India’s Position
The Indian government has itself acknowledged that 521,262 persons, well over half the population of
Bhopal at the time of the toxic leak, were “exposed” to the lethal gas. 1 In the immediate aftermath of the
accident, most attention was devoted to medical recovery. The victims of the MIC leak suffered damage to
lung tissue and respiratory functions. The lack of medical documentation affected relief efforts. The
absence of baseline data made it difficult to identify specific medical consequences of MIC exposure and to
develop appropriate medical treatment. Another problem was that malnourishment of the poor Indians
affected by the tragedy added to the difficulty because they already suffered from many of the postexposure
symptoms such as coughing, breathlessness, nausea, vomiting, chest pains, and poor sight.2
In a paper on the Bhopal tragedy written by Pratima Ungarala, a student at Hindu University, he analyzed
the Browning Report and characterized the company’s response as one of public relations. He noted that the
report identified the media and other interested parties such as customers, shareholders, suppliers, and other
employees as most important to pacify. Ungarala criticized this response for its lack of concern for the
people of India or the people of Bhopal. Instead, the corporation saw the urgency to assure the people of the
United States that such an incident would not happen here.3
Browning’s main strategy to restore Union Carbide’s image was to distance the company from the site of
the disaster. He points out early in the document that Union Carbide had owned only 50.9 percent of the
affiliate, the Union Carbide India Ltd. He notes that all the employees in the company were Indians and that
the last American employee had left two years before the leak.
The report contended that the company “did not have any hold over its Indian affiliate.” This seems to be a
contentious issue because while “many of the day to day details, such as staffing and maintenance, were
left to Indian officials, the major decisions, such as the annual budget, had to be cleared with the American
1Vinay Lal and Jamie Cassels, “Sovereign Immunity: Law in an Unequal World,” Social and Legal Studies
5, no. 3 (1996), pp. 421–436.
2Paul Shrivastava, “Long-Term Recovery from the Bhopal Crisis,” The Long Road to Recovery:
Community Responses to Industrial Disaster (New York: United Nations University, 1996).
3Pratima Ungarala, Bhopal Gas Tragedy: An Analysis, Final Paper HU521/Dale Sullivan 5/19/98,
www.hu.mtu.edu/ hu_dept/tc@mtu/papers/bhopal.htm.
headquarters.” In addition, by both Indian and U.S. laws, a parent company (United Carbide in this case)
holds full responsibility for any plants it operates through subsidiaries and in which it has a majority stake.
Ungarala concluded that Union Carbide was trying to avoid paying the $3 billion that India demanded as
compensation and was looking to find a “scapegoat” to take the blame.4
After the government of Madhya Pradesh had taken over the information Web site from Union Carbide, it
began to keep track of applications for compensation. Between 1985 and 1997, over 1 million claims were
filed for personal injury. In more than half of those cases the claimant was awarded a monetary settlement.
The total amount disbursed as of March 31, 2003, was about $345 million.5 An additional $25 million was
disbursed through July 2004 at which time the Indian Supreme Court ordered the government to pay to the
victims, and families of the dead, the remaining $330 million in the compensation fund.
Lawsuits
The inevitable lawsuits began in December 1984 and March 1985, when the government of India filed
against Union Carbide in India and the United States, respectively. Union Carbide asked for the case filed
in the Federal District Court of New York to be moved to India because that was where the accident had
occurred and most of the evidence existed. The case went to the Bhopal District Court—the lowest level
court that could hear such a case. During the next four years the case made “its way through the maze of
legal bureaucracy” from the state high court up to the Supreme Court of India.
The legal disputes were over the amount of compensation and the exoneration of Union Carbide from
future liabilities. The disputes were complicated by a lack of reliable information about the causes of the
event and its consequences. The government of India had adopted the “Bhopal Gas Leak Disaster
Ordinance—a law that appointed the government as sole representative of the victims.” It was challenged
by victim activists who pointed out that the victims were not consulted about legal matters or settlement
possibilities. The result was, in effect, to dissolve “the victims’ identity as a constituency separate and
differing from the government.”6
4Ungarala.
5Madhya Pradesh Government, Bhopal Gas Tragedy Relief and Rehabilitation Department,
www.mp.nic.in/bgtrrdmp/facts.htm.
6Michael R. Reich, Toxic Politics: Responding to Chemical Disasters (Ithaca, New York: Cornell
In 1989, India had another parliamentary election and it seemed a politically opportune time to settle the
case and win support from the voters. It had been five years since the accident and the victims were fed up
with waiting. By that time, “hundreds of victims had died and thousands had moved out of the gas-affected
neighborhoods.” Even though the Indian government had taken Union Carbide to court asking for $3
billion, in January 1989 the company reached a settlement with the government for $470 million; the
agreement gave Union Carbide immunity from future prosecution.
In October 1991, India’s Supreme Court upheld the compensation settlement but cancelled Union Carbide’s
immunity from criminal prosecution. The money had been held in a court-administered account until 1992,
while claims were sorted out. By early 1993 there were 630,000 claims filed of which 350,000 had been
substantiated on the basis of medical records. The numbers are larger than previously mentioned because
the extent of health problems grew continuously after the accident and hundreds of victims continued to
die. Despite challenges by victims and activists to the settlement with Union Carbide, at the beginning of
1993 the government of India began to distribute the $470 million that had increased to $700 million as a
result of interest earned on the funds.7
What Happened to Union Carbide?
Not surprisingly, the lawsuits and bad publicity affected Union Carbide’s stock price. Before the disaster,
the company’s stock traded between $50 and $58 a share. In the months immediately following the accident
it traded at $32 to $40. In the latter half of 1985, the GAF Corporation of New York made a hostile bid to
take over Union Carbide. The ensuing battle and speculative stock trading ran up the stock price to $96 and
it forced the company into financial restructuring.
The company’s response was to fight back. It sold off its consumer products division and received over
$3.3 billion for the assets. It took on additional debt and used the funds from the sale and borrowing to
repurchase 38.8 million of its shares to protect the company from further threats of a takeover.
The debt burden had accounted for 80 percent of the company’s capitalization by 1986. At the end of 1991,
the debt levels were still high—50 percent of capitalization. The company sold its Linde Gas Division for
$2.4 billion, “leaving the company at less than half its pre-Bhopal size.”
University Press, 1991).
7United Nations Report.
The Bhopal disaster “slowly but steadily sapped the financial strength of Union Carbide and adversely
affected” employee morale and productivity. The company’s inability to prove its sabotage claim affected
its reputation. In 1994 Union Carbide sold its Indian subsidiary, which had operated the Bhopal plant, to an
Indian battery manufacturer. It used $90 million from the sale to fund a charitable trust that would build a
hospital to treat victims in Bhopal.
Two significant events occurred in 2001. First, the Bhopal Memorial Hospital and Research Centre opened
its doors. Second, the Dow Chemical Company purchased Union Carbide for $10.3 billion in stock and
debt. Union Carbide became a subsidiary of Dow Chemical.
Subsequent to the initial settlement with Union Carbide, the Indian government took steps to right-the-
wrong and its aftereffects caused by the failure of management and the systems at Union Carbide in
Bhopal. On August 8, 2007, the Indian government announced that it would meet many of the demands of
the survivors by taking legal action on the civil and criminal liabilities of Union Carbide and its now owner,
Dow Chemical. The government established an “Empowered Commission” on Bhopal to address the health
and welfare needs of the survivors as well as environmental, social, economic, and medical rehabilitation.
On June 26, 2012, Dow Chemical Co. won dismissal of a lawsuit alleging polluted soil and water
produced by its Union Carbide’s chemical plant in Bhopal, India, injured area residents, one of at least
two pending cases involving the facility known for the 1984 disaster that killed thousands.
U.S. District Judge John Keenan in Manhattan ruled that Union Carbide and its former chairman, Warren
Anderson, weren’t liable for environmental remediation or pollution- related claims made by residents near
the plant, which had been owned and operated by a former Union Carbide unit in India.
Questions
1. Evaluate the actions of the workers and management of Union Carbide in this case from the
perspectives of System 1 and System 2 thinking that was discussed in Chapter 2.
System 1 thinking is fast, automatic, effortless and emotional. System 2 thinking is slower,
It has been suggested that the workers were lazy on the night of December and did not &ush
out the pipes. The production supervisor left strict instructions to &ush the pipes but omitted a
crucial step to place solid metal discs at the end of each pipe. When the workers had problems
with the cleansing, a supervisor was consulted; further instructions were given but the
cleansing was still not &owing out of a drain as it should have been. Again the supervisor was
consulted and the water was left &owing for the next shift to ,nish the job. The late shift
The management of the plant had been trying to use system 2 thinking and a reasoned
approach to run the plant at a pro,t. To remain pro,table, the plant’s management began to
make risky decisions that put the facility and its workers in danger. They ignored several
important safety and maintenance protocols including hiring non engineers as plant operators;
2. The document uncovered by the Environmental Working Group Report refers to the
acceptable “business risk” in the Bhopal operation due to questions about the technology. Is
it ethical for a company to use business risk as a measure of whether to go ahead with an
operation that may have safety problems? How would you characterize such a thought
process from the perspective of ethical reasoning?
This is a hard question as there is always going to be business risk in most company undertakings.
However, the riskier or the higher potential dollar losses should lead to more diligent oversight and analysis
to prevent or contain any such losses. The possible ethical lapse here is the Bhopal operation seemed to
accept the risk and did not continually work on prevention. From an ethical reasoning there seems to be
3. Evaluate management decision-making in the Bhopal case from a corporate governance
perspective. Compare the decision-making process used by Union Carbide to deal with its
disaster with that of Ford Motor Co. and Johnson & Johnson in the Tylenol incident as
described in this chapter. How do you assess stakeholder responsibilities in each of these
cases?
Union Carbide had begun the process to withdraw from operations in India. The plant had been struggling
to operate at a profit and the Indian requirement at most of the jobs and positions be filled with Indian
citizens caused training, safety, and other concerns. From a corporate governance perspective, Union
Union Carbide’s response to disaster did not go as far as Johnson & Johnson but did go further than Ford in
their responses to disaster. Since some of the response was self-serving to preserve its image, its response is