Ch 1 ExxonMobil: Business, Government, and Society Interactions

Standard Oil Trust

Incorporated in 1882 by John D. Rockefeller, it was a major oil monopoly that was broken up in 1911.

Sherman Antitrust Act

A law passed in 1890 to outlaw monopolies, specifically targeting Standard Oil.

Breakup of Standard Oil

In 1911, Standard Oil was divided into 39 separate companies after legal battles over Sherman Antitrust Act (disallowing monopolies)

Petroleum Reserves

ExxonMobil controls less than 2 percent of the world's -----------------.

Seven Sisters

A group of Western oil firms that dominated global production and reserves in the 1950s, including Exxon, Mobil, Shell, British Petroleum, Gulf, Texaco, and Chevron.

New Seven Sisters

state-owned oil companies whose output surpasses that of today's privately owned companies, including Saudi Aramco, Gazprom, China National Petroleum Company, National Iranian Oil Company, Petroleos de Venezuela S. A., Petrobras, and Petronas.

Saudi Aramco

The largest state-owned oil company, which is 3.5 times the size of ExxonMobil in daily crude oil output and has 32 times its reserves.

Declining production

Output from a mature oil field drops 5 to 8 percent a year.

Mikhail Khodorkovsky

The billionaire leader of Yukos Oil Company who was arrested on charges of fraud and tax evasion after attempting to negotiate a sale with ExxonMobil.

Regulatory compliance

200 commissions, agencies, offices, and bureaus in the United States overseeing ExxonMobil.

Nationalism in oil

The rise of state-owned oil companies that reject reliance on foreign firms to exploit natural resources.

Expropriation

The act of governments like Iran and Venezuela taking control of ExxonMobil's (foreign investment) assets.

Access payments

Payments made by ExxonMobil to dictators in countries like Chad, Angola, Nigeria, and Equatorial Guinea for access to oil.

Natural gas project

A $30 billion project by ExxonMobil to liquefy and ship natural gas from Qatar.

Business-Government-Society (BGS) field

The study of the environment created by the interplay among business, government, and society.

Corporate Social Responsibility

The concept of how and when a corporation should act ethically and responsively to societal needs.

Exxon's Community contributions

ExxonMobil's financial support for various social initiatives, including $68 million to fight malaria in Africa.

society

A network of human relations composed of ideas, institutions, and material things.

ideology

The bundle of values and broad goals of life: what is considered good, true, right, beautiful, and acceptable.

government

The structures and processes in a society that authoritatively make and carry out the society's policies and rules.

1989 Exxon Valdez Oil Spill

-Occurred in Prince William Sound, Alaska, spilling between 260,000 and 750,000 barrels of crude oil. $2.4 billion spent to clean up the spill and another $2.2 billion to settle lawsuits over 20 years.

The Social Contract

An implicit agreement between business and society on duties and responsibilities of businesses to retain public trust and legitimacy (boycotts, bans, protests).

Capitalism

An economic system characterized a free market economy (law of supply and demand) - private ownership of means of production, the profit motive, free competition, and limited government restraint in markets.

Managerial Capitalism

A market economy in which the dominant businesses are large firms run by salaried managers, not smaller firms run by owner-entrepreneurs

Virtues of Market Capitalism

Positive attributes such as efficiency, innovation, and consumer choice.

Invisible Hand

A metaphor introduced by Adam Smith to describe the self-regulating nature of the marketplace, where individuals' pursuit of self-interest leads to societal benefits - Wealth of Nations

Laissez-Faire

"allow to do" An economic philosophy that rejects government intervention in markets, advocating for free competition. It is for governments, not businesses, to correct social problems. Managers should define company interests as profitability and efficiency.

Dominant Corporations

Large companies that have significant market power and influence over the economy, often managed by salaried professionals (managerial capitalism)

Industrialized World

Countries that have undergone significant industrial development, characterized by the prevalence of managerial capitalism.

Critics of Capitalism

The rising disparities in wealth and opportunity.

Bernard Mandeville - markets erode virtue and promote base values

Karl Marx - owners of capital exploited workers

Vladimir Lenin - industrialists masterminded imperial foreign policies

Pope John Paul II - A religious leader who cautioned against the domination of things over people by markets

Adam Smith

An economist and proponent of capitalism (Invisible Hand) had reservations of moral decline in workers.

Market Failures

Issues that arise in markets, including fraud, pollution, and dangerous products.

Vices in Business Models

Business practices that arise to satisfy negative human behaviors such as gambling and drug use.

Populism

A political pattern, recurrent in world history, in which common people who feel oppressed or disadvantaged seek to take power from a ruling elite for collective welfare.

Industrializing Wave

Countries undergoing this wave experienced similar populist movements as seen in the United States.

Countervailing Forces Model

A model depicting the BGS relationship as a flow of interactions among major elements of society, suggesting exchanges of power among them without constant dominance attributed to any.

Market Capitalism Model

A model that depicts business as operating within a market environment, responding primarily to powerful economic forces. There, it is substantially sheltered from direct impact by social and political forces. The market acts as a buffer between business and nonmarket forces.

Dominance Model

A model that attributes absolute primacy to business, contrasting with the countervailing forces model which credits more power to a combination of forces.

Critics of Stakeholder Model

Individuals who argue that the stakeholder model is unrealistic and sets vague guidelines that cannot substitute for profit metrics. It seeks to give power to the powerless by replacing force with ethical duty.

Stakeholder Model

a theory of corporate responsibility that holds that management's most important responsibility, long-term survival, is achieved by satisfying the interests of multiple stakeholders.

Primary Stakeholders - employees, customers

Secondary Stakeholders - environmentalists, special interest groups, and the media

Oil Pollution Act of 1990 (OPA)

In response to the Valdez oil spill, Congress

passed a law prohibiting any vessel that has caused an oil spill of more than 1 million gallons in any marine area from operating in Prince William Sound.

Market Economy (Capitalism)

The economy that emerges when people move beyond subsistence production to production for trade, and markets take one a more central role.