Case Culture Change at Texaco In 1999, Texaco settled a lawsuit that charged the firm with discriminating against African American employees. Texaco paid $175 million, the largest settlement of this kind ever. The stock had fallen $3 per share after damning audiotapes became available to the public. Peter Bijur, then CEO, decided to stop fighting the lawsuit and settle. Minority employees received $140 million in damages and back pay, and $35 million was used to establish an independent task force to evaluate the firm’s diversity efforts for the next five years. Apparently, there had been very real problems throughout the Texaco organization. These included blatant racist language and behavior on the part of Texaco employees and managers, documented lower pay for minority employees (in some cases lower than the minimum for the job category), and comments such as the following overheard from a white manager: “I never thought I’d live to see the day when a black woman had an office at Texaco.” Unfortunately for Texaco, and fortunately for minority employees, a Texaco official taped meetings about the lawsuit in which executives used racial epithets and discussed disposing of incriminating documents. The tapes were made available to the New York Times and, through it, to the public. To make matters worse for Texaco, a former senior financial analyst, Bari- Ellen Roberts, wrote a book detailing the humiliating experiences faced by many minority employees, including herself. One time, a white official referred to Roberts publicly as a “little colored girl.” She also detailed how the organization regularly ignored grievance claims from minorities. Bijur’s unusual solution to the problem was to launch a complete culture change effort. During 1998 and early 1999, the company was in difficult financial straits due to low crude oil and natural gas prices. Revenues and earnings dropped precipitously, and the number of employees was reduced from 27,000 to 18,500. At a time like that, another CEO might have put diversity issues aside in favor of a focus on the bottom line. But Bijur took advantage of the opportunity to “make us a better company.” First, as leader, he made it clear that he would simply not tolerate disrespect and that those who didn’t go along with the culture change would be dismissed. He even went outside the company, speaking to groups such as the Urban League, saying that “a real commitment must be more than a diversity checklist. It must be integrated into a company’s business plan. It must guide our strategies for hiring, developing, promoting and retaining a diverse workforce. And it must extend beyond our corporate boundaries—not only to our customers and suppliers, but also to the communities in which we work and live.” Bijur hired African Americans in key positions such as director of global business development, general counsel, and head of diversity for the company. All of these individuals said that they agreed to join the co ...

1. Case
Culture Change at Texaco
In 1999, Texaco settled a lawsuit that charged the firm with
discriminating against
African American employees. Texaco paid $175 million, the
largest settlement of this
kind ever. The stock had fallen $3 per share after damning
audiotapes became
available to the public. Peter Bijur, then CEO, decided to stop
fighting the lawsuit
and settle. Minority employees received $140 million in
damages and back pay, and
$35 million was used to establish an independent task force to
evaluate the firm’s
diversity efforts for the next five years.
Apparently, there had been very real problems throughout the
Texaco organization.
These included blatant racist language and behavior on the part
of Texaco
employees and managers, documented lower pay for minority
employees (in some
cases lower than the minimum for the job category), and
comments such as the
following overheard from a white manager: “I never thought I’d
live to see the day
when a black woman had an office at Texaco.” Unfortunately
for Texaco, and
fortunately for minority employees, a Texaco official taped
meetings about the lawsuit
in which executives used racial epithets and discussed disposing
of incriminating
documents. The tapes were made available to the New York
Times and, through it, to

2. the public. To make matters worse for Texaco, a former senior
financial analyst, Bari-
Ellen Roberts, wrote a book detailing the humiliating
experiences faced by many
minority employees, including herself. One time, a white
official referred to Roberts
publicly as a “little colored girl.” She also detailed how the
organization regularly
ignored grievance claims from minorities.
Bijur’s unusual solution to the problem was to launch a
complete culture change
effort. During 1998 and early 1999, the company was in
difficult financial straits due to
low crude oil and natural gas prices. Revenues and earnings
dropped precipitously, and
the number of employees was reduced from 27,000 to 18,500.
At a time like that,
another CEO might have put diversity issues aside in favor of a
focus on the bottom
line. But Bijur took advantage of the opportunity to “make us a
better company.” First,
as leader, he made it clear that he would simply not tolerate
disrespect and that those
who didn’t go along with the culture change would be
dismissed. He even went outside
the company, speaking to groups such as the Urban League,
saying that “a real
commitment must be more than a diversity checklist. It must be
integrated into a
company’s business plan. It must guide our strategies for hiring,
developing, promoting
and retaining a diverse workforce. And it must extend beyond
our corporate
boundaries—not only to our customers and suppliers, but also to
the communities in
which we work and live.” Bijur hired African Americans in key

3. positions such as
director of global business development, general counsel, and
head of diversity for the
company. All of these individuals said that they agreed to join
the company because
they were convinced of Bijur’s personal commitment to real
culture change. New
recruiting systems were set up to increase the pool of minority
candidates for every
position. Women and minorities were included on all human
resources committees.
Search firms with success in minority hiring were brought in to
help in the effort. For a
longer-term solution, the company set up scholarship and
internship programs to
interest minorities in areas of study of importance to the firm.
Next, Bijur set specific diversity goals and timetables and
linked managers’ career
success and bonus compensation to their implementation of the
initiatives. For all
supervisors, he instituted 360-degree feedback that included
performance on diversity
issues in evaluation criteria. He also established formal
mentoring and leadership
development programs to ensure that the company was
preparing minorities for
leadership positions. All employees were required to attend
diversity training, and
such training is now being incorporated into more general
management training. And
multiple methods were set up for filing grievances. These
included hotlines, an
alternative dispute resolution process with independent
arbitration and mediation, and
a confidential outside ombudsman. Finally, the company set up
a Minority and Women

4. Business Development Program to increase the number of
minority wholesalers it
works with. This entire change effort is overseen by the
independent task force set up
as part of the settlement. The task force meets frequently with
employee groups and
monitors the firm’s progress.
How is Texaco doing? Angela Vallot, director of corporate
diversity initiatives,
says, “You’re not going to change the way people think, but you
can change the way
people behave.” Evidence suggests that changes in behavior are
real. The new general
counsel has few discrimination lawsuits to work on. In 1999, a
total of 44 percent of
new hires and 22 percent of promotions went to minorities. The
company spent over $1
billion with minority and women-owned vendors in 1997 and
1998 and exceeded a
goal set in 1996. Texaco even applied for inclusion in Fortune
magazine’s 1999 list of
America’s 50 Best Companies for minorities. It didn’t make the
list, but the
application suggests that company officials were feeling pretty
good about their
progress. Weldon Latham, diversity expert at a Washington,
D.C., law firm, says,
“They are absolutely a model for how to approach one of the
biggest problems facing
this country.” Reports of the monitoring task force were posted
on Texaco’s
website. In a report, released in July 2000, the task force
acknowledged the commitment
of Texaco’s leadership. “Through the values espoused by its
leadership and its
efforts to improve its employment practices, the Company

5. continues to communicate
effectively the message that it will not tolerate discrimination,
harassment, or
retaliation in its workplace and that equality and fairness for all
employees are central
to its mission as a highly competitive business enterprise.” The
report also cited the
ombudsman program as employees’ preferred way to resolve
grievances that might
otherwise have become serious problems.
The task force’s subsequent report cited more mixed results.
Although the overall
percentage of women and minority employees increased
slightly, the percentage of
new hires and promotions in both categories declined, and the
representation of
women and minorities in executive positions fell slightly as
well. Nevertheless, the
percentage of promotions in these groups exceeded the
percentage represented in the
overall Texaco workforce, and this was viewed as a sign of
continuing progress.
These reports noted that there was much more work to be done,
particularly after the firm became part of Chevron in 2001. On
its website, Chevron says that it values
diversity and runs the business “in a way that respects our
employees and the world
community.” The company has recently received awards for its
treatment of women
and of gay, lesbian, and transgender employees and was named
a 2008 Best Diversity
Company by Diversity/Careers in Engineering & Information
Technology magazine.
Case Questions

6. 1. Identify the ethical culture problem at Texaco in the mid-
1990s.
2. Based on the facts in the case and what you have learned in
this chapter, evaluate the culture change effort that is under
way. What cultural systems have been targeted in the culture
change effort? What systems are missing, if any? Does the
culture appear to be in alignment? Misalignment? What else
might management do that it hasn’t already done to make the
culture change successful?
3. How long might such a culture change take?
You’re a management consultant who has been asked by Green
Company to help design an ethics communication and training
program for all Green Company employees. Your meetings to
date have been with the head of human resources, and your
contract with the company has been negotiated with him. Once
the papers have been signed, you begin your research and are
quickly stymied by Green’s corporate counsel. He says you will
not be allowed to ask employees about ethical dilemmas that
have occurred at Green. He specifically asks you to get your
information from other sources such as press accounts of
problems in the industry, or from other organizations you’ve
worked with. In addition, the head of human resources has told
you that you’ll be unable to meet the three most senior
executives because they’re busy negotiating a large acquisition.
You will have access to other high-level managers who can tell
you what they think the seniors want. You’re instructed to write
a code of conduct for the company and a mission statement, and
to prepare presentations for the senior managers to give to
employees sometime next month on corporate expectations and
values.
CASE QUESTIONS

7. 1. Based on what you know about developing ethical cultures
and programs, identify the problems presented by this case.
2. Why do you think the corporate counsel has responded in this
way? What will be
your response to him, if any?
3. As a consultant, what are your ethical obligations, if any?
4. How will you proceed?