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Failing the Reputation Management Test:
The Case of BHP, the Big Australian
Dallas Hanson
University of Tasmania, Australia
Helen Stuart
School of Business and Informatics, Brisbane, Australia
ABSTRACT
This paper explores the decline in the corporate
reputation of the Australian company BHP
(Broken Hill Propriety Ltd), ‘The Big Austra-
lian’, which occurred as a result of the compa-
ny’s involvement in the Ok Tedi mine in
Papua New Guinea. We argue that the pro-
blems of BHP stemmed primarily from the
inability of the company to recognize and
respond to the changing societal expectations of
companies which occurred during the period of
the operation of the mine in the 1990s.
These societal changes were evident in two
media ities. The first was the general trend of
increased media attention to business activities.
The second media activity, which impacted on
BHP specifically, was the reframing by the
media of the activities of BHP from a ‘commer-
cial success’ to an ‘environmental and social
crisis’. BHP’s corporate reputation suffered as a
result of the media attention on the performance
of a company relative to new expectations and
norms of corporate social responsibility.
We conclude that BHP needed to change its
strategic direction from a narrow conceptualiza-
tion of its corporate identity as ‘a mining com-
pany’ (‘The Big Australian’) to a broader view
of itself as ‘a company that undertakes mining
in relation to environmentally and socially com-
plex interactions with land and people’.
INTRODUCTION
This paper explores the history of the dete-
rioration in the corporate reputation of the
Australian company BHP (Broken Hill
Propriety Ltd), ‘The Big Australian’, in
relation to sociological and organizational
classifications of the nature of corporate
reputation. The problems of BHP
stemmed primarily from the inability of
the company to recognize and react to the
societal expectations which were taking
place, and to incorporate these new expec-
tations into its corporate identity.
In BHP’s case, the complexities of
coping with a fundamental reframing by
mass media of the Ok Tedi mining opera-
tions in PNG were beyond the company’s
reputational scope. As we will argue, the
media changed frames from describing the
mine as ‘a commercial success’ to reframing
the venture as an ‘environmental and social
crisis’. We point out that the timing of this
was consistent with a well-flagged peak in
environmental awareness within Australia
that BHP was apparently unable to take
into account. As a result, the company
failed to meet new standards of corporate
responsibility with consequent damage to
the corporate reputation.
The impact of the damage to the reputa-
tion of BHP can be seen in the fact of the
drop in its share price from around $20 to
$12 (Australian) in a short time during
1998. Additionally, the BHP 1998 Annual
Report of the company included a state-
ment which asked the Board of BHP to
appoint an independent body to ‘investi-
gate the appropriateness of . . . processes
used to control the cost of major develop-
Corporate Reputation Review Volume 4 Number 2
Page 128
Corporate Reputation Review, Vol.
4, No. 2, 2001, pp. 128–143
#Henry Stewart Publications,
1363–3589
ment projects . . . and the processes cur-
rently in place to assess the viability of
major investments.’ This statement was
inserted in the Report at the request of
shareholders.
In setting the theoretical background, we
first examine approaches to corporate repu-
tation that are of relevance to the BHP
case, and the trends which impacted on the
company during its troubled recent past.
APPROACHES TO CORPORATE
REPUTATION
Corporate reputation is a relatively new
term in management and marketing lit-
erature (Fombrun and van Riel 1998). It
is distinguished from corporate image in
that it can be considered as the corporate
image of a company as it develops over
time. Therefore, it is more stable than
corporate image. Fombrun and Rindova
(1996) characterized corporate reputation
as ‘. . .a collective representation of a
firm’s past actions and results that describe
a firm’s ability to deliver valued outcomes
to multiple stakeholders.’ Therefore, the
corporate reputation is a gauge of the
firm’s relative standing both internally to
employees and externally with its stake-
holders, in both competitive and institu-
tional environments (Fombrun and
Rindova 1996).
Corporate reputations, once created, are
relatively steadfast. ‘Reputations stabilise
observers’ perceptions of firms around
schematic representations. The process
becomes progressively more pronounced:
repeated encounters make schemas more
resilient to incoming information. The
schema resilience explains the stability of
corporate reputations’ (Rindova 1998,
190). It is clear that this schema resilience
to incoming information also affects the
perceptions of managers and employees as
well as affecting external perceptions.
According to Fombrun and van Riel
(1998, 6) there are six distinct literatures
which regard corporate reputation as a
relevant construct. These include defini-
tions of corporate reputation from the
fields of economics, strategy, marketing,
organisational behaviour, sociology and
accounting. Of most relevance to the case
of the corporate reputation of BHP are the
sociological and organisational views of the
construct.
The sociological view, as described by
Fombrun and van Riel (1998), conceives of
corporate reputations as ‘aggregate assess-
ments of firms’ performance relative to
expectations and norms in an institutional
field.’ Since observers are faced with
incomplete information about a firm’s
actions, they interpret signals from key
intermediaries such as market analysts, pro-
fessional investors and reporters.
The other view of reputation which is
relevant to the case of BHP, is the orga-
nizational view. In this instance, corporate
reputations are seen as rooted in the cul-
ture of the organization. Therefore, cul-
tural values guide managers, not only in
defining what their firms stand for, but
also in justifying their strategies in relation
to stakeholders (Fombrun and van Riel
(1998).
The relevance of these two perspectives
to the case of BHP will be discussed in
more detail later in the paper. In brief,
we argue that, from a sociological view,
BHP found itself in a changed institu-
tional field as the media changed its per-
ceptions of the activities of BHP. Also,
from an organizational perspective, we
argue that the culture of BHP, as repre-
sented by its corporate interior language
and its slogan of ‘The Big Australian’,
was unable to respond to the changes pre-
sented by changes in the institutional
field.
The major trends which have affected
stakeholder perceptions of the corporate
reputation of companies over the past 15
years or so are discussed next.
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Hanson and Stuart
TRENDS AFFECTING CORPORATE
REPUTATIONS OF COMPANIES
There are a number of trends that have
occurred over the past 15 years which have
affected perceptions of corporate reputa-
tions. These are related to the way in
which companies are replacing commu-
nities (Mackay 1993), the breakdown of
the barrier between the internal and exter-
nal functioning of organisations (Hatch and
Schultz 1997), society’s changing expecta-
tions (de Segundo 1998) and the increasing
interest in companies by the media (Chajet
1988). These are discussed in turn.
COMPANIES REPLACING COMMUNITIES
An Australian social commentator, Mackay
(1993) concluded from his research on Aus-
tralians in the late 20
th
century that they
have a ‘thirst for community’. This thirst is
a result of the breakdown of the traditional
social institutions. As people become
increasingly lonely, they are looking to
companies to restore a sense of community.
According to Mackay (1993), these ‘brand
insiders’ can be found both inside and out-
side a company. They feel an enormous
emotional attachment to the corporate
reputation of their ‘community.’ An exam-
ple of the way a business has exploited this
trend can be found in the success of the
Australian firm RM Williams, a highly
successful footwear and clothing company,
which appeals directly to the farming
legends of the ‘red heart’ of the Australian
continent.
Certainly, the corporate slogan ‘The Big
Australian’ in the late 1980s and early 1990s
carried with it the connotation that, even
though Australia was a relatively small,
insignificant world player, Australians
could be proud of the fact that they had a
big company who could compete interna-
tionally. The advertising of BHP in the
1990s centred on the ‘character’ of Austra-
lians — tough, rugged men who could
crash though any obstacle that presented
itself with their perseverance and sheer
strength.
CORPORATE REPUTATION AND THE
INDUSTRY ENVIRONMENT
The environment in which companies
operate has changed considerably over the
past ten years. Hatch and Schultz (1997, p.
356) refer to this as one of the primary
challenges facing contemporary organiza-
tions. They observed that ‘Previously,
organizations could disconnect their inter-
nal functioning from their external rela-
tions in the environment because there
were few contacts between insiders and
outsiders’. In the case of BHP, the compa-
ny’s vision of itself as being tough, rugged
and able to crash through any obstacles
was increasingly under scrutiny from
external bodies as its mining operations
began to affect the local environment.
SOCIETY’S CHANGING EXPECTATIONS
Research initiated by Shell concluded that
‘. . .people have much more confidence in
companies than they do in governments.
That confidence is rising and, along with
it, so are the expectations of what compa-
nies, and multinationals in particular, can
deliver . . . as the dream of government
panaceas has dimmed, people are turning
to companies’ (de Segundo 1998, p. 17).
This trend, was noted by Ind (1997) who
also observed that in attempting to meet
the needs of consumers, investors, legisla-
tors and employees, ‘these various needs
will sometimes be in direct opposition to
one another. It will be achievable only if a
company is united around some core
values that will allow it to reconcile these
opposing interests’ (Ind, 1997, p. 31)
The research at Shell has also demon-
strated that there are many expectations
that are very difficult, or even impossible,
to meet. Much of the restructuring and
research at Shell has been done in order to
implement a system of reputation manage-
Failing the Reputation Management Test
Page 130
ment which will ‘. . .ensure that all our sta-
keholders have a realistic image of what
they can and cannot expect from us. We
must ensure that we deliver what we pro-
mise and only promise to deliver what we
can realistically undertake’ (de Segundo
1998, p. 18).
What can be learnt from the Shell
experience is that society is changing in its
expectations of companies, increasingly
showing more interest, expecting more
from them, and, according to Mackay,
looking to companies for a sense of
belonging.
In the BHP and Ok Tedi case, the key
changes in public expectations hinge on
treatment of environmental issues. The tra-
jectory of Australian opinion on such mat-
ters is depicted in Figure 1 which uses
longitudinal survey data from Australia’s
biggest commercial survey organisation.
The clear message in Table 1 is one of a
steep rise in environmental concern starting
in 1986 and peaking in 1989. Thereafter,
environmental concern has declined but
remained above earlier levels; to use the
concept favored by Pakulski et al. (1998), it
has become routinized. Basically, this sug-
gests that environmental matters are still a
significant part of a shared social agenda
but has lost the urgency of the late 1980s
and early 1990s.
THE ROLE OF THE MEDIA IN
CORPORATE REPUTATIONS
According to Chajet, (1998, p. 19), the
subject of corporate reputation used to be a
non-issue with management. However,
there are a number of major driving forces
behind the change in attitude of senior
management towards corporate reputation
issues. One of these is what Chajet (1998,
p. 19) describes as ‘. . .unparalleled access by
the public to information and the see-
mingly insatiable appetite for information
either for its own sake or as entertainment.’
In this regard, he notes that CNBC, CNN
and Bloomberg provide business news 24
hours a day. ‘The media has assigned itself
the role of not only disseminating informa-
tion but also of becoming the watchdog of
companies’ reputations’ (Chajet 1998, p.
20). Chajet also noted the trend towards
more and more investment capital being
supplied by ‘. . .individuals investing in
publicly traded shares. The reputation of
30
25
20
15
10
5
0
S
c
o
r
e
Year
1976 1980 1984 1988 1989 1989 1990 1992 1994 1995 1995 1998 1999 1999
Score
Figure 1: Australians’ environmental concern, Morgan polls
Page 131
Hanson and Stuart
the company increasingly will influence its
appeal as an investment choice.’ (Chajet
1998, p. 20).
The way in which the media frames
events is more relevant for corporations
than ever before. The fact that mass media
play a major role in social issues and social
change in the way they frame events is the
essence of the notion of media framing
(Best, 1991, Gitlin, 1980, Shipley and Pos-
terman, 1998). Editorial staff and investiga-
tive reporters cast events in a particular
light depending on their own experience,
ideas prevailing within their organization
and the media generally, and prevailing
ideas in society. As Gitlin (1980) points
out, these frames while ‘largely unspoken
and unacknowledged, organise the world
both for journalists who report it and, in
some important degree, for us who rely on
their reports’ (Gitlin 1980, p. 7). Media
framing, therefore, creates meaning over
time. It does not directly cause changes in
public opinion but forms a system with
public opinion as the other element. Each
affects the other — journalists pay heed to
public concerns when writing, while indi-
viduals in society construct their own
meaning out of their experience of a world
that includes significant elements of media
reporting.
SUMMARY OF TRENDS AFFECTING THE
CORPORATE REPUTATION OF
COMPANIES
In summary, a number of trends have
emerged which have impacted upon com-
panies in the last decade or so. There is the
impact of the breakdown of the internal/
external barrier of an organization, as
described by Hatch and Schultz (1997)
which implies that there is increasing pres-
sure on companies to respond to external
pressures. Also, as described by de
Segundo, society’s expectations have chan-
ged with people increasingly disillusioned
with governments and looking to compa-
nies to fulfil their expectations. And if
Mackay (1993) is correct, people increas-
ingly feel an emotional attachment to com-
panies and expect them to create a sense of
community. Not surprisingly, the media
has responded to this trend by becoming a
‘watchdog’ of company reputations, and
their framing of events is of particular sig-
nificance.
All these factors impact on corporate
reputation management since companies
are increasingly vulnerable to external con-
stituencies. In summary, people expect
more from companies in terms of repre-
senting their aspirations and taking social
responsibility. The media has grasped the
importance of these trends as the basis for
newsworthy items, framing their stories
about companies accordingly. In the next
section of the paper the specifics of the
BHP case are discussed in detail in relation
to the trends indicated.
THE DECLINE OF THE REPUTATION OF
BHP
Although BHP is still Australia’s biggest
corporation and certainly the best known,
it was still vulnerable to the trends in the
area of corporate reputation management
suggested above. In particular, we argue
that the decline of BHP’s corporate reputa-
tion was related to lack of strategic capabil-
ities in the management of the natural
environment, due to a narrowly conceived
view of BHP’s corporate identity. This
narrow view was reflected in a matching
interior corporate language and exterior
communication style, as epitomized by the
company’s slogan ‘The Big Australian’.
BACKGROUND TO THE OK TEDI CASE
Central to BHP’s recent troubled history
was the controversy over its management
of the Ok Tedi mine in Papua New Guinea
(PNG). A map of the region is shown at
Appendix 1. In 1995, the issue peaked when
the Ok Tedi people filed a lawsuit in a Mel-
Failing the Reputation Management Test
Page 132
bourne Court alleging damage to their
environment because of the mine. At this
point the corporate reputation of BHP was
at perhaps its lowest ebb, with frequent arti-
cles in the popular press about the mine’s
difficulties. Shortly after, the corporation
produced a video explaining its situation at
OK Tedi and a dedicated company tele-
phone line that explained their position on
the issue. Both these responses are a clear
demonstration of belated realization of the
impact of the Ok Tedi situation on the cor-
porate reputation. In order to understand
how this situation eventuated, it is necessary
to look at the history of the mine and
BHP’s involvement in it.
BHP’s involvement in the Ok Tedi mine
followed from earlier interests in PNG. In
1968 its subsidiary company, BHP Lysaght,
began operating in Port Moresby (BHP in
PNG website 27th July, 1997). According
to Howard (1991, p. 62) ‘BHP’s motiva-
tion for becoming involved in the [Ok
Tedi] project appeared to be a combination
of a sense of its corporate role in Australia
in relation to Australia’s interests in PNG
as much as a general desire to extend its
overseas mining activities’. In other words,
BHP saw itself as a corporate citizen of
Australia. Howard’s figures detail that by
October 1975, a consortium had been
established between Amoco (37.5 per cent),
BHP (37.5 per cent) and a German consor-
tium (KEG) (25 per cent).
A summary of the complex series of
events included in the following discussion
is available in Table 1.
The mine was the subject of its own legis-
lation, the Mining (Ok Tedi Agreement)
Act, passed in 1976. The Act required Ok
Tedi Mining Limited (OTML) to submit a
detailed environmental plan, of which a tail-
ings dam was to be an integral component,
but at a cost of no more than K150,000
(Hughes and Sullivan 1989, p. 38). The
document was completed by Maunsell and
Partners in 1980 and covered aspects of
environmental management and recom-
mendations for future monitoring programs
(Hughes and Sullivan 1989, p. 38).
Table 1: A History of Ok Tedi
1975 PNG Government forms Ok Tedi Development Corporation, BHP joins.
1981 Ok Tedi Mining Limited formed, BHP 37.5%; the mine has its own legislation.
The first major critical study of the mine is published.
1983–1986 Work on tailings dam starts and it fails. There is no further active work on the
tailings dam. In 1986 a steep rise in environmental concern starts to become
evident; BHP ignores increasingly urgent signals of its significance.
1988 Strike by locals against (PNG) immigrant workers. A signal of local concern.
UNEP report critical of environmental impact of the mine. Further, impeccably
legitimated evidence of the problem — BHP makes no change to tailings disposal.
1990 Maximum production reached.
Road blocked by locals in protest against damage to the region. Ok Tedi/Fly
development trust formed.
Major increase in popular media criticism of the mine.
1994 Writ lodged against BHP in Melbourne.
BHP has 60% of OTML. The mine accounts for 20% of PNG’s export earnings.
1996 Writ succeeds.
1998 Highly unusual drought; mine in trouble. Subsequently BHP says it is getting out
of Ok Tedi.
2001 BHP/Billiton merger. Ok Tedi withdrawal strategy a significant item in merger
planning.
Page 133
Hanson and Stuart
On 27th February, 1981, OTML was
launched in Port Moresby. The final pro-
file of the joint venture comprised BHP
(30 per cent), Amoco (30 per cent), KEG
(20 per cent) and the PNG Government
(20 per cent). Construction on the mine
site at Mt Fubilan commenced immedi-
ately. In the same year, two leases were
granted OTML by the PNG Government:
a Special Mining Lease (SML), and a Lease
for Mining Purposes (LMP), both for the
duration of 35 years. BHP shareholdings in
the mine increased from 30 per cent to 50
per cent in 1993 and peaked at 60 per cent
in 1995. During the life of the mine,
Amoco and KEG withdrew from the ven-
ture and in 1993, Inmet Mining, a Cana-
dian company became a 20% shareholder.
BHP assumed the role of manager of
OTML in 1987 and in 1997 owned 52 per
cent of OTML (BHP Website 27/7/1997).
In 1994, the PNG Government increased
its equity in the mine from 20 per cent to
30 per cent in a desperate attempt to
increase revenue from Ok Tedi to compen-
sate for the closure of Bougainville,
another mine in the region (Davis, 1994, p.
28). Its shareholding was managed by the
government of Papua New Guinea’s
Department of Mining and Petroleum
(DMP) who also administered environ-
mental regulation of the mine until 1993
(Rosenbaum, 1993, p. 40). Rosenbaum
(1993, p. 42) argued that DMP’s vested
interest in the mine’s unhindered operation
compromised its ability to give impartial
consideration to environmental protection
in the mine’s operation.
The development of the Ok Tedi mine
was proposed to occur in three stages:
— construction of mine site infrastructure
and initial mining of the gold ore
capping the main copper deposit
— development of separate treatment
facilities for the copper ore and
construction of a hydro-electric power
station during an interim stage of
combined gold and copper production
— increased copper concentrate produc-
tion and shutdown of the gold circuit
after exhaustion of the gold cap (BHP
in PNG web site 27/7/1997).
It took eight years and cost US$1,400 mil-
lion to reach the final stage (Clarke, 1996).
Gold production commenced in 1984
despite problems with the tailings dam.
However, the joint copper/gold production
second stage of the project was delayed due
to low world copper prices in 1985.
THE ISSUE OF THE TAILINGS DAM
Tailings are the remains of the ore after
minerals have been removed either
through crushing or grinding, and may
contain some unextracted metals and some
of the chemicals used to extract the metal
(Clarke, 1996). Tailings are comprised of
rock powder, silt and water. The disposal
of tailings from Ok Tedi had been an issue
since the project’s inception. The initial
understanding was that a tailings dam
would be built to deal with the tailings.
The gold extraction stage involved the
treatment of tailings with hydrogen perox-
ide to lower the concentration of cyanide
which is used to retrieve gold from the
ore. The copper mining process at Ok
Tedi involved the extraction of about
180,000 tonnes of rock a day, in order to
process the 80,000 tonnes of ore from
which copper was extracted and piped 160
km to the river port of Kiunga, before
being shipped to international market, pre-
dominantly in Japan, Korea and Europe
(Rosenbaum, 1993, p. 40). Most of the ori-
ginal 180,000 tonnes ended up as tailings or
in an overburden dump.
Work on a tailings dam on the Ok Ma
commenced in 1983, one year prior to
mining and prior to the completion of
geological mapping of the region (Rosen-
baum, 1993, p. 40). In 1984, massive land-
Failing the Reputation Management Test
Page 134
slides destroyed the construction and made
completion of the tailings dam allegedly
impossible (Rosenbaum, 1993, p. 40).
After losing $A64m of investment on the
dam project, OTML sought and obtained
an agreement from the PNG Government
to dispose of tailing fines and overburden
into the river system via direct discharge or
by use of tailings dumps. The agreement
became known as the Interim Tailings Dis-
posal Scheme (ITDS), and allowed for the
dumping of the coarse fraction into a
nearby valley and discharge of the fine tail-
ings into the Ok Tedi river system at rate
of 20,000 tonnes/day (Hughes and Sullivan,
1989, p. 39). The free rein on waste dump-
ing continued until 1989 when, after public
concern had heightened, pollution levels
were agreed upon and set by the PNG
Government.
On February 28th, 1986, the 6th Supple-
mental Agreement was signed under which
OTML was permitted to proceed with
mining but to defer the decision on perma-
nent waste retention facilities until 1990.
No acceptable pollution levels were estab-
lished (Pernetta, 1988). It was agreed, how-
ever, that an environmental study would
be conducted to assess the impact of dis-
charges on the river system, and to deter-
mine the extent of permanent facilities
necessary to contain environmental impacts
at acceptable levels during the remaining
life of the mine.
Copper concentrate production at Ok
Tedi commenced in 1987 and was followed
in 1988 by the cessation of gold mining
activities and the subsequent use of cyanide.
The ITDS was abolished in 1988 allowing
for the discharge of all tailings untreated
into the river system (Hughes and Sullivan,
1989). An independently assessed environ-
mental study completed in December 1988
indicated serious environmental damage
would be caused to the river system and
delta if physical and chemical pollution
continued at the current level. The report
also noted that a tailings dam would be not
only be technically difficult, but may jeo-
pardise the economic viability of mine
(Hughes and Sullivan, 1989, p. 40).
Ok Tedi reached its maximum rate of
capacity utilization in 1990 and has since
been producing at full volume (Starnberg,
1991, p. 74). In 1990, OTML were forced
to re-examine a tailings dam as an option
in waste disposal. OTML upheld the argu-
ment that construction of a tailings dam
was both expensive and unsound in an area
with such high seismic activity (Starnberg,
1991, p. 74).
EFFECT ON THE LOCAL COMMUNITY
By the late 1980s damage to crops and a
decline in the number of fish in the Ok
Tedi/Fly river system were observed by
locals (Four Corners, ABC Television,
April 10th, 2000). Hence, while the indi-
genous peoples of the Ok Tedi/Fly River
region were initially relatively passive
onlookers as mining development pro-
ceeded, by the late 1980s many had become
very vocal critics of the environmental and
social damage caused by mining and were
willing to protest the environmental degra-
dation and lack of adequate compensation.
On January 19th, 1990, Ok Tedi land-
owners blocked road access to the mine in
response to the continued discharge of tail-
ings into the river and in demand for better
economic compensation. The Workers
Union and Ok Tedi National Staff Associa-
tion supported the landowners’ protest.
The mine reopened on 22nd January with a
warning from the President of the Star
Mountains Local Government that if com-
pensation demands were not finalized, they
would shut the mine completely (Hynd-
man 1992, p. 82).
In 1990, as a response to local concerns,
OTML established the Ok Tedi/Fly River
Development Trust. The aim was to bring
long term benefits to communities living
along the Ok Tedi/Fly River system out-
Page 135
Hanson and Stuart
side of the mine lease area who were not in
receipt of direct royalty or land lease pay-
ments (OTML 1994, p. 1). The Trust’s
objectives were to assist in the development
of village infrastructure, with particular
emphasis on meeting social, educational,
health and recreational needs, and to pro-
vide for rural and non-rural business devel-
opment.
In 1991, the Development Trust began
compensating for some of the mine’s
impacts on water supply, fisheries and river
transport. The focus has been on family
and community development to assist in
improving their standard of living and
opportunities for long-term employment
not directly related to the mine (Clarke,
1996, p. 30). By 1995, OTML had contrib-
uted K17m to the Trust, with total funding
over the life of the mine expected to be
around K80m. A new benefits package was
approved in 1995, resulting from agree-
ment between OTML and the Govern-
ment, which includes general
compensation for eligible people (BHP
web site 27/7/1997).
The Trust did not placate locals who
remained concerned about environmental
and social damage to their region. The
greatest expression of dissatisfaction came
with the filing of the Miripiki Writ in
May 1994 against OTML. The villagers of
the Ok Tedi/Fly region ‘pursued a degree
of autonomy in shaping local development’
(Connell and Howitt, 1992). While there
have been several social costs of the Ok
Tedi mine development, Connell and
Howitt (1992, 15) reflected on the survival
instinct of the indigenous peoples who
were ‘resilient, responsive, and adaptive to
change, and increasingly able to challenge
the historic domination of mining compa-
nies and distant companies’.
EFFECT ON BHP EMPLOYEES
Although BHP claimed that they did not
understand the extent of the environmental
damage that the tailings would cause, other
evidence suggests that they did have
knowledge from their own employees. In
an Australian documentary on the mine
(Four Corners, ABC Television, April
10th, 2000), Mike Ambraski, a former
Environmental Chemist for OTML,
claimed that the company asked the envir-
onmental division to make calculations of
the environmental impact of the mine
without a tailings dam which he assumed
were ‘just for comparison purposes’. Mr
Ambraski claimed that the figures were
‘sky high’ and ‘ridiculous in comparison to
environmental guidelines’. He described his
reaction to the news of the dumping of
waste in the river system as ‘shock . . . I
couldn’t believe it was true’. Another
former employee of the PNG government
who was involved in the project, Dr Phil
Townsend, a structural engineer, made the
comment on the same program that ‘if
BHP didn’t know what was going on,
they weren’t listening to their own staff’.
These comments suggest that BHP had
been told by employees of concerns relat-
ing to the environment but did not
respond to them.
The culture of BHP at the time was
described by Ambraski as very much ‘crash
through’ and we can fix anything that goes
wrong later. As he described it, ‘What hap-
pens in these mining companies . . . you have
a group of people who have this project to
get on with . . . and they are all working
very hard in that direction . . . they tend to
egg themselves on [when problems arise] . . .
we can fix that later on. . .. a good engineer
can solve almost anything’. In other words,
the most important thing was getting on
with the extraction of materials. Environ-
mental concerns could be addressed later.
EXPERT OPINION ON THE MINE AND
MEDIA COVERAGE OF OPERATIONS
Environmental problems were present
from the mine’s inception. OTML had
Failing the Reputation Management Test
Page 136
been able to mine without regard to the
natural environment or the needs of local
people. The company was backed by a
revenue starved central government, itself
a Western style political and legal structure
invented and imposed on previously auton-
omous and culturally distinct communities
after transition from (Australian) protecto-
rate status in 1975. In addition, the mine
was not framed by mass media as a news-
worthy issue. It was a major mine with big
social and environmental problems, but the
region is both geographically and cultu-
rally remote from the first world and
while media access was theoretically avail-
able it was logistically difficult. Any report-
ing of the mine was therefore routinely
financial and consistent with a general
legitimation of profit-oriented action in
remote locations. Stakeholders remained
passive in this situation because it was diffi-
cult for them to press their case and, in the
early days of mining at least, because they
may not be able to define issues that were
still developing much less communicate a
good case to an apparently uncaring inter-
national community.
Change to this situation followed a
number of articles critical of the mine in
specialized intellectual journals, for exam-
ple Jackson (1981) in The Australian Geogra-
pher and Hyndman (1989) in The Ecologist.
Such analyses defined the issues involved in
mining negatively for a steadily larger
(although still specialized) international
audience. The ground for criticism was fer-
tile, as the Morgan polls on environmental
thinking indicate. Starting in 1986 and
peaking in 1989, there was a steep climb in
the urgency of environmental concern in
Australia which paved the way for nega-
tive media coverage of the mine.
The late 1980s also saw work-oriented
activism from the local people (the Wop-
kaimin) who were concerned about leak-
age of jobs at the mine to immigrant
workers. At the same time more negative
international attention was focused on the
mine, ‘official’ western environment orga-
nizations researched and published on the
negative environmental impacts of the
mine. These reports and the Wopkaimin
prior experience of successful activism pre-
pared the way for environmental activism
by people in the Fly River region, includ-
ing blocking of access to the mine in 1990.
By now OTML was at least partially
responsive to the social concerns of newly
activated human stakeholders as evidenced
by the setting up of the Ok Tedi/ Fly
River Development Trust.
MEDIA REFRAMING OF BHP’S
INVOLVEMENT IN OK TEDI
Despite the earlier stability of the corporate
reputation of BHP, media reframing of
environmental and social issues connected
with the mine was well under way by the
late 1980s. This reframing was assisted by
the relative freedom afforded the media in
PNG and hastened further by the attention
given to the natural environment by world
media in the late 1980s. Protest actions and
minor research critical of the mine in the
mid to late 1980s were quickly followed
by further reports from international
watchdogs, for example, the Starnburg
Institute in 1991. In addition, numerous
articles on the issue appeared in the popular
press in the early 1990s. Hanson and
Gibson (1998) cite more than 40 articles
published between 1992 and 1994. These
were widely disseminated, well grounded
in scientifically legitimated research and
backed up by stories from local people. By
this time too, criticism of the mine from
within the PNG was strong with provin-
cial politicians in an intensely competitive
political environment critical of the failure
to build a tailings dam (Davis, 1994).
The impact of this criticism on BHP was
increased by heightened world attention
given to environmental matters at that
time. This increased the social receptivity
Page 137
Hanson and Stuart
of environmental disaster stories and conse-
quently sales of the magazines and newspa-
pers that ran them.
By 1983 BHP had clear indications that
the mine’s problems in disposing of tailings
were serious. The attempt to build a tail-
ings dam is a clear indication that they
understood the problem. By 1987 at the
latest they also had clear indications from
public opinion polls on environmental
awareness that the Australian public was
concerned about environmental matters.
Moving into the late 1980s and early 1990s
the signals to BHP about the mine’s pro-
blems in popular press and official reports
such as that of the UNEP were insistent
and urgent. BHP had the opportunity to
do more in response. There was no further
attempt to construct a tailings dam after
the 1984 collapse nor was there any other
attempt made to overcome environmental
problems in the mining region. The cor-
poration did not acknowledge the gravity
of the situation, thus leaving itself open to
obvious criticism — they were a sitting
target for media who saw a good story
based on real problems.
BHP management, in control of a cor-
poration trading in more than 40 coun-
tries and beholden to (by now anxious)
shareholders, increasingly found itself in a
crisis situation — the number, scope and
believability of press and journal reports
had established an important image of
corporate misbehaviour and they had no
actions they could put forward as reason-
able responses. At some time after 1990
the issues reached what can be called
‘social responsibility momentum’ (see
Hanson and Gibson, 1998); a situation
which would normally result in signifi-
cant changes to formal (or in Mintzberg’s
terms, ‘deliberate’) corporate strategy.
This momentum continued with the suc-
cessful lawsuit launched by villagers in
1994 and further critical commentary in
world media as widely recognised activists
such as Ralph Nader chose to comment
(Wilson, 1995).
THE FINAL DECLINE
It is reasonable to suggest that the mine had
become a major source of international
embarrassment for BHP by late 1993. The
$A4bn Miripiki writ was lodged through
Melbourne law firm Slater and Gordon on
behalf of the Ok Tedi/Fly River villagers
in May 1994. The villagers claimed that
the mine had ruined their river and
destroyed their traditional way of life and
were fighting not for closure of the mine,
but for a tailings dam and rehabilitation of
the area.
BHP’s response to the situation was a
vigorous defence initially and an attempt
to balance the argument in their favor.
Again, they did not acknowledge their
responsibility, even at this late stage after
the high tide of media coverage of the
mine. BHP still believed it had a strong
case to put in support of the mine, but
instead spent most of the year under siege
in the courts (Davis 1996, p. 26). They
launched a PR campaign in Australia
(mostly in the form of paid advertisements)
in defence of the corporation’s public repu-
tation in order to combat the media reports
and analyses critical of its activities in
PNG. At the BHP Annual General Meet-
ing in September 1995, at which dead fish
were thrown as a form of protest by Ok
Tedi villagers, the (then) CEO Loton
stated: ‘I believe that when the full picture
is viewed, the company will be seen to
have acted responsibly in relation to the
Ok Tedi project . . . and in a way that has
produced overall benefits, not least for the
people of PNG’ (Jamieson & Pirrie, 1995).
Following failure in the courts BHP did
finally admit that it was poor management
on their behalf that led to the damaging
publicity. They acknowledged that man-
agement of their public position in Austra-
lia was weak and that they had failed to
Failing the Reputation Management Test
Page 138
get a balanced story across (Jerry Ellis,
BHP Chief Executive Minerals). BHP also
said it was prepared to spend millions to
find a solution to the tailings problem. Mr
Ellis said ‘BHP would be prepared to
spend whatever funds were required to fix
the waste problem if the economics of the
solution fit within the fiscal regime of the
project’ (Frith. 1995). However, BHP
acknowledged that structure of compensa-
tion was not enough. According to Stevens
(1995, p. 21), ‘The company has always
worked within the rules established by a
democratically elected government. It has
built a world-class, highly profitable pro-
ject that underpins the economy of PNG.
It believes it outstrips expectations of the
good corporate citizen of both the PNG
Government and the wider community it
represents. But its critics say that is not
enough’. Ethical errors included decision to
go ahead without tailings dam and attempt
to criminalize (within PNG) further com-
pensation claims, this latter move a classic
case of bully tactics that failed to deter vil-
lagers who used the Australian court
system.
The ramifications of the lawsuit on BHP
are clear, and were compounded by
another series of disasters for BHP in 1995.
BHP were found liable for the 1994 Moura
Mine Disaster in which 11 people died and
found negligent in the grounding of their
vessel Iron Baron off Tasmania. Yet ‘The
Big Australian’, despite a turbulent year,
announced a record A$1.5bn net operating
profit for year ending June 30 (Rees, 1995,
p. 62), a 26 per cent rise in operating prof-
its (Economist July 1995, p. 66).
The financial benefits of the mine had
helped to secure BHP’s position as the ‘best
company in the world supplying energy
and resources’, a position strengthened by
BHP’s commissioning of the Escondida
copper mine in Chile in December 1990,
the third largest copper producer in the
world (Korporaal 1991, p. 45); and again
in 1995 with the acquisition of the Arizona
based copper mining and processing com-
pany, Magma (Rees 1995). BHP by then
was the second largest copper producer in
the world.
The damage to BHP’s corporate reputa-
tion in Australia and in the world commu-
nity included probable long-term financial
losses in law suits and, as world opinion
forced a clean-up of the Fly region, possi-
ble difficulties in getting access to other
world copper deposits as other govern-
ments avoid a known despoiler of the
environment.
BHP management then restructured the
company. It installed series of general man-
agers and made country managers stand
beside line managers to help them with
local community issues and reports to head
office in Melbourne (Kohler, 1996, p. 81).
The restructuring was designed to stimu-
late growth, create cultural diversity,
strengthen environmental performance and
improve public and media images (Davis,
1996, p. 26). Ok Tedi was a factor, but not
the sole factor in the management restruc-
ture that BHP undertook in early 1996.
BHP had been forced to the realization
that it could no longer point to its large
profits and capital investment as the ratio-
nale for its actions. It was no longer
answerable only to its shareholders, but
indicated that it strives to be responsive to
a wider community.
This realization of the problems with the
Ok Tedi mine was evident in a discussion
paper ‘BHP and Ok Tedi’ found on the
2000 BHP web site (BHP web site 14/2/
2000) where BHP acknowledged that
‘. . .difficulties can only be resolved success-
fully with the input of all stakeholders in
the project. . . . Under its own charter it
has to consider the commitments and
responsibilities to shareholder value, the
community and the environment in deter-
mining what this means for its future
involvement with the mine’. In other
Page 139
Hanson and Stuart
words, BHP had been forced to acknowl-
edge the role of external stakeholders
(other than shareholders) in the evaluation
of its corporate reputation.
By late 2000 it appeared that BHP no
longer perceived itself as ‘The Big Austra-
lian’. In speech to the Securities Institute in
August 1997, the then Managing Director,
John Prescott said, ‘We are becoming a
global company. We are not turning away
from Australia. We are moving from
being a ‘Big Australian’ to managing a
global portfolio of quality resource assets’
(BHP web site, 20th March 2000). How-
ever, this approach was contradicted some-
what by Paul Anderson, the new
(American) CEO appointed in early 1999
who said in his review of BHP that:
‘Along the way we are proud of our Aus-
tralian heritage but we are no longer ‘The
Big Australian’, but a challenger fighting
hard to take its place as a truly global com-
petitor’ (BHP web site, 20th March 2000).
Following the March 2001 merger with
Billiton, the Anglo-South African mining
giant, the corporation is now the biggest
mining organization in the world (Fitzger-
ald, 2001, Bartholomeuz, 2001). The
reconciliation of these points of view may
well be the A$37bn merger. BHP/Billiton
now has no choice but to be a truly global
player, even though it can remain proud of
an Australian background.
DISCUSSION
The Ok Tedi case was very costly to BHP,
both directly in terms of loss of profit and
indirectly in terms of loss of corporate
reputation. The company failed to recog-
nize changes in their external world, in
particular, the increased attention given to
matters related to the natural environment
in the late 1980s and early 1990s. This was
something that a reasonably able strategic
planning body might, under normal cir-
cumstances, be in a position to discern. The
Morgan polls that were cited and graphed
earlier in our analysis make clear the ease
with which information about increasing
environmental interest could be obtained.
These are well-publicized polls that are
regularly discussed in the popular press.
The mid to late 1980s surge in official
reports on OK Tedi followed by a steep
rise in popular press articles in the late
1980s and early 1990s provided even more
obvious indications of the problems of Ok
Tedi. The tenor of these articles is such
that, to a casual observer, a normally func-
tioning corporation can have had no
doubts that the mine was a huge embar-
rassment.
BHP was not, at this time, functioning
in such a manner. Their organizational
routines were apparently concentrated on
the technical challenges of ore extraction
rather than equally significant matters such
as community relations, difficulties with
the natural world and the environmental
groups who seek to protect it, and the
need to continually fine-tune their corpo-
rate reputation in response to the views of
external constituencies. In this situation it is
reasonable to speculate that the corporate
public affairs specialists were either under-
skilled or ignored by those managing what
was the unabashedly technocratic culture
of ‘The Big Australian’. Effectively, their
organization culture made it difficult for
perceptions about the value of natural
world that had become normal in society
to penetrate to upper levels of manage-
ment. The corporation was apparently
single-minded in its pursuit of profit and
short-term in its orientation to the future.
BHP’s error is explicable, not only in
terms of the limitations of its technocratic
culture, but also by the fact that the task
they had was so difficult. Once they had
taken the decision to mine in a geographi-
cally remote, undeveloped, wet and geo-
graphically unstable region, significant
environmental damage was inevitable, as
was major change to local society. The
Failing the Reputation Management Test
Page 140
company lacked the technical skills to cope
with the environmental problems as much
as they did the willingness to do so. They
gradually developed the skills necessary to
handle better disputes with the local people
but too late to protect or embellish their
corporate reputation.
The company was perhaps misled by the
subtleties involved in the pivotal change
from commercial framing to environmen-
tal crisis. As Gitlin (1980) and Shipley and
Posterman (1998) argue, the dominant
frames within established media are usually
tied to the media’s role in legitimising the
established order in society. Competing
frames struggle against these, for example
environmental groups constantly frame
issues in terms of crisis but usually fail to
convince established media to follow. Suc-
cessful transitions of the conventional com-
mercial frame to environmental crisis are
relatively infrequent. In the Ok Tedi case it
was related to the extent of environmental
damage, to expert knowledge of it that
was built up over time from credible
sources, to local activism, and to an unu-
sual level of social receptivity to green
ideas in the late 1980s and early 1990s. The
complexity of such a process of change
would arguably have challenged a far more
sensitive organization than BHP. One of
the most interesting issues following the
BHP/Billiton merger is the development
of a new corporate reputation and the
extent to which the two existing reputa-
tions contribute to the new one. Within
that, the extent to which the Ok Tedi saga
has damaged the BHP and then BHP/Billi-
ton reputations is equally interesting.
IMPLICATIONS IN RELATION TO
CORPORATE REPUTATION
MANAGEMENT
The case of BHP demonstrates that compa-
nies can no longer have a narrow concep-
tion of their corporate identity as a purely
internal matter. The corporate reputation
of a company must be actively managed,
taking account of the views and expecta-
tions of all external stakeholders, not just
shareholders. Shareholders may be inter-
ested in profit but they will also share the
shame and declining profits associated with
a deteriorating corporate reputation which
is now increasingly the subject of media
and public scrutiny.
BHP needed a change in strategic
direction so that it becomes aware of a
broader conceptualization of its corporate
identity as being ‘mining in relation to
environmentally and socially complex
interactions with land and people.’ In
future, BHP/Billiton must be far more
environmentally sensitive than the old
BHP. Increasingly, companies like BHP/
Billiton must be prepared for the
onslaught of media interest and changing
societal expectations of their corporate
role. They will have to develop better
skills in communicating to external consti-
tuencies, advising them of the way in
which they are meeting expectations, or
carefully and cleverly explaining why
some expectations cannot be met.
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Appendix 1 Map of the Region
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Hanson and Stuart
