Documents uncovered after the Exxon Valdez oil spill in Alaska revealed that Exx

Question

Documents uncovered after the Exxon Valdez oil spill in Alaska revealed that Exxon could have used double-hulled oil tankers that would have prevented the spill, but the cost of refitting their fleet of single-hulled tankers was considered too high. Exxon determined that the cost of cleaning up an oil spill would be less than the cost of refitting the ships, thus increasing shareholder value. Several years after the oil spill, however, Exxon was fined billions of dollars for the spill. How do the costs of the clean up and the fines pertain to a discussion of maximizing shareholder value and ethical responsibility?

Explanation / Answer

Oil spilling should be prevented, since this is a loss of valuable resource. There is scarcity of oil resource in the world. Therefore, such spilling in any way should not be entertained.

The company didn’t go for such prevention, since the prevention cost by way of refitting is higher than the clean-up cost. The company thought that the higher cost reduces shareholders’ value, since the profit margin becomes low.

But the thinking is not correct from the viewpoint of ethical responsibility, since ethic do not permit misusing resources. The company should not give excuse of such incident only because of shareholders’ ground. This is illegal and unethical. The current fine would be a burden to the company and it doesn’t maximize shareholders’ value.

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