Halliburton: Government Sponsored Unethical Dilemmas
Auburn University Montgomery
Value & Ethics for Strategic Leaders
December 2, 2012
Ethics is not a subject that is as unfamiliar as some people would like to pretend. We were all taught beginning ethics as children. What I mean is that when our parents taught us basic right from wrong, and to be kind to others, these were our first lessons in ethical behavior. The majority of companies do have ethical codes of conduct but do not enforce them, and some do not know how to enforce their own ethical codes. However, many people and organizations prefer to act as if ethics do not exist. Basically, these organizations and their people prefer to operate on the thought process that if it does not harm me, why should I care? Can you imagine what our world would be like if we all chose to behave in this fashion? Sadly, some of our biggest corporations in this country do still operate under this belief.
Unfortunately, for years many people and organizations have been able to function in this capacity and have made billions because of it. More importantly, some of these people and organizations are some of the biggest and most important in our country. Not to mention, these people and organizations were acting unethical while doing a job that should require the absolute utmost ethical behavior. In addition, it is not that these people or organizations operated unethically on just one issue but they committed numerous unethical decisions and behaviors over a period of many years. Additionally, many of these unethical business dealings did not just affect those involved in the actual business but it affected every United States citizen. Moreover, technically we are still paying for this behavior today and will be for generations to come. Unfortunately, it seems as if their business code of ethics is more for show than actual sustenance.
Halliburton is a major fortune 500 company and the mother company of numerous subsidiaries who are major corporations in their own right. More importantly, some very influential people have operated Halliburton and its subsidiaries. For example, ex-Vice President Dick Cheney and President Bush’s grandfather were top executives of Halliburton for many years and still own stock options in the company. Moreover, these were the people in charge when numerous allegations of unethical and criminal conduct were first alleged against the company. Not to mention, this is the company our government has entrusted with the safety of our deployed soldier’s food, water, and transportation in war zones in the Middle East. Halliburton is also the same company that our government has awarded billions of dollars to repeatedly in no bid contracts for services to our military. More notably, these contracts are the main source of the money we are spending on the war that American citizens feel has left our country in unnecessary debt.
Halliburton has been accused of numerous unethical business dealings and criminal sanctions regarding fraud and doing business with rogue nations. Not to mention, they were sued by a female employee who claimed she was gang-raped by other employees while doing contract work on a United States military installation in Iraq. Moreover, former Halliburton subsidiary KBR just lost a lawsuit against them by a National Guard unit claiming while providing security for the company in Iraq, the company exposed them to hazardous conditions knowingly. In Bixby v. KBR, Inc., 748 F.Supp.2d 1224, the court opinion states:
In addition to preexisting sodium dichromate, it appears that defendants brought additional sodium dichromate to the site in June 2003, and continued storing and working with it at the site. In an internal email, a KBR employee discussed sodium dichromate contamination at Qarmat Ali in June 2003, and recommended that appropriate remedial measures be taken.
Defendants did not advise the Oregon National Guard of the presence of sodium dichromate at Qarmat Ali until August 12, 2003, when KBR issued an official report to the army conceding the chemical’s presence. The report indicated that sodium dichromate at Qarmat Ali constituted a serious health hazard. The Qarmat Ali site was shut down September 9, 2003. Plaintiffs have allegedly been seriously harmed by their exposure to sodium dichromate at the Qarmat Ali plant.
A jury found the company guilty and liable to Oregon National Guard soldiers to the amount of $85 million dollars. However, this seems a small price to pay for what are ultimately these soldiers’ lives and the repercussions their families are bound to endure in caring for them.
More importantly, our ex Vice President Dick Cheney was in a main leadership role during the time that many of the accusations against Halliburton had taken place. According to oil industry executives and confidential U.N. records, however, Halliburton held stakes in two firms that signed contracts to sell more than $73 million in oil production equipment and spare parts in Iraq while [C]heney was chairman (GPO, 2004, p. H613). Of course, these accusations came after Cheney had left Halliburton to become the United States Vice President. Moreover, he went on “Meet the Press” and stated he had no more financial dealings or ties with Halliburton (Cnn Money, 2003). However, it became known that Cheney did still receive a salary and kept his stock options while he was Vice President. The Congressional Research Service investigated these allegations:
The report says that the deferred compensation that Cheney receives from Halliburton as well as the more than 433,000 stock options he possesses “is considered among the ‘ties’ retained in or ‘linkages to former employers’ that may ‘represent a continuing financial interest’ in those employers which makes them potential conflicts of interest (Cnn Money, 2003).
In addition, this was the time period in which Halliburton and KBR were receiving no bid military contracts approved by the republican led Congress. Back in 2002, Vice President Dick Cheney stated ‘‘Halliburton is a fine company, and I am pleased that I was associated with the company” (GPO, 2004, p. H609). Not to mention, there were several facts stated in a congressional hearing relating to unethical behavior by Halliburton concerning government contracts:
Fact number one: Halliburton has acknowledged that it, ‘‘accepted up to $6 million in kickbacks in its contract work in Iraq.’’ Fact number two: Halliburton is now being investigated by the Pentagon for overcharging the American government for its work in Iraq. Fact No. 3, Halliburton faces criminal charges in a $180 million international bribery scandal during the time that Cheney was the CEO of the company. Fact No. 4, Halliburton has been repeatedly warned by the Pentagon that the food it was serving 110,000 U.S. troops in Iraq was dirty, and a Pentagon audit found blood all over the floor of the kitchens Halliburton supplies over in Iraq. Fact No. 5, Halliburton is getting around an American law that forbids doing business with rogue nations. Thanks to a giant loophole, Halliburton is able to do business with Iran, of all nations, through a subsidiary in the Cayman Islands.
Granted, these allegations and accusations are just the tip of the iceberg regarding Halliburton’s unethical business behavior and dealings with the United States Government.
Halliburton’s Code of Ethics
The most up-to-date code of ethics for Halliburton is dated December 3, 2008. However, there are numerous amendments since this code was published. Halliburton’s code of ethics purpose is generic in its form and simply states that it is their adopted rules and regulations concerning ethical and legal issues. It goes on to principally state that its code of ethics pertains to all of their executive officers. More importantly, it states:
The Company believes that this Code of Business Conduct exceeds the requirements of the definition of a “Code of Ethics” as set forth in the regulations of the United States Securities and Exchange Commission (“SEC”) issued pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 (General Policy Regarding Laws & Business Conduct, 2008).
In other words, the law does not only require a code of ethics for a company such as Halliburton, it must be disclosed in their annual reports to the Securities and Exchange Commission. Considering that this law was signed in the year 2002 and there have been serious allegations of unethical behavior by Halliburton since the law’s inception, one can only assume their code of ethics is only for legal reporting purposes. Halliburton’s code of ethics goes on to state:
Beyond legal compliance, all Company Directors, Employees and agents are expected to observe high standards of business and personal ethics in the discharge of their assigned duties and responsibilities. This requires the practice of fair dealing, honesty and integrity by Directors and Employees in every aspect of dealing with other Company Employees, the public, the business community, shareholders, customers, suppliers, competitors and governmental and regulatory authorities. Directors and Employees when acting on behalf of the Company shall not take unfair advantage through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or other unfair-dealing practices (General Policy Regarding Laws & Business Conduct, 2008)
The previously stated allegations seem to shatter every word in this clause of Halliburton’s code of ethics. Admitting to receiving kickbacks in its contract work in Iraq definitely is taking unfair advantage through abuse of privileged information and could be considered unfair-dealing practices. Not to mention, Halliburton’s business dealings with rogue nations is beyond just unethical business practices but should be considered treasonous. Where is the fair dealing, honesty, and integrity in this admission of unethical behavior? “Moral sensitivity (recognizing the presence of an ethical issue) is the first step in ethical decision making” (Johnson, 2012, p. 236) and it seems they missed this point when dealing with Nigerian officials and rogue nations. In 2010, Nigerian officials filed bribery charges against ex-Vice President Dick Cheney and Halliburton. Elisha Bala-Gbogbo states:
Nigeria alleges the companies, which were part of group known as TSKJ, paid bribes totaling $180 million to Nigerian officials between 1994 and 2004 to win a $6 billion liquefied natural gas plant contract. KBR and Halliburton agreed to pay $579 million to U.S. authorities in February 2009 for bribery payments in Nigeria (Bala-Gbogbo, 2010).
It is clear that Halliburton leaders suffered from serious ethical fading which is when “deceive ourselves into thinking that we are acting morally when we are clearly not” (Johnson, 2012, p. 237). Moreover, just as their numerous other crises, this one also took a toll on their public perception. Johnson (2012) states, “The best way to rebuild an organization’s image depends a great deal on the particular crisis and the past history of the group” (p.419). However, considering Halliburton’s past history there may not be a public perception recovery. One of the main components of ethical crisis management is to accept broad responsibility. “Preventing, managing, and recovering from crisis all depend on the willingness of leaders and followers to accept their moral responsibilities. However, in this crisis “a lawyer representing Cheney, denied the allegations after the charges were filed” (Berger, 2010). In other words, Cheney did not take responsibility for this crisis but the company paid $250 million to make the issue disappear. Granted, this leaves the question, how does paying more money to officials to drop bribery charges result in correcting the problem? How is this moral or ethical? Moreover, Halliburton’s code of ethics states:
It is the Company’s policy to observe and comply with all Laws applicable to it or the conduct of its business wherever located. In some situations, the applicable Law of the United States may conflict with the applicable Law of another country. In such cases, the Company will endeavor to resolve such conflict following the guidance of its Law Department. Where such a conflict cannot be resolved, the applicable Law of the United States will be observed and complied with by the Company” (General Policy Regarding Laws & Business Conduct, 2008).
Bribery is a crime in the United States and obviously in Nigeria, therefore, how is bribing officials to gain a contract complying with applicable laws. Unfortunately, Cheney was able to walk away from criminal charges regarding this crisis but “Former KBR CEO Albert “Jack” Stanley pleaded guilty in 2008 to federal bribery charges in the U.S. for his role in the scheme” (Berger, 2010). In the end, Stanley was sentenced to two and half years in prison for his role in the scheme.
More importantly, Halliburton’s code of ethics is supposedly to deter such unethical behavior by their top executives in stating that:
for purposes of clarity and to ensure compliance with Section 406, this Code of Business Conduct as it applies to these listed officers is
designed to deter wrongdoing and promote:
1. honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships
2. full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the SEC and in other public communications made by the Company
3. compliance with applicable governmental laws, rules and regulations
4. the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and
5. accountability for adherence to the Code” (General Policy Regarding Laws & Business Conduct, 2008)
In addition, Halliburton claims in their code of ethics that:
The disciplinary measures which may be invoked include, but are not limited to, counseling, oral or written reprimands, warnings, probation or suspension without pay, demotions, reductions in salary, termination of employment and restitution” (General Policy Regarding Laws & Business Conduct, 2008).
However, when such behavior becomes publicly known, Halliburton makes no real statement condemning their top employees but pays huge amounts of money to make such situations go away. How is this supposed to solve this ethical crisis? Where is the lesson learned in just paying more money and the situation is resolved? Why does it seem that their leaders keep making the same ethical mistakes? Of course, social learning theory could be seriously at fault in this organization due to the fact it is obvious that Halliburton’s unethical behavior goes way back. Therefore, their new leaders just continually learn unethical business practices from their predecessors.
In summary, this paper was supposed to be a critical review of how Halliburton solved an ethical dilemma; sadly, I found no such information. On the other hand, what I did find is Halliburton has quite a massive history of organizational unethical behavior and business practices. Moreover, many of these unethical business dealing are with the United States government which leads to questions about our government’s code of ethics. More importantly, many investigations are still ongoing today regarding their unethical business practices. In regards to their code of ethics, it is a well-written ethical dream. It can only be considered a dream due to the fact it is the farthest thing from how they actually operate according to the numerous allegations and accusations still being hurled in their direction. More importantly, we as American citizens can only hope that one day that dream code of ethics will come to fruition due to the fact that our military depends on this company to take care of our soldiers and their well-being. Not to mention, the huge amounts of money we pay them for their services to our military. Last, but certainly not least, let us hope our government has learned a lesson in ethics from Halliburton and will hopefully discontinue their relationship.
Cnn Money. (2003, September 25). Retrieved from Cnn: http://money.cnn.com/2003/09/25/news/companies/cheney/
Government Printing Office. (2004, February 25). Retrieved from gpo.gov: http://www.gpo.gov/fdsys/pkg/CREC-2004-02-25/pdf/CREC-2004-02-25-pt1-PgH609.pdf
Halliburton. (2008, December 8). Retrieved November 2, 2012, from General Policy Regarding Laws & Business Conduct: http://www.halliburton.com/AboutUs/default.aspx?pageid=2335&navid=976
(2010, October 22). Retrieved from Google Scholar: http://scholar.google.com/scholar_case?case=5897783310837454590&hl=en&as_sdt=2&as_vis=1&oi=scholarr
Bala-Gbogbo, E. (2010, December 7). Nigeria Files Charges Against Dick Cheney, Halliburton Over Bribery Case. Retrieved November 27, 2012, from http://www.bloomberg.com/news/2010-12-07/nigeria-files-charges-against-dick-cheney-halliburton-over-bribery-case.html
Berger, J. (2010, December 21). Retrieved from Fox News: http://www.foxnews.com/politics/2010/12/21/nigeria-drops-bribery-charges-cheney-halliburton-m-deal-struck/
Johnson, C. E. (2012). Meeting the Ethical Challenges of Leadership: Casting Light or Shadow. Thousand Oaks: Sage Publications.