Bhopal tragedy still haunts Dow Chemical

The Indian Olympic Association is pressuring the London Olympic Committee to drop Dow from its list of sponsors.

By Trefis Mar 27, 2012 12:37PM
The Dow Chemical Company (DOW) has been facing immense pressure from the Indian Olympic Association regarding its sponsorship of the London 2012 Olympics. Instead of promoting goodwill -- which is usually expected from such financial support -- Dow's sponsorship of the Olympics has turned into a public relations disaster for the company. 

How might this backlash impact the company's business and its stock price?

We don't expect it to have a big effect, but we remind those unfamiliar with the incident what the issues are and its potential impact on the company.

Dow Chemical Stock Break-Up

Bhopal gas tragedy


On a December night in 1984, a United Carbide India (UCIL) pesticide plant in Bhopal (Central India) leaked methyl isocyanate gas and other toxic chemicals, resulting in the deaths of thousands of people. Many others suffered from permanent disabling injuries, and still more continued to die over the course of several years from the harmful effects of the chemicals. 


The plant also dumped toxic waste, which contaminated the ground water in surrounding areas. Over 40,000 people depend on this ground water for drinking. The contamination continues today, endangering the health of the surrounding population. Countless children in the region are born with deformities and mental disabilities due to the effects of these poisons.


The Indian government sought damages worth $3 billion from UCIL's parent company Union Carbide, but Union Carbide was only willing to pay $350 million for the victims. After a lengthy court battle, an out-of-court settlement was reached for $470 million. However, criminal cases continued against the executives of the company. These executives, even after repeated summonses, refused to appear in court, forcing Indian courts to declare them fugitives. The company continues to maintain its stand that there was no operational negligence and the disaster was the result of a sabotage.


Union Carbide was bought by Dow Chemicals in 2000. Dow has refused to assume any liability for the tragedy, citing that it did not have any ownership stake in the company involved until 16 years after the incident.


Indians sensitive to Dow's sponsorship at Olympics


The Indian Olympic Association is pressuring the London Olympic Games Committee to drop Dow from its list of sponsors as it conflicts with the Olympic's focus on ethics and sustainability. However, this is unlikely to happen, as almost all stakeholders agree that Dow was in no way connected to the tragedy. The opposition from India, too, seems half-hearted as the country conducted business with Dow while hosting the Commonwealth Games in 2010. Dow continues to have some small operations in India.


While we don't expect anything to come of this issue, the market is still aware of Dow's possible vulnerability. In 2004, a prankster claiming to be a Dow representative told World News that Dow had agreed to clean up the site and compensate those harmed by liquidating Union Carbide for $12 billion. Immediately afterward, Dow's share price fell 4.2% in 23 minutes -- a loss of $2 billion in market value.

Tags: DOW
4Comments
Mar 30, 2012 8:43AM
avatar

IF Union Carbide bought by Dow Chemicals, THEN DOW need to own the liability for the tragedy in December, 1984. I myself belongs to Bhopal and was living near to the factory, it was a horrific night I can not forget it in my whole life and unfortunately people are still suffering from it. It was not an earthquake or a flood, it was a "chemical disaster" leaking methyl isocyanate gas and other toxic chemicals. 


Indian government claimed for $470 million and UCIL just gave $470 million as we are begging? Why UCIL refused to appear in the court? They knew that they don't have strong defense and now DOW need to take full responsibility of it by cleaning up the contaminated site AND compensate those harmed. If anyone of you disagree with it, please visit Bhopal once and see the worst condition from your own eyes. Regards,


In London Olympic they will get all kind of negative publicity and people will HATE Dow. 


"BHOPALI from Bhopal

Mar 30, 2012 8:43AM
avatar

IF Union Carbide bought by Dow Chemicals, THEN DOW need to own the liability for the tragedy in December, 1984. I myself belongs to Bhopal and was living near to the factory, it was a horrific night I can not forget it in my whole life and unfortunately people are still suffering from it. It was not an earthquake or a flood, it was a "chemical disaster" leaking methyl isocyanate gas and other toxic chemicals. 


Indian government claimed for $470 million and UCIL just gave $470 million as we are begging? Why UCIL refused to appear in the court? They knew that they don't have strong defense and now DOW need to take full responsibility of it by cleaning up the contaminated site AND compensate those harmed. If anyone of you disagree with it, please visit Bhopal once and see the worst condition from your own eyes. Regards,


In London Olympic they will get all kind of negative publicity and people will HATE Dow. 


"BHOPALI from Bhopal

Mar 27, 2012 2:12PM
avatar

Union Carbide is alone responsible for this incident. How can DOW be blamed for something that happened 16 years prior. While I think it was probably not a good move from an ethics standpoint for DOW to buy Union Carbide they can't be expected to pay for something that occurred so long ago....Whatever should have happened should have been addressed way before DOW bought UC.

Mar 27, 2012 1:33PM
avatar

Union Carbide was a irresponsible greedy corporate giant who could have cared less about the people of India who still have to drink the very contaminated ground water leading to birth defects and sickness of all kinds.  Their actions and those of DOW are reprehensible and a forced clean up should be mandated by world governments if they wish to continue doing business on a worldwide basis.

 

Look at the BP disaster in the Caribbean or the Exxon Valdez disaster.  These Corporate giants must be made to pay big time for their destruction of the environment and loss of life.  It is beyond disgusting what Union Carbide and Dow get away with.

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