Corporate officials need disaster emergency training as much as do workers, particularly in relating to the authorities. The Indian officials were caught off-guard; they were naturally shocked and before they could respond to any degree they found themselves under arrest. While the world tended to the disaster, they had to sit around for long hours and days, in the unaccustomed role of jailbirds, comfortably imprisoned, deprived of contacts with their own employees, and out of touch with their headquarters in the USA. There was no chance of throwing themselves into the vast effort to help and reorganize the community. Seven were jailed, including the Chairman from America briefly. They would ask themselves, "Am I really a criminal," and then ask it again and again, incredulously, ironically, and, of course, "What went wrong?" To which they could not well reply.
The American officers had a better chance to be heroes. They were, after all, free and running, and had resources. The press fell upon them, of course, ravenous for news. Still they were able to think together and take action. They should have called in pastors and philosophers, but they brought in lawyers and public relations men. The tragedy was too large for such conventional behavior. Instead of blurting out that they would spend every cent they could collect to help the situation, they delved neatly into their treasury for a dispensation of an appropriate sum of rupees with did not look quite appropriate when translated into dollars. It seemed as if they were already trying to settle the matter. They were facing an irate world without a plan of defense, or a surviving populace in Bhopal that would have burned down the installations if it were not fearful of releasing more MIC. Nor to this day has an adequate flow of instruction or any constructive proposal come from the headquarters of Union Carbide. Their apparent scheme is to convert the mess into a technical mishap and legal case, to fight it in the courts until doomsday and take the best settlement offered outside the courts, meanwhile claiming and -- who knows? -- probably sincerely, that they want badly to settle the matter as soon as possible. Naturally they do, but on their terms, just as the U.S. government wants to settle the Nicaragua matter and the Soviet Union the Afghan matter.
Union Carbide Corporation is in grave danger of ultimate bankruptcy, arising out of its Bhopal Experience. If the bankruptcy were rationally handled, it might not be the worst solution, and, in fact, if the company does go bankrupt solutions on the order of those presented here may have a chance, if only because the handling of such a large bankruptcy allows leeway for ingenious reorganization of assets and meeting of obligations. Still, the managers of Union Carbide owe it to themselves and to the victims of Bhopal to exercise their imagination, to come out of the trenches, to put to work in a good sense the adage that the best defense is a good offense.
What damages can Union Carbide afford to pay? We have charged it with an obligation of $1.3 billion. Union Carbide is a multinational conglomerate with current assets of $3.58 billion and current liabilities of $1.9 billion, the difference of $1.68 billion affording some indication of what funds it may have no work with in a solution. Its long-term debt is $2.3 billions, which must be serviced or might be refinanced under emergency conditions. It earned a net profit of $323 millions in 1984, after reserving $18 million as a probable loss in connection with the Bhopal tragedy. It has issued 70 million shares, 20% to institutions; of course, by its domination of many affiliates abroad, scores of thousands of shareholders overseas look hopefully to its profitability in their sector; one needs bear in mind that a decision affecting the profitability of a Union Carbide company in Germany may be made on the basis of a decision in regard to a Union Carbide company in India or America.
Union Carbide is the 3rd largest chemical concern in America, the 7th largest in the world. It is the 37th largest company overall in the USA, and as Union Carbide (India) the 25th in total sales of India. It is the 31st largest of the world's thousands of multinational companies. Its many affiliates around the world give it the international needs and relations of a medium sized nation of the world, but one would not suspect this in examining its corporate structure or leadership. It has no Department of State or Ministry of Foreign Affairs. One may note, however, that the last but one President of Union Carbide quit to become successively an ambassador and Deputy Secretary for Defense and for State. It might be argued that this acknowledges a kind of career line, but whether it is complimentary to the Department of State or to Union Carbide is questionable in view of the proven reputation of the first and the provable reputation of the second for inertness in the face of the ever more menacing complaints and aggressiveness of all three worlds towards U.S. conduct abroad.
Union Carbide (India) operates thirteen plants besides the pesticide installation at Bhopal. There it employs some 750 workers, down from over a thousand at its peak several years ago. Receipts on pesticides amounted to $14 millions in 1983, composing only 8% of the Company's total sales of $175 million. Union Carbide (India)'s equity, which gives an idea of its net worth and profitability, grew by 15 times in 30 years through 1983, from $1.7 million to $26.7 million. The company, with five divisions, produces batteries, bulbs, lamps, pesticides, films, resins, and other products. Headquarters are in Bombay, and plants are owned in seven cities.
The Press Trust of India, a new service, reported recently that in testimony before a court inquiry in Madhya Pradesh the Deputy Attorney General of the State declared that, before the disaster, Union carbide of India had decided to dismantle and sell the plant because of its unprofitability and had instituted stringent economies and staff reductions affecting safety operations.
Its Board of Directors is headed by one of the most influential and successful industrialists of India. Its managing Director (President) is a mechanical engineer, long with the company, new to his position, and paid about one-tenth of what his peers in America earn. The same ratio of one-to-ten seems to prevail for all grades of employment. Presumably, this difference is equalized in the comparable life-styles that can be afforded in the two countries. However, one may object that the "work-style" is supposed to be 100% American, that is, driven by the executive's "work ethic." And the "profit-style" may be actually reversed, so that the proportionate profits from Indian firms exceed by far the profits obtainable in the USA. What this actually means is that somehow, mentally, the Indian managerial class in a multinational situation such as this one is expected to be of triple mind -- to think Indian for compensation, to think U.S. for production processes, and to think Indian capitalist or multinational for questions of profiting. These are not the best conditions for mental health and equanimity of soul.
What can be extracted from Union Carbide Corporation, this alchemical golden goose, without killing it? Hopeful and hateful figures are bandied about : $200 millions; $400 millions; $1 billion; $2 billions; $5, 10, 15 billions; but long before we reach the last figures we are speaking of a dead goose.
Many expert calculations will be made, based upon different premises. Here only one method of thinking about the question is suggested. One collects whatever insurance is payable. One takes from the company its Indian holdings and places the balance of the Indian Union Carbide under long-term encumbrances. One strips the parent company of its ready cash; forces it to sell practically at auction its best, not its worst, holdings, to obtain more cash; compels it to undertake new long-term obligations to trust funds set up for the Bhopal victims; and then helps it in every way possible to become the best, the most progressive, and the most profitable conglomerate multi-national operating in the traditional chemical industry that must be with us for a long time to come.
If these measures are taken, Union Carbide should be able to muster $1.3 billion to confront its Bhopal obligation -- $700 millions in the first two years (without interest), $600 millions with interest at market rates over the longer term, extending to twenty years.
How would this affect the shareholders of the parent company? If the company radically re-appraises and restructures itself for the future, it should begin to restore a dividend payment within four years, based upon a share value expected to be much lower than even at present. But shareholders and investors can behave in surprising ways. Should Union Carbide emerge like the phoenix bird from its own ashes; should it become a world leader in the organization and reform of world-wide trade and production, we should not be surprised to see it receiving a complimentary overvaluation or overconfidence in the market place. Shareholders might become patriotic and company-proud. It would snatch victory from the jaws of defeat.
More than effective internal leadership and a sound plan would be needed to redress the situation. All manner of legal obstacle will be brought to bear, whether by people who pretend to speak for victims or people who see their profit in blocking positive large solutions. For example, as I indicate below, a redistribution of securities obligations will be required, to which some stockholders might object on the basis of their immediate needs. Some few of these would undoubtedly institute legal proceedings against any conceivable plan to settle the Bhopal accounts. All the more reason that the Union Carbide plan be ambitious, generous, and progressive, for the company will need political, financial, press and public support from all quarters. The same public help can guard it against the corporate pirates who will be hoping to mobilize dissidents and take over the company.
A "Fire sale" of the Union Carbide (USA) share of Union Carbide (India) need not be required. If the company is assessed by Court appraisers to have a value, say, of $150 millions, the $75 millions belonging to Union Carbide (USA) can be turned over to the Trust Fund it is proposed to establish for the Bhopal victims. In addition, the Indian company could issue interest-bearing debentures payable over 10 tears to the amount of $25 millions, and these, too, would turned over to the Trust.
Perhaps the bulk remainder of $1.2 billions can be handled by borrowing on the market and by giving notes to be held by the Bhopal Trust, payable in decreasing amounts, with interest.
The shares of Union Carbide (USA) have been trading recently in the range of $40.00. This stock should be watered (with "holy water") by a supplementary issue of 50 million preferred shares valued at $20.00 per share, providing the Bhopal Trust with a value of $1 billion, that could be sold gradually as needed. The participation of the victims as owners of Union Carbide should let them enjoy and suffer and learn from being capitalists.
If the damages are to be settled in America, let them be settled by means congenial to American culture, so long as they do not conflict with Indian culture. Actually, the heavier interdependence and realistically greater utility of Indians to each other in extended families and beyond is congenial to semi-collective a settlement. Indians enjoy much more of a mutual support system. So one must pay to support the system as much as to support the individual. That can be borne in mind especially when one considers how the recoveries for damages should be expended and handled.
The arrangement ought to allow for both individual and system support. This may be done if the total amount of damages recovered were to be divided into three portions. The same Bhopal Trust heretofore mentioned would be assigned to administer all three parts. The Trust can be organized under Indian law under much the same conditions as in American law. The Board of Trustees would be composed of persons renowned for their independence, integrity, and skills. The American and Indian courts would designate the form of the Foundation and the Board Members in the original document of settlement. A large historical experience with this type of organization exists to be drawn upon in the USA and elsewhere. The tasks assigned the Foundation are large, numerous, complex, but no more so than those of a number of Foundations that have performed successfully in recent years.
The first portion of the damages would be paid at the earliest time to all qualified persons as soon as they can qualify by visual testimonial, and medical standards. A second portion would be held in reserve by the Foundation, with accumulating interest to be paid on an individual basis when sufficient time has elapsed to determine the long-term effects of illness upon the individuals. Any surplus or residual sum will be added to the third portion. The third portion would be used by the Foundation for system support and development whose functions would be educational and community development.
In respect to education, the Foundation would purchase from Union Carbide the present property of its Bhopal pesticides plant and from the City of Bhopal a segment of the communities devastated by the gas cloud. The structures would be maintained as a national monument to industrial safety, open to the world, with a museum for industrial safety, employing to the maximum extent as caretakers victims of the disaster.
Then, upon this same land would be erected a complete school system for Applied Science, from nursery school to postgraduate university education. Victims and their survivorswould receive priority as students; all students would receive a scholarship stipend sufficient to guarantee their support, whether or not living with their families. The curriculum would be designed for education in modern life and equipped with the latest educational tools. Its aim would be to create a fully modern mentality in the young, a devotion to social work, and skills up to the limits of achievement of each student. Thus a child might enter in nursery school and complete his or her studies as a Doctor of Science and Technology, or might complete his schooling at any time along the way if his interests move in another direction, or if he cannot master the curriculum beyond a certain point. If qualified in other regards, a student changing field may attend another school with a full scholarship covering tuition and living expenses for the duration of his education.
In regard to community development, nothing less than a new city is contemplated, a city built several kilometers from the farthest limit of Bhopal by the victims and survivors, that is by the people of Bhopal to the maximum extent possible and giving the people of Bhopal a priority for transferring their residence to the new housing. The city would be built to house half a million people. The master idea employed in the new construction would be to abandon many useless traditional and modern western conceptions of housing and urban design, in favor of a design that would fulfill the needs and desires of the modern ordinary Indian with an average income. The land would be owned by the Foundation. The materials would be local, the heating solar, the electric and phone system modern and their lines buried in ground; a television cable would also be conveyed everywhere. There would be no place for private vehicles except at the town limits. The housing would be compact, with small gardens for each apartment (chickens and goats permitted). Space would be provided for public and religious construction, at the option of the surrounding residents. The city would be fireproof. There would be no elevators. And many other features that could only be supplied in a new city would be added and invented. The chief business of the new city would be modern arts and crafts, plus the building of other new cities profiting from the lessons learned here.
It would be proper to consider asking Union Carbide Corporation to set up the special corporation to build and manage the new city under control with the Foundation. Afterwards this special corporation might itself become a multinational company working not only in India but elsewhere, even in USA, to provide new cities at low costs where urban crowding has become serious and the existing cities so hopelessly out-moded and costly as to warrant their abandonment.
Settlements of this nature are practically unprecedented, and no one can be sure of its legality in American constitutional law. Tests of its legality would be sure to occur. The peculiar requirements of the case, rather than its universal importance, might persuade the American courts to take it up in the first place and then govern its complex solution.
Yet when one compares the legal and economic complexities of the Bhopal case with the recent breakup of the giant American telecommunications monopoly into dozens of elements, each with its own territory and or functions, each with its own property and rights, and each with special local laws to observe, and altogether with a hundred million customers to accommodate and please, all of this done through the courts, one can see that the American courts have an extraordinary confidence in their ability to confront and handle problems, no matter how great, once they feel they must accept jurisdiction.
The Indian government appears inclined to negotiate a settlement with Union Carbide. If the government does so it must then file suit in the U.S. courts parens patriae. The Courts must approve the settlements. In this case, the American lawyers will find their assignments of attorney for the victims annulled. Various sources estimate that a settlement in the area of $300 to $400 millions may be arrived at.
Such an action on the part of the Indian government may boomerang against the government itself. The government will be called upon to administer a monstrous and thankless process, lasting for many years. Even if the Indian bureaucracy were the world's best, it would be hard pressed to pull together the necessary social work, medical, legal, accounting, et al. personnel and we may be sure that accusations and scandal will beset such an agency administering to the subjectively framed wants of a quarter of a million, nay, a million, people. And how will this operation be decentralized to the state of Madhya Pradesh and City of Bhopal? A great confusion and waste may be expected. How will the government ever explain administrative costs that may ultimately reach those asked by some of the American "legal vultures," who, once they have done their work, will at least fly away, while the governments will be around forever.
Is it rational for the Indian government to take on the job of taking care of up to a million individual clients? And what will poor voters everywhere think when they, mistakenly, believe that the government is treating these victims of Bhopal like pampered children while they, the others, are just as poor, often as sick, and suffer all manner of industrial and pesticidal injuries? And will the government now take upon itself the task of representing in foreign courts the case of every Indian damaged by a foreign multinational or struck by a tourist's car, for that matter? If all these risks are nevertheless to be taken, it is suggested that the government immediately rid itself of most of these troublesome tasks by turning over the whole settlement to trusts, independent of the government, such as I have described here.
Still, one more grave consideration must enter the policy of the Indian government in this case. Whatever be the total of the settlement, it will be regarded as too little. It does not matter that all "reasonable men" believe $400 millions, say, to be a just and generous settlement (and I, for one, doubt this to be so). No matter what the figure, the settlement will be considered by the political opponents of the government and by a large part of the public to be a "sell-out" to U.S. interests.
Would a billion-dollar settlement be considered a sell-out? Who knows? But now we encounter hard realities. Union Carbide will not settle on so high a figure, unless it were to take to heart the philosophy of this book, which is doubtful. So Union Carbide will only settle for a figure too low for the Indian government to avoid risk of a political disaster in accepting it.
Actually, the Indian government -- city, state, and federal -- are not unassailable with regard to responsibility for the Bhopal situation. Rather than demanding compensation from the corporations, they ought to be considering their own liability, and, besides facilitating a settlement, might well be making a larger contribution as part of the settlement, taking a token part of the burden of liability off shoulders of Union Carbide.
Consider one point further : if Union Carbide survives and flourishes after a settlement with the Indian government, a great many people will believe that Union Carbide shrewdly outwitted the Indian leaders. If Union Carbide survives and flourishes under the conditions proposed in this book, Union Carbide will be received as a "reborn Christian" or, devout Hindus will say, "deservedly reincarnated to a higher level of existence."
Union Carbide may be in a situation similar to that of the Indian Government if it deals exclusively with the Government. A "bargain" settlement of under $400 millions will find the giant company accelerated on a path of long-term decline already noted by financial experts. Wherever it moves, whether in the USA or the Third World, it will be "taxed" for its record at Bhopal. Whatever the settlement, some of its financial advisers will regard it as too high : they would prefer preemptive bankruptcy anyhow. No amount of sheer public relations will promote the settlement to a stroke of genius and good luck.
Besides it is doubtful that Union Carbide can be assured that any settlement is final. Union Carbide can be charged in American and Indian courts on scores of counts. Who gives the Indian government the right under the American Constitution to deprive a man of his day in court? Who gives such a right to Union Carbide? The American lawyers are not fools. Some of them are among the best in the business of law.
Until the settlement is legally final, Union Carbide cannot expect its financial position to be any better than it is now -- precarious and uncertain. Before the legality of the settlement is fully determined, at least a year from the settlement date, much litigation will take place in attempts to disallow the agreement. The Indian government, in its majestic sovereignty, can decide to withdraw at any time from the agreement.
It will be of help in the resolution of the overall problem if the United States government were to participate as a friend of the court and as amicus curiae express an intention to assist the parties to move towards a just settlement. The USA already is implicated in the case in the eyes of the world; it must concern itself with the governance of multinational companies, whether they be American or foreign companies operating in the United States and elsewhere, too, in the world economy. In the event that sums of the settlement go beyond the dimensions outlined here, the difficulties experienced by Union Carbide, whether financial or politico-economic, may threaten an excellent arrangement. The U.S. government may then choose to contribute a sum to the Trust as compensation on its own account for its indirect responsibility, or lend money to or support a public or bank-loan for Union Carbide. Its help to the Chrysler Corporation, formerly in dire straits, may offer a precedent. This is no more and even less than the U.S. government is doing for debt-ridden governments around the world who are on the brink of bankruptcy. American diplomats will hardly fail to realize the improvement of their government's relations with India that would result from this friendly service.