The 1984 Bhopal disaster in the plant of Union Carbide India Ltd (UCIL) is generally viewed as a crime committed by the Union Carbide Corporation (UCC).

As per the generally held view, Warren Anderson, the then Chief Executive of UCC (and not of UCIL) is held liable personally for the matter so much so that Indian peace activists have demanded that Warren Anderson be swapped for Osama ben Laden. Third world sentiment notwithstanding, each issue and matter, however, needs evaluation on the basis of its own merit after a careful analysis of facts specific to the case.

A case written by a renowned American expert in strategic management, Arthur Sharplin,serves to illuminate the facts pertinent to the Bhopal gas incident. The UCIL in whose agricultural chemicals’ plant this disaster occurred was so named in 1959. It was first incorporated as the Ever-Ready Company (India), Ltd in 1934 which became a subsidiary of UCC headquartered in the USA. Agricultural chemicals’ division, which started work in 1966’ was one of the five divisions of the UCIL. The other four divisions of the UCIL were batteries, carbon, metals, plastics, and marine products.

The agricultural chemicals plant was first set up near Trombay in the Maharashtra state which was later moved to Bhopal in 1968. The pesticide plant was set up with the express permission of the government of India. Knowing the fact that Indian governments have always been strong and nationalistic, there is a certain regulatory role that was also expected of them to guard the interests of the company’s immediate and distant stakeholders. Initially, the plant’s was a simple formulation process started with only $1 million in initial investment. Imported concentrated Sevin powder was diluted with non-toxic powder. It was then packaged and sold. UCC, USA, had no explicit transfer of technology agreement with the Indian government. However under the Foreign Exchange Regulation Act (FERA), there was a continuous pressure to restrict imports.The Indian government then required the UCIL to undertake basic manufacture for Sevin and its components including poisonous Methyl Isocyanate (MIC) in India proper.

MIC was made at the plant by reacting phosgene gas with another chemical but the system had been idle for six weeks. Sometime before midnight, several hundred gallons of water had entered a tank that contained 41 metric tons of MIC. The water reacted with the MIC producing heat and gas that leaked as a relief valve lifted. Eyes started watering indicating an MIC leak. As the workers searched for the leak, “they set up a fire hose to spray water on the suspected leak” (Sharplin). Unbelievable indeed! Workers ought to have known that water reacts with the ARC and they used it further. This is clearly an indicator of various factors that would not point to the corporate headquarters in the USA if there was no technical collaboration agreement and if the plant was managed by Indian nationals.

And further still “the supervisors retired to the company canteen—in violation of instructions not to take their break together” (Sharplin). This is clearly a problem in administration and/or labour relations. As comes out later in the case, one of the management’s cost cutting efforts focused on the lowering of entry-level standards and training requirements for plant’s operators. All of the 900 employees at the plant were Indians with engineers from India’s prestigious Institutes of Technology about whom a UCC official said that they were ‘“.... better educated than the average American engineer.” How come they did not know how to manage a leak? And, how come a leak took place in the first place?

The Union of India (UOI) said that either the workers who were washing a small piping system failed to isolate it or there was a design defect. If the workers made a mistake, as they did in also handling the leak, it points to either a poor quality work force or a poorly motivated one. In both cases, it reflects on the quality of management in general and quality of management of sensitive areas in particular. If there was a design defect, then while the process design was provided by UCC, 20 senior Indian engineers visited the WCC’s Institute in West Virginia in 1978 to study their pesticide plant’s design and operation.

A company headquartered in Bombay was retained by UCIL to produce the detailed drawings and serve as general contactor. All sub-contractors were Indians. The plant was handed over to Indian engineers by Americans after it was commissioned. Why then did the elite Indian engineers not detect defects in design or installation as they had not only been involved with it but were real fine engineers from the Indian Institutes of Technology regarded very highly the world over?

There were some other technical problems too including problematic refrigeration system and safety devices in addition to a lack of compliance of WCC’s standard operating procedures (SOPs). These were mainly technical problems that a well-trained engineering force should have absolutely no problem in pre-empting or coping with. However, the underlying necessary condition is a level of motivation required to mobilize competence and capability. As it turned out, the turnover of senior managers increased after 1981 as prospects of a company turnaround turned bleak.

The UCIL management thought that good plant performance was perhaps not their responsibility since the plant was virtually forced upon them by “unreasonable” Indian government’s pressure to undertake basic manufacture. They had always maintained that the basic manufacturing plant was unviable and so it was turning out to be. Was UCIL managed and/or governed by UCC headquartered in USA whose chief executive was Warren Anderson? Was there an agreement between UCC and UCIL to maintain the plant technically and/or otherwise?

UCIL came under pressure to set up basic manufacture during a period when IBM and Coca-Cola had to pull out of India UCC did not want to lose an Indian market which the UCIL management could not cultivate after establishing basic manufacturing on pretexts that students of marketing would have difficulty comprehending. Instead, they sold semifinished materials to competitors thus creating more competition for UCIL’s own finished agricultural product. Also, UCIL focused well on their other divisions.

They penetrated\developed the Nepalese market for dry-cell batteries by sponsoring a 77.5 per cent owned subsidiary in Nepal. As their overall assets more than doubled in 9 years by 1983, the UCIL was ranked number 21 in 1984 by the Economic Times of India. The agricultural chemicals division did not enjoy a prioritized place in UCIL’s overall operations. A firm ranked 21 in India would experience a disaster in the same year in which it was commended overall. A disaster remembered to this day. Was UCIL, therefore, not competent enough to avert it? Or, was it not interested enough? Or was it interested in proving the unviability claims they had made earlier before the Indian government? If the latter be the cases then the Indian nationals were in it as much as the UCC who too did not want a basic manufacturing facility to come up.

Before the disaster, it was being actively considered by UCIL’s management to dismantle and ship the plant to either Brazil or Indonesia. UCIL was governed by an 11-member board of directors (BOD) out of which only four were foreigners from Union Carbide Eastern, Inc. (UCE - a wholly owned UCC subsidiary headquartered in Hong Kong. The Chairman of the BOD was an Indian resident and citizen as was the Managing Director and other employees at various levels. It was a totally Indian managed operation and was autonomous of the control of UCC, USA whose equity was diluted in 1977-78 from 60 to 50.9 per cent as a condition for permission to construct the MIC plant.

The rest was held by Indian public financial institutions (about 20 per cent) and about 23,000 individuals. While the Indian FERA required less than 50 per cent nonresident interest, UCIL was granted an exemption as the UOl viewed it to be ‘’a priority area under FERA.” So, in addition to the Indian management of UCIL, there was a regulatory responsibility vis-a-vis plant operations and safety that the UOI ought to have discharged towards its pet project in “chemicals’7’ basic manufacture. Did it do so? The outcome is before everybody to see.

As for the minority UCE representatives on UCIL’s BOD (despite majority interest), their minority representation alone communicates the force with which UCIL’s management was taken over by the Indians. Knowing boardroom politics, even minority can hold sway provided they have the interest and the will to do so, however unethical or improper it may sound. But they were obviously not interested in a facility they had to set up under pressure to meet the requirements of nationalistic Indian government.

The Indians ought to have known this sentiment and ought to have guarded against eventualities at the same time ensuring that the plant becomes viable and profitable. As for the latter goal, the direct UCIL management was as unconvinced as their American counterparts were. Why then did they assume positions of eminence in a “non-starter” project? How well did they discharge their responsibility towards turning it around? The case lacks evidence in support of the management’s interest and involvement.

So, at least the bare minimum safety requirements could have been met.The UCC conducted three safety audits at Bhopal in 1979, 1980, and 1982. After the incident, the UCC said that they could have conducted frequent safety audits and could have deployed safety personnel at the plant but “.....UCIL was not allowed to pay for such service.” Also,the Indian government required deployment of Indian nationals if expertise was available which it was considering the superior technical expertise of Indian technicians and engineers.

However, it could not turn over into a safer plant due to weak personnel management practices and an overall quality of management that left a lot to be desired. Even though the UCC later resolved to take responsibility for safety wherever they had an interest,one wonders if it could still provide safety if the plant was poorly managed to the extent that possibility of sabotage from workers or dissident groups was also considered.

So, while the UCC learned from the incident to provide safety to all its interests, have we third worlders learned to manage our projects efficiently and responsibly, especially the sensitive ones that we acquire forcibly from the Westerners who may hesitate to relinquish control. If we manage to acquire such control, should we not be twice as careful and cautious in managing disputed projects? By poorly managing a good project, have we not established the point of the West that the third world countries are not as yet equipped to undertake basic manufacture. The technology required is not just about engineering. It was management technology too that was needed of which again there ought to be no dearth in India—home to some prestigious institutes in management as well. One would be curious to know about the positions that the then Indian top management at the UCIL now holds!