business law

At 9:30 p.m. onThursday, the22nd of March, the oil tanker ExxonValdez left the oil terminal atYaldez, Alaska, loaded with I .26 mlllion barrels of oil. The Valdez was the largest tanker owned by Exxon. It was nearly 1,000 feet long and weighed, fully loaded, 280,000 tons.

When the ship left port, it was under the command of Captain William Murphy, the harbor pilot. Harbor pilots are responsible for steering both incoming and outgo- ing tankers through the Valdez Narrows, a lr-mtle-wide approach to the port of Valdez. After exiting the Narrows and achieving the sea lanes in Prince William Sound Captain Murphy turned over command to Captain Joseph Hazelwood and left the ship. Captain Murphy testified later that he had smelled alcohol on the breath of Captain Hazelwood, but that he made no comment and took no action. He knew that it was common practice for both the officers and crew of oil tankers to drink while in port.

Captain Hazelwood, immediately after assuming command" radioed the Coast Guard and requested permission to alter course to avoid large chunks of ice that had broken loose from the Columbia Glacier and were floating in the outbound shipping lane. The

Chapter 6 How Can a Business organization Be Made Morar? "147

permission was granted. captain Hazelwood then turned over command of the vessel toThird Mate Gregory cousins and went below to his cabin. Mr. cousins was not licensedto pilot a ship in the sea channels approaching Yaldez. Mr. Cousins and others latertestified that it was common practice to turn ou., ,o-mand of oil tankers to nonli- censed officers' Captain Hazelwood had set the automatic pilot to steer the ship south-ward into the inbound shipping lane, and he had instructed Mr. cousins to maintainthe course until after the ice chunks from the glacier were passed and then to returnnorthward to the outbound lane. No inbound trarric was expected and permission forthis course change had been granted by the coast Guard, so no danger was anticipated.At 11:55 Mr. cousins ordered a course change of 10 degrees right rudder to bring thetanker back to the proper lane within the channel. There *u, no response. At 12:04the lookout, who

YT- on the bridge rather than atthe normal station on the bow of thetanker, sighted the lighted buoy marketing Bligh Reef, a rock outcropping only 30 to 40feet beneath the surface. Mr. cousins ordered-...r..g.rr.y hard right rudder. Again there

was no response' In the hearing that followed the accident, it was determined that eithercaptain Hazelwood had not informed Mr. cousins that he had placed the ship on auto-matic pilot, or that Mr. cousins and the helmsman had not remembered to disconnect the automatic pilot, which prevented manual steering of the vessel.

At 12:05 a'm' the Exxon Yardezran aground on Bligh Reef. The hull was punctured in numerous places, and,260,000 barrels, approximatety t1,000,000 gallons of crudeoil, spilled from the badly ruptured tanks. It was the largest oil spill in the history of theNorth American petroleum industry. -r

^ -^^

At 12:28 a.m' one of the officers on the ship radioed to the coast Guard that it was aground on Bligh Reef. 'Are you leaking oil?'l a Coast Guard operator asked. ,,I think so," was the reply.

At 3:28 a.m. members of the Coast Guard boarded the Exxon valdez and reported that oil was gushing from the tanker. "'We've got a serious problem,,,radioed the Coast Guard officer on board the tanker. "There's nouody here. . . . where,s Alyeska?,,

'Alyeska" was the Alyeska Pipeline Service Cimpany, which both managed the oilpipeline that brought crude oil 800 miles from the oil ri.ld, at prudhoe Bay to Valdez and ran the oil terminal atYaldez.It was responsible, through a formal agreement withthe state of Alaska' for the containment and recovery of alioii spills within the harbor and sea lanes. That agreement was expressed in a deiailed writte; plan, 250 pages long, that listed the equipment and personnel that were to be kept available by Alyeska, and the actions that were to be taken by Alyesk a, to reactpromptiy to oil spills. . The stated goal of the written plan was to encircL any serious oil spill with float-ing containment booms within five hours of the first report of the occurrence, and to recover 50 percent of the spill within 48 hours. The stated goal was well known within the atea, and accounted for the perplexity of the coast Guard officer. when he reported, "There's nobody here," he was referring not to the captain and crew of the tanker, but to the oil spill recovery team and equipment from Alyeska.

The coast Guard officer also noted the smeli of alcohol on the breath of Captain Hazelwood, and reported to his base in very blunt terms that he suspected the captain was drunk' He was unabie to establish the i.gr.. of intoxication, due to the lack of atesting kit, but he did request the assistarrr. o1the Alaska State police to conduct thetests as soon as possible. Those tests were conducted the following morning, and did

148 Chapter 6 Hox.Can a Business organization Be Made Moral?

establish that the level of alcohol in Captain Hazelwood's bloodstream at the time was

twice the legal limit. At 6:00 a.m. on Friday, March 23 (six hours after the accident), officials from

Exxon flew over the grounded tanker for the first time and reported a massive oil slick

streaming away fromlhe tanker. They contacted the Alyeska oil terminal, and ordered a

quicker response and greater effort. The problem, the manager atthatterminal reported,

was that the single barge capable of handling the long containment booms had been out

of service for two *..Lr and had been unloaded for repairs. Workers were preparing to reload the barge, he said, but the only employee who was capable of operating the crane

needed for reloading had not yet reported for work. Later that morning the loading

was completed and the barge was taken in tow by a harbor tug. At 2:39 p'm' the barge

arrived at the wreck site, carrying all of the containment booms that were available at

the terminal and a number of centrifugai pumps to help in removing the remaining oil

from the Valdez. At 7:36 a.m. on Saturday, March 24 (3!Vz hours after the accident), Exxon began

pumping oil from the Valdez to a second tanker moored alongside, the Baton Rouge.

At about the same time, seven Alyeska "skimmers," or barges with vacuum equipment

designed to siphon oil off the surface of the water, arrived at the site. The skimmers,

however, were designed to recover oil that had been bunched in a compact mass by

containment booms. Those booms were still not in place due to a shortage of tugs and to

some degree of confusion in the means of unloading the booms and placing them in the

sea. By nightfall, only I ,200 barrels of oil had been recovered.

By 11:00 a.m. on Sunday, March 25 (59 hours after the accident), the ExxonValdez

was finally encircled by containment booms. It had taken 2% days to get the booms in

place, despite the original plan that called for full containment of any spill within five

horrrr. Most of the oil was now outside the booms in a slick that covered 12 square

miles, and the wave action had begun to convert the crude oil to an emulsified "mousse"

mixture of oil and water that quadrupled the volume. This emulsified mixture now lay

5 to 9 inches thick upon the surface of the sea. The specific gravity of the emulsified

mixture was very difierent from the specific gravity of either water or oil, and the skim-

mers were no longer effective except when working on fresh seepages close to the

grounded tanker, within the booms. At 6:00 a.m. onMonday, March 26 (75 hours afterthe accident), the Coast Guard

admitted that the situation was out of control. The first two days had been calm, but

Sunday night winds as high as 73 miles per hour had arisen, and driven the emulsified

oil-and-water mixture 37 miles from the wreck site. It was swathing the islands and

beaches throughout prince William Sound with solid bands of black petroleum "gunk,"

the accepted term for the residue that is left after the more volatile elements in crude

oil have evaporated. The skimmer barges and boom-tending boats had been forced to

retreat to sheltered water. Flights into theValdez airport, to bring additional supplies and

people, had been halted. Most of the oil that had remained in the unruptured tanks of the

Exxon Valdez had been pumped out, but it was now thought to be impossible to recover

any further substantial amount of the spill. Eventually marks of this spill stretched 700

miles along the coast, spoiling fishery resources, wilcrlife refuges, and national parks in

one of the most scenic regions of the country, and killing sea birds, fish, and mammals

in one of the prime marine habitats of the world.

Chapter 6 How can q Business organization Be Made Moral? "l4g

Nearly two months after the biggest oil spill in American history, Alaskan officials saynot a single mile of beach has been completely cleaned and that the death tolls of birds,fish and mammals continue to mount. Large patches of oil, untended in rough and remote seas, are still washing up on pris-tine Alaska beaches more than 500 miles from the reef in prince william Sound wherethe Exxon Valdez went aground,March24. The oil from the spill of i 1 million gallons hitT3}miles of coastline, Alaskan stateofficials said today' of that, only four miles have been declared cleaned. Less than onemile is totally free of oil, the officials said. The ecological toll of the spill thus far includes more than 11,000 birds of 300 differ-ent species, 700 Pacific seal otters, and,200bald eagles, according to atallyby the StateDepartment of Environmental Conservation. Biologists say that the actual number of dead wildlife could be three to five timeshigher than those found because many of the animals have been washed out to sea ortaken by predators. on some beaches in Prince william Sound the oil is more than three feet thick, lodgedin the rocks and providing a reseryoir of fresh contamination at every high tide. (The NewYorkTimes, May 19, 19g9, p. 1)1

The causes of the accident, while obviously related to the intoxication of the captainand the subsequent command of the ship by an unlicensed third mate, were thought to bemore complex thanthatsimple explanation. TWo additional factors were mentioned in theearly hearings of the Federal Transportation safety Board that investigated the oil spill. ' Tired crew members' The crew members on the tanker were said to have beenexhausted from working long hours, and not fully alert. The Exxon valdeznormally

carried a crew of 20 persons. This crew size was ctnsidered to be typical for crude oiltankers, but it was substantially smaller than that required by coast Guard regulations and union requirements on merchant cargo ships. The oil cornpanies had argued thatthe new technologies automated the operations of the tankers u.rd.li-inated the needfor a larger crew- The modern equipment, however, had to be manned and maintained, and consequently the automation did not keep the officers and crew from workingextensive amounts of overtime and frequently going long stretches with little or nosleep' crew members on the Exxon valdez tesiifled that they had worked an aver-age of 140 hours of overtime per month per person for the six months prior to theaccident' one hundred and forty hours of ou.riime per month and,20 days at sea permonth plus the regular g-hour watches works out to be 15 hours per day.

Many of the crew members were exhausted, a routine feeling on Exxon ships, theytestified. (The NewyorkTimes,May 22,19g9, p. 10)2

' Ignored sailing rules. There were definite violations of sailing rules. captain Hazel-wood advised the coast Guard that he was taking the ship on a southwesterly course,into the inbound shipping channel, to avoid nout"ing ice chunks. That was consideredto be perfectly proper, and normal under the circutstances, though permission wasnever granted for this maneuver except when the inbound lanes *o. ,o*pletely free I copyright o 1989 by The New York Times Co. Reprinted with permission. 2 copyright o 1989 by The New York Times Co. Reprinted with permission.

150 Chapter 6 How Can a Business Organization Be Made Moral?

of other shipping. Captain Hazelwood, however, did not advise the Coast Guard that

he then altered course ever furthef to the south, out of the inbound shipping lanes

and into watefs close to Bligh Reef, or that he had engaged the autopilot' Permission

for the further course change would almost certainly have been refused had the Coast

Guard been informed, and Coast Guard rules are very definite that autopilots should

never be used except in the open sea. Both improper actions certainly contributed to

the final grounding of the shiP.

.,your children could have driven a tanker up through that channel." (Statement of Paul

Yost, commandant of the U. s. coast Guard, quoted tn The wall street Journal, March 31,

1989, p. 1)3

Within Alaska, public reactions to the accident and to the lackadaisical practices that

apparently led to the accident centered on the potential damage to the fishing resources

-^d, ,onrequently, on the harm to the livelihood of a substantial portion of the state's

population. The Alaska coast from Prince William Sound northward is known as the

richest salmon and crab fishing grounds in the world. Exxon assured the fishing boat

operators that they would be compensated for any losses they suffered as a result of the

oil spill, and explained that the company had insurance that would protect it against

claims for negligence up to $4,500 million' Outside of Alaska, public reactions to the accident and to the lackadaisical

practices

reveared in the hearinjs focused on the fouring of the environment and the destruction

of the wildlife:

Already thousands of birds have died, and biologists fear that a significant portion of

the Sound's 12,000 sea otters-which lose buoyancy when just 10 percent of their body is

covered in oil-maY be in jeoPardY' Those who know these bejeweled waters-rich in fish, fowl and fauna like

few other

places on earth-believe the damage will be monumental and long lasting. (The Wall

Street Journal, March 31, 1989, P'1) Right now I,m still finding dead sea otters on the beach (61 days after the accident)'

Bald

eagles feed on them, so I'm finding dead eagles, . . . Here I am, a scientist with a Ph'D'' and

as I watch these oiled birds trying to take offI start to cry' (Statement of a biologist

at the Kenai Fjords National Park, quote dtnThe NauYotrkTimes, May 19, 1989, p' 1f')a

public reactions to the accident also were not mollified when the chairman of Exxon,

Mr. Lawrence Rawl, decided not to go to Alaska and supervise the cleanup operations

directly. Instead" he remained in New York City and made no direct comment upon the

oil spiil or cleanup operations for seven days. other officials with Exxon also refused to

conrment. The fiist statement by the president of Exxon U'S.A., the holding company

for Exxon Shipping, which owned the grounded tanker, was made on May 9:

we do not know what caused this accident. . . . Exxon',s response was prompt and con-

sistent with the previously approved corrtingency plan' (Mr. Bill Stevens, quoted in the

Detroit Free Press, MaY 9, 1989, P' 7A)

3 The Wall Street lournol, Central Edition fonly staff-produced materials may be used] by N/A'

copyright 2005 by Dow Jones & Company, lnc. Reproduced with permission of Dow lones &

Company, lnc. in ihe format Textbook via Copyright Clearance Center.

a Copyright o 1989 by The New York Times Co. Reprinted with permission.

Chapter 6 How Can a Business organization Be Made Moral? -15"1

In fairness to Exxon, it should be explained that company officials felt that publicreactions to the oil spill were extreme and did not take inio account several mitigatingfactors' First, they thought that the public did not rearly understand that the companycould not be held responsible for the intoxication of captain Hazelwood. Second, theythought that the public did not fully reali ze thatthe company had been prevented fromusing chemical dispersants on the oil. chemical dispersants, it should be understood, do not destroy the oil. Instead, theeffect of the dispersant is to lower the surface tension of the oil to the point where itwill break up and disperse in the water in the form of tiny droplets. The problem is thatthese tiny droplets are in a size range that is easily ingested by marine organisms on thelower end of the marine food chain, and therefore graduarly impact marine creatureson the higher end of that chain. The extent of that impact has never been studied underall climatic conditions' It is known that dispersants make an oil spill much less visible;there is no certainty that they make it any less toxic.

Despite the lack of certainty about the effect of the dispersants, company officialsthought that chemicals should have been used as soon as it was apparentthat the con-tainment and recovery efforts had failed, and before the beaches were fouled and thewildlife kilied' Mr' Rawl, the chairman of Exxon, in an interview with Fortune maga-zine' said environmentalists acting with the state of Alaska had prevented the companyfrom applying the dispersants prolptly:

one of the things I feel strongly about-this catching hell for two days,delay-isthat I don't think that we got a tiii shake. The basic problem we ran into was that we hadenvironmentalists advising the Alaskan Departmenttf Enui.onmental conservation thatthe dispersants could be toxic. (Lawrence Rawl, quoted in The New york Times, May 22,1989, p. t0)s

Mr' Lee Kelso, director of the Alaskan Department of Environmental conservation,disagreed strongly that his department was responsibie for any delay in the use of thechemical dispersants:

Exxon was free to use dispersants on the vast majority of the oil slick, and did not doso' (Lee Kelso, quoted in the The watt street Journar,April 3, 19g9, p. 1) 6

Mr' Lee Raymond, president of the Exxon corporation, said that he blamed .,ulti-mately the coast Guard" (The wail strlet Journar,April 3, rggg,p.12) for the deray inthe use of dispersants, explaining that it had required a test before granting permission.coast Guard officials denied that they had required testing, saying that it was onlvcommon sense to gauge the effectiveness of the ireatment under tn.-*irrJ,^;;;;,;;; water temperature conditions that existed at the time.

Government reactions to the oil spill centered not on the causes of the accident. andnot on the consequences of the oil rpill or the dispute about testing, but *;;;il#.,and ineffectual nature of the cleanup. The federal attitude seemed to be that accidents 5 Copyright o 1989 by The New york Times Co. Reprinted with permission. 6 Thewott Streetlournof central Edition [onlystaff-produced materials may be used] by N A.Copyright 2005 by Dow Jones & Compan y, lnc. Reproduced with permission of Dow Jones &company, lnc. in the format Textbook via copyright Clearance Center.

"152 Chapter 6 How Can a Business Organization Be Made Moral?

do occuq that seamen have been known to consume excessive amounts of alcohol in the past, and that under conditions of stress people may forget about test conditions and requirements. But in the view of the government in Washington, there was no excuse for the inability first ofAlyeska and then of Exxon to deal promptly and effectively with the spill itself.

The contingency plan that had been developed by Alyeska and approved by the state of Alaska envisaged containment within five hours and recovery of a minimum of 50 percent of the oil by skimmers within 48 hours. Containment, as stated previously took 59 hours, and estimates of the amount of oil actually recovered ranged from 0.4 to 2.5 percent. A number of reasons for the ineffectiveness of the response by Alyeska and Exxon were given in hearings held by the National Transportation Safety Board.

It should be explained before discussing the results of these hearings before the National Transportation Safety Board that the Alyeska Pipelines Service Company is not a subsidiary of the Exxon Corporation. It is a consortium owned by the seven oil companies that have drilling rights on the North Slope ofAlaska and ship crude oil from Prudhoe Bay to YaIdez. Representatives of all seven companies serve on the board of directors. Exxon is the second largest owner, and is said to participate actively in the management of the company.

The first reason given for the slowness of response was a shortage of equipment. The oil spill contingency plan required Alyeska to maintain two barges, loaded with contain- ment booms and ready for use. At the time of the spill, only one barge was available. The other had been scrapped as old and obsolete, but its replacement was still in Seattle. There was a requirement in the contingency plan that Alyeska notif' the state Depart- ment of Environmental Conservation if any equipment was out of service for any period of time. Alyeska now concedes that it failed to provide this notification.

The barge that was available had been damaged by a storm in January. It was still considered to be seaworthy, but the containment booms had been unloaded to facilitate repair. Repairs had been delayed, according to testimony by Alyeska officials, because the company had been unable to locate a licensed marine welder. Environmentalists at the hearing displayed the Valdez telephone book that listed four companies that claimed to provide licensed marine welding services.

Seven thousand one hundred feet of containment booms were stored at the oil terminal. The contingency plan did not specifu an exact lineal footage that was to be kept in stock, but it can be understood that 7,100 feet would be enough to contain a spill around a 1,000 foot tanker only if the booms could be placed quickly, before the oil spread out upon the surface of the water. Three thousand feet would be required just to encircle the hull.

Ten skimmers, which are Iarge suction units that can be mounted on barges and used in essence to vacuum oil from the surface of the sea, were available as promised in the contingency plan. However, replacement parts were not kept in stock, and equip- ment breakdowns were common as the machines were not designed to work on the emulsified mixture of oil and water that was formed rapidly through wave actions on the noncontained spill.

Other equipment that was needed either was missing or could not be found quickly. Heary ship fenders, essential for the second tanker to come alongside the Exxon Valdez and pump out its remaining oil, couldn't be located for hours because they were buried under 74 feet of snow. Half of the required six-inch hose, needed for the pumping, never

Chapter 6 How can a Business organization Be Macle Moral? "153

was found and replacement had to be flown in from seattle. The emergency lightingsystem, to illuminate the boom-laying and oil-pumping work at night, was finally dis-covered off base, being readied for use in the valdezwinter carnival. As a final example of the shortage of equipment, it was determined after the accidentthat there never had been enough ch.mi.at iirp.rrunt stored inyardezto treat the oilspill' even had there been no disagreement or misunderstanding about permission to usethis material.

Records made available this week show there was prior approval to use dispersants inthe area of the spill and that only 69 barrels of dispersants were on hand in Valdez for ajob that called for nearly 10,000 barrels. Six days after the spill, Exxon still had only a fraction of the amount needed to fight

the disaster, according to records and the company's testimony this week. (The lvew york Times, May 22, I 989, p. 10 )

7

In addition to the shortage of equipment, there was also a shortage of personnel. The oil spill contingency plan required Alyeska to have a crew of 15 persons on duty atall times' These were not oil spili experts. These were hourly paid workers responsible for the normal operations of the terminal, but according to the plan they should haveincluded all of the skills and trades necessary to respond to emergencies, whether oilspills at sea, oii leaks on iand, or oil fires at the terminal.

At the time of the spill, only 1 I workers were on duty. Unfortunately, none of thosepeople knew how to operate the crane, which was needed to load the barge with thelong and heavy containment booms. A crane operator was finally located, but he was also the only one who knew how to drive the fork lift, and he spent the morning afterthe accident, when speed in response was essential, running back and forth between thefork lift and the loading crane.

Last' there was a lack of training. Alyeska had dismissed its oil spill response teamin 1981' This was a group of 12 persons originally set up to contain and then clean up spills throughoutYaldez Harbor and Prince wiliiam Sound. The duties of the spill response team were assigned to regular employees at the plant. At the time of dismissal, Alyeska had claimed that this arrangement would be superior as they would have,,l20 people trained in oil spill response rather than 12.,,

Some of the cited 120 scoff at this. one senior employee says he has had ,,zero oil spill training, none." He recalls being summoned to two spills over the years. ,,I didn,t know what the helr I was supposed to do, and when I found the guy I was supposed toreport to, he did not know what the hell we were supposed to ao .lit

"r. We just stood

there watching." (The wail street Journar, Jury r6, ilsl, p. t;* ---- ' ''- J"

Some of the operating managers within the oil industry have been greatly con- cerned by this tendency to replace specialized teams with plrsonnel from the general workforce:

7 Copyright o 1989 by The New York Times Co. Reprinted with permission. 8 Thewatt streetJournal, Central Edition [onlystaff-produced materials may be used] by N/A.copyright 2005 by D9w lone: & Company, 1nc. Reproduced with permission of Dow Jones &company, lnc. in the format Textbook via Copyright Clearance Center.

154 Chapter 6 How Can a Business Organization Be Made Moral?

You either have a team of people who are dedicated to a specific task, and trained to

perform that task under any and all conditions, or you have nothing. The Valdez terminal

didn't have that trained team, and it showed. We run into this same problem continually with fire drills. Previously, every refinery

had a fire department, with fire engines, a fire chief and a fire crew. Now, they just have

the engines and, if they are lucky, they still have a chief who knows what he is doing

and can teach the others. We are not lucky, and we don't still have a chief. It is company

policy to run a drill once every six months. The bell rings, and all of the 9:00 to 5:00 desk jockeys jump on the truck, and away they go. When they get there, they don't know how

to turn on the hydrant, they don't know how to work the PumP, they don't know how to

lay the hose and fight the fire, and they don't know what is safe and what isn't. We have

not had a fire since the department was disbanded" but when we do it is going to get very

bad very fast. I can understand exactly what happened atYaldez. They had not had a major spill in

18 years, but when they did it got very bad, very fast. ( Statement of oil industry executive

made in confidence to the case writer)

The shortage of equipment, the shortage of personnel, and the lack of training were

caused, it now appears, by deliberate policy decisions reached by the senior manage- ment of Exxon Corporation, who pushed strongly for cost reductions at Alyeska during

the mid-1980s. These policy decisions were not taken arbitrarily. They were in response

to a change in the basic economic conditions of the oil industry. Oil prices fell from $32lbarrel in 1981, at the height of the power of the OPEC

(Organization of Petroleum Exporting Countries) to $ I2harcel in 1987, and then rose slightly to stabilize in the range of $ 15 to $20lbarrel. The large oil companies are verti-

cally integrated, with divisions for the exploration, production, and refining of crude

oil, and for the distribution and marketing of oil products. The lower price for crude oil brought exploration nearly to a halt and severely reduced the profits that come from

production. The large, vertically integrated oil companies reacted slowly to the changed eco-

nomic conditions, but the reaction-when it came-was dramatic and harsh. Costs were reduced. Employees were discharged. The changes at Exxon were particularly dra-

matic because the company for years had prided itself on a generous, almost paternal

attitude towards its employees. In January 1986 Mr. Clifton Garvin, chairman of Exxon

Corporation since Ig7 5, commente d to Fortune magazine about personnel policies at

the time of his company's selection as one of the 10 "most admired" firms in the United

States.

Six months later, Exxon Corporation was in the midst of an extensive restructuring

effort that would eventually change the company from one of the "most admired" to one

of the most disliked. The company plann ed a 2 percent budget cut. They gave workers

60 days to decide whether or not to resign with their partially funded pensions. It added

that if it did not get enough volunteers, it would resort to involuntary terminations, with no pensions. Analysts estimated that the 26 percent budget cut, almost totally aimed at

mid-level managers and hourly paid workers, would reduce employment approximately

one-third. The generous, almost paternal attitude of the company toward Exxon employees had

disappeared. Nearly one-third of all the company's workers, almost all of those over 50 years of age, were told they had to retire early or be fired:

Chapter 6 How Can q Business organization Be Mqde Morar? r 55 with oil companies cutting production in the face of falling crude oil prices and ahard-noised head chopper named Lawrence Rawl in the president's chair, at least part ofExxon's worldwide workforce of 145,000 seemed destined for the block. In late April, theworld's largest oil company offered 40,500 employees the option to retire early or quitwith compensation. (Fortune,May 16, tlSO, p. t i;

The new chairman of Exxon, Mr. Lawrence Rawl, who replaced Mr. clifton Garvinin the spring of 1986, apparently believed that he had been selected by the board ofdirectors to reduce costs and increase earnings, despite the probable impact uponemployee morale. The cutbacks in staff extended throughout Exxon to the Exxon shipping company-the 2O-person crews on that company's oil tankers reportedly were to have beenreduced to 15 persons had the accident not intervened-and to the Alyeska pipeline

Company:

when oil prices began falling in 1981, the owners of Alyeska ordered it to save even more on costs. In late 1992, Alyeska managers prepared what they thought was alean budget and presented it to a melting of the own.rri.o--ittee in San Francisco. According to former Alyeska officials who were briefed on the meeting at the time, com-mittee members cited a figure, roughly $220 million, and asked if the budget was underthat; told that it wasn,t, they rejected it out of hand.

"There was an overall attitude of petty cheapness that severely affects our ability tooperate safely," recalls Mr' woodle who came over from the coast Guard to run the ter-minal's marine operations just in time to see their budget slashed by about a third. ,,1 wasshocked at the shabbiness of the operations." (The wal-l street Journal,July 6, 19g9, p. l)