Spring 2014 MGMT 4322 INDIVIDUAL CASE GRADING RUBRIC E.docx

Spring 2014 MGMT 4322
INDIVIDUAL CASE GRADING RUBRIC
Ehsan Fakharizadi
Individual Case Assignment: TBA
PART I. Summary and Issue Identification (25 pts.)
1.a. (5 pts.) Write a summary of the case (approximately 100-
150 words).
1.b. (20 pts.) Identifies (lists) the ethical issues that have arisen
in this case. (about 100 words)
Explain in detail each ethical issue (e.g. what’s occurred, who’s
affected, etc). (about 1-2 pages)
Number Question 1: Below Expectations 2: Meets
Expectations 3: Exceeds Expectations Score
1.a. Summary The answer does not
adequately summarize
the case. (0 – 3.0)
The answer adequately
summarizes the case.
(3.5 – 4.0)
The answer fully and
concisely summarizes the
case. (4.5 – 5)

1.b. Identify an ethical
issue in a given
business situation
Fails to identify the
ethical issue(s) in a
given business
situation.
(0-14.0)
Identifies the ethical
issue(s) with a few
pertinent facts. (14.5-
17.5, C+ to B+)
Accurately identifies the
ethical issue(s) with all the
pertinent details. (18-20, A to
A+)
Additional
Feedback
1.a.
1.b.
Note: 1.b. is worth 20 points because identifying ethical issues
is at the heart of this case. You should identify
several issues in this case and explain why these are ethical
issues with all pertinent details.

390 Chapter 11 Multinational Corporations
INVESTIGATING THE CAUSE OF
THE MIC LEAK
In the days following the gas leak, there was world-
wide interest in pinning down its precise cause. A
team of reporters from The New York Times inter-
viewed plant workers in Bhopal. Their six-week in-
vestigation concluded that a large volume of water
entered tank 610, causing the accident.f The Times re-
porters thought that water had entered when R. Khan
failed to use a slip blind as he washed out piping.
Water from his hose simply backed up and eventually
flowed about 400 feet into the tank. Their account was
widely circulated and this theory, called the "water
washing theory," gained currency. However, it was
not to be the only theory of the accident's cause.
Immediately after the disaster, Union Carbide also
rushed a team of investigators to Bhopal. But the
team got little cooperation from Indian authorities
operating in a climate of anti-Carbide popular pro-
test. It was denied access to plant records and work-
ers. Yet the investigators got to look at tank 610 and
took core samples from its bottom residue. These
samples went back to the United States, where more
than 500 experimental chemical reactions were un-
dertaken to explain their chemical composition. In
March 1985 Carbide finally released its report. It
stated that entry of water into the tank caused the gas
release, but it rejected the water washing theory.
Instead, Carbide scientists felt the only way that
an amount of water sufficient to cause the observed
reaction could have entered the tank was through ac-
cidental or deliberate connection of a water hose to

piping that led directly into the tank. This was possi-
ble because outlets for compressed air, nitrogen,
steam, and water were stationed throughout the
plant. The investigators rejected the water washing
hypothesis for several reasons. The piping system
was designed to prevent water contamination even
without a slip blind. Valves between the piping being
washed and tank 610 were found closed after the
8 The team wrote a series of articles. SeeStuart Diamond,
"The Bhopal Disaster: How It Happened," The New York
Times, January 28, 1985; Thomas J. Lueck, "Carbide Says
Inquiry Showed Errorsbut IsIncomplete," TheNew York Times,
January 28, 1985; Stuart Diamond, "The Disaster in Bhopal:
Workers Recall Horror," The New York Times,January 3D,
1985; and Robert Reinhold, "Disaster in Bhopal: Where
Does Blame Lie?" The New York Times, January 31, 1985.
accident. And the volume of water required to create
the reaction-l,OOO to 2,000 pounds-was far too
much to be explained by valve leakage.
The Carbide report gave a plausible alternative to
the water washing theory, but within months an in-
vestigation by the Indian government rejected it. This
study, made by Indian scientists and engineers, con-
firmed that the entry of water into the MlC tank
caused the reaction but concluded that the improper
washing procedure was to blame (see Exhibit 3).
There matters stood until late 1985,when the Indian
government allowed Carbide more access to plant
records and employees. Carbide investigators sought
out the plant's employees. More than 70 interviews
and careful examination of plant records and physical
evidence led them to conclude that the cause of the gas

leak was sabotage by a disgruntled employee who in-
tentionally hooked a water hose to the tank.
Here is the sequence of events on the night of
December 2-3 that Carbide set forth. At 10:20 p.m.
the pressure gauge on tank 610 read 2 ppsi. This
meant that no water had yet entered the tank and no
reaction had begun. At 10:45 the regular shift change
occurred. Shift changes take half an hour, and the
MlC storage area would have been deserted. At this
time, an operator who had been angry for days about
his failure to get a promotion stole into the area.
He unscrewed the local pressure indicator gauge on
tank 610, hooked up a rubber water hose, and turned
the water on. Five minutes would have sufficed to
do this.
Carbide claimed to know the name of this person,
but it has never been made public. Its investigative
team speculated that his intention was simply to ruin
the MIC batch in the tank; it is doubtful that this
worker realized all that might happen. The inter-
views revealed that the workers thought of MIC
chiefly as a lacrimator, a chemical that causes tearing;
they did not regard it as a lethal hazard.
Now the plot thickens. A few minutes after mid-
night, MlC operators noted the fast pressure rise in
tank 610. Walking to the tank, they found the water
hose connected and removed it, then informed their
supervisors. The supervisors tried to prevent a cata-
strophic pressure rise by draining water from tank
610. Between 12:15 and 12:30 a.m., just minutes be-
fore the explosive release, they transferred about
1metric ton of the contents from tank 610 to a holding
tank. Water is heavier than MlC, and the transfer was

made through a drain in the tank's bottom: thus, the
Chapter 11 Multinational Corporations 391
EXHIBIT 3 Two Theories Clash on Water Entry into MIC Tank
According to the water washing theory of the Indian
government, water was introduced
through a hose into bleeder A at filter pressure safety valve
lines. As the hose kept running,
water proceeded through the leaking valve in that area and rose
up into the relief valve vent
header line (RVVH).It took a turn at the jumper line, B, and
moved into the process vent
header line (PVH), filling it in the reverse direction all the way
to the slip blind, C. When
PVH was completely filled, water rose at line D and proceeded
into MIC storage tank 610.
On February 8, 1985, two months after the leak, India's Central
Bureau of Investigation
drilled a hole in the PVH line at point E to drain any water left
in the line. No water emerged.
Carbide says this fact alone disproves the water washing theory.
The fact that various valves
in the pathway to the tank were closed also disproves the
theory, according to Carbide.
Carbide espouses an alternative theory: The company says it has
proof that water was
introduced by a "disgruntled employee" who removed pressure
gauge F, attached a hose
to the open piping, and ran water into theMfC tank. Gas then
escaped through a rupture
disk and proceeded through the RVVH and out the vent gas

scrubber.
Source: Courtesy of Union Carbide.
supervisors hoped to remove the water. They failed,
and within 15 minutes the relief valve blew.
The investigators had physical evidence to sup-
port this scenario. After the accident, the local pres-
sure gauge hole on tank 610 was still open and no
plug had been inserted, as would have been normal
for routine maintenance. When the MIC unit was ex-
amined, a crude drawing of the hose connection was
found on the back of one page from that night's log
book. Also, operators outside the MIC unit told the
investigation team that MIC operators had told them
about the hose connection that night. In addition, log
entries had been falsified, revealing a crude cover-up
effort. The major falsification was an attempt to hide
the transfer of contents from tank 610.
Why did the supervisors and operators attempt
a cover-up? The Carbide investigators gave this
explanation.
Not knowing if the attempted transfer had exacer-
bated the incident, or whether they could have
otherwise prevented it, or whether they would be
blamed for not having notified plant management
earlier, those involved decided on a cover-up. They
altered logs that morning to disguise their involve-
ment. As is common in many such incidents, the re-
flexive tendency to cover up simply took over.?
9 Ashok5. Kalelkar,"Investigationof Large-Magnitude
Incidents:Bhopalas a CaseStudy,"paperpresentedat the

Instititutionof ChemicalEngineersconferenceon Preventing
MajorChemicalAccidents,London,England,May1988,p. 27.
EXHIBIT 4 A Breakdown of the $470million Settlement
The settlement was based on calculations about the number and
size of payments in a range of categories.
Source: Kim Fortun, AdVOCllC!J after Bhopal (Oticago:
University of Chicago Press, 20(1), p. 38.
0...-(.-';"" ~"-~
A SETTLEMENT IS REACHED
The theory of deliberate sabotage became the
centerpiece of Carbide's legal defense. However, the
case never came to trial. In 1989 a settlement was
reached in which Carbide agreed to pay $470 mil-
lion to the Indian government, which would distrib-
ute the money to victims (see Exhibit 4). In return,
India agreed to stop all legal action against Carbide,
VCIL, and their executives. India agreed to this set-
tlement, which was far less than the $3.3 billion it
was asking for, because a trial and subsequent ap-
peals in the Indian court system would likely have
taken 20 years. Carbide paid the settlement using
$200 million in insurance and taking a charge of
$0.43per share against 1988net earnings of $5.31per
share. Victims' groups were upset because they
thought the settlement too small, and they chal-
lenged it. In 1992the Indian Supreme Court rejected
these appeals but permitted reinstatement of crimi-
nal proceedings against Warren Anderson and eight
VeIL managers. to

In 1993India issued an arrest warrant for Anderson
on charges of "culpable homicide not amounting to
murder," but it has never been served. At the trial of
the remaining VCIL defendants Indian prosecutors
argued the managers were criminally negligent be-
cause they knew of lax operating procedures but
failed to improve them to avoid costs. After 18 years,
10 Union Carbide Corp. v. Union of India, AIR 1992 (S.c.)
248.
186 witnesses, and various delaying motions, the
court convicted seven managers (one had died) of a
reduced charge, "causing death by negligence."!'
They were sentenced to two years in prison, and
fined the equivalent of $2,100.All appealed and were
released on bail. Victims and the Indian public found
the punishment outrageously modest.
Meanwhile, the Indian government was slow and
inefficient in distributing settlement funds to gas vic-
tims. In 1993, 40 special courts began processing
claims, but the activity was riddled with corruption.
Healthy people bribed physicians for false medical
records with which they could get compensation.
Twelve court officials were fired for soliciting bribes
from gas victims seeking payments. All told, 574,366
claims were paid, including 14,824death claims, with
average compensation about $1,280. Ninety percent
of all claims were settled for $550, the minimum
allowed.P
Because the claims process moved at a glacial
pace for years, the settlement money accrued interest
and, after all claims were paid, $325 million re-

mained. The government wanted to use the interest
11 India Central Bureau of Investigation, "Eight Accused
Sentenced in Bhopal GasTragedy Case," pressrelease, Ne.
Delhi, June 7, 2010.
12 Paul Watson, "Cloud of Despair in Bhopal," Los Angeles
Times, August 30, 2001, p. A6; and Government of Madhyc
Pradesh, Bhopal Gas Tragedy Relief and Rehabilitation
Department, "Facts and Figures," www.mp.gov.in/bgtrrdrl.:Y
facts.htm, accessedJune 2010.
http://www.mp.gov.in/bgtrrdrl.:Y
to clean up soil contamination at the plant. But in
2004 the Indian Supreme Court ordered it distributed
to the victims and families of the dead in amounts
proportionate to claims already paid.P
AFTERMATH
In the wake of Bhopal, Congress passed legislation
requiring chemical companies to disclose the pres-
ence of dangerous chemicals to people living near
their plants and to create evacuation plans. The
chemical industry's trade association adopted a pro-
gram of more rigorous safety standards that all major
firms now follow.
In 1994 Union Carbide sold its 50.9 percent equity
in UCIL to the Indian subsidiary of a British com-
pany for $90 million. It gave all of this money to the
Indian government for a hospital and clinics in
Bhopal. After the sale, the company had no presence
or current legal obligations in India. Nevertheless,
Bhopal had destroyed it. As it exited India, it was a
smaller, less resilient company. Forced to sell or spin

off its most lucrative businesses, it grew progressively
weaker. In 1984,the year of the gas leak, Carbide had
98,400 employees and sales of $9.5 billion; by 2000 it
had only 11,000 employees and $5.9 billion in sales.
The end came when it merged with Dow Chemical
Co. in 2001 and its workforce suffered the bulk of
cost-reduction layoffs."
The pesticide plant never reopened. According to
a recent visitor, "The old factory grounds, frozen in
time, are an overgrown 11-acre forest of corroded
tanks and pipes buzzing with cicadas, where cattle
graze and women forage for twigs to cook their
evening meal. «is Chemical waste at the site has con-
taminated the groundwater. In 1998 the state govern-
ment took over the plant and made cleanup plans,
but never carried them out.
In 2004 the United States again denied a request
by the Indian government to extradite Warren
Anderson. Anderson, who is now 91, has dropped
from public view. In the unlikely event of extradition,
he would face a long trial. Recently, his wife told a
13 "Compensation for Bhopal Victims." The New York Times,
July 20, 2004, p. A6.
14 Susan Warren, "Cost-Cutting Effort at Dow Chemical to
Take4,500 Jobs," The Wall Street Journal, May 2, 2001, p. A6.
IS Somini Sengupta, "Decades Later, Toxic Sludge Torments
Bhopal," The New York Times, July 7,2008, p. 1.
Chapter 11 Multinational Corporations 393
reporter that he had been "haunted for many years"
by the accident."

The struggle of gas victims for compensation
spawned an activist movement that lives on after
more than 25 years. The lead organization is the Inter-
national Campaign for Justice inBhopal, a coalition of
gas victim groups and charities. Survivors complain
of chronic medical conditions including headaches,
joint pain, shortness of breath, and psychiatric prob-
lems. They believe that gas exposure and toxic wastes
from the plant have caused birth defects.
NEW TARGET: DOW CHEMICAL
After Dow Chemical absorbed Union Carbide it
became the victims' bull's-eye. Both victims and the
Indian government now demand that Dow pay for
cleaning up the contaminated plant site and further
compensate injured survivors. In 2010 the Indian
government filed a petition with the Indian Supreme
Court seeking to overturn its 1989 settlement "to cure
a miscarriage of justice." The petition, still pending,
seeks to force Dow Chemical to pay another $1.1 bil-
lion to the victims." This is justified, argues the gov-
ernment, because the full extent of the disaster was
unknown in 1989.
Members of the victim's movement have repeat-
edly sued in U.S. courts seeking to overturn the
$470 million settlement, accusing Union Carbide of
human rights violations, and trying to hold it respon-
sible for cleaning up groundwater pollution at the
plant site. All their efforts have so far failed, although
one case still drags on.l8
Victims otherwise harass the company. They have
joined with progressive religious orders and pension
funds in the United States to picket its shareholder's

meetings while inside, friendly shareholders introduce
16 Celeste Katz, "India Sez Bust Bhopal Yank," Daily News,
August 2, 2009, p. 26.
17 Geeta Anand and Arlene Chang, "Dow Chemical Hit
Again on Bhopal," The Wall Street Journal, December 4-5,
2010, p. B5.
18 The case is Janki Bai Sahu, et al. v. Union Carbide Corp.,
No. 04 Civ. 8825, 2010 U.S. Dist. LEXIS23860, February 11,
2010. Two previous long-running cases are In re Union
Carbide Corp. Gas Plant Disaster at Bhopal, 634 F. Supp. 842
(S.D.N.Y. 1986) and Bano v. Union Carbide Corp. and Warren
Anderson, No. 99 Civ. 11329,2005 U.S. Dist. LEXIS22871,
October 5, 2005).
resolutions asking Dow to acknowledge its responsi-
bilities. All such resolutions have been defeated, gar-
nering only single-digit percentages of the vote.
Activists tried to embarrass Dow with a brand of bot-
tled water named B'eau Pal containing groundwater
from near the old plant. Children of gas victims once
went on a 22-city U.S. tour to promote congressional
hearings on Dow's responsibilities. No hearings were
held.
Dow never wavers in denying any obligation.
"While we have sympathy for this situation," said a
company representative recently, "it is not Dow's re-
sponsibility, accountability or liability to bear."19But
the activists are resolute. "1 will fight until my last

breath against Dow," says one gas survivor. "I will
not give Up."20The fight also has ideological mean-
ing. One movement leader believes that "[u]nless
those responsible are punished in an exemplary mat-
ter, the message that goes out to the corporate world
is that you can kill and maim people and carryon
with business as usual."21
POSTSCRIPT
Despite the passage of time, Bhopal does not fade
away. The library bookshelf on it keeps growing.22It
has been the subject of at least seven films, including
a drama that was a box office hit in India. A tend en-
19 Quoted in Brian Bowling, "Group from Bhopal SaysGas
Still Kills," Pittsburgh Tribune Review, May 1, 2009, p. 1.
20 Hazara, a one-name activist, quoted in Mark Magnier,
"Despair Lingers in Bhopal," LosAngeles Times, December 3,
2009, p. 28.
21 Satinath Sarangi, quoted in Jim Gilchrist, "Bhopal Hero,"
The Scotsman, July 8, 2009, p. 18.
22 A recent addition is Surviving Bhopal: Dancing Bodies,
Written Texts,and Oral Testimonials of Women in the Wake
of an Industrial Disaster (New York: Palgrave Macmillan,
2010).
tious book of reality fiction based on Bhopal became
a best seller in Europe.P Told as a tragedy, the story
stirs basic emotions. A Canadian critic reviewing a
play on Bhopal found it badly written and acted, but
nevertheless "a touching tale of human suffering"
raising "such imposing themes as the relative worth
of a human life and the intersection of greed and de-
velopment in the Third World. "24 Doubtless these
themes will keep the story alive.

Questions
1. Who is responsible for the Bhopal accident? How
should blame be apportioned among parties in-
volved, including Union Carbide Corporation,
UCIL, plant workers, governments in India, or
others?
2. What principles of corporate social responsibility
and business ethics are applicable to the actions of
the parties in question?
3. How well did the legal system work? Do you
agree with the decision to try the lawsuits in
India? Were victims fairly compensated? Was
Union Carbide sufficiently punished?
4. Did Union Carbide handle the crisis well? How
would you grade its performance in facing
uniquely difficult circumstances?
5. Does Dow Chemical Company have any remain-
ing legal liability, social responsibility, or ethical
duty to address unresolved health and environ-
mental claims of Bhopal victims?
6. What lessons can other corporations and coun-
tries learn from this story?
23 Dominique Lapierre and Javier Moro, Five Past Midnight in
Bhopal (New York: Warner Books, 2002).
24 Kamal AI-Solaylee, "Bhopal: A Chemical and Theatrical
Disaster," The Globe and Mail, October 25, 2003, p. R17.
The play is Rahul Varma, Bhopal (Toronto: Playwrights
Canada Press,2006).

Union Carbide Corporation and Bhopal
On December 3, 1984,tragedy unfolded at the Union
Carbide pesticide plant in Bhopal, India. Water en-
tered a large tank where a volatile chemical was
stored, starting a violent reaction, Rapidly, a se-
quence of safety procedures and devices.failed, Fugi-
tive vapors sailed over plant boundaries, forming a
letha: cloud that moved with the south wind, envel-
oping slum dwellings, searing lungs and eyes, as-
phyxiating fated souls, scarring the unlucky.
Bhopal is the worst sudden industrial accident
ever in terms of human life lost. Death and injury es- ,
timates vary widely: The official death toll set forth
by the Indian government for that night is 5,,295,with
an additional 527,894 serious injuries. Greenpeace
has put the death toll at 16,000.1
The incredible event galvanized industry critics.
"Like Auschwitz and Hiroshima," wrote one, "the
catastrophe at Bhopal is a manifestation of something
fundamentally wrong in our stewardship of the
earth. "2 Union ~1itide was debilitated and slowly
declined as a company after the incident. The gov-
ernment: of India earn€d mixed reviews for its
response. The chemical industry changed, but ac-
cording to some, not €Ilough. And the gas victims
endure a contmumg struggle ~ get compensation
and medical care.3
UNION CARBIDE IN INDIA
Union Carbide established an Indian subsidiary
named Union Carbide ::ndia Ltd. (VeIL),in 1934.

At fust the company owrifki a 60 percent majority
irrteles-t. but over the years this was reduced iD50.9 per-
cent, Shares in the ownership of the oilier ~91 per-
cent traded OZi. the Bombay Stock Excllange. This
ownership scheme W2.S signHicant because although
UCIL operated with a great deal of autonomy, it
gave the appearance that Union Carbide was in con-
trol of its operations, By itself, Uen. was one of In-
dia's lazgest firms, In 1984, the year of the incident, it
I -Has the World Forgotten Bhopalr The Lancet. Oecember 2,
2000, P. 1863.
2 i)avid Wei:. Th~ Bhopal Syndrome (San Francisco: Sierra
Club Books, 1987), p. xii.
3 Rama lakshmi, - Jus".ice for Bhopal Victims, - The £conomic
-mes, February 18, 2011.
had 14 plants and 9,000 employees, including 500 at
Bhopal. Most of its revenues came from selling
Eveready batteries,
Union Carbide decided to build a pesticide plant
at Bhopal m 1969. The plant formulated pesticides
from chemical ingredients imported to the site, At
that time, there was a growing demand in India and
throughout Asia for pesticides because of the "gree:-,
revolution," a type of planned agriculture that re-
quires intensive use of pesticides and fertilizers on
special strains of food crops such as wheat, rice, and
com. Although pesticides may be misused and pose
some nsk, they also have great social value. Without
pesticides, damage to crops, losses in food. storage,
and toxic mold growth in food supplies would
cause much loss of life from starvation and food
poisoning, especially in countries such as India.
Exhibit 1 shows a Union Carbide advertisement

from the 19605 that describes the company's activi-
ties in India.
The Bhopal plant would supply these pesticides
and serve a market anticipated to expand rapidly.
The plant's location in Bhopal was encouraged by
tax incentives from the city and the surrounding
state of Madhya Pradesh. After a few years, how-
ever, the Indian government pressured VeIL to
stop importing chemical ingredients. The company
then proposed to manufacture methyl isocyanate
(MIC) at the plant rather than ship it in from
Carbide facilities outside the country. This was a
fateful decision.
Methyl isocyanate, ~O, is a colorless, odor-
less liquid. Its presence can be detected by tearing
and t[,e bummg sensation it causes in the eyes and
noses of exposed individuals. At the Bhopal plant it
was used as an intermediate chemical in pesticide
manufacture. It was not me final product; rather,
MIe molecules we..ooecreated, then pumped into a
vessel where they reacted with other chemicals. The
reaction created unique molecules with qualities that
disrupted insect nervous systems, causing convul-
sions and death. The plant turned out two similar
pesticides marketed under the names Sevin and
Temik..
In1975 UOL received a permit from the Ministry
of Industry in New Delhi to build an MIC produc-
tion unit at the Bhopal plant. Two months before the
EXHIBIT 1

Union CarbIde
Adver&ement
Tnisad
appeared
irtFortune
~in
April 1962.
So!m:e: Court,esy
ofUnion CaJb!de
COrporation.
Cnapter 11 Multinational Coroorations 385
O&-.c ~f.6Ua .••tM eo.ecalrtrerGepl ••• j-.!W ~fa«l JIL·u.:T«!q
er..tI,7mbc.!IGf~tllrdb.afdal4!1byl!ide.a_qM-modml~.W!a
lWd.Mrdoptd iKIJd _, P.tit bu!lil iU~ _ brll!a the ~Of.
bdrht.fIlttlN
.. _ ~ ~J)OO,DOO .-,Ie. Ii>:&t 1:8. =-s.t die ~ b:IOwWp ttl tll.e
'ftd:!.lI'ore:.t:mP!a. woUinl wilh lMia~ ..._~~ U::a!.oll~
_. .. w:ilab:le itt t.~ ~ fie 1Ie!:p 1Iou!!:J • lC:Iajc:t d:.e:c:aa ad
poul,._ ....BOt::bq. Ii> ~l:1It t!Ie,_ wotld~~~Jw~"dtl ..
hi ~ pbttflortMlII~dvamb'" J!laC'~~ .... ud
'!'be ~p qlUrdoD 0ubIde Wf~tlao;:~&ty to u..tht!t Imc~md
fIa pmtauni:dp with the ~ 01_ ~ put ~ . "'1'-11",
issuance of this permit, the city of Bhopal had en-
acted a development plan requiring dangerous in-
dustries to relocate in an industria] zone 15 miles
away. Pursuant to the plan, M. N. Buch, the Bhopal
- .'1 T"~ __ ...4!-1..3 ....
mercia1 use. For reasons that are unclear, his effort

f~ed, and Ouch was soon transferred to forestry du-
ties elsewhere.
The MIC unit was based on a process design
_ .......... ..I.. A hv Tlninn Carbide's engineers in the
The design required storage of we in big tanks.
A~-.alternative used at most other pesticide plants
would have been to produce small amounts of MIC
only as they were consumed in pesticide produc-
tion. The decision to use large storage tanks was
based on an optimistic projection that pesticide
sales would grow dramatically. Since an Indian law,
the Foreign Exchange Regulation Act of 1973, re-
quires foreign multinationals to share technology
and use Indian resources, detailed design work was
done by an Indian subsidiary of a British firm.
Local labor using Indian equipment and materials
built the unit.
In 1980 the MlC unit began operation under
UCIl's management. During the five years of design
and construction, densely populated shantytowns
sprang up nearby, inhabited. mainly by impover-
ished, unemployed people who had left rural areas
seeking their fortunes in the city. A childlike faith that
the facility was a benevolent presence tuming out
miraculous substances to make plants grow was
widespread among. them.
In fact, when the MIC unit came on line the plant
began to pose higher risk to its neighbo~; it now
made the basic chemicals USM in pesticides rather
than using shipped-in ~gredients. One step in the

manufacture of MIC, for example, ctelltes phosgene,
the lethal "mustard gas" used in World War I.The
benighted crowd by the plant abided unaware.
In 1981 a phosgene leak killed one worker, and a
crusading Indian journalist wrote articles about dan-
gers to the population. No one acted. A year later, a
second phosgene leak forced temporary evacuation
of some su."l'OUllding neighborhoods. Worker safety
and er.vironmental inspections of. the plant were
done by the state Department of Labour, an agency
with only 15 factory inspectors to cOver 8,000 plants
and a record of lax enforcement 4 Oversight was not
vigorous.
Meanwhile, the Indian economy had turned
down, and stiff competition from other pesticide
firms marketing new, less expensive products re-
duced demand for Sevin and Temik. As revenues fell,
so did the plant's budget, and it was necessary to de-
fer some mai,l'terumce, lessen the rigor of training,
and Jay oli workers. By the time of the incident, the
~ Sheifa Jasanoff, "Managing India's EnVironment, w
Environment, October 1986, p. 33.
MJ[C unit operated wifr, six workers per shift, half the
number anticipated by Its designers,
UNION CARBIDE'S
RELATIONSHIP WITH THE
BHOPAL PLANT
What was the organizational relationship of Union
Carbide Corporation in the United States to its sub-
sidiary, Union Carbide India Ltd., and ultimately to
the Bhopal plant? How much direction and control

did the corporate parent half a world away in
Danbury, Cor.necticut, exercise over the facility?
The Bhopal plant fit into the Union Carbide man-
agement hierarchy as shown inthe chart inExhIbit 2.
Although Carbide employees frorr the United States
managed the plant in its early years, in 1982, under
pressure from the government, it was turned over to
Indian managers. The experience of colonial rule in
India created a strong political need for leaders to
put on shows of st!ength with foreign investors.
Indians felt a burning desire to avoid any appear-
ance of subjugation and demanded seH-sufficiency.
This is what had led to passage of the law requiring
foreign investors to use Indian firms and workers
incertain ways-and to put pressure on. Union Car-
bide to tum the plant completely over to its Indian
subsidiary. .
The Bhopal plant was but one of 500 facilities in
34 countries in the Union Carbide Corporation
universe. There was no regular or direct reporting
relationship between it and Union Carbide's head-
quarters in Connecticut. At the request of UCIL,
employees of Union Carbide had gone to India
twice to perform safety inspections on the plant.
Other than those occasions, managers in the United
States had received information or reporting abdtit
the plant only infrequently and irregularly when
major changes or capital expenditures were re-
quested. Thus, the Bhopal plant was run with near
total independence from the American corporation.
In litigation to determine where victims' lawsuits
should be tried, a U.S. court described its autonomy
in these words:

[Union CarbideCorporation's} participation [in the •
design and construction of the plant] was limited
and its involvement in plant operations U!rminated
long before the accident ..• [It] was constructed and
managed by lndians inlIldia. No Americans were
EXHIBIT 2
Union
CarbJde's
Organization
Stra~6
REhtdtotha
Bi1i~alPlant
-"~
employed at the pla..'lt at the time of the accident In
the five years from 1980 to 1984, although mo~ than
1,(100indians were employed at the plant, only one
American was emp~oyedthere and he left in 1982.
No Americans ~ the plant for more than one
year prior tO;be accident, and during the 5-year
pedod before the acdd.ent the communicatlol'ls be-
tween the plant and the United Stales were almost
nanex!stent.'
Thus, the Bhopal plant was run by UCIL with
near total independence £rom the .Ameri.can corpora-
tion. Despite this, shortly after the gas leak Otairman
Wan-en M Anderson said that Carbide accepted
"moral raponslbillty" for the tragedy.
5 In re Union earbicJe Crxporation Gas Plant Disaster at

Chapter 1.1 Murcinat;onal Corporations 387
THE GAS LEAK
On the eve of the disaster, tank 610, one of three stor-
age tanks in the MIC unit, sat filled with 11,290 gal-
lons of MIC. The tmk, having a capacity of 15,000
gallons, was a partly purled, stainless-steel, pressu-
rized vessel. Its purpose was to take in MIC made
elsewhere in the plant and hold it for some rime un-
til it was sent to the pesticide production area
through a transfer pipe, there to be converted into
Sevin or Thmik.
At about 9:30 p.m. a supervisor ordered an opera-
tor, R Kha:n, to unclog four filter valves near the
MlC production area by washing them out with wa-
ter. Khan connected a water hose to the piping above
the clogged valves but neglected to insert a slip
, · ....... L _4 _ ...._ ..... 1-=:_,..,. .." ~~'4IH'l" """A~,.l,.p~Icc;
------ -_
into adja:::ent pipes. Khan's omission, if it occurred,
would have violated established procedure.
Because of either this careless washing method or
the introduction of water elsewhere, 120 to 240 gal-
lons of water entered tank 610, starting a powerful
exothermic (heat building) reaction. At first, opera-
tors were unaware of the danger, and for tWO hours
pressure in the tank rose unnoticed. At 10:20 p.m.
they logged tank pressure at 2 pounds per square
inch (ppsi). At 1::30 p.m. a new operator in the MIC
control room noticed that the pressure was 10 ppsi,

but he was unconcerned because this was within tol-
erable limits, gauges were often wrong, and he had
not read the log to learn that the pressure was rrow
five times what it had been an hour earlier.
Unfortunately, refrigeration units that cooled the
tanks had been shut down for five months to save
electricity costs. Had they been running, as the MIC
processing manual required, the heat rise from reac-
tion with the water might have taken place over days
instead of hours.
As pressure built, leaks developed. Soon workers
sensed me presence of MIC. Their eyes watered. At
11:45 p.rn. someone spotted a small, yellowish drip
from overhead piping. The supervisor suggested
fixing the leak after the regular 12:15am. tea break. At
12:40 the rea break ended. By now the control room
gauge showed the pressure in tank 610 was 40 ppsi
Ina short time it rose to 55 ppsi, the top of the scale.
A glance at the rank temperature gauge brought
more bad news. The MIC was 77 degrees Fahrenheit,
36 degrees higher than the specified safety limit and
hot enough to vaporize. Startled by readings on the
gauges, the control room operator ran out to tank
610. He felt radiating heat and heard its concrete
cover cracking. Within seconds, a pressure-release
valve opened and a white cloud of deadly MlC va-
por shot into the atmosphere with a high-decibel
screech.
Back in the control room, operators turned a
switch to activate the vent gas scrubber, a safety de-
vice designed to neutralize escaping toxic gases by
circulating them through caustic soda. Itwas down
for maintenance and inoperable. Even if it had been

on line, it was too small to handle the explosive vol-
ume cf MIC shooting from the tank. A flare tower
built to bum off toxic gasas before they reached the
atmosphere was also off line; it had been dissnantled
for maintenance and an elbow joint was missi.~" An-
other emergency measure, transferring MIC from
tank 610 ro one of the other storage tanks, was fore-
closed because both were too full. This situation also
violated the processing manual, which called for
leaving one tank empty as a safeguard.
At about 1:00a.m. an operator triggered an alarm
to warn workers of danger. :be plant superintend-
ent, entering the control room, ordered a water
spraying device be directed on the venting gas, but
this last-resort measure had little effect, Now most
workers ran in panic, ignoring four emergency buses
they were supposed to drive through the surround-
ing area to evacuate residents. Two intrepid opera-
tors stayed at the control panel, sharing !:he only
available oxygen mask when tae room filled With
MIC vapor. Finally, at 2:30, the pressure in tank 610
dropped, the leaking safety valve resealed, and the
venting ceased. Roughly 10,000 gallons of MIC,
about 90 percent of the tank's contents, was now set-
tling over the city.
That night the wind was calm, the temperature
about 60°, and the dense chemical mist lingered just
above the ground. Animals died. The gas attacked
people in the streets and seeped into their bedrooms.
Those who panicked and ran into the night air suf-
fered higher exposures.
As the poisonous cloud enveloped victims, MIC

reacted with water in their eyes. This reaction, like
the reaction in tank 610, created heat that burned
corneal cells, rendering them opaque. Residents
with cloudy, burning eyes staggered about, Many
suffered shortness of breath, coughing fits, i..'"lflam-
mation of the respiratory tract, and chemical pneu-
monia. In the lungs, MIC molecules reacted with
~isture, causing chemical bums. Fluid oozed from
seared tissue and pooled, a condition called pu.lnio.,
nary edema, and its victims literally drowned in
their own secretions. Burned lung tissue eventu.aD.y
healed, creating scarred areas that diminished
breathing capacity. Because MIC is so reactive with
water, simply breathing through a wet cloth would
have saved many lives. However, people lacked thiS
simple knowledge.
UNION CARBIDE REACTS
Awakened early in the morning, CEO Warren M.
Anderson rushed to Carbide's Danbury, ConnecticUt,
headquarters and, learned of the rising death toll.
When the extent ofIthe disaster was evident, a senior
management committee held an urgent meeting.
decided to send emergency medical supplies, res-
oxygen (all Carbide products), ana an
'AUleri1c.andoctor with knowledge of MIC to Bhopal
day, Tuesday, December S, Carbide dis-
.Itch{!d arteam of technical experts to examine the
on Thursday, Anderson hlmself left for India.
'1f(JIwe'vet.iarner arriving in Bhopal, he Was charged

criminal negligence, placed under house arrest,
.00 then asked to leave the country.
With worldwide attention focused on Bhopal,
Carbide held daily press conferences. <:IU'1.stnas
parties were canceled. Flags at Carbide facilities
.Dew at haJf-sBff. All of its nearly 100,000 employees
observed a moment of silence for the victims. It
gave $1' million to an emergency relief fund and
offered to tum its guesthouse in .Bhopal into an
orphanage.
MOr.fr.3 later, the company offered another $5 mil-
lion, b-.:t the money was refused because Indian poli-
ticians trenabJed in fear that they would be seen
cooperating with the company. The Indian pub:ic re-
viled -anythirl.g associated with Carbide. Later, when
the state govemmenr learned that Carbide had set up
a training school for the unemployed in Bhopal, it
flattened the facility with bulldozers.
CARBIDE FIGHTS LAWSUITS
AND A TAKEOVER BID
No sooner had the mists cleared than American at-
torr~ys arrived in Bhopal seeking litigants for dam-
age claims. They walked the streets signing up
plamti.ffs. Just four days after the gas leak, the rust
sUit was filed in a U.S. cour!j soon cases seeking
~ billion indamages for 200,000 Indians were filed
against Carbide.
However, the Indian Parliament passed a law giv-
ing the Indian government an exclusive right to .rep-
~ victims. Then India ~l::e United States.
Union Carbide offered $350' to settle existing

claims (an offer re',ected by the Indian government)
and brought a motion to have the cases heard in
India. Both Indian and American lawyers claiming to
represent victims opposed the motion, lcnowing that
wrongful death awards in India were small com-
pared with those in the United States. However, in
1986 a federal court ruled that the cases should be
heard in India, noting that "to retain the litigation in
[the United States] ... would be yet another example
Chapter 11 Mu/tinariona. CorporatIons 389
of imperialism, another situation in which an estab-
lished sovereign inflicted its rules, its standards and
values on a developing nation."6 'This was a victory
for Carbide and a defeat for American lawyers, who
could not carry their cases to India in defiance of the
government.
In late 1986 the Indian govemment filed a $3.3
billion civil suit against Carbide in an Indian court?
The suit alleged that Union Carbide Corporation, in
addition to being majority shareholder in Union
Carbide India Ltd., had exercised policy control
over the establishment and design of the Bhopal
plant. The Bhopal plant was defective indesign be-
cause its safety standards were lower than similar
Carbide plants in the United States. Carbide had
consciously permitted Inadequate safety standards
to exist. 1h.e suit also alleged that Carbide was con-
ducting an "ultrahazardous activity" at the Bhopal
plan! and had strict and absolute liability ior com-
pensating victims regardless of whether the plant
was operating carefully or not.
Carbide countered with the defense that it had a

holding company relationship with uen. and never
exercised ~ control over the Bhopal plant; it was
prohibited from doing so by Indian laws requiring
management by Indian nationals. In addition to the
civil suit, Carbide's chairman, Warren Anderson,
and several UCIL executives were charged with
homicide in a Bhopal court. This apparently was a
pressure tactic, since no attempt to arrest them was
made.
On top of i-.s legal battle, Carhiae had to fight for
its independence. in December 1985, GAP Corpora-
tion, which had been accumUlating Carbide's shares,
made a takeover bid. After a suspenseful monthlong
.battle, Carbide fought orr GAF, but only at !he cost of
taking on enormous new debt to buy back 55 percent
of its OUtStancmg shares. This huge debt had to be
reduced because interest payments were crippling.
'So in 1986 Carbide sold $3.5 billion of assets, includ-
ing its mosf popular consumer brancis-Eveready
batteries, Glad bags, and Prestone antifreeze. It had
sacrlficed stable sources of revenue and was now a
smaller, weaker company more exposed to cyclical
economic trends.
61n re Union Carbide Corporation GasPlant Disaster; 634 F.
Supp. 867 (S.D.N.Y. '986).
7 Union of India v. Union Carbide Corp. and Union Carbide
India Ltd., Bhopal District Court, No. 1113 (1986).

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