As the CEO of Enbridge Inc., it is part of my responsibilities to determine whether or not a pipeline from Alberta to the pacific coast is in the best interest of ethical reasoning. In building an ethical framework, I must balance what is needed though Creative Destruction and set the path for my company into the future. In order to meet the demands of an ever-changing economy, which is increasingly demanding companies become globalized to survive, it has been brought to my attention through the company’s Board of Directors that we must strengthen our relations with the Asian markets in order to survive as a corporation. We are facing increasing pressure from other companies that could be first to make their move the Asian market, and in a race to make it there first, we have to consider the principles of Creative Destruction. In developing this ethical framework, I will combine the demands of Creative Destruction to pave the way for the company to grow and to prosper, because without a route to the pacific, our company might not survive.
In building an ethical framework, it is important to consider what the greatest effect on the greatest number of people is. Utilizing utilitarianism will provide the framework in which to apply Creative Destruction and determine if it is compatible for what is the greatest good for the greatest number of people. The effects of the pipeline to the B.C. coast on people are numerous and these need to be balanced with the need to preserve the environment for the long-term survival of mankind.
I also need to give a description of what Creative Destruction actually is and how it applies to this case. Creative Destruction says that a company needs to keep up with an ever-changing economic landscape. Many companies find that they need to change what they are doing business so that they can stay ahead of the competition. Many companies get stuck in bounded rationality, which causes them to lose sight of the big picture. The CEOs of these companies find that they are stuck with ideas of the past. And this attitude of complacency extends throughout the staff at the company. These techniques have worked for them before and so they feel like there isn’t a need for change. However, what these managers often don’t consider is that there are people who are starting up new companies, and these new companies have an objective view, and possibly new technologies and better connections. These companies could be specialists in some area of business that would reshape the current way things are being done. For example, Apple took over the cellphone industry virtually overnight when it basically made the telecommunications providers at their heels. Nearly everyone in North America switched to a smartphone. Nearly every other phone company suffered massive losses. But bounded rationality isn’t confined to just one industry. It affects every industry. Competition is always looming and looking to execute something better than the company that currently has all the business. Creative destruction is one way of dealing with the constraints of bounded rationality.
In order to win out over the companies that are ready to take over, businesses like Enbridge need to reinvent themselves, with new ideas. This could include a new line of product, or it could include finding new customers, which is the case in the example that will be provided in this essay. In order to stay ahead of the competition, Enbridge needs to expand to the B.C. coast. But the question is whether Creative Destruction and ethics can be used in combination in the case of oil drilling.
The environment should be a top concern to any oil company. And it is on the minds of everyone who is involved with this project, whether they are concerned that environmental policy will cut into potential profits, or if it is because they are actually sympathetic towards the potential results of the pipeline. In order to access the Pacific Coast via the Northern Gateway Pipeline, Enbridge is required to build an 1,100-kilometre dual pipeline from Alberta to the coast. This would accommodate the plan to transport the bitumen for shipment to Asia, while also pumping in condensate into Alberta. The project could make Enbridge the most profitable oil company in the world, many shareholders and people who would be employed by the project would benefit from the construction of the pipeline, but the long term effects to society as a whole is too much of a cost to bear and it doesn’t justify the application of Creative Destruction in this way.
The pressures in the current economic environment require companies to be constantly looking at reinventing themselves, and the principles of Creative Destruction are perhaps needed the most. Enbridge has reached near its limit of providing oil to its current North American market. It is no longer an option – if the company wants to continue to increase profits – to remain only in this continent. While the profits at the company are huge, there is a desire among the Board of Directors and top executives to expand. The company also has close friends in the government who tout the project for the tax revenue that would result and the jobs creation.
While the environment plays an important role in building this ethical framework, I must also consider the 7,000 full-time employees at the company. Enbridge has a market cap of over $31 billion, and the top executives, including myself, are making over a million. Last year, I (Mr. Al Monaco) pulled in close to $1.5 million. I would obviously like to increase the income at the company, and increase my pay, and this is perhaps a guiding factor in considering the ethical framework, because I fear that I may have become addicted to the money that this company is making. Year-over-year from 2010 to 2011, the company increased revenue by about $4.3 billion, or around 27 per cent. This tells me that the company is doing well, despite the new corporate environment that calls for Creative Destruction.
As part of the considerations, I must take into account any spill reduction plan that would be included in protecting the environment. While expansion to the Asian market is important for the company’s prosperity, if there is a chance of a tragedy, such as the one that struck the Gulf of Mexico during the British Petroleum oil leak, then I believe that this plan should be scrapped. This is why there needs to be a considerable investment into the safety of the pipeline. Without a guarantee that a spill isn’t possible, I believe it would not fit within any logical ethical framework to move forward with the plans. Enbridge is working very closely with the Province of Alberta and the Province of British Columbia on this project and we will also be doing our own environmental analysis. However, while the project has been approved by the Alberta government, it is still going through hearings with B.C. In the meantime, this framework will require the efforts of the company’s own engineers and environmental researchers to determine the environmental impact that this project would have.
In making the decision of whether or not to expand to the coast of B.C., it should be noted that now might be the best time to do such a thing. This is because the economy is recovering and it is unknown when it may crash again. Right now, profits have increased substantially year-over-year and we need to take advantage of that increase in revenue and put the capital into an expansion project for the coast of B.C. If we wait too long, we may be faced with the prospect of having to make this type of investment when we don’t have as much capital. If we are faced with the possibility of investing too much capital in the Northern Gateway Pipeline several years from now, when the economy could again be in the gutter, we may not be able to put the money into the project and the company might not be able to recover. If we have the capital in the pipeline put in now, then we can further establish ourselves as the major pipeline company in North America. This would give us the chance to reinvent ourselves, as is mentioned as a priority in Creative Destruction. This is a strategic move, and while the environment may be affected in an extremely bad way, we should accept the fact that the prosperity of the company, which is reflected in the prosperity of the nation. This pipeline isn’t just for the future of the company, it is also for the future of the country. Without taking this action, the national economy may be left out as other countries do business with each other. It should also be noted that this project will create a massive number of jobs, which will further stimulate the economy. There are other players who will be investing in this project if it is approved and much of that money will be coming from out of the country. Attracting that kind of capital to the nation, employing that many people, will ensure that the prosperity of the nation is put into pilot mode.
Furthermore, this project needs to happen now because according to Creative Destruction this type of reinvention needs to happen in order put the company on top. But if the company isn’t taking this type of initiative then there could be another company that beats Enbridge to the Asian market. The longer we wait, the greater the chance of another company taking over that massive market and Enbridge will be forced to stay in North America, where it has already expanded to the point where there is little opportunity for further growth.
This pipeline project will likely go forward whether Enbridge is willing to do it or not. The free market product of Capitalism plays a key role in the fact that there is likely to be another oil company to tear through B.C. in their own version of the Northern Gateway Pipeline. So whether Enbridge chooses move ahead with the project or not, it is almost guaranteed that the same environmental hazards will show up. Also, there may be a company that doesn’t have the capital that Enbridge does and this could cause that company to not take the environmental precautions that Enbridge would take.
On the other hand, Enbridge already has a gross amount of capital and there could be debilitating effects to the environment if this project goes ahead. There is a massive number of trees that will have to be cut, the ground will be torn up and the pipes will be put deep into the ground, affecting the potential for many areas to be developed. There is also the risk for massive oil leaks, which is difficult to determine at the early stage. Not to mention the effects of the oil we would be transporting, once it is burned. Creative Destruction doesn’t take into consideration the ethical consequences of reinventing a company.
In taking into consideration Creative Destruction and how it is applied to the Northern Gateway Pipeline, I can’t see a problem with moving forward with the project. The only way for our company to survive, according to the Creative Destruction framework, is to be innovative. However, where this theory failed to match up, was in the greed and environmental department. The company is already taking in billions of dollars. The top executives are making millions per year. There is no need to make this decision based on the fact that the company wants to survive. There is no indication that the company is suffering financially and needs to be innovative in order to squash the competition before they have a chance to start up. In taking this into consideration, it would be extremely unethical to move forward with the Northern Gateway Pipeline, despite what Creative Destruction might say about the need for it. As mentioned, this project might go on under the guidance of another oil company, but that doesn’t mean I, as CEO, needs to play a role in the destruction of the environment and the greed that is expressed by the Board of Directors at this company.
Creative Destruction, while it might provide a framework for companies to stay prosperous into the future, doesn’t take into consideration moral duty. Furthermore, in modern times, a business plan that doesn’t consider the impact on the environment won’t gain the approval of the public. In the oil business, this isn’t much of a concern, because the company isn’t selling directly to individuals, but to other companies. And that is a scary proposition for the world, because if people don’t stop buying from these companies that are blindly following Creative Destruction, the only thing that will be destroyed is the environment.