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CHAPTER ONE

INTRODUCTION

1.1 Background Of The Study

The crises in the oil and gas industry, nationally and globally, have necessitated this study. The crises emanating from pipeline vandalisation, oil spillages, devastation of the environmental, restiveness in the host communities and kidnapping of oil workers, have called to question, the effectiveness of Corporate Reputation Management (CRM) strategies deployed by oil companies to address the problem.

CRM, a multi-disciplinary concept is avery strong practise, in Public Relations (Fombrun and Van-Riel, 1997). In the past decade, it has become the subject of many studies (Fombrun, Gardberg and Sever, 1999; Gotsi and Wilson, 2001; Mahon, 2002). Today, the establishment of the Reputation Institute (RI) and Corporate Reputation Review (an academic and professional journal) in the United States of America stand as major pillars supporting the growth of the concept of CRM worldwide (Barnett, Jermier and Lafferty, 2006).

Today, CRM has become the most acceptable Public Relations practice in world-class organisations — the banking industry, the telecommunications industry, manufacturing sector, government establishments, tertiary educational institutions, the professions, security services, and indeed, the oil and gas industry used for building and sustaining organisational reputation (Fombrun and Van-Riel, 1997; Regester and Larkin, 2002; Nwosu and Uffoh, 2005). It combines integrity with consistency (Kottsz, 2000; Joep, 2004 and Dalton, 2005). However, many practitioners of CRM do not have a clear idea about the concept and its application (Barnett et al 2006). Knowledge of various strategies, models, tools and techniques required to achieve results are indeed needed at both academic and practitioner levels.

How does this subject relate to the Nigerian scene? Preliminary researches (Haastrup

1997, Nwosu&Uffor 2005, Ogedengbe 2007, Azaiki 2008, Obeta 2008, and Orukari, 2010) have shown that CRM is also practised as Public relations in many blue-chip organisations in Nigeria, including the oil and gas industry, which is the focus of this study. International oil companies (IOCs) operating in Nigeria’s oil and gas industry employ various strategies in CRM to address and redress reputation issues, challenges and crises that arise in the course of their operations – exploration, exploitation and distribution of petroleum and gas products.

Taking altogether, there is therefore the need to streamline the basic foundations of CRM by upholding a good working definition of the concept, and identifying its principles, models, methods, techniques and strategies employed in solving problems and achieving results.

CRM in the oil and gas industry in Nigeria is expected to tackle the myriads of issues, problems or challenges facing the industry. The major problems have been identified hereunder by some Nigerian authors (Haastrup, 1997; Nwosu and Uffoh, 2005; Obeta,

2007; Orukari, 2010):

• Hostile communities and agitations

• Vandalisation of oil pipelines (sabotage)

• Oil spillages and pollution of environment

• Constant negative media publicity

Corporate reputation management (CRM) has been viewed from four basic concepts, namely “reputation”, “corporate reputation”, “corporate image and identity”, and “management”. Most definitions are therefore narrow. For instance, Oxford Advanced Learners’ Dictionary, (7th ed. 2010) defines reputation as “the opinion that people have about somebody or something based on what has happened in the past: to earn / establish / build a reputation — to have a good or bad reputation.” Reputation, therefore, is the accumulation of positive values, goodwill over time in the life of somebody or a corporate organisation.

Barnett et al (2006:34) defined corporate reputation as:

“Observers’ collective judgements of a corporation based on assessment of the financial, social, and environmental impacts attributed to the corporation over time.”

Smaiziene and Jucevicius (2009:96) stated:

“Corporate reputation can be defined as the evaluation of a company’s socially transmissible characteristics, practices, behaviour and results; settled over a period of time among stakeholders, that represents expectations for the company’s actions, and levels of trustworthiness, favourability and acknowledgment compared to rivals”.

Kumar (1999) defines corporate reputation as the overall perception held by an organisation’s key stakeholders such as employees, customers, media, host communities, bankers or creditors, suppliers, and even competitors.

What is missing in many definitions is the linkage of corporate reputation with management. This study is interested in both terms: corporate reputation and corporate reputation management.

Management as an organizational concept is involved in the effective and efficient planning, organizing, controlling, directing, leading, coordinating and allocation of human and material resources to achieve organizational goals and objectives (Akpala, 1993). It therefore follows that corporate reputation management deals with the effective planning, organizing, controlling and directing organizational resources to achieve a positive stakeholders’ assessment of a company in relation with its competitors.

Wikipedia (2010), the internet encyclopaedia,defines corporate reputation management as the process of tracking an organisation’s actions and policies in relation to its publics or stakeholders. This, it asserts, is usually done using the tool of communications. Corporate reputation management is usually regarded as the livewire of any organisation. For instance, Sherman (1999) quoted the chief executive of a leading UK consumer goods manufacturing company as saying: “If we lost all our production

facilities, we could rebuild the business. But if we lost our brand name and reputation, the business would collapse!”

From the mid-90s to date, there has therefore been a conscious effort in blue-chip organisations to build, sustain, protect, project and maintain solid positive corporate reputation, which is now recognised as an invaluable corporate asset by many researchers (Mahon, 2002; Alsop, 2004, Fombrun, 1996, and Orukari, 2010). Besides, such organisations can now evaluate or measure their reputation quotient (RQ) on a reputation scale (RS) – (Fombrun& Foss, 2001).

In CRM circles, there is also the question whether image and reputation are the same.

Many people use them interchangeably. Are they right or wrong? Various researches (Bennet&Kottasz, 2000; Cornelissen, 2004; Dalton, 2005, etc) have shown that a company’s reputation is much bigger than mere image. It has a lot to do with corporate mission and vision, corporate character and culture, corporate values and virtues,corporate brand and corporate governance, and the effective communication of same to various internal and external stakeholders or publics.

From the preceding overview of the concept of CRM, and the crises in the oil and gas industry, especially in the Niger Delta region of Nigeria, there is need to carry out a comprehensive evaluation of the effectiveness of corporate reputation management strategies employed in selected oil companies in Nigeria.

Various authors (Fombrun, 1997; Lesly, 1998; Nwosu, 1996; Ajala, 2001; Wilson, 2004; Regester&Larkin, 2002; Orukari, 2010) have in different expositions identified various strategies in corporate reputation management (CRM). In this study, the dependent variables to be measured are the following major strategies of CRM:

(a) Strategic communication

(b) Effective stakeholder engagement

(c) Corporate Social Responsibility (CSR)

(d) Issues & Crisis management

(e) Effective events management and protocol

1.2 Statement of the Problem

As one can deduce from the definition of Corporate Reputation Management (CRM), it is supposed to reduce community hostility, achieve better stakeholders’ rating, reduce pipeline vandalisation and oil spillages, as well as engender positive publicity for oil and gas companies in Nigeria.

CRM is supposed to engender positive perception of the company from its critical publics namely employees, customers, distributors, suppliers, contractors, bankers, regulatory agencies, the media, the community, top government officials, opinion leaders, etc. This is why corporate reputation is regarded as an invaluable intangible company asset (Mahon, 2002; Alsop, 2004, and Fombrun, 1996).

However, the oil companies selected for this study suffer so much reputation defects from constant negative media publicity. Various issues including hostile communities, environmental degradation, pollution, oil spillages, gas flaring, incessant labour unrests, alleged poor welfare packages, youth restiveness, kidnapping of oil workers, pipeline vandalisation, problems with regulatory agencies, etc have continued to generate negative headlines in national newspapers and airwaves (Haastrup 1997, Nwosu&Uffoh 2005, Ogedengbe 2007, Azaiki 2008, Obeta 2008). In fact, Nwosu and Uffoh (2005) are of the opinion that the oil and gas companies have over the years failed to adequately address most of the issued identified above.

Two major incidents captured by two newspaper editorials highlight the failure of oil and gas companies in addressing issues that impact negatively on their reputation:

“Shell’s latest oil spill — For reasons that are difficult to understand, the issue of oil spills in the Niger Delta has not been receiving the kind of attention it deserves…The recent oil spill recorded by Shell Petroleum Development Company of Nigeria has been described as the worst in the last one decade. Over 40,000 barrels of oil that was said to have leaked in the process of transferring the commodity from a floating platform onto a tanker, is certain to further increase the worry of the inhabitants of the oil-rich region (Punch, 11/1/12, pg 22)

“Chevron rig fire: A drama of insensitivity and suffering —-

A January 16, 2012 explosion and fire aboard a drilling rig in Chevron’s Funiwa Field, 10 kilometres offshore, has become the latest in a string of environmental disasters resulting from oil and gas-related operations in the Niger Delta region. The raging fire which caused massive destruction of fishes and other sea foods, has yet to receive due attention from the government and the multinational oil company, even as population in impacted communities face starvation and pollution-induced health challenges (Punch, 17/2/12, pg 18).

The IOCs have spent various sums on corporate social responsibility (CSR). For instance in 2010, Shell Petroleum Development Company (SPDC) spent a total of 65 million US

Dollars in funding development projects in 244 communities in Nigeria (Shell in

Nigeria,2011). Another company, Chevron, spent a total of 56.7 million US Dollars on 425 communities in six years to fund various developmental and social welfare programmes (Chevron: 2011 Nigeria Corporate Responsibility Report).

In the same vein, Exxonmobil affiliate companies in Nigeria invested about US$280 million over the last decade (2000 – 2010) on strategic and sustainable community investments in healthcare, education and capacity building initiatives (Vanguard, 2010 ). As part of its corporate social responsibilities (CSR), the Nigerian Agip Oil Company (NAOC) also declared it has aided farmers’ cooperative societies, youths and women groups in its areas of operation with over N80 million as micro credit facility within the last four years (2005 – 2009)(Vanguard, 2009).

Azaiki (2008), Haastrup (1997) and Orukari (2010) affirm that the IOCs have adopted various strategies including Communication and community development. Despite the expenditures on CSR and communication, the companies still suffer community hostility, negative perceptions from the communities and bad press. The following newspaper headlines reflect the nature of bad press about oil companies in Nigeria:

o 10 Ijaw communities blame Shell for oil spill (Daily Champion, 13/7/09, pg. 26) o Nigeria: Delta Assembly blasts Shell over oil spillages (Vanguard, 19/10/08, o Oil spillage: Senate reads riot act to oil companies (Thisday, 7/11/2007 o Hundreds of protesters hold Shell workers hostage in Nembe (Sweet Crude, May 2012, pg. 102) o Ikarama Community groans Under Oil Spills (Sweet Crude, December, 2009, pg. 52) o Chevron Rig: Fire: A Drama of Insensitivity and Suffering (Punch editorial, 17/2/2012, pg. 18) o Oil firms to face stiffer penalties for spillage (The Guardian, 6/10/2009, pg. 3) o Oil industry ridden with corruption — NEITI (Punch, 7/5/2012, pg 21)

Host communities question the so-called “huge budget on CSR”. They ask: “What is the percentage of the budget on CSR in relation to total revenue of the oil companies? Is the budget equal to the devastation on the environment, or the harm to human, caused by the oil companies?” The hugeness or otherwise of CSR can only be measured using three main perspectives: (1) Legal / statutory requirement (2) Economic framework

(3) Ethical consideration.

The research problem is: Over the past five years (2007 – 2012), increasing expenses by the oil companies on Corporate Social Responsibility (CSR) has only succeeded in heightening restiveness in the host communities. Why? The CRM strategies deployed by the oil companies have not significantly achieved reduction in community hostility,

pipeline vandalisation, oil spillages and bad publicity.

1.3 Research Objectives

The objectives of this study are as follows:

1. To evaluate the effectiveness of identified Corporate Reputation Management (CRM) strategies employed in selected oil and gas companies in Nigeria in the past five years (2007 – 2012).

2. To examine critically the full application of CRM strategies in the selected oil companies in the past five years.

3. To assess the extent of application of the following five CRM strategies in selected oil companies in the past five years:

i. Strategic communication ii. Effective stakeholder engagement iii. Corporate Social Responsibility (CSR) iv. Events and protocol management

v. Issues & Crisis management

1. To evaluate the impact of five CRM strategies on the operations, survival and growth of selected oil companies in the past five years.

1.4 Research Questions

The following research questions have been developed in line with the research objectives:

1. How effective are the five major CRM strategies identified in the research objectives in relation with selected oil and gas company in Nigeria in the past fie years?

2. What is the level of application of CRM strategies in the oil and gas industry?

3. Where is CRM located in the overall organizational organogram — considering the fact that CRM is supposed to be a top management function?

4. What is the extent of application of CRM strategies in the IOCs selected?

5. What is the level of impact of CRM strategies on the operations, survival and growth of the oil and gas industry in Nigeria?

6. Are regular evaluative research carried out in the selected oil and gas companies to assess impact of its CRM strategies?

7. What is the level of knowledge of the tenets and principles of CRM among the builders of reputation in the oil companies?

1.5. Research Hypotheses

Based on the stated objectives of this study, the following hypotheses are postulated for validation in the course of our research/study.

Hypothesis One:

Ho: In the past five years (2007 – 2012),International oil companies operating in

Nigeria have not significantly adopted CRM strategies in their Public Relations practices and operations.

HI: International oil companies operating in Nigeria have significantly adopted CRM strategies in their practices.

Hypothesis Two:

Ho: The CRM strategies identified are not highly effective in building and sustaining the reputation of the selected oil companies in Nigeria.

HI: The CRM strategies identified are highly effective in building and sustaining the reputation of the selected oil companies in Nigeria

Hypothesis Three:

Ho: Evaluative research about the effectiveness of CRM strategies was not significantly carried out in the Public Relations operations of the selected oil companies in Nigeria.

HI: Evaluative research about the effectiveness of CRM strategies was significantly carried out in the Public Relations operations of the selected oil companies in Nigeria.

Hypothesis Four:

Ho: The level of knowledge of the tenets and principles of CRM in the selected oil companies is not significantly high.

HI: The level of knowledge of the tenets of CRM in the selected oil companies is significantly high.

Hypothesis Five:

Ho: There is no significant correlation between CRM and successful business operations in the oil and gas industry in Nigeria.

HI: There is significant correlation between CRM and successful business operations in the oil and gas industry in Nigeria

1.6. Significance of the Study

This study is designed to enhance the practice of corporate reputation management, as well as contribute immensely to knowledge and literature in the all-important but volatile oil and gas industry in Nigeria. For instance, in Nigeria, there is no known detailed research or book written on the subject of corporate reputation management. Besides, despite the high importance of the oil and gas industry in the economic and socio-political development of the nation, there is still the dearth of relevant information for critical decision making.

It is expected that this research will unveil a lot of data and information about corporate reputation management practices and issues in the selected oil companies; and ultimately lead to better practices or application of the concept and its strategies to build, sustain, protect, project and repair corporate reputation. Oil company executives, regulatory agencies, government decision makers, students and practitioners of public relations will find the research quite useful and significant.

1.7. Scope of the study

For the purpose of this study, four major oil and gas companies operating in Nigeria have been selected for this study. They are:

1. Shell Petroleum Development Company (SPDC)

2. Chevron Nigeria Limited (CNL)

3. ExxonMobil/Mobil Producing Nigeria Unlimited

4. Nigerian Agip Oil Company (NAOC)

The choice of the four oil companies is based on the following criteria:

• To achieve a true representation of the major oil and gas companies in Nigeria. There are, indeed, five IOCs involved in Joint Venture (JV) exploration and production (E&P) operations in the country with the Nigerian National Petroleum Corporation (Nigeria Oil Handbook & Directory, 2005). Apart from the four IOCs identified above, the fifth is TotalFinaElf Nigeria Plc. Other oil and gas companies are ConocoPhillips, Pan Ocean, Dubri, AENR, Addax Petroleum, and many oil marketing companies.

• To capture a true representation of corporate reputation management practices in the oil and gas industry in Nigeria.

• To be able to reach the officers and managers of the four selected oil companies whose operational headquarters is in Port Harcourt where the researcher resides.

The study is restricted to the years between 2007 and 2012.