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Companies in Crisis - What not to do when it all goes wrong

Exxon Mobil and the Exxon Valdez

Many companies have faced a crisis during their history, whether due to external forces beyond their control, through their own failings or management problems, or a combination of the two. Only a few, however, come to personify corporate irresponsibility through one pivotal event. Such a one is Exxon's experience with the Exxon Valdez.

What happened

In 1989, the Exxon Valdez oil tanker, entered the Prince William Sound, on its way towards California. In spite of the fact that the weather and sea conditions were favourable and the Bligh Reef clearly marked on the maps, the ship ran aground and began spilling oil. Within a very short period of time, significant quantities of its 1,260,000 barrels had entered the environment.

At the moment of the collision the third mate, who was not certified to take the tanker into those waters, was at the helm. The probably cause was established that the Captain and many of the crew had been drinking alcohol in considerable quantities.

What did the company do?

According to most observers, too little and too late. The action to contain the spill was slow to get going. Just as significantly, the company completely refused to communicate openly and effectively. The Exxon Chairman, Lawrence Rawl, was immensely suspicious of the media, and reacted accordingly.

Shortly after the accident had taken place, and the world's media had piled in to begin extensive coverage, a company spokesman pointed to the existence of procedures to cover the eventuality - procedures which the TV shots showed were demonstrably failing. When asked in Rawl would be interviewed on TV, the response was that he had no time for that kind of thing.

Meanwhile the operation on the ground was getting nowhere fast. Around 240,000 barrels had been spilled, with another million still on the ship. During the first two days, when calm weather would have allowed it, little was done to contain the spillage. This spillage spread out into a 12 square mile slick.

Then the bad weather struck, making further containment almost impossible.

After more than a week, the company was still giving no ground on the request for better communication. The media clamour became so hostile that eventually Frank Iarossi, the Director of Exxon Shipping, flew to Valdez to hold a press conference. It was not a success. Small pieces of good news claimed by the company were immediately contradicted by the eyewitness accounts of the present journalists and fishermen.

John Devens, the Mayor of Valdez, commented that the community felt betrayed by Exxon's inadequate response to the crisis, in contrast to the promises they had been quick to give of how they would react in exactly this eventuality.

Eventually, Rawl deigned to go onto television. He was interviewed live, and asked about the latest plans for the clean-up. It turned out he had neglected to read these, and cited the fact that it was not the job of the chairman to read such reports. He placed the blame for the crisis at the feet of the world's media. Exxon's catastrophe was complete.

Cost and benefit

The consequences for Exxon of its two-pronged disaster - the spill and its environmental consequences, alongside its disastrous communications - were enormous. The spill cost around $7bn, including the clean up costs. $5bn of this was made up of the largest punitive fines ever handed out to a company for corporate irresponsibility.

The damage to the company's reputation was even more important, and more difficult to quantify. However, Exxon lost market share and slipped from being the largest oil company in the world to the third largest. The "Exxon Valdez" entered the language as a shortcut for corporate arrogance and damage.

Conclusion

The features that made Exxon's handling of the crisis a failure included the following:

  • The company failed to show that they had effective systems in place to deal with the crisis - and in particular their ability to move quickly once the problem had occurred was not in evidence
  • They showed little leadership after the event in showing their commitment to ensuring such problems would never happen again
  • They quite simply gave no evidence that they cared about what had happened. They appeared indifferent to the environmental destruction.

Links:

Exxon website

News stories

"Largest U.S. Oil Spill Fouls Alaska Marine Habitat" [no longer available]
Black Rain Falls: Oil, Water, and the Politics of Rock and Roll Environmentalism, J. Arnold G'Schwind [no longer available]

Other sources

"Risk issues and crisis management" - Michael Regester and Judy Larkin, Insitute of Public Relations. 1997.

Comment added 12th May, 2008

I wish someone would give this incident full unbiased coverage.  I was an employee of Exxon shipping company and can provide a better format of what really happened. As in all accidents like this there was a series of errors, any of which, if caught would have prevented this tragic accident from happening. True- the Valdez was outside of the shipping lane- it had obtained Coast Guard approval to veer outside the lane because of icebergs. When the Coast Guard issues such permission it is supposed to keep monitoring the vessel- the Coast Guard did not do this or it would have alerted the Vessel that it was heading towards the reef. True the Captain had been drinking ashore, but when the Captain left the bridge and asked the third mate- who had NOT been ashore drinking if he was comfortable on the bridge, the third mate was not, but was afraid to say so because the Captain is the one who gives him an evaluation
which affects promotions. True the vessel was on automatic pilot, which it should not have been in restricted waters, so when the lookout reported a light appearing on the wrong side of the vessel and the mate gave the helmsman a wheel command- the ship would not respond.  If the helmsman had been a seasoned AB, instead of a lifetime ordinary seaman who just got promoted because they did away with his rating- he would have known to take the helm off automatic pilot before turning the wheel-thus averting disaster. After the ship grounded on the reef and started leaking oil- provisions were in place for just suck an emergency-there was a barge maintained by ALEYESKA loaded with booms to take out to the vessel to contain spills- unfortuneatly, all the booms were off the barge for an inspection- this cost precious time and by the time this resource was available for oil containment, the weather had worsened and the seas increased, spreading the spill and making it harder to contain. So you see- it was a series of errors which created this nightmare.

Carol L. Ginsberg
Former first mate, unlimited tonnage license

 

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