British Petroleum and Royal Dutch Shell received strong ratings for their policies in ethics, transparency and corporate social responsibility. Both got B ratings on a scale of A (highest) to D (lowest). These are the first ethics ratings to be given to oil companies and are significant for investors. Oil companies are ethically high-risk companies, being regularly plagued by oil spills, chemical explosions, fatalities, litigation and management scandals. A landmark study by international ethics rating agency Management & Excellence (M&E) finds that oil companies are investing more in equipment, social policies and employee trainings, resulting in fewer mishaps.
Company Rating
Europe
BP B
Shell B
Total Fina Elf B
Repsol C
USA
ExxonMobil B
ChevronTexaco B-
Latin America
Petrobras C+
Pemex C
Russia
LukOil C
Major oil spills over 700 tons worldwide have declined to three annually over the past three years, down from 50 in 1990. In 2001 only 8,000 tons of oil was spilled, compared to 435,000 tons in 1991. Fatalities are still among the highest of all industries but are declining. In 2001 only 16 people lost their lives at BP, mostly in road accidents transporting oil in underdeveloped countries. Years ago this figure was several times higher. Many accidents at oil companies result from poor training of employees.
Repsol (Spain) was the only European to score C, with fire fighters complaining to the Government, employees striking and an accident at Puerto Llano killing 8 people.
Madrid-based ethics specialists, Management & Excellence reviewed nearly 300 ethical areas and rated each (e.g. how a company treats employees and the environment, litigation history), giving a score to the total ethical performance and ethical risk of each company. The M&E ethics ratings come at a time when investors want to know more about a companys management. M&E was one of the first ethics rating agencies, founded a year before Enron and has rated over 60 companies worldwide in all industries.
While M&E found that occasional oil spills and chemical accidents, for example, have little short-term impact on revenues and equity price, good ethics management normally goes hand-in- hand with better long-range financial performance.
