CRITICAL PERSPECTIVE IN LEADERSHIP AND GOVERNANCELeeds Metropolitan University

Critically Analyse the Leadership and Governance ofTitanic Case In Terms Of Stakeholder Theory

By

ADEMIJU ADEREMI

Student ID: 77138338

ContentsINTRODUCTION.......................................................1SYMNOPSIS..........................................................1

THE TITANIC........................................................1THE SINKING........................................................2

CASE EVUALATION AND THEORY.........................................2CONCLUSION.........................................................5

REFERENCE:.........................................................6

FIGURE 1: …………………………………………………………………………………………………………………………………………3

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INTRODUCTIONStakeholder theory is one of the most in uential theories inflbusiness ethics (Zandén & Sandberg, 2010). It is a theory that pullstogether all related “factors” to an organisation to achieve acommon goal. These factors could either be individuals ororganisations both internal and external to the organisation. Withthis theory in view certain questions come to mind. For example: whois a stake holder? And which stakeholder should be prioritized? We can take an insight from Freeman who labels a stakeholder as “anygroup or individual who can affect or is affected by the achievementof the decision making organisation’s objectives” (Howitt & Mcmanus,2012). His definition gives a clear understanding of who a stakeholder is, and this helps the organisation define who counts more interms of priority. But the theory of stakeholder cannot be fullyexplained without the subject of Leadership and Governance as itrelates to the organisation. Good corporate governance is theestablishment of rule, regulations and standards that should not becompromised. This is done to ensure that values are kept within theorganisation and standards and regulations are met from the externalstakeholder context (government, customers and others). Corporate governance evaluates the interest of each stakeholder asit related to the organisation. Leaders on the other hand are theaction agents, they are the one who decides what law or regulationshould be created and how they can be implemented. Everyorganisational stakeholder has a leader that presents their interestto the organisation.

SYMNOPSIS

A proper synergy of leadership and governance with stakeholders inan organisation results to sustainable success. Many organisationshave focused more on the bottom-line and traded away their socialand environmental responsibility, while some have devalued goodethical behaviour for wealth- like in the case of Enron in herfinancial misconduct. This study evaluates leadership and governancewith stakeholder theory in relation to the Titanic case. Unlike moststakeholder or governances cases, this study does not focus onfinancial accountability or the violation of human rights, rather itfocuses on ethical issues and the lack of accountability in relationto standard practice and leadership errors, as a result from lack ofstake holder engagement and dialogue and wrong choice of values.

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It critically evaluates the leadership and board of the White StarLine, as it relates to governance, board decision making andstakeholder prioritisation. Also it evaluates the disaster of April1912 and how it relates to leadership inefficiency. The essay pullsall key stakeholders to the Titanic and her owner and evaluated eachone’s stake, interest and participation to the disaster. The purposeof this study is not just to critic the case in terms of stakeholdertheory -because even in 1912 the theory did not exist- but to usetodays findings in management and leadership to analyse the case andmake good recommendations with the theory.

THE TITANIC

The Titanic was one of the largest vessels ever built. Built inBelfast (Ireland) by British shipbuilders, it was the second of thethree Olympic-class ocean liners owned by the White Star Line3. Theship was constructed by the Belfast shipbuilder, Harland and WolffHeavy Industries Ltd in 1912 (Fu-Lai Tony Yu, 2012) . The Titanicwas built as a British luxury passenger ship and was said to beunsinkable because of it’s design. According to the Titanic’sbuilders, even in the worst possible case of two ships colliding,the vessel should stay afloat for at least two to three days,providing adequate time for passengers to be ferried to safety(Kelly, 2013).

Figure 1: KEY STAKEHOLDERS TO THE TITANIC

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White Line (TITANIC

ENGINEERS

Staff (captain,...)

Board of

Trade

Other Ships

Passengers

THE SINKINGOn the 14th of April 1912, the titanic set out on her maiden tripfrom Europe to America (New York) with 2,223 passengers and crew onboard. Despite several warnings of icebergs that were received fromother ships by the titanic they were ignored but kept going at fullspeed, just four days into the journey, an iceberg was sighted 450mahead, all attempts were made to prevent a collision with theiceberg, but it was to no avail. The collision with the icebergresulted in the damage of the rivets holding the metal sheetstogether; this affected the hull and destroyed many of thecompartments and resulted to a sinking. It took 2 hours and40minutes for her to sink. Of the 2,223 people on board, 1517 (68per cent) died and only 706 (32 per cent) survived (Rayment &Jonathan, 2011). The nearest ship; the California, was at 19 NM(nautical miles, about 35km) from Titanic, had already turned offthe wireless at midnight. The Carpathian, which was 56 NM away,received the rescue call and headed its way to the titanic. Whentitanic launched a signal flare at 0:44, the California that wastraveling nearby did not take it as a rescue signal and left withoutstopping and at 4:10am, Carpathian arrived; 2hr 10 min after Titanicsank.

Titanic was a ship that was termed ‘unsinkable’, there wasconfidence in the design and durability of the ship because allnecessary measure to keep her safe were thought to have being takencare of during construction. It’s being speculated that the shipcould not have sunk or at least would have survived with littledamage and still be able to stay safe until rescue came, but thiswas the contrary, due to wrong decision making by the captain, theoperators and lack of good regulations in the construction of theship and other as would be analysed in this ‘study’.

CASE EVUALATION AND THEORYIt is important here to note that the details of the theory thatwill be discussed will be subject to relevance to the Titanic case,and would be used for case evaluation. Drawing on Freeman’sdefinition of a stakeholder (as defined above), Stakeholder theorymakes it very important for managers or board members to analysetheir business environment and know there stakeholder. The managersof White Line, were not aware of their main stake holder; the

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passengers. In the shipping industry safety should be prioritisedover luxury.

Stakeholder identification helps to achieve adequate “stakeholderengagement”. Stakeholder engagement is a process of identifyingpeople or organisations, that are affected by or affect thedecisions of the organisation, this stakeholder identification leadsto a dialogue which helps the organisation know what is required ofthem (by their customers, immediate society, government, andothers). It was necessary for the White Line to have had a dialoguewith the Board of trade who was responsible for regulating standardprocedures in the industries; this dialogue would have proposed keysafety question as to the amount of life boats, design andconstruction materials as this was significant to the sinking of theship.“Theory suggests that stakeholders fall into two broad categories – primary and secondary. Primary stakeholders (the ones who can directly affect a decision making outcome) “must be managed” so thatthe decision-making may achieve its objectives. Secondary stakeholders are generally individuals who are affected by the decision-making in some way, but may not have a primary stake in thedecision making. If these stakeholders are not supported effectivelythe decision-making manager may not achieve success” (Howitt & McManu, 2012). Stakeholder identification and engagement is very important, because it helps the goals of the organisation to be relevant to its primary stakeholder (shareholders, board members) aswell as relate the goals of the organisation to the secondary stakeholder (customers, environment). With the Titanic the primary stakeholders cared more about luxury and secondary stakeholder caredmore for safety. One key term in governance and stakeholder theory is ethics and values. Also there was a bit of ethical misconduct, one could not explain why only 34% of the children in the third class survived whereas every child in the second class and six of seven in the first class survived, in addition. The investigators discovered that the Titanic had sufficient lifeboat capacity for allthe first class passengers, but not for their other two classes. In fact, most third class or steerage passengers had no idea where the lifeboats were (Rayment & Jonathan, 2011). Going by the definition of ethics as the concept of what is right and fair conduct or behaviour and value as the views expressed as statements describing objects or features of objects that have worth, one can conclude that this was morally wrong and the company prioritised the life of the first class over the third class passengers (Payne & Landry, 2006).

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The leadership question is a key area in the subject of stakeholdertheory. They are crucial to stakeholder engagement and ensureconformity to standard practice. Leaders have always being thedifference makers in every society or organisation. They set thepace and lead the race. In high – risk industries such as airline and shipping, thesituation is never the same and things can go right or wrong at anytime because of external factors that man has no control over. Thiskind of environment requires situational leadership. As situationschange the leader is expected to change (respond) to the situation.During the incident the situation got worse, but the Captain showednervousness and appeared to be indecisive. For example he did notissue a full call for evacuation nor order his officers to load thelifeboats. He did not adequately organize the crew. He withheldcrucial information from his officers and crewmen and gave ambiguousand impractical orders (Fu-Lai Tony Yu, 2012). Captain Smith’sleadership during the crises was unusual and not expected from anexperienced captain. This was a display of situational leadership.Situational leadership needs a positive response, where as in hiscase the situation had a negative impact on him. “He did notsupervise the loading of the lifeboats and seemingly made no effortto find out if his orders were being followed. In short, CaptainSmith entirely lost control in this chaotic situation” (Fu-Lai TonyYu, 2012). One leadership style stands out always in business ethics andgovernance; Responsible leadership. Responsible leadership is arelational and ethical phenomenon, which occurs in social processesof interaction with those who affect or are affected by leadershipand have a stake in the purpose and vision of the leadershiprelationship (maak&pless, 2006). Responsible leadership is differentfrom authoritarian, here the leader asks questions (to showaccountability) and also give answers. It is a perfect fit forstakeholder theory where stakeholder views have to be noted and ifappropriate integrated into company policies.Responsible leaders ask vital question that has to do with theirstake holder, for example how is our present decision affecting ourstakeholder (e.g customer); positively or negatively (e.g health).Here the leader those not shy away but responds to situations thatneed attention. It’s important for leaders to take responsibilityfor their duty. Although there was potentially enough capacity for 1,178 people,only 705 were saved. Almost 500 empty seats were left unused on thelaunched lifeboats. This was partially due to the lack of trainingof staff with evacuation procedures. No official drill was everconducted during the voyage and only one had been completed prior tolaunching, when not all staff was present. This was compounded

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further by the lack of experienced seamen aboard the vessel in ratioto support staff (Kelly, 2013). This is still a show of failure inresponsibility, there were “life boats to save life”, but people didnot know how to efficiently use them. Every organisation has its keyresources for certain task execution, when is come to sailing, thelife boats are key to rescuing but the Titanic was like manyorganisation who through ineffective and inefficient use ofresources leading to waste.

Responsibility is a key area in leadership; it is the defined taskof an individual, a duty or obligation. Irresponsible would be theproper term for the actions exhibited by some of the wirelessoperators. A neglection of duty by them; as passengers were chargedfor sending and receiving of messages and were generous with thetips, so the wireless operators were very keen to handle as manypassenger messages as possible. One ship, the Californian, wasnearby having stopped for the night due to the threat of icebergs,whose wireless operator had attempted to warn the Titanic that therewas ice ahead but been told by the Titanic operator to let himconcentrate on sending passengers’ messages. The Californian’soperator reacted by turning off his wireless and going to bed. Laterin the night the Californian’s officers saw light and distresssignals in the distance and informed their captain who after somedebate decided to take no action, not even to wake the wirelessoperator (Rayment & Jonathan, 2011). At the time of the sinking,Titanic sent distress call for rescue, the Carpathian was the onewho got the message and decided to respond but it took them 2 hourto get to the Titanic. This would have not being the case if theCalifornian wireless was not turned off, as they were only 19NM(nautical miles) from the Titanic and the Carpathian who respondedwas 56 NM. Neglection of duty has cost many organisation great loss;some financial in the case of the Titanic lives were lost. It’simportant that every individual in the organisation knows andunderstands their duty and feedback is being sent to a superior toensure proper accountability of individuals’ actions. The operatorswere key stake holders in the Titanic, there were responsible forreceiving and send information, this type of responsibility iscrucial and proper attention and supervision should have being kepton the, by a superior (the captain)According to Maak & pless Responsible leaders make sure that theproducts and services meet the needs of their customers and clients,that they are safe and not harmful (Maak & Pless, 2006). One woulddisagree with the managers of White Line who traded safety overluxury. “On average, each lifeboat could take up to 68 people.Altogether they could accommodate 1,178 people, near half the amount

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of people on the Titanic. The shortage of lifeboats was not becauseof lacking space, nor of cost consideration. Rather, the White StarLine Company preferred to have the deck with grand views of the sea,which would have been blocked by installing more lifeboats” (Fu-LaiTony Yu, 2012).

The topic of governance has being tailored more into financialaccountability and transparency as a result of the corporatescandals in the early 2000s by Enron, Tyco and others. The case ofthe Titanic governance was not related to finance, but to standardpractice. The British board of trades was responsible for regulatingand ensuring that shipping companies conformed to rule andregulations for safety measures. But these standards were mostlyoutdated and wrong. The speed of the ship was one of the causes ofthe disaster, but the captain was following the standard procedureof the last quarter century to “keep course in clear weather, tomaintain speed, and trust to a sharp look-out to enable them toavoid danger”. It was standard practice to maintain speed and coursethrough ice treacherous waters when the weather was clear.” Peoplemistakenly believed that the improving advancements in constructionand safety features made it unnecessary to update regulations thatno longer strictly applied” (Kelly, 2013).Also the British Board of Trade required all vessels over 10,000metric tons carry a minimum of sixteen lifeboats. The Titanic hadtwenty lifeboats aboard, exceeding the requirement by four devices.However, the Titanic’s total mass was over 40,000 metrics tons,considerably more than the classification criteria. The BritishBoard of Trade had not updated the lifeboat requirements in overtwenty years (Kelly, 2013). Apart from the requirement of lifeboats, the board of trades should have set standards of buildingmaterials and ship designs for safety. It is much needed that inall organisations when it comes to; ethics, transparency andaccountability, there must be constant review of rules, regulationsand standard to ensure professionalism, excellence and the securityof lives and properties.Good governance ensures good dialogue with all stake holders and asa checks and balances with procedure for proper supervision, controland information-flow. The Board of Trade should have regulated thedesigns of the ship. This was a ship that had not being builtbefore, it poses the fact that question had to be asked andstandards reviewed. From the evidence of the investigation takenafter the incident, one could deduce that a lot of the cause of thesinking came from the design of the ship and the materials used.Modern analysis has shown that the steel the Titanic hull was

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constructed from was not suitable for use in cold locations as itwould become brittle (pro. The quality of several of the materialsused in the construction of the Titanic is believed to be a majorcontributing factor in the vessel’s demise. (Rayment & Jonathan,2011)

CONCLUSIONThe world is more global than ever and the products and services ofcompanies complement each other, making the stakeholder theory morerelevant than ever. 1912 was far different from now; there wasnothing so global or intercontinental about the world at that time.But stakeholder holders are still the same; it is only being maderelevant today. The titanic case is one that shows the need for good leadership andgovernance in terms of ‘responsibility’ and a sense of stakeholderawareness. Stakeholder theory must answer two important question‘What is the purpose of the firm?’ and ‘‘what responsibility doesmanagement have to stakeholders?’’ (Maak & pless, 2006). If thesequestions were asked and answer; more safety measure would havebeing taken with the Titanic. From this study, one could concludethat the relation of stakeholder theory to the case was descriptive,following the explanation from Darryl Reed “A descriptive use of theterms stake and stakeholder, for example, might be based upon theempirical relationship between the activity of the firm and anaffected party (e.g., a stakeholder as someone who is directlyaffected by the activity of the firm)” (Reed, 1999) and from Jones &others who gave a description as “How does the firm relate to itsstakeholders”? (Lones, Felps & Bigley, 2007). In respect to thiscase, stakeholder theory should be more Normative, asking thequestion “how should the organisation relate to its stakeholders”?Lack of stakeholder engagement left some question answered, whocounts; the first class passenger or Third class, what counts; Speedand luxury or safety. Every organisation has responsibility to itsstakeholders the same way it has to investors (Heath & Norman,2004). Still there is more to be done, to contribute to thestakeholder theory, the awearness now is quite appealing than in1912, but as Mitchell and others said “stakeholder theory has beena popular heuristic for describing the management environment foryears, but it has not attained full theoretical status”. Oncecontribution can be to a more practical approach to stakeholderidentification and engagement for managers and board directors.

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REFERENCE:Zanden, N. and Sandberg, J. (2010) Distinctions in descriptive andinstrumental stakeholdertheory: a challenge for empirical research. Business Ethics: AEuropean Review, 19 (1) January, p. 1.

Howltt, M. and Mcmanus, J. (2012) Stakeholder Management: Aninstrument for decision

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Making. Management Services, 56 (3), pp. 29-34.

Fu-Lai Tony Yu. (2012) The sinking of the unsinkable Titanic: Mentalinertia and coordination failures. Human Systems Management, 31,pp.177–186.

Kelly, H. (2013) The Sinking Of the Titanic. Journal ofUndergraduate Engineering Research and Scholarship, 1 March,

Rayment, J. and Jonathan, S. (2011) Misleadership: Prevalence,Causes and Consequences. England: Gower.

Laplume, A, Sonpar and Litz, A. (2008) Stakeholder Theory: Reviewinga Theory That Moves Us. Journal of Management, 34 (6), pp1152-1189.

Maak, T. and Pless, N. (2006) Responsible Leadership in aStakeholder Society – A Relational Perspective. Journal of BusinessEthics, 66. pp. 99-115.

Payne, D. and Landry, B. (2006) A UNIFORM CODE OF ETHICS: BUSINESSAND IT PROFESSIONAL ETHICS. Communication of the ACM, 49 (11) pp.81-84.

Jones, T. Felps. and Bigley, G. (2007) Ethical Theory and Stakeholder related Decisions: The Role OfStakeholder Culture. Academy of Management Review, 32 (1). pp. 137-155.

Heath, J and Norman, W (2004) Stakeholder Theory, Corporate Governance and Public Management: What can the History of State-Run Enterprises Teach us in the Post-Enron era? Journal of Business Ethics 53pp 247–265.

Mitchell, R. AGLE, R. and Wood, J. (1997) Toward A Theory of Stakeholder Identification and Salience: Defining The Principle of Who And What Really Counts. Academy of Management Review 22 (4) pp. 853-886.

Darryl Reed (1999) Stakeholder Management Theory: A Critical Theory Perspective. Business Ethics Quarterly, 9 (3) July, pp453-483.

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