Exxon Valdez Case Study

Kym Robinson

Comm 642

Case Study Summary

Exxon and the Valdez Oil Spill

Background

As a direct descendent of John D. Rockefellers’s Standard Oil, ExxonMobil ranked number one in 2011 in America’s largest corporations by Fortune 500 magazine. Ranked globally number three by the Fortune Global 500, the company saw profits of $41.1 billion and revenues of $452.9 billion in 2011. It is the largest company in the world by revenue. When the Valdez oil spill took place in 1989, Exxon (before the 1999 merger with Mobil) was one of the five largest companies in the United States. They had sales of $80 billion.  Lawrence G. Rawl was the CEO.

Problem

On March 24, 1989, the Exxon Valdez was leaving Prince William Sound off the coast of Alaska, when it hit the submerged rocks of the Bligh Reef. The tanker was ripped open.  The hole in the hull was almost the length of the ship.  It leaked 11 million gallons of crude oil into the Sound.  It was considered the worst oil spill ever in American waters.  The oil spill was affecting the land, sea life and the economy.

Situation Analysis

Strengths

Exxon had a capable coordinator, Don Cornet, at the site in Alaska.  Cornet set up a media center in Valdez, Alaska. The company had a desire to restore normalcy to the area with an immediate focus on clean-up.  With sales of $80 billion dollars, Exxon had the resources to try and diminish the situation.  Exxon had the ability to fund the hiring of numerous public relations firms and advertising agencies to promote Alaskan tourism. They were able to fund a tourism crisis plan, along with area clean-up and animal rescue efforts.  The company was also able to pay local and federal fines, restitutions, and civil settlements.

Weaknesses

Exxon had no crisis plan or position for a public relations manager in the company. CEO Lawrence G. Rawl missed the “golden hour” to make a statement and declined to immediately visit the scene. After the crisis when Rawl finally issued a statement via television, he focused his statement on clean-up and made no apologies.  He showed no emotion or acknowledgment to the individuals who were affected by the spill.  Frank Iarossi, who at the time was president of Exxon Shipping, held a press conference before briefing by public relations and was verbally slaughtered.  Brian Dunphy, also in Shipping, would not verify damages to or clean-up efforts to media.  The company under estimated the public’s concern with the environment. They also underestimated the difficulties with clean-up and communications that would be necessary after such a large oil spill.  Another weakness that Exxon suffered from was the ship captain’s prior drunk driving record and that he had been hospitalized for alcohol treatment.  Captain Joseph Hazelwood also put a third mate in charge of a task that he was not prepared to do.  Exxon’s employees blamed the corporate culture for crew cuts that lead to long hours and very little sleep for crew members. The Exxon Valdez should have had 33 crew members instead of the 19 it had the night of the oil spill.

Opportunities:

This crisis was an opportunity for Exxon to move away from Excellence Theory Model 3 – Two-Way Asymmetric Mode and more toward Model 4 – Two-Way Symmetric Model.  They had a chance to begin a mutual understanding model with the public.  This crisis could have helped Exxon improve its corporate image with both internal and external public’s.  They could take in information from the affected community and use it to better handle the situation.  Exxon could set an example for other oil companies. They had the opportunity to clean of the spill and pay for the damages.  They had a chance to help the Alaskan tourist industry, the local residents’ livelihoods and the economy of the area.

Threats:

The threats facing Exxon included the loss of customers. Many outraged individuals, including the media, emerged to show their disappointment with the way the crisis was handled. The court of public opinion could demonize the company in the media. Exxon also faced possible product boycotts and additional governmental sanctions and local civil suits.

Strategies:

  1. Exxon’s Cornet hired a advertising and public relations firm to develop and implement strategies including a crisis plan for three areas including the tourism industry, the animal rescue centers and the seafood industry
  2. Exxon had the public relations firm begin an extensive public relations and advertising campaign for tourism, animal rescue and the seafood industry and they Exxon worked with the Alaskan governor to promote Alaska
  3. Exxon first statement to the public was that they wanted a swift clean-up
  4. Exxon released full page adds expressing concern and vowing to clean-up the spill
  5. The captain of the Valdez was fired; the third mate was not
  6. A media center was set up in Valdez Alaska to be near the government officials, citizens and the site of the spill
  7. The company refused to admit guilt or apologize

Consequences

  1. The public relations campaign reached 50 million Americans while the advertising campaign reached even more people
  2. Tourism for the following year set a new Alaskan record. Tourism rose by 5% over the year before the spill
  3. It took Exxon a month after the spill to have the equipment on site for a full scale clean-up; the company stated it had spent $2.1 billion in clean-up and another $1 billion in fines, criminal restitution, and civil settlements to state and federal governments; the company was originally fined $5 billion, but after several appeals, the U.S. Supreme Court dropped the fine to $507.5 million (instead of $5 billion) to be paid to Alaskan natives, fisherman and business owners
  4. In 1999, scientists announced that Prince William Sound was recovering although not fully; environmental groups still demonstrate against ExxonMobil, but the demonstrations have had no impact on the companies’ business
  5. Captain Hazelwood was acquitted of operating the tanker while intoxicated but he was charged with negligence, fined and ordered to perform community service; Cousins, the third mate in charge at the time of the spill was promoted to second mate on another ship
  6. Exxon became a prodrome for other oil companies and now all companies operating in Alaska must have a crisis plan approved by the state
  7. Rawl resigned and the new Exxon CEO created the position of public relations manager and restructured the organization so that the public relations department would have easier access to the CEO; Cornet was named to this position in 1993

Comments

In 1989, Exxon was in no way prepared to engage in the type of crisis management it needed to address an oil spill of the magnitude it encountered. There was no crisis plan and a CEO not willing to take the appropriate actions.  The first reaction of the company was to blame others. They wanted a scapegoat and the Captain, with his record, was perfect.  It was easier to blame him than recognize the limited and over worked crew.  The company launched a late effort focusing on clean-up.  The clean-up took longer than the company expected. They made a mistake by telling the public that the clean-up would be swift. They had no idea how long it would take. Exxon also put forth great effort to help tourism in the state. The effort was successful.  However, the company never apologized and tried to escape paying the individuals it had harmed by appealing the $5 billion damages awarded against it.  It seems to me that Exxon should have been required to pay this money in full. Based on the companies’ earnings in 1989, they could have afforded the payout.  ExxonMobil still thrives and is number one in American and number three globally. In my opinion this crisis did not harm Exxon’s reputation.  Exxon funded animal rescue efforts that led to the standard environmentalist still use today. This crisis actually helped other oil companies avoid making the same mistakes and gave them a guide for what not to do.

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3 Responses to Exxon Valdez Case Study

  1. djwindholz says:

    I agree. I also think Exxon should have had to pay in full. Also, I liked your comment on the ‘golden hour’. The CEO should have been to first one to make a comment and be at the scene, but instead he angered many customers by not doing so. An apology should have been made!!

  2. lynnluig says:

    Very well written Kym. You gave a thorough analysis of the crisis. I like that you focused on how affordable this crisis was for the corporation. They most certainly had the resources to handle the situation better than they did and should have accepted the fines in order to help the people that the spill affected. I agree that the fines were justified and should not have been decreased after the appeal.

  3. nnfisher2343 says:

    This is written very well and i thought that you had a great outlook on the situation! I agree on all of your points!

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