Paul Holmes 03 Nov 1989 // 12:00AM GMT
It is now almost exactly five years since poison gas seeped from an underground storage tank in Bhopal, India, forming a deadly white cloud over an area of 25 square miles. That morning, 4 December 1984, 200 people were killed and 20,000 more were injured. Ultimately, more than 3,300 deaths were attributed to the accident.
Those managers—and they still exist—who believe that even major crises present only a short-term problem should study the effect on Union Carbide of this one incident. Not only are the direct consequences of the Bhopal tragedy still occupying management time today, a settlement with the Indian government still not concluded, but the indirect consequences have included a hostile takeover bid and a total restructuring of the company.
It is scarcely an exaggeration to claim that Union Carbide as it exists today is a company created—or recreated—by crisis.
"Union Carbide was shaken to its organizational core by the accident at Bhopal," says crisis expert Gerald Meyers, author of When It Hits the Fan. "Until that time, UC was a large but relatively undistinguished member of the nation's chemical industry, riding up and down with the industry's swings:
"Faced with the Bhopal crisis, UC got moving. It undertook a $1.06 million restructuring of its major activities; dismissal notices went to 1400 salaried employees in nine months; non-performing assets were sold and written off, plans were announced to buy back a major block of common stock."
Robert Berzok, Carbide's director of corporate communications, agrees: "Prior to Bhopal we had a very good employee communications set up but we did not communicate externally to any great degree. In the year before Bhopal we received about 250 press inquiries. In the year after Bhopal that number had risen to 5,000.
"The communications department took on a much more important role in the company, became much more valued by senior management. The company began to look outwards to a far greater extent, and to try to control the way it was perceived by the outside world to a greater degree than had been the case."
Berzok, like many outside observers, believes that Carbide's relatively small PR staff—at the time just ten people—grew up in the course of the crisis.
The company's immediate reaction to the disaster was swift and bold. The company called an immediate halt to production of methyl isocyanate (the chemical that had leaked) worldwide, and dispatched both medical and technical teams to the site of the tragedy. The next day, in a move that created considerable controversy, UC chairman Warren Anderson flew to Bhopal and was immediately arrested.
Opinion is divided over the wisdom of this move. While some saw arrest as a humiliation for Anderson and the company, and yet more bad news, others felt that by risking arrest Anderson had made the most dramatic demonstration of concern for the victims of the tragedy possible. Berzok, himself, feels that Anderson's mistake was unfortunate for another reason. Had the chairman been able to complete his visit, he says, Carbide may have been able to do more for the victims, more swiftly.
On the other hand, the company 'suffered from its inability to explain the cause of the accident. The media, as it always does in such circumstances, chose speculation in the absence of hard facts. Although Anderson explained the company's dilemma—"If you say something before you know all the facts you speculate,' he said. "If it is subsequently wrong, you're a liar. If you don't say anything you're a stonewaller"—he was unable to deflect criticism.
When he later attempted to blame the management of the plant in India, and distance the U.S. parent company from its operating company, he was seen as attempting to minimize the effects of numerous lawsuits brought against the company. The New York Times contrasted UC's defensiveness with the immediate resignation of a Japan Airlines executive after one of the company's airplanes crashed claiming 500 lives.
On the positive side, however, UC held daily press conferences throughout the crisis, emphasizing the medical and technical aid it was sending to India, and was always prepared to offer some comment on the situation.
"I think we did very well under difficult circumstances," says Berzok now. "Given the resources we had and the magnitude of the task I would say we merited a ten. Before Bhopal we rarely held press conferences at all. After Bhopal we had a press conference a day, virtually. We were essentially a low profile company before Bhopal. After Bhopal we became much more open, much more communicative."
That helped when nine months later a second accident occurred. A leak at the company's facility in Institute, West Virginia, found six operators engulfed by toxic gas with only two gas masks between them. One hundred nearby residents were sent to hospital, and although no-one died it became clear that the company's safety standards left something to be desired.
Although some of Warren Anderson's comments about public concern—"Today you couldn't invent the pencil," he said. "Children use them and they have sharp points"—did not help, the company was frank in its admission of fault and moved much more rapidly to put its case before the public. Perhaps more importantly, the Institute plant was voluntarily shut down.
The need for management of UC's crises did not end there, however. It still has not ended. It should be a valuable lesson to companies like Exxon that the company is still feeling the aftershocks of events that happened five years ago.
Union Carbide's continued wrangling with the Indian courts over a financial settlement continue. Earlier this year marchers in Bhopal screamed "Hang Anderson" as UC agreed to pay the Indian government a mere $470 million (a figure that caused the company's stock soar and a Salomon Brothers analyst to describe the settlement as financially reasonable and psychologically "terrific."
That is a clear and direct consequence of the Bhopal tragedy. Its role in the attempted GAF takeover bid and the subsequent liquidation of the commercial products division of the company is less clear. Berzok says he does not know how important a factor Bhopal was, but one crisis expert says: "There's no doubt that Bhopal made the company more vulnerable to that kind of attention. Everyone has a kind of subconscious negative reaction when they hear the name Union Carbide, whether they are being offered a job, buying shares, or looking at an application for a new plant."
Opinion is divided over whether Carbide will continue to suffer because of the events of five years ago. John Budd, formerly of Emhart and now with Carl Byoir & Associates in New York, says he believes Carbide has learned its lessons, and because of that may be less likely than some of its competitors to make the same mistakes twice.
Alan Towers, who runs a corporate counseling company which bares his name in New York, is less sure: You have to schedule crisis communications to fit the psychological needs of your audience, not the psychological needs of the company," he says. "Often the two are distinct, or even opposite.
"The company needs to forget about crisis as quickly as possible and move on to new challenges. Unfortunately, people—both employees and customers—don't forget about things quite so conveniently. They may continue to be concerned about a crisis long after the company stops talking about it, and the company needs to recognize that concern and address it."
Union Carbide's Bob Berzok says that the public relations department—now 15 strong—is certainly called upon to address safety and environmental issues more often than it was in the past, although he is not sure how much of that is due to the Bhopal tragedy and how much is due to an increasing interest in environmental issues.
The company has become more proactive, he says, particularly in its efforts to forge good relationships with the communities in which it operates.
"It simply isn't enough to put out press releases or respond to press inquiries any more," he says. "We have people going out into the community talking about what we do and how we are addressing safety concerns, and we invite people into our plants so they can see for themselves what Union Carbide is about and how safety conscious we are.
"Senior management has come to value the contribution of public relations to a far greater extent than before because of the way we came through the crisis. We have a vice-president of public affairs who reports directly to the chairman, and the chairman himself is responsible for the more communicative nature of the company."
And, he says, "most of the inquiries we receive now have nothing to do with Bhopal."