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© Chevron 2008 Engineering Ethics – Why It Matters in the Real World Janeen Judah ’81 President Chevron Environmental Management Company February 8, 2008 Texas A&M University
© Chevron 2008 2 Outline of Today’s Presentation About Chevron and Chevron Environmental Management Company Engineering Ethics and… Your Employer Your Boss You Graduate School Options Questions and Answers
© Chevron 2008 3 Exploration & Production Refining Chemicals Power Technology Chevron: A world-class, global energy company Chevron Headquarters 180 countries 53,000 employees Over 24,000 retail outlets 12 billion BOE oil and gas reserves 2.3 million BPD of refining capacity 2.6 million BOE daily net production Chevron ranks among the world’s largest global energy companies Where are our employees? - 45% in North America - 23% in Asia Pacific - 32% in Europe, South America, Africa
© Chevron 2008 4 Upstream Inside Chevron Downstream Explore Produce Midstream Market Truck Refine Store Ship Pipeline Technology Info Tech Energy Tech
© Chevron 2008 5 What is Chevron Environmental Management Company (EMC)? EMC provides global environmental and abandonment liability management for Chevron. Work scope includes site remediation, site assessment, facility decommissioning, well abandonment, and site operations and maintenance. Democratic Republic of the Congo Richmond Refinery, CA
© Chevron 2008 6 EMC Fast Facts 175 Employees 1800 Contractors 4000 service stations and terminals 125 superfund sites 30 refinery sites 70 offshore structures 1000 wells abandoned/year 300 specialty sites Community Service Lawrenceville, IL Offshore Gulf of Mexico Porter Oil Field, Michigan
© Chevron 2008 7 Chevron Environmental Management Company Touching Chevron’s World Around The World Panama Latin America California – Central Coast Alaska Pakistan Louisiana
© Chevron 2008 8 Outline of Today’s Presentation About Chevron and Chevron Environmental Management Company Engineering Ethics and… Your Employer Your Boss You Graduate School Options Questions and Answers
© Chevron 2008 9 Ethical Lapses Can Lead to Engineering Failures Famous Failures – case studies: Hyatt Regency Kansas City Walkway Collapse (1981) Challenger disaster (1986) Columbia shuttle (2003) These failures were spectacular & public, but what about more subtle failures?
© Chevron 2008 10 What about Legal Issues? Legal & Ethical are not the same Famous Frauds: Enron Tyco WorldCom Legal Remedy – Sarbanes-Oxley Act of 2002 Imposes significant reporting and management oversight requirements for internal controls that may materially affect the value of a company Criminal penalties for noncompliance Fewer famous fraud events in last 3-4 years
© Chevron 2008 11 Enron Before and After Before Grew 1985-2001 to 7 th largest US Company 21,000 employees Stock price ~$90/share (8/2000) After Bankruptcy December 2, 2001 Criminal prosecutions – 34 Arthur Andersen disappears Liquidation stock announced 1/15/08 – $6.79/share Sarbanes-Oxley corporate governance
© Chevron 2008 12 Sherron Watkins’ Famous E-mail to Ken Lay of Enron August, 2001 Dear Mr. Lay, Has Enron become a risky place to work? For those of us who didn't get rich over the last few years, can we afford to stay? Skilling's abrupt departure will raise suspicions of accounting improprieties and valuation issues. Enron has been very aggressive in its accounting--most notably the Raptor transactions and the Condor vehicle. We do have valuation issues with our international assets and possibly some of our EES MTM positions. The spotlight will be on us, the market just can't accept that Skilling is leaving his dream job. I think that the valuation issues can be fixed and reported with other good will write-downs to occur in 2002. How do we fix the Raptor and Condor deals? They unwind in 2002 and 2003, we will have to pony up Enron stock and that won't go unnoticed. To the layman on the street, it will look like we recognized funds flow of $800 million from merchant asset sales in 1999 by selling to a vehicle (Condor) that we capitalized with a promise of Enron stock in later years. Is that really funds flow or is it cash from equity issuance? We have recognized over $550 million of fair value gains on stocks via our swaps with Raptor. Much of that stock has declined significantly--Avici by 98 percent from $178 million, to $5 million; the New Power Company by 80 percent from $40 a share, to $6 a share. The value in the swaps won't be there for Raptor, so once again Enron will issue stock to offset these losses. Raptor is an LJM entity. It sure looks to the layman on the street that we are hiding losses in a related company and will compensate that company with Enron stock in the future. I am incredibly nervous that we will implode in a wave of accounting scandals. My eight years of Enron work history will be worth nothing on my resume, the business world will consider the past successes as nothing but an elaborate accounting hoax. Skilling is resigning now for "personal reasons" but I would think he wasn't having fun, looked down the road and knew this stuff was unfixable and would rather abandon ship now than resign in shame in two years.
© Chevron 2008 13 How Do You Balance Safety & Profits? The Lessons from the BP Texas City Refinery Explosion March 23, 2005 – Process explosion: 15 workers killed, 180 injured Baker Report – Concluded that process safety was compromised due to high emphasis on cost cutting & poor safety culture at refinery Prudhoe Bay Oil Spill (3/06) – due to corrosion also due to cost cutting Criminal: October 2007 – BP pleaded guilty to federal environmental crimes - $50MM in fines + 3 years probation Plaintiff’s attorneys want >1B$ in fines, hearing this month Civil: 4000 claims, 1.6B$ spent to resolve about half Other: BP has spent >1B$ in plant upgrades since 3/05 Management overhaul including early retirement of CEO (July 2007) Yet 3 more fatalities since then – 7/06, 6/07 & 1/08 Has BP Found the Balance?
© Chevron 2008 14 The Chevron Way Our overarching ethical standard The heart of The Chevron Way is our vision… to be the global energy company most admired for its people, partnership and performance.
© Chevron 2008 15 The Chevron Way: Our Values Our company’s foundation is built on our Values: Integrity Trust Diversity Ingenuity Partnership Protecting People & the Environment High Performance
© Chevron 2008 16 Chevron Culture Open-door atmosphere Mutual respect and trust … diversity is valued Good work life/personal life balance Commitment to protecting the environment A commitment to continuous improvement, both company and personal Support and involvement in the community Our culture is a big part of what makes employees want to come to work every day...
© Chevron 2008 17 Hard Question – Company Ethics Should your company do business in a country that may not be ethical? Democracy or lack of it Human Rights issues (especially women & minority groups) Country does not provide basic infrastructure to citizens Possible siphoning off of government funds by rulers Environmental standards are not as high as US/EU And can we make these judgments for them?
© Chevron 2008 18 Outline of Today’s Presentation About Chevron and Chevron Environmental Management Company Engineering Ethics and… Your Employer Your Boss You Graduate School Options Questions and Answers
© Chevron 2008 19 Your Boss May Influence Your Decisions…. Most decisions are not black/white: Design uncertainty and risk avoidance Economics Schedule pressure Politics As a new engineer – how much can you do about it ?
© Chevron 2008 20 Hard Question – Your Boss & Ethics What would you do when your Boss tries to influence the outcome of your analysis to meet a preconceived goal? You are the rookie and the influence may be from high up The preferred interpretation may be within the boundaries of analysis “Legal” line is rarely sharp When do you speak up? How hard do you push?
© Chevron 2008 21 Outline of Today’s Presentation About Chevron and Chevron Environmental Management Company Engineering Ethics and… Your Employer Your Boss You Graduate School Options Questions and Answers
© Chevron 2008 22 Why Ethics Matters to You: Once tarnished, a reputation is hard to fix “Honesty, Integrity, Reliability” Aggies are held to a higher standard Guard your reputation carefully – it is one of your most precious assets! What really ended Coach Franchione’s support?
© Chevron 2008 23 Hard Question – Personal Ethics What would you do when your “company line” does not align with your personal ethical code? It may be perfectly legal It may be a matter of perspective or interpretation You may not have all the facts
© Chevron 2008 24 Outline of Today’s Presentation About Chevron and Chevron Environmental Management Company Engineering Ethics and… Your Employer Your Boss You Graduate School Options Questions and Answers
© Chevron 2008 25 Can Graduate Education Help My Career? You have many options ─ are they worth it? MS/PhD in Engineering MBA Law School Disclaimer – these are my personal views!
© Chevron 2008 26 Why Graduate Degrees? Increase technical expertise Increase credibility and knowledge Career change or alternate career opportunities Open doors for advancement and cross-training Not always more money Usually enough to get started Greater technical expertise Business knowledge Career change M.S. B.S. M.B.AJ.D. Career Development
© Chevron 2008 27 MS in Engineering Purpose Increase technical expertise When Soon after BS Why Job change early in career, increase credibility, technical career path, subject matter expert Advantages Increase technical expertise Increased credibility Disadvantages Usually minimal salary increase Value decreases with time as experience increases
© Chevron 2008 28 Master of Business Administration Purpose “Makes you qualified for anything” When Before age 30 and/or family (and life gets too complicated) Why Opens doors, greater value to company, greater emphasis on business skills in today’s corporations Advantages Additional business knowledge Increasingly important Opens doors within company Disadvantages None
© Chevron 2008 29 Types of MBA Programs ProgramCost Prestige (Top 10) $130,000 – $180,000 (Plus lost wages) Resident (UT, A&M, SMU, Rice, etc) $60,000 – $100,000 (Plus lost wages) Executive (UT, A&M, Rice, Tulane) $60,000 – $80,000 (Minus company subsidy) Night School (UH) $20,000 – 25,000 (Minus company subsidy)
© Chevron 2008 30 Law Degree Purpose/Why Career Change When Anytime Advantages Career change (you’ll be a lawyer not an engineer) Disadvantages Must make a choice between law and others Law or Engineering? Starting over with salary Working with lawyers!
© Chevron 2008 31 My Usual Recommendation… #1 Night or Executive MBA Sharpens business skills May open doors Increases credibility Minimal cost/ no lost income Lots of options in Houston & other major cities #2 MS in Engineering Especially if you aspire to the technical career path or your undergraduate degree is in another discipline Positions you for a technical leadership position, probably earlier Options – TAMU Distance Learning or Night/Part time
© Chevron 2008 Questions?
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