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49,5/6
Multinational oil companies’ CSR
initiatives in Nigeria
The scepticism of stakeholders in host
218 communities
Gabriel Eweje
Department of Management and International Business, College of Business,
Massey University, Auckland, New Zealand
Abstract
Purpose – The purpose of this paper is to critically examine the multinational oil companies’
(MOCs) corporate social responsibility (CSR) initiatives in Nigeria. Its special focus is to investigate
the scepticism of stakeholders in the producing communities about the long-term effect and the
beneficiaries of the oil companies’ CSR/community development initiatives.
Design/methodology/approach – This paper employs a qualitative methodology, drawing on
semi-structured interviews conducted in Nigeria and London. The field work was carried out in
Nigeria (Abuja, Lagos and Port-Harcourt) and in London, UK. Visits were made to the head offices of
the MOCs; Ministry of Petroleum and the Nigeria National Petroleum Commission; and the office of
The Movement for the Survival of the Ogoni People in the Niger Delta. In London, Shell International
Office was visited.
Findings – The study found that expectations of host communities in the Niger Delta for CSR/
community development initiatives are greater. The communities above all want social development
projects that provide hope of a stable and prosperous future. The companies, on the other hand, have
embraced development initiatives primarily in order to demonstrate that they are socially
responsible.
Practical implications – If the host communities do not feel that the CSR projects will create a
sustainable economic development, they will keep agitating for change and create an hostile
environment for multinational enterprises (MNEs).
Originality/value – This research adds to the literature on MNEs’ CSR initiatives in developing
countries and rationale for demands for social projects by host communities. It concludes that
business has an obligation to help in solving problems of public concern.
Keywords Economic development, Multinational companies, Nigeria, Communities, Oil industry,
Corporate social responsibility
Paper type Research paper

Introduction
There have been increasing demands on multinational enterprises (MNEs) to provide
community development programmes and assistance to their host communities, in
particular, in developing countries (Amaewhule, 1997). In other words, meeting locally
defined social and economic goals. This is mainly because developmental projects and
other social infrastructures are lacking in most of these countries and most of the time
they are not provided by the government. For example, oil companies, particularly,
those operating in developing countries are now constantly under pressure to be more
open and accountable for a wide range of actions, and to report publicly on their
performance in the social and environmental arenas. And because of their impact on
Managerial Law politics, economics and society in host nations, they must be more attentive than others
Vol. 49 No. 5/6, 2007
pp. 218-235 in demonstrating social responsibility through initiatives to reduce their negative
# Emerald Group Publishing Limited
0309-0558
impact (Warhurst and Mitchell, 2000). It has been argued that MNEs need to take
DOI 10.1108/03090550710841340 account of the ‘‘social, ethical and environmental perceptions’’ of their operations and
how these are likely to shape the future attitudes and actions of stakeholders (Zadek, Multinational oil
1998). Following this argument, Frynas (2005) asserts that oil companies attach greater
importance to their social and environmental impact and they engage more with local
companies in
communities than they used to do in the past. Various community and environmental Nigeria
initiatives may be seen as a response to the threat of stakeholder sanctions. Yet the
cries of unethical and immoral behaviour from host communities and nations have
continued to grow louder in recent times (Eweje, 2001, 2006). The clamour has led
many MNEs to engage in purposeful soul searching to find a deeper and more
219
convincing approach to ethical systems (Payne et al., 1997).
Furthermore, MNEs alleged double standard, corporate scandals, decline in
economic and social development in host communities due to neglect and lack of
development initiatives from host governments, has fanned the world-wide debate
about the social responsibility of corporations. According to Frooman (1997),
stakeholders increasingly are looking to the private sector for help with a myriad of
complex and pressing social and economic issues. Similarly, it has been argued that it
is good business to actively engage all stakeholders in the development of sustainable
strategies that reflect both economic and socially responsible outcomes (Maignan et al.,
2005).
This discussion[1] is based upon the development issues associated with
multinational oil companies’ (MOCs) corporate social responsibility (CSR) initiatives in
Nigeria. Its special focus is to investigate the scepticism of host communities in the oil-
producing Niger Delta of Nigeria. In other words, this paper will examine the rationale
behind the criticism of MOCs’ CSR projects, bearing in mind that, if well executed,
these projects can improve the socio-economic-environment development of the region.
Specifically, I will examine the scepticism that trails the oil companies’ CSR initiatives
and community development projects. The fundamental question is: are the host
communities benefiting from the CSR initiatives/projects when at the same time their
region is alleged to be environmentally devastated as a direct result of oil exploitation
and exploration?

Study background
In Nigeria today, the most critical issue that affects the oil and gas industry is the Niger
Delta (oil-producing region) question, which requires stability in the oil and gas sector.
There has been enormous pressure on both the Nigerian government and the MOCs to
double their efforts and develop the region that contributes more than 80 per cent of
Nigeria foreign earnings.
Widespread community demands for relevant, direct and sustained benefits from
oil/gas and mineral wealth are a relatively recent phenomenon. So frequently neither
government institutions nor companies or communities themselves have been properly
equipped to respond to them (Culverwell et al., 2003). In developing countries, MNEs
are expected to provide some social services and welfare programmes in addition to
their normal economic activities. Considerable attention has been asked to be devoted
to community development programmes. For example, MOCs ‘‘provide education,
scholarships, and build roads in Nigeria’’[2]. Similarly, Frynas (2005) argues that oil
companies have initiated, funded and implemented significant community
development schemes. He further asserts that ‘‘global spending by oil, gas and mining
companies on community development programmes in 2001 was over US$500 million’’
(p. 581). In economic terms, these are not the functions of businesses, but in less
developed countries (LDCs) these roles, or rather duties, are expected from MNEs.
ML Indeed, there have been times when local people in oil-producing regions have
turned against MNEs precisely because they feel, as Mitte, the president of Movement
49,5/6 for the Survival of the Ogoni People – one of the communities in the Niger Delta put it:
‘‘they were not getting enough social and economic infrastructures/assistance from the
MNEs that operate in their communities’’. Regrettably, the lack of visible and positive
impact of CSR initiatives in oil-producing communities has been questioned. Evidence
suggests that there is a gap between the MOCs stated CSR objectives and the actual
220 results on the ground. What follows is the criticism of the community development
initiatives of the companies because the host communities believe that MOCs CSR
initiatives are not addressing both the social and environmental problems they are
intended to resolve. This assertion is somewhat similar to the argument of Blowfield
and Frynas (2005) who suggest that numerous claims have been made about the
contribution CSR can make to poverty alleviation and other development goals. They
further argue that ‘‘contributors to this issue have reached the conclusion that current
CSR approaches do not warrant such claims’’ (p. 499). MOCs CSR initiatives in the
Niger Delta have many aspects which include employment issues, environmental
issues and local community issues. The region wants employment for their youths;
reduction in environmental damage of their farmlands which directly affects their
livelihood; and economic and social development of the entire region.
A good example is the Ogoni case in Nigeria. Royal/Dutch Shell began operations in
Ogoniland in 1958 in a joint venture with the Nigerian government. Shell is Nigeria’s
largest oil producer and generates more than ten per cent of Shell’s total exploration
and production profits. $30 billion worth of oil has been taken from Ogoniland so far
(Banfield, 1998). However, due to a world-wide campaign against MOCs by the Ogoni
people, in 1995 the World Council of Churches sent observers to the region who found
‘‘no piped water supplies, no good roads, no electricity, no telephones and no proper
health care facilities’’. Trends such as these raise serious questions about the behaviour
of MNEs and have ‘‘contributed to mounting pressures on business to demonstrate its
social accountability, especially those multinationals which operate in politically and
environmentally sensitive regions of the world, or which have supply chains that
extend into those regions’’ (World Business Council for Sustainable Development,
1998). It is pertinent to state here that there has not been much improvement to this
date. It should also be noted that the instability and lack of law and order in the Niger
Delta is mainly due to the lack of basic infrastructures. This directly contributes
largely to sabotage and kidnapping of oil and oil-related companies’ personnel and
presently a major problem in the region. Concern about this development has led to
calls from the international community that MOCs and the Nigeria nation should do
more to improve the living standard of the host communities in the Niger Delta. The
environmental crises in Ogoniland are indicative of the problems experienced by other
host communities in the Niger Delta. The argument is: MNEs have a moral
responsibility to protect the physical environment and society in which they carry out
their operations. As this study has shown, when corporations violate this
‘‘responsibility’’ and behave in an unacceptable ethical manner there is tendency for the
host community to protest or demonstrate against them. This is consistent with the
definition of an unethical situation defined by Eweje (2001, 2005) as:
A situation wherein the actions of a multinational enterprise are commonly perceived to
have had a detrimental impact on the host community [and other stakeholders], arousing
powerful emotions which express themselves variously through such things as strikes,
demonstrations, press campaigns, legal actions, financial sanctions and sabotage.
It is similar to Eweje’s definition in the sense that the actions of large multinational Multinational oil
companies involved was called unethical and there were widespread press campaigns, companies in
sabotage and legal actions as a direct result of the companies’ behaviour. The host Nigeria
communities in this case have alleged that the MOCs had failed in their obligation to
provide necessary infrastructures, safe environment to live and minimise the
environmental impact of their operations which directly affect their livelihood.
The continued interest of corporations in community and development initiatives 221
has also contributed to the World Business Council for Sustainable Development[3]
(WBCSD) definition of social/community involvement (issues) as:
A broad range of activities, including community assistance programs; supporting
educational needs; fostering a shared vision of a corporation’s role in the community;
ensuring community health and safety; sponsorship; enabling employees to do voluntary
work in the community; philanthropic giving.
The World Bank also acknowledged the importance of corporate social involvement/
investment issues when it stated in its 1995 annual report that:
Evidence that human capital development is critical for overall economic and social
development is not new. What is new is that the awareness of its importance has gone beyond
the confines of academic scholars and social reformers and has entered into thinking of
mainstream decision-makers (Nelson, 1996).
The argument goes further that MNEs have role in global development not only
through capital investment, but more importantly, by investing in human capital and
providing local people with the tools to drive their own economic development (Nelson,
1996).
Socially responsible practice in business has generated debates that are central to
management practice and decision-making. For example, some scholars have argued
that managers should conduct business purely in the interests of the shareholders, and
that applying the organisation’s resources to the social good undermines the market
mechanism, jeopardises organisational survival and places management in the role of
non-elected policy-makers (Carson, 1993; Friedman, 1970). Others, in contrast, argue
that business has a responsibility, indeed an obligation, to help in solving problems of
public concern (Monsen, 1974; Quinn and Jones, 1995). Davis (1973) and Velasque
(1996) support this view, suggesting that it is a matter of enlightened self-interest for
organisations to be socially responsible, since ethical behaviour is more profitable and
more rational than unethical behaviour, and crucial for organisational effectiveness.
Against this background, social responsibility has been argued to involve two
major participants: business and society. According to Ojala (1994), social
responsibility has three major facets: legal (complying with the law); setting and
abiding by moral and ethical standards; and philanthropic giving. Simply defined,
social responsibility is the obligation of both business and society to take proper legal,
moral-ethical and philanthropic actions that will protect and improve the welfare of
both society and business as a whole, all of which must be accomplished within the
economic structures and capabilities of parties involved.
However, ambiguity remains because the social responsibility of business is
whatever society decides that it is. In her work, Ojala asserts that in recent years:
Society has been exceptionally ambivalent . . . Communities at different times and in different
places establish different constraints within which business is expected to fulfil this purpose
. . . In the United States business activity has reflected a particular situation at a particular
ML time, and as that situation changes so do the constraints on business. It is the change that
raises the issues of social responsibility.
49,5/6
Some studies have also proven empirically that good corporate citizenship suggests
MNEs have an obligation to act as responsible members of the societies which grant
them legal standing (Etheredge, 1999; Miles et al., 2006). According to Etheredge, its
application to good corporate conduct generally implies responsibilities that go beyond
222 meeting minimum legal requirements. Thus social responsibility involves notions of
voluntary corporate conduct that are both acceptable and beneficial to various social
constituencies that surround business enterprises. By their nature, MNEs operate
simultaneously in often dissimilar societies around the world where values, standards
and expectations of corporate conduct may differ quite radically. This great diversity
in cultures, attitudes and systems makes it more difficult than in a relatively
homogeneous national business setting to determine common standards for desirable
corporate conduct.
In exceptional circumstances, MNEs may be called upon to assume added
responsibilities where other actors, including governments, do not or cannot carry out
critical duties, as in Nigeria. In this respect, the role of MNE social responsibility may
be broadest in LDCs and transitional economies where free market regulating
mechanisms are not yet fully formed or effective. In these circumstances, MNE’s have a
distinct challenge and a special opportunity in addressing social responsibility issues
(as in the Niger Delta), especially where prospective host countries lack the legal
framework, societal infrastructure or established traditions and experience of a market
economy.

The Niger Delta

The Niger Delta is a relatively small area in the Southeast of Nigeria, with over six
million people living in the region (Dappa-Biriye et al., 1992). The region has vast oil
reserves but remains poor, underdeveloped and torn apart with conflict. It is the centre
of oil exploration, exploitation and production in Nigeria since 1958. Nigeria is rich in
oil mineral resources, with proven reserves of 35 billion barrels of oil. It ranks as the
world’s sixth largest oil-producing nation. In fact, oil plays a fundamental role in the
nation’s economy, accounting for over 90 per cent of export earnings (Pepple, 1999). Oil
production in Nigeria is mainly through joint ventures between the government and a
number of MOCs. These include Shell (normally called Shell Petroleum Development
Company – SPDC), Mobil, Chevron, Texaco, Elf and Agip (called Nigeria Agip Oil
Company). Between them, they produce an average of two million barrels of oil daily.
The area is one of the world’s largest wetlands, and the largest in Africa: it
encompasses over 20,000 square kilometres. It is a vast floodplain built up by the
accumulation of centuries of silt washed down the Niger and Benue Rivers, composed
of four main ecological zones – coastal barrier islands, mangroves, fresh water swamp
forests and lowland rainforests – whose boundaries vary according to the patterns of
seasonal flooding. The mangrove forest of Nigeria is the third largest in the world and
the largest in Africa; over 60 per cent of this mangrove, or 6,000 square kilometres, is
found in the Niger Delta (Human Rights Watch, 1999).
The region has a high biodiversity characteristic consisting of extensive swamp and
forest areas, with many unique species of plants and animals (The World Bank, 1995;
Moffat and Linden, 1995). The Niger Delta provides more than ‘‘80 per cent of Nigeria’s
income, 8 per cent of US oil imports and 22 million tons of oil a year to the European
Union [EU]’’((The) Guardian, 1999). The area faces crisis as violence flares and
resentment builds up against multinational oil companies which extract oil worth an Multinational oil
estimated ‘‘£94 billion a year’’((The) Guardian, 1999). The oil companies, human rights companies in
activists and environmental organisations report a rapidly disintegrating society
plagued by summary executions, shoot-outs, inter-ethnic violence, pollution, riots, Nigeria
occupations of oil facilities and demonstrations ((The) Guardian, 1999, 2006). The host
communities in the Niger Delta region have experienced negative environmental
consequences and have seen their livelihoods destroyed because of environmental 223
degradation of farmlands from consequence of oil exploitation. The MNEs which
operate in LDCs have been accused of environmental degradation and pollution by the
host communities and countries, especially those with prominent oil operations[4].
Indeed this issue has led to many conflicts, as in the case of Nigeria Niger Delta where
the producing communities have been in near constant conflict with the MOCs.
Swanson and Barbier (1992) have reported that within the past two centuries, the
rise of industrialism has transformed the planet in ways natural processes and
previous civilisations would have taken millennia to achieve. They argue that in a
short time, ‘‘we have wrought dramatic changes in the environment, the most far-
reaching being ‘‘our’’ effect on the chemistry of the atmosphere and the genetic
diversity of the planet’’. These changes, they claim, have given rise to a ‘‘shift from
exploitative industrialism to something called ‘‘sustainable’’ development’’. On
environmental degradation, Swanson et al. posit that, ‘‘. . . there is no ‘‘natural habitat’’,
in the sense of a terrestrial ecosystem having evolved without the presence of a human
element. There is only the choice between different methods and forms of human
involvement in the habitat’’. It has also been shown that ‘‘our rivers and lakes are dirty,
and our air is unclean. Lush forests are disappearing, and with them countless species
of plants and animals’’. The above postulation reflects the present environmental
situation in the Niger Delta.
MNEs have a moral obligation to societies in which they operate, including the
protection of the environment. This includes obligations to refrain from polluting
rivers, lakes and seas; to preserve the rain forests; to keep the ozone layer from
depleting; to consume natural resources only in a sustainable fashion; to refrain from
harming people and their source of livelihood such as farmlands. It is argued in this
paper that corporations have an obligation to protect the environment over and above
what is required by environmental law and that they should co-operate and interact
with governments in establishing environmental regulations. It is worth posing at this
point the question raised by Beauchamp and Bowie (1997): what is the proper rationale
for responsible business action towards the environment? They argue that a
‘‘minimalist principle is to refrain from causing unwarranted harm, because failure to
do so would violate certain moral rights not to be harmed’’. Bowie (1990), for example,
uses the harm principle, but contends that business does not violate it as long as it
obeys environmental law. Frederick (1990), on the other hand, convincingly argues that
the ‘‘harm principle morally requires business to find ways to prevent certain harm it
causes even if such harm violates no environmental law’’. Similarly, many observers
believe that business should be responsible for environmental cleanup because
business is responsible for causing many of the problems in the first place (Des Jardins
and McCall, 2000).
Business has an ethical responsibility to become a more active partner in dealing
with social concerns. Research carried out by other scholars has led to the conclusion
that:
ML Business must creatively find ways to become part of solutions, rather than being a part of
problems . . . Corporations can and must develop a conscience . . .and this includes an
49,5/6 environmental conscience . . . Corporations should not isolate themselves from participation
in solving our environmental problems, leaving it up to others to find the answers and to tell
them what not to do (Goodpaster, 1990).
An important question to answer is, why did the host communities accuse the oil
224 companies of environmental degradation and what led to such intense disputes and
conflicts against the MOCs? It must be borne in mind that:
Corporations have special knowledge, expertise, and resources which are invaluable in
dealing with the environmental crisis. Society needs the ethical vision and co-operation of all
its players to solve its most urgent problems, especially one that involves the very survival of
the planet itself. Business must work with government to find appropriate solutions. It should
lobby for good environmental legislation and lobby against bad legislation, rather than
isolating itself from the legislative process (Hoffman, 1991).
Research in Nigeria[5] led to the conclusion that the Nigerian government wished to
maximise its return from MNEs oil revenues as petroleum is Nigeria’s main export and
source of foreign earnings. However, the activities of MOCs and their environmental
activities in the oil-producing areas of Niger Delta have attracted condemnation from
within Nigeria and supra-national organisations, foreign governments and
international environmental organisations. During fieldwork for this paper in Nigeria,
the author found that if stability in the Niger Delta is assured, then Nigeria can be
looking into the issue of increasing her national assets in terms of oil and gas reserves.

MOCs CSR initiatives in the Niger Delta

In Nigeria, oil company operations have been dogged by ‘‘local unrest and criticism
from the communities within the oil-producing areas, and drawn increasing
condemnation from abroad’’(GREENPEACE Report, n.d.). Charges of unethical
behaviour include: ‘‘Total neglect of the Niger Delta (oil-producing areas in Nigeria) and
lack of educational facilities such as classrooms, teachers, and scholarships which will
enhance the literacy development of the indigenes of the communities’’[4]. Over the
years, the oil exploration and producing companies have borne the brunt of ‘‘endless
communal agitation, as the host communities have looked up to them for support and
assistance in the provision of social and economic infrastructure and employment’’(The
Nigerian Petroleum News, 1998). The people of the Niger Delta ‘‘who now live in a
polluted environment, have received precious little in return for living with the oil
companies and dispute both the quantity and quality of community assistance’’[4].
Mitee also points out that: ‘‘People have grown to realise that the oil companies are
taking from their communities and are not putting anything back. The poorest parts of
Nigeria are where these oil companies are, and this has heightened conflict’’.
The case study of Shell and the Ogoni by Hummels (1998) reveals that host
communities have continued to agitate for more and more support from the oil
companies. In addition, the level of the demands and the methods adopted to achieve
these have changed, with violence appearing to be the key weapon. Recourse to
violence has resulted in a lot of damage to property, and casualties on both sides. In
some instances, it has resulted in the withdrawal of operations by oil companies from
some locations, while planned seismic and drilling activities have been abandoned in
others.
 In the past, the oil companies’ approach was to help or appease the communities Multinational oil
whenever the need arose. More recently, however, they have established a more
proactive and thoughtful approach to community assistance. This has resulted in the
companies in
‘‘emergence of a fully developed community relations department in each of the Nigeria
companies, solely set up to anticipate and plan the needs of the communities’’(The
Nigerian Petroleum News, 1998), who understand better their own real needs and
future aspirations. During interviews with senior managers of oil companies in
Nigeria, it was confirmed that community relations departments were created solely to 225
meet local needs and situational politics[6]. The argument here supports the theoretical
position of Nasi et al. (1997) who argue that corporations tend to listen to the demand of
powerful stakeholder groups. In this case, the MOCs listen carefully to the demands of
host communities and changed their approach towards them.
The issue of community development, for example, has compelled Shell in Nigeria
to speak about its community initiatives when once it believes that ‘‘silence is golden’’
(Akpan, 1999). A SPDC of Nigeria executive stated that not many Nigerians were
aware that ‘‘since the mid-1950s, SPDC has assisted more than 1,500 host communities
in its areas of operation through an ever-widening range of services covering
education, agriculture, health and water supply’’[7].
Educational initiatives include the provision of teachers paid directly by the
companies and the building of classrooms. There are also situations where companies
pay ‘‘special rates to teachers’’ to encourage them to go and teach in rural areas where
the governments are inactive. This is because teachers refuse to teach in some rural
areas due to the remote nature of such villages as stated by both Shell and other oil in
Nigeria.
To show their commitment to the communities where they operate, policies for
educational developments are incorporated into the companies’ credos. For example,
Shell Oil Company wrote in Article 7 of their Statement of General Business Principles:
The most important contribution that companies can make to the social and material
progress of the countries in which we operate is in performing their basic activities as
effectively as possible. In addition Shell companies take constructive interest in societal
matters which may not be directly related to the business. . . . For example through
community, educational or donations programmes . . .(The Royal Dutcth/Shell Group of
Companies, 1997)
The host communities also demand social welfare projects from the MOCs. In many
developing countries, national and local governments have taken a more ‘‘hands-off
approach’’ to regulating business due to such things as changing policies, the
globalisation of commerce and shrinking resources. Against this background,
companies are relying less on government for guidance, and instead they are pursuing
their own policies with regard to such matters as environmental performance, working
conditions and ethical marketing practices. This approach can be problematic. The
secretary of the chief’s council of the oil-producing village of Bonny in the Niger Delta
accused the oil companies of:
Apartheid in its residential areas where all the state of the art welfare facilities including good
water, constant electricity, good roads, super markets, schools with high-tech equipment,
swimming pools and other facilities were in existence while the people of Bonny, the host
community suffer absolute squalor and neglect (The Nigerian Guardian, 1999).
This is one example of a charge of double standard brought against multinationals in
developing countries. The host communities believe they should have the same
ML facilities that are on offer to the companies’ workers since the bulk of profits of the
49,5/6 MNEs come from their land. As one observer pointed out:
Communities in the Delta area in particular, where most of the exploration and production
activities take place, feel generally ill-treated in the entire process of oil prospecting and
production and consider themselves as being at the end of only the adverse effects of these
activities. They believe that they have not received an equitable share of the tremendous oil
revenues which are being derived from their land and territories, especially in the light of
226 disruptive consequences on their health and sources of livelihood. Nor have they been
recognised as the inhabitants of oil-producing areas who should benefit from the natural
resource that abounds in their ancestral lands (Nnadozie, 1998).
According to Nnadozie, due to inadequate social amenities and infrastructure and the
loss of farmland, bearing in mind that farming is their way of life, the Bonny
community’s demands from the oil companies include ‘‘payment of N500 million (naira)
to fishermen and farmers for the disruption of their livelihood; and provision of potable
water and electricity to every home on the island’’. The demands of host communities
are numerous, and MNEs are desperately trying to provide them whenever possible.
This is because some host communities in Nigeria, have barred the MOCs from
operating in their communities until their demands are met. There have been
circumstances whereby the MOCs kept operating in some host communities and the
youths of the community went and kidnapped the companies’ workers, leading in some
cases led to loss of lives.
It is frequently the case that oil companies are blamed for inactivity by government.
A beyond petroleum (BP) engineer who visited an oil town in Nigeria in 1990 remarked:
‘‘I have explored for oil in Venezuela, I have explored for oil in Kuwait, I have never
seen an oil-rich town as completely impoverished as Oloibiri’’(GREENPEACE Report,
n.d.). The Nigerian government is supposed to direct 3 per cent of its oil revenue to
develop communities where the oil is produced. However, as a community leader states:
Little, if any, of that money has reached those in need of it. Even Shell has admitted as much
but maintains that it is beyond the scope of its business activities. The Ogoni see it differently.
They see Shell as a multinational, supported by the federal government of Nigeria, which was
influential enough to persuade the government to increase the oil revenue royalty from 1.5 per
cent to 3 per cent in 1982, but unwilling to ensure that the money is made of effective use[4].
The host communities argue that the wealth being generated should also be used for
community development. Wealth creation is central to the economic role of business
but society determines the extent to which this wealth can be enjoyed and the value
systems which surround enterprises. This view is summarised by the comments of two
of the most successful entrepreneurs of their day:
There is but one right mode of using enormous fortunes – namely, that the possessors from
time to time during their own lives should so administer these as to promote the permanent
good of the communities from which they were gathered . . . Business only contributes fully to
a society if it is efficient, profitable and socially responsible (Cannon, 1992).
A manager of a multinational oil company interviewed further suggest that MNEs in
LDCs find themselves in paradoxical situations because:
For quite a long time people in LDCs have seen MNEs to be very large, very powerful and
very important because of their economic contribution to countries. That they are too bad and
too big and unaccountable and people tend to lump all companies together in that sort of
umbrella. Now at the same time though, very often in developing countries, governments are
 either incapable because they are too poor or unwillingly, because they are too corrupt, to Multinational oil
solve a lot of problems which are inherent within the social fabric of that country and then
these same people who accuse companies of having all this power then almost torturously companies in
turn round and say the only people who can actually fix this are those very same companies Nigeria
that we so dislike . . .[8].
The alleged unethical behaviour that has prompted host communities to demand from
MOCs infrastructure improvements and small business training schemes is similar to 227
that discussed earlier. On the issue of electrification of the communities, the companies
are accused of neglecting the areas where they work by only ‘‘providing electricity to
their installations. The communities do not benefit from the same developments that
the companies undertake for their installations and workers’’[4]. This accusation could
equally be directed at government departments responsible for rural development[9].
Due to the complexity of working in LDCs and the spotlight that comes with it, the
MNEs, under intense public scrutiny, are now expected, even required, to carry out the
duty of developing the rural areas where they work.
Companies are often accused of ‘‘damaging roads due to the impact of their
operations and their locations sometimes denied the producing areas from setting up
market stalls where their farm produce would be bought’’[4]. These practices, the host
communities argue, deny them access to good roads and market place to sell their
crops. Hence, the MNEs have to provide the necessary infrastructure and services. An
oil company executive argued that companies are ‘‘providing these services because
they want their host communities to benefit from the success of their operations from
their communities and lands’’[6]. This view was generally shared by all the senior
managers interviewed.
The host communities, on the other hand, still argue that the companies ‘‘do not do
what they say they did’’. For example, a community leader asserted that ‘‘most of these
developments are only reflected on their books, not on the ground and even then it is
not based on the priorities set by the communities but what suits their public relation
image of the company’’[4]. He cited a situation when he was a chairman of a
development committee in 1994 and Shell offered to buy them some hospital
equipment. The committee gave Shell a list of what it wanted because at the time they
thought the ‘‘list was a significant thing to our community centre which we built’’. They
were disappointed when the company sent them different items from those on the list.
The items were rejected and returned to the company. He went on to add that ‘‘to them
what we requested is not important. What is important is what suits their image and
that is what they want to do’’.
Such reports call into question the level of MNE commitment to CSR. Some scholars
such as Hummels have argued that MNE social investments amount to little more than
good public relations (PR). On the other hand, the companies assert that ‘‘corporate
social investments are not a public relation thing but serious and solid investments in
the host communities and for the host communities’’[10].
The non-renewable nature of oil and mining operations and high degree of
dependency of the host communities on such operations has brought to the fore the
issue of small business training schemes. Whenever employees are made redundant,
companies are accused of not preparing workers for skills in other industries. This led
to the introduction of small business training schemes in the host communities and has
become an intense ethical issue when dealing with the producing communities. This
study confirms that oil companies in Nigeria such as Shell have numerous small
business training initiatives, however, like other projects, the communities still feel the
ML projects are to improve the corporate image abroad. For example, Shell has a Women’s
Programme in the Niger Delta[6, 7]. The programme provides training for women of all
49,5/6 ages (particularly teenage mothers and adolescents who left school early) focusing on
soap and pomade making, sewing, hairdressing and catering. Other small business
initiatives by the company include micro-credit and business development. Due to lack
of access to finance, which is a key inhibitor to business development and self-
employment in the rural parts of Nigeria, including most of the host communities,
228 micro-credit and business development programmes have been established within the
development portfolio. The aim is to help revive the economy of the host areas by
promoting self-help enterprise development. As Omuku and Pepple aptly put it, a key
objective is ‘‘to build up local capacity to operate and manage micro-credit schemes’’.

The unrest in the Niger Delta

There are evidence that suggest that MOCs have contributed to economic development
in Nigeria; petroleum still accounts for more than 80 per cent of Nigeria exports.
However, the fieldwork for this study suggests that the social and environmental cost
of oil exploitation in the Niger Delta is starkly visible; the continued violent, chronic
underdevelopment of the region which is home to the MOCs and environmental
degradation. What is also evident on a weekly basis is the ‘‘kidnapping and release’’ of
foreign oil workers by militants and youths from the Niger Delta who are agitating for
the development and equal sharing of proceeds from oil exports. The social and
environmental problems coupled with the lack of development have led to the
scepticism and constant violent. Notably, Des Jardins (1999) has suggested that
business has a responsibility not to intentionally or negligently cause harm to others.
When such harms do occur, business has a responsibility to compensate individuals
who are harmed by its intentional or neglect acts. It should be stressed that the
hostage – taking and frequent conflict in the region has reduced the daily oil production
in Nigeria and some foreign countries have asked their nationals not to work in the
Niger Delta. The Nigerian government has also noted with concern and regret the
incidence of hostage taking.
According to Ite (2004) the lack of national macro-economic planning and
management, backed by equitable resource allocation, and an enabling environment,
have significant implications for the overall performance of CSR initiatives by MOCs.
He further asserts that, if the macro-economy is underperforming due to government
failure, there is a likehood that the contributions of MOCs to social issues could fail to
achieve the desired outcome. ‘‘Good governance in all its dimensions is therefore an
important component of the CSR agenda’’ (Ite, 2004, p. 1).

Trust and discontent issue

It is argued in this paper that the issue of ‘‘trust’’ plays a significant role in the
relationship between the host communities in the Niger Delta and the MOCs. The past
behaviour of MOCs for unfulfilling promises to the host communities has created a
negative perception and mistrust. Hence, any CSR initiative no matter how laudable it
is, does not always receive positive reaction in host communities. According to Wicks
et al. (1999), managers can find a wealth of benefits from trust, including cost savings
and enhanced organisational capacities. According to these researchers, what is
evident is that the willingness of managers to create mutually trusting relationships is
a matter of strategic choice. In other words, managers can, through their behaviour,
help determines levels of trust in relationships between their firm and its various
stakeholders. Trust is thus define as ‘‘an integral part of the strategy formulation Multinational oil
process’’ (Wicks et al., 1999, p. 99). Figure 1 below shows the major stakeholders in the
Nigeria oil industry and summarises the issues at stake with all the stakeholders. This
companies in
figure suggests that the Nigerian government rakes billions of US dollars in form of Nigeria
revenue from the oil industry. However, the host communities in the Niger Delta are
neglected; corruption and mismanagement is rife amongst officials hence some
projects earmarked for the development of the region are never completed. The oil
companies on the hand do make huge profits from the oil sales; contribute to the 229
development of the Nigeria economy but also create environmental degradation of the
region. Unfortunately, the CSR projects have not reduced the social and environmental
costs of oil exploitation.
According to Wicks and Berman (2004), the conditions for trust arise when parties
have something at risk. Trust provides a morally compelling and economically efficient
way to address a number of cooperation problems where parties have something at
risk. Figure 2 shows that the level of trust amongst the stakeholders in the oil industry
is not balanced. The Nigeria government and the oil companies have to work together
and trust each other in order to achieve their financial objectives as shown in Figure 1.
However, the host communities do not trust the government and the MOCs because of
many failed promises. This relationship has led to the scepticism amongst the host
communities. Thus, I argue in this paper that the level of trust between the MOCs and
host communities is very low and this is prompted because of unfulfilled promises by
the oil companies. This has degenerated to continued attack and conflict on MOCs
facilities and personnel.
Frynas (2005) argues that from the perspective of oil companies, the benefit of social
initiatives may be to bring managers closer to political decision-makers, while
appearing to be socially responsible. From the perspective of broader society, a crucial
pitfall of using social initiatives as a competitive weapon is that development priorities
pursued by oil companies may be those of specific government officials and not
necessarily those of the people for whose benefit the initiatives are ostensibly
undertaken. This argument reflects the present situation and mistrust between the
MOCs and the host communities who have always argue that the MOCs do not take

Figure 1.
Major stakeholders in the
Nigeria oil industry
ML their needs into consideration. Following this assertion, it could be argued that CSR
projects that are initiated in order to buy a short spell of peace are unlikely to resolve
49,5/6 the problem with the host communities and in the long time will intensify the existing
conflict.

Scepticism of MOCs initiatives

In the Niger Delta of Nigeria, MOCs are expected to provide some social services and
230 welfare programmes in addition to their normal economic activities. Considerable
attention has been asked to be devoted to community development programmes. For
example, as discussed earlier, MOCs ‘‘provide education, scholarships, and build roads;
build clinics and provide drugs, and also provide medication and vaccination for
malaria in the Niger Delta’’. Indeed, as formerly stated, there have been times when
local people in oil-producing regions have turned against MOCs precisely because they
feel they were not getting enough social and economic infrastructures/assistance from
the MOCs that operate in their communities.
Due to complexity of working in developing countries and the spotlights that come
with it, the MNEs, under intense public scrutiny, are now expected, even required, to
carry out the duty of developing the rural areas where they work such as the Niger
Delta. The argument goes further that MNEs have role in global development not only
through capital investment, but more importantly, by investing in human capital and
providing local people with the tools to drive their own economic development (Nelson,
1996).
MOCs operations have been dogged by ‘‘local unrest and criticism from the
communities within the oil-producing areas, and drawn increasing condemnation from
abroad’’. Charges of unethical behaviour include: ‘‘Total neglect of the Niger Delta and
lack of educational facilities such as classrooms, teachers, and scholarships which will
enhance the literacy development of the indigenes of the communities’’. Over the years,
the oil exploration and producing companies have borne the brunt of ‘‘endless
communal agitation, as the host communities have looked up to them for support and
assistance in the provision of social and economic infrastructure and employment’’.
The host communities believe they should have the same facilities that are on offer to
the companies’ workers since the bulk of profits of the MNEs come from their land. On
the issue of electrification of the communities, the companies are accused of neglecting
the areas where they work by only ‘‘providing electricity to their installations. The
communities do not benefit from the same developments that the companies undertake
for their installations and workers’’. The host communities further argue that the
companies ‘‘do not do what they say they did’’. For example, a community leader
asserts that ‘‘most of these developments are only reflected on their books, not on the
ground and even then it is not based on the priorities set by the communities but what

Figure 2.
The issue of trust
amongst the major
stakeholders in the
Nigeria oil industry
suits their public relation image of the company’’. He cited a situation when Shell Multinational oil
offered to buy them some hospital equipment. A committee from the producing regions
gave Shell a list of what it wanted because at the time they thought the ‘‘list was a
companies in
significant thing to our community centre which we built’’. They were disappointed Nigeria
when the company sent them different items from those on the list. The items were
rejected and returned to the company. He went on to add that ‘‘to them what we
requested is not important. What is important is what suits their image and that is
what they want to do’’. This raises the question of ‘‘who actually benefits from
231
corporate community development initiatives’’. The tension that exist between
companies and communities have resonances in the developed world but with lesser
intensity.
This discussion has demonstrated that community development initiatives/
investment is vital for the establishment of a cordial relationship between MNEs and
their host communities. One of the issues raised is that of host community expectations
and trust on the part of MOCs. The communities above all want social development
projects that provide hope of a stable and prosperous future. The companies, on the
other hand, have embraced development initiatives primarily in order to demonstrate
that they are socially responsible. This is done by providing services such as
scholarships, classrooms and teachers for local communities. A fundamental question
that might be raised from the above concerns the extent to which business can
legitimately be asked to respond to the interests, values and demands of individuals
and groups affected by large scale operations. Is it right to blame MNEs for the failure
of governments’ in developing countries?
Based on the above analysis, it is evident from the research carried out in Nigeria
that pressures from stakeholders and negligent business behaviour has resulted in a
growing requirement on business to fulfil their social responsibility by committing to
delivering benefits to the host communities in which they seek their legitimacy to
operate. The MOCs are now moving forward by forming partnerships based on
dialogue, consultation and collaboration with the host government, host communities
and the NGOs. Such partnerships are increasingly important and can be effective
vehicles for sustaining a cordial relationship with the various stakeholders including
the host communities and, ultimately sustainable business practice.

Conclusion
This study has demonstrated that community development initiatives/investment is
vital for the establishment of a cordial relationship between MNEs and their host
communities in the Niger Delta. One of the issues raised is that of host community
expectations. The communities above all want social development projects that
provide hope of a stable and prosperous future. The companies, on the other hand, have
embraced development initiatives primarily in order to demonstrate that they are
socially responsible. This is done by providing services such as scholarships,
classrooms and teachers for local communities. The situation here conforms with the
work of Monsen (1974) who examines the role of multinationals in society and
concludes that business has an obligation to help in solving problems of public
concern. This paper concludes that no matter how laudable the CSR initiatives are – if
the host communities do not feel that the projects will create a sustainable economic,
social and environmental development the conflict and unrest in the Niger Delta will
continue. Moreover, the MOCs CSR initiatives can only contribute significant
development to the region when the government creates an enabling environment and
ML the macroeconomic management is improved and supported by institutional
governance.
49,5/6
Notes
1. Part of this paper was originally presented at the 2006 Annual Meeting of the Academy
of Management, Atlanta GA, USA, in a symposium session ‘‘Processes of Governance
Across Multiple Stakeholders: Performance, Control and Innovation’’. Primary data
232 relating to material used for this symposium were gathered in Nigeria from archival
sources and through fieldwork interviews with personnel from multinational oil
companies, government departments, petroleum trade union and host community
representatives over the period of 1999-2004. Some of this research has been published
or in press (Eweje, 2001, 2005, 2006).
2. Evidence collected from the interviews with Mr P. Omuku, former Manager, Corporate
External Relations, Shell Nigeria Limited, Lagos, Nigeria, 7 April, 1999.
3. A coalition of more than 120 international companies united by a shared commitment to
the environment and to the principles of sustainable development.
4. Interview with the President of the Ogonis’ of Niger Delta of Nigeria – Mr Mitee, 15
April, 1999, Port-Harcout, Nigeria.
5. Interview carried out in Nigeria with managers of multinational oil companies,
government and union leaders in April – May 1999.
6. Interview with Mr P. Omuku, Manager, Corporate External Relations, Shell Nigeria
Limited, Lagos, Nigeria, 7 April 1999.
7. Interview with Mr Noble Pepple, Corporate Advice, Shell International Limited, March
25, 1999.
8. Interview with Dr Mark Wade, Senior Corporate Advisor, Social Accountability Team,
Shell International Limited, London, 8 March 1999.
9. There have been some studies criticising the governments of LDCs for not developing
their mineral and oil communities. i.e. Khan (1994, 1997).
10. Interview with Mrs Keeton, CEO, Tshikululu Social Investments (Community
Development Foundation of Anglo-American Corporation), South Africa, 25 August, 1999.

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About the author

Gabriel Eweje is a senior lecturer in Management and International Business at College of
Business, Massey University, Auckland Campus, New Zealand. Previously, he worked as a
Research Fellow at the United Nations University, Institute of Advanced Studies (UNU/IAS),
Tokyo, Japan, and taught at Royal Holloway University of London, England. His PhD from
University of London focused on corporate social responsibility and activities of multinational oil
and mining companies in developing countries. He also worked as a Research Fellow with
International Institute for Environment and Development (IIED), London on a project on how
mining and minerals can contribute to sustainable development (MMSD). Gabriel was recently a
visiting professor at Meiji University, Tokyo, Japan. His research interest lies around the issues of
business ethics, corporate social responsibility and sustainability-related disciplines. He has
published widely in these areas in the Journal of Business Ethics, Business and Society, and
Sustainable Development Journal. Gabriel Eweje can be contacted at: g.eweje@massey.ac.nz

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