On the 20th of Apr 2011 explosion at Deepwater Horizon rig in the Gulf of Mexico killed 11 staff and led to the largest petrol spill in the petroleum industry's background.
Apportionment of blame is likely to be contested in the law courts for a long time to come. Who - i. e. which stakeholders - do you consider has to show some responsibility for the automobile accident - or do you consider it an in the end unpreventable accident, in today's global economy?
Trying to get out of the PR wars on the engine oil spill, 4 month following the tragedy on September 8th, 2010, BP given its own inner 234-page article. BP cited at least eight errors of common sense and equipment failures that caused the explosion that sank the rig. BP concluded that "a complicated and interlinked series of mechanical failures, human judgments, anatomist design, operational execution and team interfaces" added to the event.
The company accepted only shared responsibility for the explosion and pointed hands at its companies - Halliburton, which provided concrete for the blown-up Macondo well, and Transocean, who owns the Deepwater Horizon. Transocean assailed the BP record as "self-serving, " contending that BP's "fatally flawed well design" set the stage for the rig explosion 50 kilometers off the Louisiana coast. Halliburton, which performed the well cementing, said it found a "number of considerable omissions and inaccuracies" in the article and "remains positive that all the work it performed was completed in accordance with BP's specs. "
BP's internal analysis report was satisfied with criticism by watchdog communities who questioned the business's motives. Wenonah Hauter, professional director of non-for-profit firm Food & Water Watch informed IPS News Company: "BP is distributing the blame and deflecting responsibility for the incident so they can justify their continued operation in the Gulf".
"Instead of accept the blame and financial repercussions for its disaster, BP is continuing to point fingertips at everyone it can, " said Kieran Suckling, professional director of the conservation group Center for Biological Variety. "BP is evidently seeking to limit its financial responsibility by blaming others and denying there was criminal carelessness, " Suckling said. "In the event the Team of Justice concludes that BP was criminally negligent, its fines under the Clean Normal water Action will quadruple from 1, 300 us dollars per barrel to 4, 300 dollars. That is greater than a 10- billion-dollar difference. "
One month after the accident on May 21 President Barack Obama set up the National Commission rate on the BP Deepwater Horizon Essential oil Spill and Offshore Drilling. The Commission payment reviewed the relevant facts and circumstances concerning the root causes of the Deepwater Horizon explosion and developed options to guard against, and mitigate the impact of, any olive oil spills associated with just offshore drilling in the future. This included recommending improvements to federal regulations, polices, and industry techniques. A final survey on the Commission's findings was provided to the Leader on January 12, 2011.
According to the record, "the Macondo blowout was the product of several specific missteps and oversights by BP, Halliburton, and Transocean, which government regulators lacked the specialist, the required resources, and the specialized expertise to avoid.
Halliburton and BP's management procedures did not ensure that cement was adequately examined. Halliburton had inadequate controls in spot to ensure that laboratory evaluation was performed in a timely fashion or that test results were vetted rigorously in-house or with the client. In fact, it would appear that Halliburton didn't even have assessment results in its possession showing the Macondo slurry was secure until after the job had been pumped. It really is difficult to imagine a clearer inability of management or communication.
BP, Transocean, and Halliburton didn't communicate adequately. Information has been exceedingly compartmentalized at Macondo as a result of poor communication. BP did not share important info with its companies, or sometimes internally despite having members of its own team. Contractors didn't share important information with BP or each other. As a result, individuals often found themselves making critical decisions with out a full appreciation for the framework in which they were being made (or even without acknowledgement that the decisions were critical).
Decision making functions at Macondo didn't adequately ensure that staff totally considered the risks created by time- and money-saving decisions. Whether purposeful or not, many of the decisions that BP, Halliburton, and Transocean made that increased the chance of the Macondo blowout plainly saved those companies significant time (and money). There may be nothing inherently wrong with choosing a less-costly or less-time-consuming alternative-as long as it is proven to be equally safe. The thing is that, at least in regards to BP's Macondo team, there has been no formal system for ensuring that alternative steps were in reality equally safe. "
The article summarized that "the accident of Apr 20 was avoidable. It resulted from clear flaws manufactured in the first illustration by BP, Halliburton, and Transocean, and by federal government officials who, relying too much on industry's assertions of the basic safety of their operations, didn't create and apply a program of regulatory oversight that could have properly reduced the risks of deepwater drilling. It is now clear that both industry and federal need to reassess and change business procedures to minimize the potential risks of such drilling".
BP's promise about catastrophe in the Gulf coast of florida to be the "unavoidable automobile accident" was actually powered with a reckless pursuit of earnings and selfish disregard for our planet.
QUESTION 2: If you were Tony Hayward, how do you have acted in the immediate aftermath of the car accident?
It is easier to say what I'd have done being truly a CEO of BP after examining what Tony Hayward have wrong through the incident in the Gulf.
BP's handling of the Deepwater Horizon problems under its former CEO Tony Hayward may be observed as a "textbook" case of how never to manage an organization in a period of reputational problems. On June 17 Tony Haywood stonewalled the home Energy and Business Subcommittee on Oversight and Analysis by refusing to provide information he recognizes as main operating official. He was recorded sharing with a camera man to "escape there" throughout a photo-op on the shores of Louisiana.
Hayward's summer months of PR disasters culminated in his people declaration that "I'd like my life again, " and he went to take part in the JP Morgan Asset Management Round the Island yacht competition off the Isle of Wight in the UK, while Gulf residents struggled with the effects of the spill. He was widely criticized for his comment that was perceived as selfish and he later apologized for it on BP America's Facebook web page.
President Obama's main of staff Rahm Emanuel wryly noticed on American network media that "I think we can all conclude Tony Hayward won't have a second job in PR consulting. " In an interview on NBC on 8 June, 2010, Barack Obama said that Hayward "wouldn't be working for me after some of those statements", referring to the remarks BP CEO made following a spill.
In a lecture at Stanford Business College in May 2009 Hayward declared to the business students that ". . . our main purpose in life is to build value for our shareholders. " Later his claims that centered only on the individual corporate remit have also been quoted outside the context of the entire lecture. Hayward's perspective is consistent with Milton Friedman who composed in his famous 1970's article in THE BRAND NEW York Times Journal, that "the one and only cultural responsibility of business, is to increase gains for shareholders. "
General idea of Friedman was that only people can have obligations, but not businesses. The people who are hired by companies have a responsibility mostly with their employers, to meet their desires which generally are profits. General public view the company all together representative of course, if CEO's mistake contributes to one is social judgment, the general public will judge the whole company, not merely this person.
It has shown time and whilst CSR has yet to be harnessed to make a significant positive difference to profits, a negative insurance policy can destroy profits. The expenses BP saved by firmly taking high-risk decisions at Deepwater Horizon have finally gone to many other stakeholders - residents of the Gulf, federal government, companies. "BP cut corner after corner to save a million dollars here and a few time there, " said Henry Waxman, whose committee was investigating the Deepwater Horizon accident in the US. "And today the whole Gulf Coastline is paying the price. "
Some theorists assume that CSR puts a stop to businesses performing to their full potential and crippling the market. My opinion is the fact that a powerful CSR policy as well as reliable marketing and clear business strategy may help an enterprise grow to much larger profits whilst also benefitting population.
Ironically enough, Tony Hayward was one of the key proponents of CSR in 2005, supplying a talk about corporate responsibility and its own increasing importance at BP. This was when Lord Browne was CEO and CSR was gaining more attention. But since middle-2007 many factors have weakened under Tony Hayward's control, including contractor fatalities and greenhouse gas emissions. Environmental and safety fines spiked upward in '09 2009 and hydrocarbon flaring has practically doubled since 2007.
Summarizing the response, easily was a CEO of BP I would spend all my amount of time in the united states to see what's happening frequently and actively communicate with US administration for coordination of clean-up initiatives. I'd not lie about how big is catastrophe right from the start and will not make an effort to bribe ecologists in makes an attempt to cover up the actual consequence of the engine oil spill. The first choice is obviously needed at the time of crisis which Tony Hayward has didn't be.
QUESTION 3: In the event that you were a member of the BP table what do you be recommending at this point that BP must do about the disaster unfolding in the Gulf coast of florida?
BP lost $95 billion in market capitalization within a couple weeks of the Deepwater Horizon explosion, using its stock priced back again to 14 years. There is a definite disproportion between the company's market loss and even the most pessimistic estimates of cleanup costs - that never exceeded $30 billion - this is a sign of the expenses of this reputational risk turmoil to BP. While businesses today recognize the value of brand definition as a competitive edge available on the market, reputation remains an often underestimated component of a company's value.
Corporations experiencing a public turmoil, such BP in 2010 2010 undergo what's termed "reputational problems. " This concept was initially coined by Stephen Greyser, Professor Emeritus at the Harvard Business Institution, and explains the critical period following a crisis event whenever a company's management reaches risk of losing the self confidence of the markets. Reputational distress can result in significant impact upon a firm's market capitalization, as well as its corporate and business reputation, in relationship to how the turmoil response of the firm's management is symbolized in the markets and the mass media.
Brand Funding Plc, the world's leading brand valuation consultancy, predicted that the fallout from the explosion at the Deepwater Horizon rig has caused BP's brand value to plummet by $7. 4bn, representing a 61% street to redemption (or 72m per day). Having put in many a huge number on promoting its "Beyond Petroleum" strapline and setting itself as the most green of the engine oil companies, this catastrophe has had an extremely detrimental impact on its brand value internationally, especially in america.
In comparison to BP, the actions of Johnson & Johnson regarding the Tylenol tampering scandal signify a "guidelines" example of how a organization can successfully control reputational risk. Employing a crisis strategy described by ambitious transparency, Johnson & Johnson retained general population and market assurance, resulting in the worthiness of its stocks quickly rebounding from immediate loss and the Tylenol brand actually becoming the industry head quickly thereafter. Reputational risk management can therefore represent not just a challenge, but a chance.
Traditionally in CSR the Bottom Line identifies the financial and economic responsibility of the company that is making profits. Recently launched by John Elkington (1994) Triple Bottom Line model gives a wider view of duties of organizations which naturally encompasses financial aspects and also environmental and interpersonal impacts of the business. The use of the triple bottom line allows companies to evaluate their success not only in their financial field but also in environmentally friendly and communal ones.
BP currently remains a member of US Global Compact. That is a high-profile CSR system, which requires firms to stick to 10 guidelines which require to have a precautionary approach to environmental challenges, promote environmental responsibility, and encourage the development of clean technology. The oil spill in the Gulf coast of florida seems to provide facts that BP hasn't adhered to the principles and may undermine its credibility as a signatory to the Compact.
According to Mary Ann Ferguson, professor of PR at the School of Florida, "when a company has a good reputation, people will appreciate its high-fit CSR program. But if BP tries to use high-fit CSR to help expand its general public image, it could do itself more harm than good. Before you develop any high-fit CSR program, examine your company's reputation first and that means you don't just wreak further harm". After the company name is tarnished, high-fit CSR will produce only skepticism. Quite simply, it backfires.
If I had been a member of the BP table at the time of the scheduled board appointment in London in May 2010, to begin with I would suggest that the table reaching should be convened in Louisiana, ideally carrying part than it using one of the support vessels, employed in the petrol spillage liquidation procedure, so that all board members can see for themselves, what has took place and received first hands information from the emergency operations crew. The next area of the board meeting must have been carried on the shore in Louisiana, and staff from the main element stakeholders in US such as regulators, environment protection agencies, NGOs, angling community, must have been invited to the meeting. This little step, which wouldn't cost much would have helped to change the public belief of the company's approach to the problem.
Secondly, Tony Hayward must have been removed by the mother board at this appointment, and a new interim CEO with specific drilling and catastrophe management experience should have been appointed at this time, showing BP's dedication to liquidate the devastation, thus delivering someone with hands-on methodology instead of discredited CEO. At the moment I would also suggest that the business start providing accurate estimates of the quantity of engine oil spilling from the well, instead of trying to deceive the press and specialists. BPs move with cutting down estimates of the engine oil spillage did more harm than good. The inconvenient truth is less harmful that the lovely lies.
The next thing would be stop placing blame on subcontractors Halliburton and Transocean and start working together looking for fast and sturdy solution of the trouble. BP appeared really silly using its biased internal survey which has put most responsibility for the devastation to its companies. Wasn't it BP - who owns the rights to the well, who preferred those contractors to begin with? I am sure that BP did their due diligence before hiring these companies.
Last, however, not least is to start out paying serious attention and making an investment significant funds into disaster liquidation in the neighborhoods along the Gulf. BP has to get attention of generally US as well as world marketing to the work recognise the business is starting in the sea and on the ground along the influenced seacoast. Capping the well is without doubt a high goal, but dealing with the neighborhood stakeholders and environmental harm is believe it or not important task, which provided to the company as being one of the most difficult ones. Stakeholder management is evenly important, and saving the environment and providing other opportunities to people which have lost their source of income is critical. EASILY was an associate of the panel of BP at that time, I would put all the efforts and financing into this exercise as I'd into capping of the well, or even more. Such proactive way would help BP in the future when coping with individual or class lawsuits, approaching their way, as US is one of the very most litigious countries on the globe.
QUESTION 4: Why do you consider BP captivated such opprobrium?
Hayward, and BP generally, at first downplayed the spill, proclaiming on 17 May 2010 that environmentally friendly impact of the Gulf spill would likely be "very very modest" and dialling the spill "relatively small" in comparison to how big is the ocean. On 27 May, Haywood modified his assessment, dialling the spill an "environmental catastrophe" within an interview with CNN. Hayward attained the nickname "Tone-Deaf Tony" for his not very true assertions.
Then after the explosion, BP rejected there was a drip until it became painfully obvious. If they could no longer hide that simple fact, they low-balled the estimation of the drip at 5, 000 barrels every day, which is most likely low by one factor of 20.
When Hayward fulfilled with participants of the U. S. Senate shortly after the car accident, he asserted that BP designed to meet its commitments up to its $75 million liability cover under the U. S. Essential oil Pollution Work. Hayward's assertion that BP was guarded by limited responsibility under U. S. legislation, coming at a time when thousands of fishermen and tourism staff in Gulf states were being let go due to the engine oil spill, so angered the senators with whom he met that within days and nights legislation was presented in the U. S. Senate to improve the damage cover facing BP from $75 million to $10 billion.
BP sprayed more than 1 million gallons of chemical dispersants Corexit 9500 and 9527 in to the Gulf because the oil spill commenced in a reckless work to make the engine oil "disappear" from general population view. BP threatened clean-up staff they'd be fired if indeed they spoke to the advertising, also the business ordered workers showing up with respirators and other protecting gear to remove it or be terminated. Cleanup personnel have been complaining of dizziness, nausea and other symptoms since then.
Dispersants only alter the chemical and physical properties of the engine oil, making it more probable to mix with seawater than deposit on the shoreline. Just what exactly the dispersants do is re-direct the essential oil, making its impact perhaps less so on parrots and shore-dwelling animals, but way more on fish, coral reefs, oysters and other marine life that are in the deeper waters. Also, when the dispersants mix with the crude essential oil, a third far more toxic product is produced called "dispersed essential oil" which includes been shown to become more harmful than the sum of its parts. Toxicologists can only guess what the entire magnitude of the destruction will be, and it's likely it will not arrive in full for years or ages.
Before BP could stop the essential oil leaking in the bottom of the Gulf of Mexico, it unleashed $100 million in ad spending, basically on network Television, to stem the damage to its image. But it addittionally started spending heavily where it possessed never put in much before: buying advertisements in Google's serp's. Almost $3. 6 million in the month of June by itself were put in by BP, which forced the company in to the upper echelon of search advertisers, in a group with AT&T, Expedia, Amazon and eBay. When people sought out "oil spill" they'll be directed to BP's damage control page that shows the business's "Gulf of Mexico Response" and cleanup initiatives, instead of the massive amounts of destruction that was still ongoing.
In the CNN interviews, Deepwater Horizon personnel described a corporate and business culture of lowering staff and disregarding warning signs ahead of the blast. They stated BP routinely trim corners and pushed ahead despite concerns about safeness. The rig survivors also said it was always realized you could get terminated if you increased safety concerns that might postpone drilling. CNN interviews also uncovered that BP experienced bought a shortcut on the day of the explosion designed to speed drilling, as the rig was five weeks behind schedule and 1 day of its operation had around cost of $750, 000.
All these fact is unsurprising as BP is not any stranger to environmental criminal offenses. Within the last two decades, BP subsidiaries have been convicted of three crimes in Alaska and Texas, including two felonies. Also BP contains the dubious honor of acquiring the stiffest fine in history for work basic safety violations - 760 fines as of June 2010, while Exxon Mobil has had just one. In 1991 BP was cited as the utmost polluting company in america based on EPA dangerous release data. The company has been recharged with using polluted gases at its Ohio refinery (for which it was fined $1. 7 million), and in July 2000 BP paid a $10 million fine to the EPA for its management of US refineries.
During the previous year or two prior to the Gulf mishap BP became more profitable: Tony Hayward received a 40 percent pay increase in 2009 predicated on BP's "upgraded performance. " The business announced profits of $5. 6 billion for the first quarter of 2010, more than increase the same quarter in 2009 2009. But BP failed to fix the one problem that continues to obtain it into trouble: a reactionary management culture that puts an focus on cutting costs and efficiency while neglecting preventative maintenance. BP has been chronically unable or unwilling to learn from its mistakes relating to analysts, competition and ex - employees.
QUESTION 5: Looking forward 3-4 years, how will you think the disaster will have an impact on BP? Does it: (a) haven't any significant, long-term effect on the business enterprise? (b)Bring about BP becoming a much smaller company? (c)) Result in BP being bought by the Chinese, Qataris etc ormerged with another international engine oil company? (d) Be the catalyst for BP to move irrevocably "beyond petroleum" and learning to be a new form of global energy business, established eventually in renewable energy?
The BP olive oil spill has place a new precedent for both environmental harm and commercial irresponsibility. According to BP formal "there was reasonable why the Macondo well had been drilled in the first place. It's because the world badly needs the coal and oil that reside beneath the seabed of the Gulf of Mexico, the Atlantic and other oceans to be able to meet inexorably growing energy demand". BP forced technology to the limit in the remotest reaches of Alaska and the deepest waters of the Gulf of Mexico - "the rough stuff that others cannot or choose never to do, " as Tony Hayward once said.
Last year there was a serious debate as to if the Deepwater Horizon event will lead to individual bankruptcy for BP. Project failures like the Deepwater Horizon can have tremendous consequences on the value of BP shareholders, including many pensioners in the UK and current and earlier employees and may even jeopardize survival of the business.
BP have been paying not only for all environmental and monetary damage from the blowout, but may also be facing years of claims, negotiations and litigation. The company is still facing legal suits from Edinburgh and Merseyside pension money for the increased loss of value that emanated from an Alaskan pipeline spill in 2006. Gulf coast of florida claims will last much longer. Matching to Bloomberg, BP required charges totaling US$40 billion in the next and third quarters of 2010 to account for the cost of the Gulf spill.
The company declared in July 2010 it would sell between $25 billion and $30 billion of property, and has sold areas in Argentina, Colombia, Pakistan, the U. S. and Vietnam. BP pursuits in Algeria, Alaska's Prudhoe Bay and Canadian pipelines may be next up on the block. Corresponding to offshoreenergytoday. com, since taking fee in Oct, new CEO Bob Dudley has considered asset sales to $22 billion to pay costs from the most severe US oil spill, reorganized management and slice the deal with Rosneft to provide the company usage of Russia's untapped Arctic reserves. The share price has recovered about 60 percent from June's post-spill low, partly on expectations that the dividend will give back at 50 percent of the prior level. Recently BP has reinstated the dividend that was suspended after the spill as higher engine oil prices and improved upon refining margins lifted its cash flow.
It is unlikely that BP will be obtained by other major petrol companies ExxonMobil or Royal Dutch Shell. BP professionals held talks with a number of sovereign prosperity funds including money from Abu Dhabi, Kuwait, Qatar and Singapore, for creation of any strategic collaboration to avoid takeover. Now BP continues to be Europe's second-biggest petrol company and the biggest producer of oil and gas in the US. Financial Times said that "before the accident, the united states had been the principal focus of the group's strategy, with deepwater petrol development in the Gulf coast of florida at its heart and soul. It had been a source of coal and oil reserves in an area with an obviously stable legal and tax platform, and was a destination to develop techniques that may then be deployed about the world".
The BP oil spill has brought attention to the issue of greenwashing. This term was coined by New York environmentalist Jay Westerveld (1986) and means deceptive use of inexperienced PR or inexperienced marketing in order to promote a misleading notion that a company's procedures or products are environmentally friendly. BP entered the greenwashing playing field spending 200 million dollars on rebranding the business in 2000. BP Television ads were focused on designs of biofuels, substitute energy and carbon footprints, closing with a green, flower-like custom logo and the slogan "Beyond petroleum. "
According to Kate Sheppard, a writer at Foreign Plan (3 May 2010), "despite all BP has allocated to rebranding, the business hasn't done practically as much to move "beyond petroleum" as its plan implies. Actually, BP has been turning away from opportunities in nonfossil energy, last year cutting investment in alternate sources from $1. 4 billion to $1 billion. Weeks prior to the spill, BP declared that it was shuttering its solar manufacturing plant in Maryland, it shut the entrance doors of its much-hyped UK Option Energy headquarters in '09 2009. The company earned $73 billion in income in the first quarter of 2010, but only about $700 million of its business was different energy resources like breeze and solar. The company has also put in lots of time and money convincing political leaders that just offshore drilling is clean, safe, and environmentally friendly -- while at the same time actually fighting with each other against safety precautions that might have averted the horror in the Gulf. "
Green Energy Reporter said that BP plans to invest $1 billion in 2011 in its renewable energy business, roughly the same amount it invested last year. In 2008 BP was granted a satirical award, the "Emerald Paintbrush" award, by Greenpeace UK. The award was given to BP to be able to spotlight its alleged greenwashing advertising campaign. Critics point out that while BP advertises its activities in alternative energy sources, the majority of its capital investments (more than 90%) continue steadily to go into fossil fuels associated with major environmental obstacles on a worldwide scale.
BP will definitely not make steps to learning to be a new form of global energy business based on renewable energy until it can find the same tremendous gains from coal and oil. After the event Bob Dudley has determined improving BP's safe practices practice and performance as you of his highest priorities. Since it talked about in BP's inside investigation record, it was easy for BP to drill deepwater wells safely and securely. It is essential for the company's future which it can surpass that aspiration.
In his latest conversation on March 08th 2011 at CERA Week Conference in Houston Bob Dudley said: "BP is sorry. BP gets it. BP is changing. We're building up basic safety, growing value and working to earn trust".
The lesson for large companies is the fact that whilst cost and time cost savings are certainly key initiatives, senior management and the Plank must ensure that they do not happen at the risk of brand and stakeholder associations. Only by remembering this disaster and pressing for the reality to be brought to the top - the truth in what BP was covering - we can prevent a similar event from developing in the foreseeable future.
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