shell's interests within
the communities. But the level of organisation
and education within Ogoni communities by the
late 1990s made the reactivation of the network
very problematic. For many Ogoni it was a
potent symbol of the fact that in Nigeria at least
Shell had not changed.
Even more damaging for Shell than their
apparent reliance and re-mobilisation of old aUies
in the Ogoni community was their continuing,
stumbling record on engagement and community
development. Shell sponsored development
projects were associated with violence and death
as late as 1999. In that year residents in the village
of K-Dere in central Ogoni were shot and killed
and more than 15 houses were burnt down by
the Nigerian Mobile Police. This was the first
manifestation of renewed fatal violence since the
end of military rule. The village was regarded as
a focal point for the MOSOP organisation, and
was the home village of MOSOP Acting
President Ledum Mitee. Tensions increased in the

308

David Wheeler et al.

Dere area due to a pending road project, paid for


by SPDC, which many local people felt had not
faced adequate consultation, a view shared by the
Federal Senator for the area.
To give them credit. Shell in Nigeria has
recognised "the gap between its intentions and
its current performance" (SPDC, 1998c).
MOSOP and its supporters agree with this
appraisal, and point to what they see as good
evidence. For example, in its public statements
SPDC claimed that "[i]n December 1998, the
company was able to restore electricity to the
area" (Shell International, 1999). But a mission
comprising journalists and senior figures from
The Body Shop International in September
1999' found pockets of unreliable electricity
supply in Ogoni, and large areas with no, or
damaged infrastructure (Roddick and Roddick,
1999).
In a 1996 press release. Shell had announced
that "[f]ollowing talks with government health
authorities and Ogoni community leaders, the
Shell Petroleum Development Company of
Nigeria Limited (SPDC) this week takes over
responsibility for the maintenance and supply of
drugs for the Gokana general hospital, Terabor.
It will also supplement staff wages" (Shell
International, 1996b). However, three years later
The Body Shop team found the reality to be
quite different. The conditions in the hospital
were dreary:
Gokana hospital has fewer drugs than most people
in Britain keep in their bathrooms. It has no electricity and no running or hot water. The beds have
no mattresses, there are holes in the roof, the
medical records are kept on the floor (Roddick and
Roddick, 1999).
Shell admitted that "SPDC has not been able
to look after this particular hospital as well as it
would have liked" because "unlike with other
hospitals and health centres Shell supports in the
Niger Delta (. . .) Shell staff are still not welcome
in Ogoniland" (Achebe, 1999).
Furthermore, the way in which development
monies were deployed remained a cause of deep
resentment. In late 1999, villagers had accused
the company of being "parsimonious at best,
incompetent at development work, neglecting

consultation, and paternalistic" (Vidal, 1999b).


The community development projects supported
by Shell were dismissed by Ledum Mitee, Acting
President of MOSOP as "ineffective, unnecessary or just PR for the company (. . .) They
decide what is good for us. They are just wasting
resources. We have yet to see the impact of all
this spending" (Vidal, 1999b). The Ogoni
described the "continuing failure of Shell and
other multinationals to make substantive changes
to their practices in the Niger Delta" as one of
"the current areas of prime political concern for
MOSOP" (MOSOP, 1999).
Thus by early 2001, very little common
ground existed between SheU and MOSOP. Little
or no meaningful dialogue was occurring with
respect to substantive issues and many questions
remained with respect to specific commitments
made by SPDC. With Shell still persona non-grata
in Ogoni, it was entirely unclear how Shell
would keep its promise to bury all fiowlines,
renew production infrastructure, remediate oil
spills, and undertake its program of Environmental Impact Assessments and Environmental
Evaluation Reports (SPDC, 1998a).
Despite all of the corporate policies and commitments, and nearly five years of active stakeholder-responsivenss at the international level.
Shell in Nigeria had still not (by early 2001)
established either a mutual understanding of perspectives and views with the Ogoni or an ability
to engage effectively with the community. In
SPDC's submission to the Human Rights
Violations Investigation Commission or Oputa Panel

(Imomah, 2001), Shell Nigeria listed its contacts


with MOSOP and other Ogoni stakeholders over
a period of years and noted: "It can therefore be
seen, that SPDC has reached out to a broad
spectrum of leaders and organisations for reconciliation. However, these efforts have not yielded
as much result as would be expected, perhaps,
because of the multiplicity of opinion in Ogoni".
The submission concluded: "In every confiict,
no matter how deep, parties have to meet and
have dialogue. SPDC had its hand outstretched
since 1996. Our hand is still outstretched".
And so to our last paradox:

Paradoxes and Dilemmas for Stakeholder Responsive Firms

Paradox 2(b): A company that fails to establish


genuine dialogue with the community
cannot easily facilitate genuine engagement
and development in that community. But a
stakeholder group that perceives a company
to have no legitimacy may not permit
dialogue or engagement, regardless of the
potential benefits which might accrue. Both
parties may have something to gain from
dialogue but neither has the capability or
desire to create the conditions for progress.

6. Addressing the paradoxes - experience


from elsewhere
We have uncovered four paradoxes arising from
the Shell experience in Ogoni. They all relate
to the specific dilemmas of Shell and the Ogoni,
but they may have wider relevance. In summary
they involve four specific challenges: two for the
company and two "mirror challenges" for the
stakeholders:
l(a) The company's challenge in avoiding
legitimation and de-legitimation of fragmented stakeholder groups
l(b) The stakeholders' challenge in dealing
with contradictory views and attitudes
within the company
2 (a) The company's challenge in establishing
credible and inclusive dialogue in the
absence of shared understanding and
perceptions.
2(b) The stakeholders' challenge in agreeing
to dialogue in the absence of trust,
whatever the long term potential benefits
may be to the community.
We are proposing no universal solutions to the
paradoxes. But we will reflect on how these challenges have been addressed by other companies
and their stakeholders in other circumstances.
A company which has had almost as much
attention as Shell with respect to its dealing with
indigenous communities and the social and environmental performance of its subsidiary operating
units is Rio Tinto (Mulhgan, 1999). This British
based mining company has an impressive set of
policies under the strapline "global citizen, local

309

partner" which embrace health, safety and the


environment, communities, human rights, transparency, corporate governance and accountability,
business integrity, political involvement and
employment (Rio Tinto, 2001a). The company
also has a Board Committee on social and
environmental accountability comprising only
non-executive directors.
Despite these policies and structures, there are
few mining companies which have commanded
as much antipathy from labour, environmental
and community activists as Rio Tinto and its
subsidiaries (ICEM, 1999; Friends of tbe Earth,
1998; Project Underground, 2000). Controversy
has occurred in places as diverse as Indonesia,
Madagascar, South Africa, Canada and Australia
(Project Underground, 2000).
If we take Rio Tinto's policy and structures
at face value, these would seem to indicate an
attitude to stakeholders and the environment
which covered most of the territory in Carroll's
four part definition of CSR: economic, legal,
ethical and philanthropic/discretionary (Carroll,
1979, 1999). Rio Tinto's policies would also seem
to map well against the Committee for Economic
Development (1971) and Sethi (1975) three tier
models of corporate social responsibility. In this
they would be no different from Shell, whose
own policies, structures and indeed stated strategies embrace sustainable development in an
explicit way.
However, as we have argued elsewhere (Boele
et al., 2000a, b. Wheeler et al., 2000), when it
comes to strategy formulation and implementation - especially at the business unit level - there
is much room for disconnects between CSR
policy and economic and operational reality. It
is interesting to note, for example, that Rio
Tinto's stated business strategy is based entirely
on questions of economic value, competitiveness
and profitable expansion: "minerals and metals
for the world" is the company's strategic strapline
(Rio Tinto, 2001b). Shell fares somewhat better
in this comparison. The strategies of Shell's
business areas have varied in the degree of social
and environmental responsibility which is made
explicit - with upstream business units tending
to be more financially and technically driven and
downstream units being more stakeholder

310

David Wheeler et al.

responsive (Wheeler et al., 2000). Moreover, at


corporate level Shell has demonstrated a relatively
high degree of competence in the third tier of
the CSR models of the Committee for
Economic Development (1971) and Sethi (1975).
Perhaps it is the gap between corporate policy
and competence in particular subsidiary business
units which is most to blame for the troubles Rio
Tinto and Shell have experienced in particular
countries. But formal business strategy and the
hierarchy of economic, social and environmental
values must also be a factor. In this regard we
may define Rio Tinto's approach to CSR as
wholly instrumental to its economic mission and
Shell's approach as at least partially instrumental
- most especially in its upstream business units.
It is interesting to note that the WBCSD's
landmark publication on Corporate Social
Responsibility was published under the joint
names of Phil Watts and Lord Richard Holme,
key players respectively in SheU and Rio Tinto
(Watts and Holme, 1999). The two case studies
quoted earliest in the document were those of
Rio Tinto's wind down of the Kelian mine in
East Kalimantan in Indonesia and Shell's Camisea
case in Peru. The document went on to list many
other positive examples of WBCSD member
involvement in CSR. The report was also honest
enough to list some of the principal barriers to
adoption of CSR by companies. Rather
poignantly the barriers included "lack of local
management understanding of good practice",
"poorly trained managers" and "governmental
action or the demands of military regimes".
In comparison to the difficulties of Shell and
Rio Tinto in establishing universal competencies
for stakeholder- responsiveness at the local level,
some companies seem to have developed a
culture where this is taken for granted. Like Shell
and Rio Tinto, Canadian oil and gas company
Suncor and international oil and gas major BP
have placed sustainability and stakeholder inclusion firmly within their corporate policies and
strategies. But unlike Shell and Rio Tinto's
experience in certain parts of the world, these
companies seem to have been able to generate a
greater level of community confidence where
they operate and seem to benefit from a higher
level of acceptance for their developments.

Suncor's very rapid securing of permission to


develop oil sands exploitation in Alberta
(McKague et al., 2001) and BP's securing of
exploration rights in Alaska with the support of
civic leaders and community groups (BP, 2001),
demonstrate the point. Throughout the 1990s
these companies also enjoyed a much higher level
of respect with the NGO community (Arnold,
2000).
Of course social capital (as defined by
Nahapiet and Ghoshal, 1998), requires maintenance if it is to avoid erosion. For example, BP's
difficulties in Colombia in the late 1990s and its
subsequent investment in PetroChina strained
relations with human rights campaigners - particularly those with a focus on Tibet or Sudan
(Milarepa Fund and Project Underground, 2000).
Alongside Canadian oil company Talisman
(which had already received significant crtiticism
for its activities in Sudan), PetroChina's presence
in Sudan led to urgent calls for withdrawal and
disinvestment by BP in PetroChina in March
2001 (Christian Aid, 2001). One interpretation
of the more recent difficulties of BP might be
that they have become over-confident in their
reliance on a universal licence to operate in difficult parts of the world. Thus BP has stretched
their stakeholder relations to such a degree that
the company has re-introduced risk. Another
interpretation could be a shift in corporate
strategy whereby licence to operate is taken for
granted and less importance is accorded to the
care and maintenance of social capital.
The question we must pose is why Suncor (to
date) and BP (throughout the 1990s) have been
able to generate positive stakeholder relations
relatively easily and why has it appeared to be so
much harder for companies like Shell and Rio
Tinto?
In our view this is likely to be based on a
number of inter-related factors. Three of those
factors seem to be:
(i)

The absence of a strategy or defining crisis

which confirm the corporation as an


entity which asserts or demonstrates the
primacy of conventional economic motivation
and/or
stakeholder-exclusive
behaviours. Despite the controversies

Paradoxes and Dilemmas for Stakeholder Responsive Firms

around BP's activities in Colombia and


their aggressive pursuit of new hydrocarbon reserves in Alaska and elsewhere,
they did not seem to generate anything
like the level of labour, NGO and community antipathy which attached to Shell
and Rio Tinto during the 1990s. In early
2001 it remained to be seen whether BP's
involvement with PetroChina's adventures
in Tibet and Sudan would emerge as a
defining (and damaging) crisis for that
company.
(ii) The ability of the corporation to navigate com-

plexity, to span boundaries within and


between the firm and to deal with the
sorts of paradoxes which we have explored
in this article. Thus even when problems
arose for BP in Colombia and Alaska in
the 1990s, there were attitudes and competencies in place, an assumed level of
respect and humility, a bank of social
capital (ie relational attributes) to draw on,
and space for dialogue based on perceived
potential commonality of interests.
(iii) The ability of leaderships to establish a con-

sistent tone for stakeholder-responsive


dialogue within the organisation, balancing economic and social obligations
effectively at multiple levels. This links
directly to the issue of integrity and consistency in strategy and implementation of
CSR. BP's Sir John Browne and Suncor's
Rick George modelled this behaviour
throughout the 1990s.
These three factors are all highly relevant to
effective development of the second and third
tiers of corporate social responsibility described
by the Committee on Economic Development
(1971) and Sethi (1975). As we noted earlier,
those are the tiers relating to the ability of the
firm to recognise and internalise societal expectations and to engage with external stakeholders
on issues and concerns. They also relate strongly
to Carroll's categories of ethical and philanthropic/discretionary CSR.
We have explored the first of these factors at
some length in this article in tbe context of
Shell's difficulties in Nigeria. Corporate strategy

311

is determined by the firm but "defining crises"


may be somewhat random and event-dependent
factors yvhich may or may not be wholly within
the capacity of the firm to contain or control.
The second is about developing organisational
competencies (or capabilities) and the third is
about leadership integrity - two factors which
firms certainly can do something about.
Sanjay Sharma (2001) identified a number of
organisational capabilities which he postulated
were required to deliver effective "stakeholder
integration" i.e. "the ability to establish trustbased collaborative relationships -with a wide
variety of stakeholders - especially those with
non-economic goals" (Sharma and Vredenburg,
1998). The principal capabiHties were: boundary
spanning, higher-order learning and a commitment to sustainability. He linked these capabilities to the way in which stakeholders exert
influence eg through collaborative or adversarial
relations and to the way in which corporations
may achieve competitive outcomes such as the
building of social capital (as defined by Nahapiet
and Ghoshal, 1998), "competitive imagination"
(as defined by Hamel and Prahalad, 1991), lower
costs and differentiation.
Of particular interest to this case is the capability for boundary spanning. As we have seen,
the evidence is that at corporate, strategic level
Shell has established growing competence in the
areas of higher order learning and committing
to sustainability. We have insufficient evidence to
comment on whether in Nigeria SPDC has now
made a serious commitment to sustainability or
whether they are now capable of higher order
learning (although judging by the content of
their public declarations, sensitivity and humility
has not been a hallmark). But it is arguable that
whilst Shell International has employed staff
who can span the boundaries of the firm and
establish more trust-based relations with key
stakeholders, SPDC (Shell Nigeria) has either
chosen not to do this or has attempted to do so
and the boundary spanners have failed.
On the third factor (leadership integrity),
Sergio Sciarelli (1999) has proposed a useful
model describing how business leaders may
achieve "prestige" for themselves and their
corporations through effective navigation of

312

David Wheeler et al.

economic and ethical values. SciareUi argues that


business leaders who achieve prestige follow a
path where profit, power and prestige are
achieved sequentially, with economic values
dominating earlier and ethical values later in the
progression. If we apply this model to BP and
Suncor, there is little question that this sequence
was followed effectively by strong CEOs in both
companies throughout the 1990s.
With his landmark Stanford speech on chmate
change and successive speeches on human rights
and the corporate social responsibility of business.
Sir John Browne of BP achieved "first mover"
status and clear differentiation for his leadership
on sustainability and CSR. In our experience,
despite significant concerns over BP's activities in
Colombia and Alaska, NGOs and other opinion
formers continued to be impressed by Browne's
dynamism and the expectations this created in his
company. In many ways, Browne seemed to
allow little room for ambiguity on CSR performance - at least until the PetroChina issue
emerged.
Similarly Rick George, CEO of Suncor in
Canada allows little room for doubt on his
personal commitment to sustainability and CSR
based on the speeches he makes and the expectations he creates for his managers and employees
(McKague et al., 2001).
Other companies in extractive industries have
CEOs with similar vision and stakeholderresponsive commitments. In addressing an
international ethics conference held in Ottawa in
2000, the President and CEO of Placer Dome
Jay Taylor articulated the need for partnership
with NGOs and other civil society groups
bringing competencies into his company that
they did not possess. Taylor elaborated on the
twin philosophical notions of "do no harm" and
"do as much good as possible" and he summarised the "ethical question" for his company
in Canada and elsewhere as "how to balance the
considerable infiuence we can wield in these
countries with a necessary respect for local
culture" (Taylor, 2000).
There is no question, in our view, of the
sincerity of the statements of Mark MoodyStuart (Chairman of Shell's Committee of
Managing Directors until mid-2001) on issues

such as sustainability and stakebolder- responsiveness (Moody-Stuart et al., 1998; MoodyStuart, 1999). As we have noted, at the corporate
level Shell International has well articulated
strategies, systems and processes to describe their
commitment to sustainability and corporate social
responsibihty (Wheeler et al., 2000). But for
some reason Shell has not fared as well in
reputational terms with NGOs and opinionformers as BP (Arnold, 2000) and the issue of
Nigeria remains a seemingly intractable challenge. It seems to us that the lack of consistency
between corporate leadership and strategy (in
London and the Hague) and local leadership and
operational behaviour (in Nigeria) is a major part
of the problem.
Interestingly, there are cases in the natural
resources sector where boundary spanning and
leadership questions have been addressed simultaneously with remarkable results. Boutilier and
Svendsen (forthcoming) have described how after
several years of bitter confiict with non-governmental organisations and first nations groups,
forestry company MacMillan Bloedel (since
bought by Weyerhaeuser) renounced clearcutting
on Vancouver Island and even formed a joint
venture company with its former adversaries in
Clayoquot Sound. The company appointed a
new CEO who immediately announced his
intention for MacMillan Bloedel to eliminate
antagonism with stakeholders and instead become
the safest, most respected, and most profitable
forest company in Canada. These breakthroughs
occurred almost entirely as a result of effective
boundary spanning by individuals representing
the protagonists and the subsequent integrity of
leadership pronouncements and behaviours.
In contrast to the MacMillan Bloedel story, it
is clear that SheU Nigeria has been permitted to
continue using defensive and non-conciliatory
language on its corporate web site. And the
evidence the company gave to the Oputa panel
hearings in Port Harcourt in early 2001 was
abrasive and unhelpful. Thus however many good
things may be happening in London and the
Hague and in other parts of Shell's international
operations, the continued flawed implementation
of Shell's approach to CSR and stakeholderresponsiveness in a Nigerian context continued

Paradoxes and Dilemmas for Stakeholder Responsive Firms

to undermine the company's credibihty and call


into question the integrity of its leadership and
corporate strategy. Most damaging of all for Shell
globally, the continued under-performance of
Shell Nigeria in stakeholder-responsiveness
demonstrated that at least in one part of Shell's
global operations:
(i)

it was permissable to continue to play the


game of legitimation and de-legitimation
of stakeholders (paradox la);
(ii) it was permissable to perpetuate debates
arising from an absence of shared language
and perceptions (paradox 2a);
(iii) the combination of past events (defining
crisis) and evident lack of competencies
on the ground (to navigate complexity
and deal with paradox) was allowed to
foster confiictive rather than conciliatory
relations with stakeholders;
(iv) the integrity and consistency of the corporation's global strategy and performance
on sustainability, CSR and stakeholderresponsiveness was permitted to be put at
risk; and therefore, it may be postulated
that.

Given the size of the investment Shell has made


in its corporate repositioning since 1995, the
tolerance of this risk only be permitted for
reasons of significant institutional blockage
and/or some higher purpose/organisational
imperative.

313

International (1999). In many ways, at the corporate level SheU is now a model company with
respect to the concepts of CSR advocated by
Committee on Economic Development (1971),
Sethi (1975) and Carroll (1979). At the corporate level, and indeed in a number of key business
units (May et al., 1999), SheU has developed and
continues to operate a comprehensive and leading
edge approach to CSR and stakeholder-responsiveness.
But for the Ogoni, the exploitation of oil in
their homeland - and their subsequent introduction into a global economic system has left
them struggling to make sense of SheU's approach
to CSR as it has impacted on them. The Ogoni
feel that oil exploitation without sufficient regard
for the environment and local customs may well
be beneficial for the economic growth of Nigeria
as a whole but it has done little or nothing to
improve the quality of life for the local communities who live above the oil reserves.
Have the Ogoni been unreasonable in tbeir
economic and social demands? First president of
MOSOP, Garrick Leton described these demands
thus:
The people of the Niger Delta have not demanded
the total proceeds from the rent and royalties. They
have always said that since they live in a federation,
they must be their brother's keepers. An equitable
portion of the proceeds is what they have always
asked for. To deny them everything in the face of
the massive pollution and degradation of their
environment is totally inhuman (Rowell and
Goodal, 1994).

Conclusions

There is no doubt that Shell's corporate repositioning on sustainability, CSR and stakeholderresponsiveness is real. Their international
stakeholder outreach and public relations in the
years since the events of 1995 have been very
effective with a number of audiences. A U.K.
newspaper reported that a survey of 160
(Western) global opinion leaders found that Shell
was thought to be "strong on tbe environment",
"ethical" and "committed to human rights"
(Vidal, 1999a). This has been reinforced in
international polling of ordinary citizens in 23
countries world wide conducted by Environics

And what of SheU's response to these


demands? Earlier in this paper we posed the
question of SheU's ability to match corporate
positioning with operational reality from an
Ogoni perspective: what would it mean for a
company like Shell to become a stakeholderresponsive corporation in Nigeria?
It is clear to us that by early 2001, SheU stiU
did not have the tools at its disposal in Nigeria
to achieve progress in Ogoni. There remained a
harshness in the rhetoric and a continuing
inability to engage on the terms of the community. In our opinion real change would have
required at the very least (i) a cessation of legit-

314

David Wheeler et al.

imation and de-legitimation behaviours; and (ii)


an acceptance of the Ogoni perspective. The
latter have been achieved, for example, through
exhibiting humility and deep regret for what tbe
Ogoni perceive to be the devastating impacts on
their environment, their culture and their people
(including murders and executions) of the unsustainable development which occurred in Ogoni
over a period of 40 years.
Clearly SheU's commitment to sustainability,
CSR and a stakeholder-responsive model of
business raised expectations for the company's
performance in community relations internationally. Nigeria and the Ogoni in particular,
remain the company's greatest ethical chaUenge.
As SheU International's spokesperson for Nigeria
said: "Brent Spar was a big wake-up caU. Nigeria
keeps us awake aU the time" (Sharp et al., 1999).
SheU has a major challenge to overcome. If the
company cannot, or chooses not to resolve the
Ogoni case they can be accused of making commitments at corporate level without the competencies or the will to deliver where it reaUy counts.
It is not for this paper to speculate what might
be the internal institutional barriers for SheU to
overcome to address the competency issue in
their Nigerian operations. Nor is it appropriate,
without further evidence, to discuss whether a
higher purpose or organisational goal is at stake
that prevents corporate strategy being translated
into local action in this case. Clearly there
remains much in SheU's approach to CSR and
stakeholder-responsiveness
(particularly
in
Nigeria) which is instrumentalist: in service of
an economic goal rather than an effective and
synergistic balance between ethical and economic
values. But it is impossible to judge whether this
is a question of transitional inconsistency or
whether it represents a more fundamental and
irreconcilable problem for the company.
But the learning for aspiring stakeholderresponsive firms in the extractive sector may be
summarised thus:
There may be no inconsistency between achieving
economic, environmental and social goals in the
extractive sector, including in the developing
world. There is both theoretical and empirical
evidence for "stakeholder capitalism" being a viable
model for the creation of value in all three dimen-

sions of the sustainability model, i.e. economic,


social and environmental. However we may postulate that:
(a) A genuinely stakeholder-responsive model of
CSR may need to be more than an instrumentalist management tool for managing troublesome groups in service of conventional
economic goals; it must become an integrated
part of the company's approach to strategy
formulation and implementation and the development of competencies consistent with that
strategy. This is a pre-requisite for achieving
consistency between stated strategy and actual
performance with respect to social responsibility.
(b) Stakeholder-responsiveness requires an ability
to navigate complexity, span boundaries and
address paradox throughout the organisation
most especially in areas where there has been
a history of conflict. This requires at the very
least: (i) avoidance of stakeholder legitimation
and de-legitimation behaviours; and (ii) an
ability to generate shared language and perceptions with stakeholders even if this
requires suspension of the corporation's own
certainties and assumptions.
(c) Stakeholder-responsiveness also requires the
presence of leaders at different levels of the
organisation ie at corporate and business unit
levels who are able to navigate themselves and
their parts of the organisation to a position of
"prestige" through their effective and appropriate balancing of ethical and economic
values.
The story of Shell in Nigeria and the Ogoni
provides many salutary lessons for businesses
seeking to operate successfully and ethically in
developing countries. To its credit, SheU
International has attempted to internalise much
learning from the events described here - to the
extent that it has altered its business strategy in
line with principles of sustainable development
and CSR and the company has successfuUy
updated its approach to stakeholder dialogue at
the corporate level. SheU has also recognised the
need for cultural change and a more sophisticated
attitude to "political" questions of human rights,
environmental responsibility and corporate social
responsibility. The challenge that remains for
SheU International is to translate its new corporate strategy into leadership, competencies and

Paradoxes and Dilemmas for Stakeholder Responsive Firms

genuine stakeholder-responsiveness locally in


Nigeria.
Notes
' Two of the three authors of this paper accompanied this mission.

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David Wheeler
Erivan K Haub Program in Business and
Sustainability,
Schulich School of Business,
York University,
4700 Keele Street,
Toronto, Ontario,
Canada M3J 1P3,
E-mail: dwheeler@schulich.yorku.ca
Heike Fabig
Graduate Research Centre for the Comparative
Study of Culture,
Development and Environment,
Sussex University,
U.K.
Richard Boele
Centre for Stakeholding and Sustainable Enterprise,
Kingston Business School
Kingston University,
U.K.