Business Ethics and Corporate Governance

Term Paper, 2015

22 Pages, Grade: 10.00





Agency theory

The Stakeholder Theory



Profit Maximizing Theory

Role of Government

What the Indian Government should have done?




The transnational corporations and globalisation of economic activities has led to two broader issues i.e. corporate social responsibility and corporate governance. Though, they are well appreciated by mass population but still it has certain negative socio-economic effects. As certain writers have pointed out, corporations are special organisations which have enormous impact and influence upon different economies (Meintjes, 2000; Galbraith, 1977; Bakan, 2004). This is especially in context to the developing economies, where the local government don’t have any other option but to go ahead with the terms and conditions of these corporations.

In order to exploit the environmental regulations, lower standards on working conditions and basic worker rights, many corporations from developed countries like United States have begun their operations in developing countries of Asia and Africa (Snider, 1993; Meyer, 1998; DeMartino, 2000; Forsythe, 2000). But, these corporations claim that they create more jobs and work within the law (Meyer, 1998). While some of these claims are now often unearthed and attacked by social activists and media (Klein, 2001; Cavanagh et al., 2002; Korten, 1995).

There are many instances which show the irresponsibleness of these corporations which led to advert effect on social and economic state of an economy. One such instance is Bhopal – Gas Tragedy, a catastrophically event that took place at Union Carbide India Limited (UCIL) pesticide Factory in City of Bhopal, Madhya Pradesh. When 40 tons of MIC (Methyl Isocyanate) was poured into natural environment creating a hazardous situation as 3500 people dies and 400,000 people suffered injury and effects arising from it. It is termed as greatest industrial disaster which occurred on 3rd December 1984 around 11.30 pm but no steps were taken before 2 am.

UCIL was a Subsidiary of American Union Carbide Corporation which at present has merged with Dow Chemical’s making it word’s no.1 chemical company. It was established as a part of Green revolution to serve pesticide needs in the country and was strategically based in Bhopal in year 1969. UCC had 51% share in the venture and 40% was owned by state government and government of India.

MIC or Methyl Isocyanate is a poisonous gas that is half times heavier than air and heavier than water. This property of MIC was the reason that when it was released in natural environment it moved closer to the earth and thus affected life of residents living near the spread range of the Gas. Effects of this gas can be noticed through the range of diseases that can be caused due to this gas –

a) Chronic Cataract
b) Chronic Bronchitis
c) Emphysema
d) Gastrointestinal problems – Hyperacidity and chronic gastritis
e) Neurological Disorders
f) Psychological Problem – Depression and anxiety
g) Gynecological Problems
h) Muscular-Skeletal problems

The case talks about the reasons for the leakage of Water into the MIC tank and delayed as well as immature steps taken by plant manager. The manager and other staff was unprepared for the situation and nobody knew what to do when such event take place. It tells about the negligence of corporate governance by the UCIL and it management in taking care of general things (Like maintenance and basic steps) whose fulfillment could have stopped this event from taking place. Apart from that it also talks about how people were affected due to this mishap and negligence shown by UCIL in taking responsibility for post event concerns like to compensate outcomes of the event rather they tried to run away from the situation. Not just UCIL but it also tells about various warnings that were issued at UCC in America which were not taken seriously by them. Double standard shown by the UCC is also in the center of the case. Along with UCC and UCIL, government of India and State government of Madhya Pradesh were also responsible for the event as there were no policies or monitoring done by them related to the working and maintenance of the plant. Apart from that their weak indulgence in fighting for Justice of the people was also taken into question. At the end late decision by Supreme Court regarding compensation and last implementation (about 20 year later) of decision act as salt on the wounds of people. The following are the certain factors that contributed to the disaster:

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- Using harmful chemicals (MIC) instead of better ones for cost reduction
- Wrong Location since the location of their plant was near the densely populated area
- Inadequate safety equipment because of substandard maintenance
- Inefficient storage i.e. instead of storing in steel drums the gas was being stored in large tanks
- Human Error because no proper training was given to them
- Inadequate Staffing
- No backup plan in the Bhopal Plant as contrast to Western Virginia Plant
- The refrigeration unit was also closed down in order to further save the cost
- Improper management
- No proper follow up of the safety standards even after getting warnings several times from their workers
- Adoption of double standards at Bhopal Plant by UCC in contrast to West Virginia Plant


Corporate governance refers to the set of rules, principles, systems and procedures which make sure that a company is managed and controlled in the best possible manner safeguarding the interest of the stakeholders of the company such as customers, financial institutions, government, suppliers, management, etc. It is the approval by the management of the organization about the inalienable rights of the shareholders as the real possessor of the organization and of their individual role as trustees as a representative of the shareholders. Corporate governance deals performing operations of the company in such a way that it leads in promotion of fairness and transparency among the stakeholders such that each stakeholder gets maximum benefit in equal proportions specially between owners and rest of the shareholders of the company.

The Union Carbide Corporation did not take proper initiative in safeguarding and balancing the interest of the all its stakeholders, which resulted in the devasting tragedy of Bhopal. The board of directors and other top-level executives were held accused and liable for the tragic disaster. The Top-level executives who were held liable are mentioned in the following table along with their designation.

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Mr. warren Anderson had taken key decision of cost cutting measure, which compromised the safety measures at the Bhopal facility. There were inappropriate security precautions at the plant. The Anderson was arrested immediately after the disaster but he was released on 7 December 1984, and he left the country by signing a bond of Rs. 25,000. He never returned to the country and never appeared for hearings to describe what actually happened. According to the victim’s, Anderson had knowledge about the toxicity of the gas and its hazardous effects in case any disaster occurs.


Mr. Keshub Mahindra knew about the unsafe operations of the Bhopal office yet did not made preventive strides and sufficient security measures to control the fiasco.

Agency theory

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This hypothesis characterizes the relationship between upper administration and the operators (Managers) of the business. In each association there are two sorts of issues emerges first is when struggle in the middle of important and specialists because of objectives, besides when key and operators have diverse disposition. Principals pass request to their specialists and as per that they need to do work. In this hypothesis troughs need to do the offered work to inside of guidelines and regulation guided by the organization. On the off chance that any operators demonstration negative or break principles and regulations of organization, then it prompted loss of the organization and this additionally affect on the shareholder's riches.

Amid 1983 named executives is from U.S, that time each and every reports are kept an eye on time, wellbeing measures are additionally checked and amended appropriately. Didn`t go out on a limb about the life of the representatives by giving them six months preparing. At the point when delegated executive is from India this disaster happens. There are a few elements which demonstrate that Agency hypothesis exists for this situation:

- Doesn't concentrate on the ecological contamination, in 1988 organization put out 300 million waste, which was 230 million in 1987.
- Maintenance and security measures were overlooked by the chiefs and administrators. All gadgets, for example, flare tower, water window ornament, save tank, icebox framework were under repair, neglect to stop the MIC catastrophe.
- Gauges which are utilized to quantify the weight and temperature in MIC tank hinted at the inconvenience however it was overlooked by Managers and bosses.
- Refrigeration which is utilized to shield MIC tank from high temperature which is stopped to spare the expense brought about by refrigeration is about Rs. 700/day. On the off chance that refrigeration works at time of catastrophe, then it retains tank warmth of MIC.
- In 1980 the workforce in industrial facility is as per the HR arrangement, however to chop down cost the specialists were lessened to half in 1984.
- Maintenance which assumes an essential part in this sort of plants, which was decreased from six to two, so cost would be moderate down.
- About ninety Monitors and controller console were introduced for wellbeing was controlled by one individual as it were.
- Training period for wellbeing of specialists is intended for 6 months however it was decreased to 15 days. Which demonstrates that boss is more center in cutting cost as opposed to security of representatives.
- Gas scrubber is to kill the hole MIC however it was closed down for substitution, weight produced amid catastrophe day was four times than the limit of gas scrubber.
- Flame tower which is the most imperative wellbeing toll is not working. It is utilized to smolder the break MIC from the tank.
- Designed water window ornament were too little can't achieve the highest point of the fire tower.
- Alarm away tank neglect to give the sign of ascend in temperature of capacity tank, which was filled past the utmost of tank is 67 tones. On the off chance that it is not over filled, then additional MIC is consumed by void tank.

All the above focuses demonstrate that there is no measure taken into record for wellbeing of specialists. All regions were fundamental adjustment and substitutions are to be obligatorily done yet not done. Directors and Managers done work however they are overlooking vital ranges which are basic and included high cost. It is a result of essentially two reasons one is that directors and manager doesn't perform their obligation well so that these wellbeing measure were disregarded and held un-altered. This is not the best approach to chop down the expense of item by trading off with wellbeing apparatuses. Individual from upper administration to lower administration take after and actualize those things which are finished by their seniors, if in this chain upper administration is not dynamic and overlooking security measures, then lower administration additionally do likewise by disregarding the wellbeing instruments. As per Ethics, if an organization neglects to keep the cost low it will never play with life of the specialists, cost cutting will be in particular way and inside of the kept up arrangement and strategies. Specialists who work for the organization, they confidence that if an organization passes any data is in their great confidence, don't affect negative on them. When we see that entire disaster, on the off chance that all these wellbeing measures were work at that night, then there is plausibility of ingestion of this catastrophe. In the event that standards are go for expanding benefit then specialists likewise go about as same to diminish cost in any case, whether in the event that they need to decrease wellbeing components. Administrators and boss doesn`t concentrate on the gadgets which are not working, they need to send covers the basic issues about the substitution of the wellbeing gadgets. They don't do as such on the grounds that they won't be considered in charge of an issues. They don't perform their obligations well and shroud the thoughtlessness done by the representatives.

The Stakeholder Theory

Corporate administration distinguishes choices to be made adequately since it is essentially a relationship between the partners and the choices to characterize vital controls and authoritative execution.

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Characterized by Edward Freeman, the hypothesis expresses, any individual or a gathering of individual who is or are influenced by the demonstrations of the organization are partner of that organization. Implies any individual, individual or a gathering of people who is or are affected by an associations goals or exercises is alluded to as a partner. It is the representatives, suppliers, clients, and group on the loose. For the specific instance of Bhopal gas disaster, taking after is the rundown of individuals who were identified with the organization everywhere, whether straightforwardly or by implication yet are alluded to as partners of the same:

1. Government Including State government, focal and in addition nearby governments are the partners for the same. It was the choice of the administration just to begin readiness of MIC in the nation itself so as spare expense for not importing it and advance green upset in the nation and acquire independence in the agrarian development by creating pesticides in nation as it were. It was government's choice to substitute imports and begin home assembling of the gas. It was the legislature which was occupied with the delivering more employments and growing the economy. It was the legislature that had restless evenings after the fiasco took up. It was the legislature to handle the circumstance which was crazy. The establishment of Bhopal gas Tragedy Act was a noteworthy step. It was the preeminent court of the nation which maintained the settlement and guaranteed the measure of $470 million from carbide. Despite the fact that postponed and however to a couple yet equity was finished. Preeminent Court as the real partner of the business was influenced a considerable measure with the case and helped casualties a ton by giving medicinal reconnaissance programs, protections, healing center offices and so on. Government itself had 40 percent offer in the organization, so it was their ethical obligation as a shareholder and additionally the Government to deal with what is going on at the plant, as it was utilized by Union carbide against them.

Part of government turned out to be imperative when this catastrophe happens in light of the fact that it was a situation where two nations were included with various modern laws. Yet, Indian government took support of Union carbide. Set up of Detaining Warren Anderson, he was given up and even charges against Union carbide were denied when they offered $ 470 million pay. This was against a harm of 3 billion$ that was confronted by individuals.

1. The media as a partner was the one which constantly influenced the exercises of the business. They were identified with the organization as a noteworthy partner. A peril of picture ruining before the general public by the distributions is something which dependably upholds a business not to do any such errands that influences the general public. The productions like national poisonous battle and numerous global sorts of board dependably presented the issues like releasing of toxics, nonchalance of wellbeing and specialist's security and so on along these lines media and distributions go about as a noteworthy partner and are identified with the workings of the business.
2. The workers as partners were affected to a huge degree by the exercises of the business. They were the prompt sufferers of the business exercises. They are the ones who make the associations. They were not prepared to handle the circumstances well; they were just clarified about the manifestations and not the precautionary measures. Disappointed workers were influenced a great deal by the bungle of the organization.
3. The society as one of the real partner the general public was influenced by the business. Picking Bhopal as the area for assembling of MIC was a choice to spare expense of assembling since it was an impeccable area as a dependable wellspring of water, power, and work on huge scale serving the general public on the loose. According to a report the debacle was not sudden. Being the maker of such a hurtful concoction it was the most extreme obligation of the organization to take all the safety oriented measures. Be that as it may, the disappointment of operations and upkeep were never actualized and society as a partner was affected.
4. The activists as partner are still of the perspective that the equity is insufficient. Still crusades like International battle for equity in Bhopal is done as a would like to never to have a rehash broadcast of such a frightening modern debacle.
5. The legitimate power and courts as a partner were in a quandary. The cases were filled in the nation of guardian organization i.e. US and also in Indian courts. The law of the nation is connected with the working of each organization as was with this case. It was obligation of law to give equity to the casualty family. Courts attempt to locate an immaculate approach to handle the issue by isolating pay cash in 2 sections. One is essential pay that was requested that be settled in 6 months and another sum was saved for possible later use bank that will pick up premium, which will be disseminated among the casualties in future.
6. The neighborhoods as a partner was profited in certain ways but at the same time was at a misfortune. They were inclined to dangers the most extreme additionally they were the stand out to get the vocation chance to acquire their bread and spread. The business served the area by giving the procuring opportunities. Indeed, even today the new conceived are conceived with acquired infections. U can without much of a stretch recognize casualties through their face. Despite the fact that separated from remuneration these casualties were given professional preparing so as to begin acquiring all alone.
7. The NGO like Greenpeace is additionally a noteworthy partner for the same. They were the ones to demonstrate that it was just with the benefit thought process the organization set up the plant in the condition of Bhopal, where there is a yearn for employments. They just studied and presented that the delayed consequences of the same still perseveres. The incessantly sick alive and as yet enduring, the debased water and dumped dangerous ranges are still there.
8. The worldwide associations as partner universal laws were additionally on the double related. The claims were documented in the guardian organization's nation too which were later denied on grounds of nation relations and nearness.
9. Competitors as partners are the ones which lead the business to procure greatest conceivable at any expense and this is the thing that happened with the Carbide.
10. Business accomplices the UCC was influenced by the operations of its auxiliary. As the most critical partner, even subsequent to tailing all the wellbeing standards in US plant, the organization lost upon its picture in light of what happened at its India plant. This partner of the business is specifically related with the operations of the business since it controlled 50.9% stake in UCIL and thusly related. It was UCC with intend to gain most extreme benefits and grow.
11. The overall population is being intrigued as they landed the positions yet were the most endured partners. A couple of thoughtless acts and the sufferers were the overall population. Experiencing constant issues, eyes issue, gastrointestinal issues, ophthalmic issues and significantly more, were people in general who is a noteworthy partner to every single business. Furthermore, for this case, they are enduring till date
12. The Publications influenced by the doings of the business, they were the one to say that Carbide slighted the issues for its laborer's wellbeing and security. They were the one to say that carbide is a noteworthy discharger of toxics. Just because of productions the business comprehends what they need to do and take after.

This hypothesis is critical for the companies in order to mirror the best they are. Any control done turned the circumstance against them as it were. The insensible demeanor of carbide towards every one of its partners is the thing that demonstrates that carbide was not following what partner hypothesis of corporate administration clarifies. The partners are there who are in a few or the other route identified with carbide however the hypothesis expresses the obligation of the business to amplify its recipients, yet the situation was not obviously for carbide and the outcome was the calamity. For this situation it was a couple affecting and others were influenced however they are some way or another identified with the exercises of the business.


Corporate social obligations turned out to be quite a bit of examination in the late times, after numerous disappointment of partner hypotheses and the vast majority of the organizations get to be open henceforth it is essential to make corporate mindful than the individual partners. As indicated by Weir and Schapiro, (1981) there are various deficiency can be recognized under the partner hypothesis, in the globalization where organization attempting to grow its frame of reference extent of partner hypothesis are constrained to nearby/auxiliaries top administration however really parent organizations are additionally in charge of driving such choice. In the illustration of Bhopal catastrophe guardian organization UCC attempted to escape anyway it was the first which has ignored the specialized issues. Under the Corporate social obligations stage, business is in charge of owing the self-enthusiasm, taking care of the benefit augmentation, and the same time it additionally in charge of human, natural and societal obligations. Under the Corporate social obligations specialist Donaldson (2002 disclosed organization need to deal with good issues like debasement, carelessness, pay off and prejudice. These ethical issues have the mix of partner hypothesis and business morals principals. On account of Bhopal gas disaster, the whole case spread under the Indian board code and criminal trick however neglect to cover under the corporate social obligations. Specialist Hopkins (2003) discovers distinctive measurement of corporate social obligations which are:

- Environment: Under the domain of corporate social obligations, organizations must deal with the earth and perils of environment and environment. The ramifications of nature under the corporate obligations are rising and not accessible when the Bhopal catastrophe happened, UCC the organization which not just neglected to take care of the ecological concern, while working pesticide fabricating plants in the swarmed populace territories however additionally disregarded least specialized necessities. Notwithstanding, is universal substance UCC, was very much aware of the ecological variable which was utilized as a part of USA since early days fail to utilize the same convention in India. Indian government that time pushing mechanical insurgency to fortify the economy while making the businesses in industrial facilities and expansion rural yield doesn't consider the ecological perils as a result of the compound plan.
- Human Capital: As indicated by Crowther, David. Furthermore, Rayman-Bacchus, Lez., (2004), organizations should be in charge of dealing with its workforce taking care of business level, while giving their base wages, working environment, preparing and care for their wellbeing needs. In Bhopal disaster was additionally the carelessness of the human capital capacity where the neither organization nor Indian government ready to spare the specialists interest. Indeed, even following 30 years its guardian organizations neither government ready to remunerate completely the casualty or perished family.
- Society and community: As indicated by Frederick, William Crittenden(2006) , corporate must assume liability of their general public and environment which they works. Likewise they considered in charge of enhancing the family and neighborhood society wellbeing. The greater part of the current worldwide association utilizing quite a bit of cutting edge system to answer the societal and group needs however when Bhopal calamity happened there wasn't such model was existed, organization for the most part works revenue driven expansion instead of serving correspondence and society.
- Regulation: It is obligations of Government and industry bodies to make organizations in charge of act mindfully in the internationally. As per Perrini, Russo and Tencati (2007) regulation go about as a glass entryway for the organization to advancement of working structure. On account of Bhopal catastrophe neither UCCL as well as UCC been managed enough under the administration laws, henceforth both the organization has not taken completely obligations regarding the disaster. It is the administration obligations to manage the organizations at some point to ensure the human and societal qualities.
- Emergency Support : As per Maheshwari (2010), under the CSR it is vital for the organization to take care of the crisis bolster that they can give when any unanticipated circumstance that can be made. Today the majority of the fortune organizations kept asset for the crisis support.

Bhopal disaster get to be synonymous of Industrial, legitimate and political carelessness, in any case this can be stayed away from by taking a gander at the accompanying hypothesis, for example, client social obligations (CSR) and partner hypothesis, the specific ranges that can be taken a gander at before, for example, execution of Rio Principles 13. Under these standards the risk of pay after the disaster can be optimized. The casualty even following 30 years of catastrophe, it has not been completely broken down even after the intercession of preeminent court of India, since when this issue happened in India, it doesn't have any law which can address the risk for the organization additionally towards the social orders and if any disaster happen they likewise need to pay (Weir and Schapiro, 1981). For this situation, the disappointment of corporate obligation can be seen effortlessly, when the guardian organization has not assumed any liability to reacting society. Thus it is essential for the organization to comprehend and think its risk towards the general public and organizations. In the early mechanical time a large portion of the corporate works under the tight regulations of Indian government henceforth government have never consider forcing any regulation for any disappointment. The disappointment can be ignored if the organization would have considered capable and at risk of shortcoming for any and each harm which bringing on from its operation including the ecological, property or human wounds (Donaldson,2002). The case additionally highlights the disappointment the corporate law under the Indian circumstances, the guardian organizations and its auxiliaries UCCL and UCC doesn't not considered capable under the human mistake, and never approach for assuming liability (Starik, 1994). The case likewise changed the Industrial regulation flow, from that point government shaped solid law which similarly relevant for guardian and backups whatever other associated organizations for any wounds and demise. The organization need to pay full or halfway remuneration of any wounds to the home group of specialists.


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This hypothesis in corporate administration contends that people are self-spurred to work for the advantage of the association and don't take themselves to be not the same as the element. Consequently, they perform to the best of their abilities and are master associations and are totally adjusted to the organization's destinations and objectives. Self-hobby is not the essential thought process in people for this situation. Henceforth, the directors or administration steward the association thinking about their obligation while working.

In the Union Carbide case, we see mass migration of 33% of the specialists who were a part of the group when the production line was set up in Bengal. This was basically because of the way that the organization was utilizing fetched slicing methods to minimize misfortunes. This is clear from the way that the cooling frameworks were shut, inventories were not adjusted. Had the stewardship hypothesis being taken after then the administration would guarantee that they highlight the basic issues of the plant that required prompt consideration and dealt with change of the industrial facility region. Moreover, they would have in any event set the cautions and security alarms in working conditions to give cautioning signs to the representatives and other partners at the soonest. Consequently, the inherently spurred work power and administration were absent in the situation when we discussion of the Union Carbide Corporation. The Stewardship hypothesis was lessened fundamentally contemplating the accompanying focuses:

- The administrators were not spurred as they don't did anything to enhance the states of the processing plant.
- They were not professional firm as they left from their association's enthusiasm by not holding fast to the wellbeing rules.
- Administration reasoning was missing when it ought to be contribution situated.

Profit Maximizing Theory

This hypothesis fundamentally infers that the association principle center is to expand their arrival and procure benefit. This can be something worth being thankful for on the association part however an awful thing with respect to customer. So as to accomplish most extreme return association can create low quality items.

In the Bhopal Tragedy case, the vast majority of the security gear's were non-operational either because of support, repair or cost cutting reason. The refrigeration unit which is utilized to keep MIC low was closed to spare Rs. 700 every day cost for the firm. On the off chance that useful it could have deferred or even could have kept the gas spill. The 6 months' security preparing for every one of the workers in the plant was lessened to 15 days. Indeed, even the labor was diminished to half as a measure of cost cutting. Support team was chopped down from 6 representatives to 2 workers and there was one individual to screen 70 boards in the control room. Gas scrubber was under support and its ability to handle the weight was one quarter of the aggregate gas weight which spilled. The flare tower which had consumed funnels where yet to be supplanted. The water blinds where calm short to achieve the top. (Fernando, 2006, pp. 364-365) Since the gas was harmful it was encouraged to not to have more than half of the gas in the tank as a stockpiling in it. It had 87% that night. Around 67 tons of MIC was put away in two tanks and even the store tank was filled in. These realities give an obvious thought that the Union Carbide India Limited (UCIL) was attempting to accomplish benefit expanding hypothesis and involved with the security measures in the plant which prompt epic calamity. (Varma and Varma, 2005, pp. 39-41)

"A disappointed plant worker, evidently set on ruining a cluster of methyl iso-cynate, added water to a capacity tank." ~ B.Browning Jackson (Vice President) Union Carbide

Role of Government

If we look at the Bhopal Gas Tragedy, it was found out that at that time of tragedy, many government officials went escaped and even the Chief Minister of Madhya Pradesh at that time escaped from the state. Also government was trying to portray a picture that it was not such a big issue and the effects of the tragedy would not be there for a longer period of time and taking it normally. The effects of the catastrophe were mostly witnessed in the poorest cities that are basically the slum areas where mainly marginalized people are there. These people have very bad socio-economic and political conditions due to which they are unable to raise their voice in order to get justice and are helpless in asking for their demands from the government. After the disaster, Government of India did not take any strict actions against the accuse even after knowing that the factory was manufacturing the dangerous chemicals like MIC without any preventive and safety measures and the location of the factory was surrounded by the densely populated city of poor people. After the incident took place, Government was not able to take decisions regarding the actions that should be taken against the accused as well as for relief and rehabilitation of the people who got affected. There was no clarity and transparency between the Central and the State Government on the issues related to relief and rehabilitation of the people who got suffered due to this incident which made the case all the more complex. The Central Government could not do anything about the incident but just was in the part of discussion. The Government provided help in the four areas that were medical, economic, social and environmental but all went in vain. The reasons for the failure are as follows:

- Support in medical sector failed because government was not able to made essential medicines available in the government hospitals and also government could not support on the infrastructural front.
- Help for the economic rehabilitation failed since the fund was not utilized properly or remained unutilized. The fund was allocated in order to provide alternate livelihood opportunity for the people who were affected by the incident but only few people were lucky enough to get the opportunity of getting livelihood.
- Support for social welfare for the purpose of construction of houses for the affected people and other purposes also failed
- Even the budget that was allocated for the purpose of economic rehabilitation was not utilized for the purpose it meant to be.

Also the issue was that whether Indian Government or US Government to be blamed for this mishap. The Carbide completely refused to take the blame and put the blame entirely on the government of India. After the incident Bhopal Gas Leak Disaster Act, 1985 (Processing of Claims) was passed by the Government of India through which Central Government was given the authorization. Under this Act, Bhopal Gas Leak Disaster Scheme was formulated that was for the purpose of registering, processing and identifying the compensation to every claimant and appeals that were arising thereon. The people who were affected due to the disaster are fighting in order to get justice and the amount of compensation from the government of India. The Indian Government should have compensated and remunerate the people in the following manner:

- The victims should have been given a fair amount of compensation
- The toxic gases should have been vanished and the area must have been de-fumet so that the after effects of the disaster could be reduced
- The accused should have been given strict punishments as demanded by the people

I. Settlement: Compensation

Under the Act, the central government was given the authority to make different forums for different claimants so that each can demand their compensation in separate forums. There was also an appointment of Welfare Commissioner as well other staff members which led to proper assignment of duties in relation to hearing of the complaints as well as compensating them as per their claims. Just before the formulation of act, a case was filed by the Indian Government against Union Carbide Corporation in the U.S. for US$ 3 billion wherein both the government made an outside court settlement in the year 1989. In 2004, finally Carbide made the settlement by paying $470 million as against $3billion damage that Government of India claimed. This settlement resulted in freeing the Carbide from all the civil and criminal charges by the Supreme Court of India. The settlement could only satisfy the imperatives of the company and the government but the people who were affected remained unsatisfied because the compensation amount was so less. May people who did not get compensation continued to struggle. Another issue was that only 40000 people could be compensated and if we look at the medical reports, more than 400,000 needed to be given compensation. Also the medical reports suggested that people (handicapped and other affected people) who required to be given medical supervision for a longer period of time was the liability of UCC and not the Government of India. There were so many people whose claims were not even on the papers making it really a difficult task for them to be compensated. The Supreme Court of India asked Carbide officials in 1991 to give more amount of compensation i.e. $325 in order to be able to provide justice to all. But even this amount was not enough since it was only Rs.10000 per person if we compare it with the losses that they incurred. Also no compensation scheme was there for the people that were borne post the disaster (second generation victims). They have to be compensated because post the disaster people were suffering from birth related problems.

II. Clearance of Toxic Waste

After the incident, plant has only toxic wastes that were either dumped or were stored in sacks and barrels badly rotting which were required to be cleared immediately for reducing the further damages. The people who suffered due to the incident demanded for the clearance of toxic wastes from the government of India. In 2002, there were many protests for the clearance of site but even after this, government of India gave NOC to the Dow Chemicals. Recently a survey was conducted by GREENPEACE INTERNATIONAL that cited the facts like that the effects of the disaster are still evident. The groundwater is contaminated which is used by the families for the purpose of drinking and washing. However now government has hired a German Company for the site clearance but all the efforts were in vain because of the high levels of contamination of water and soil. It is rather impossible to clear such a site.

III. UCC and UCIL Officials

The people who suffered because of this monstrous incident were very annoyed and wanted all the accused to be behind the bars. But after the settlement when Carbide paid $470 million as the compensation, Supreme Court of India liberated Carbide and its officials from all the civil and criminal charges as government plus imperatives of the company were satisfied with the amount of remuneration. Once UCC collaborated with Dow made it difficult for the government of India to extract money from Dow Chemicals. Victims really had a tough life in getting compensation. Therefore, in 1991 all the sufferers joined hands together and formed “survivor” organization. After the formation of organization, a case was filed by this organization against the chairman of Union Carbide Corporation, Warren Anderson. But nothing could be sorted out since government of India as well as Supreme Court liberated them from all the charges. Till now the victims are fighting for justice. The government was doing all this because of their relation with the US country for other things like nuclear deal and buying ammunitions.

What the Indian Government should have done?

There should be formation of National Medical Commission on Bhopal with the help government as well as non-government professionals and even the representatives of “survivors” organizations. The resources should be substantial enough for undertaking the medical research as well as taking good care of the people for at least next 10-12 years.

- People who suffered should be aided with considerable amount and services so that they can earn their livelihood by undertaking individual projects or through income generating cooperatives.
- All the information whether medical or scientific related to Bhopal Disaster should be publicly disclosed.
- Government programs must be reviewed in order to provide benefit to the survivors.
- Seriousness must be there regarding the criminal investigation on the Bhopal tragedy and strict actions should be taken against Anderson and other foreign culprits like banishment or expulsion.
- A prompt and distribution of equitable compensation should be implemented in accordance with the plan that presented by the organizations of survivors through the payment of a flat sum for all the residents badly affected by the tragedy. Claim courts should work only for non-residents claimants and people who claimed for additional amounts.


The Bhopal gas tragedy acts as a warning sign that the road to industrialization in countries like India is filled with human, environmental and economic threat. Certain efforts by the government of India resulted in providing some protection to the health of people against the adoption of harmful practices by the industries. The economy of India is showing a tremendous growth particularly in environmental health and public safety since industries continue to adopt harmful practices. A lot more has been done on the part of government to show that lessons from this tragedy has been given careful attention. The reason behind the cause of the tragedy was the aim of the company which was profit maximization and not the benefit for the society as a whole. The approach of cost reduction led to miserable lives of the people. Every day in the news we hear about child exploitation etc. and as Bill Gates said “The market does not reward saving the lives, and governments do not subsidize it”. We measure the success on the basis of money and not the happiness we get. Our criterion for measurement of success is money not happiness. Some days back our honorable Prime Minister Manmohan Singh cited "The enormity of that tragedy (Bhopal Gas Tragedy) of neglect still gnaws at our collective conscience". This disaster is still in the minds of people and the atmosphere is getting more and more populated. Water is getting highly contaminated giving rise to various diseases. The compensation that government gives does not make the dead alive. It becomes our responsibility to think and work for the betterment of our planet earth.


- Bhopal gas tragedy: Report on victims' socio-economic profile, mortality - The Times of India. 2014. Bhopal gas tragedy: Report on victims' socio-economic profile, mortality - The Times of India. [ONLINE] Available at: [Accessed 11 April 2016].
- The Bhopal disaster and its aftermath: a review. 2014. The Bhopal disaster and its aftermath: a review. [ONLINE] Available at: [Accessed 11 April 2016].
- Bhopal Gas Tragedy. 2014. Bhopal Gas Tragedy. [ONLINE] Available at: [Accessed 11 April 2016].
- Corporate governance principles - OECD. 2014. Corporate governance principles - OECD. [ONLINE] Available at: [Accessed 11 April 2016].
- Corporate governance . 2014. Corporate governance . [ONLINE] Available at: [Accessed 11 April 2016].
- Corporate Governance Defined | Corporate Governance. 2014. Corporate Governance Defined | Corporate Governance. [ONLINE] Available at: [Accessed 11 April 2016].

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Business Ethics and Corporate Governance
Lancaster University
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business ethics, corporate governance, environmental regulations, social responsibility
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Ravi Kumar (Author), 2015, Business Ethics and Corporate Governance, Munich, GRIN Verlag,


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