The following is an expanded version of a paper submitted by the author on September 12, 2012 for a class assignment. The author is currently pursuing a master of science in management degree from Cardinal Stritch University in Milwaukee.
Abstract
Relying on a combination of academic research, news articles, and his own reflections and insights into business, economics, and politics, this student examines the ethics and decision-making processes of BP, formerly known as British Petroleum.
Introduction
BP, formerly known as British Petroleum, has, as Thorne, Ferrell, and Ferrell (2011) point out, “…experienced a lot of ups and downs over its hundred-year history” (p. 586). At times over this long and bumpy course, the company has earned the praise of many stakeholders, including the media, the research community, shareholders, government leaders, and the average everyday consumer of its gasoline and petroleum products, only to earn their scorn shortly thereafter, with a repeating cycle of sorts. In the following paper, this student will utilize a combination of academic research, news articles, and his own reflections and insights to analyze BP’s ethics and conduct over the years.
Analysis
There is no doubt that BP has mixed results when it comes to showing goodwill to its stakeholders and enforcing ethical, and, quite frankly, simple, commonsense behavior. In response to a large number of past incidents and scandals involving spills, neglect, explosions, employee injuries and deaths, indictments and other run-ins with the law, lawsuits, and major fines, the company issued a comprehensive code of conduct in 2005 for all its employees across the world, a sweeping, first-of-its-kind undertaking for the firm. As Thorne et. al. (2011) points out, “…the code seeks to unite its diverse employees behind a set of universal standards of behavior…regardless of location, culture, and language…a one-stop reference and guide to individual behavior at BP…everything from health and safety to financial integrity” (p. 592). Ironically, however, two oil leaks occurred at BP’s facility in Alaska in 2006; the first one in March, and the second occurring five months later, in August. Thorne et. al. notes that it was soon discovered that the regular cleaning of these pipes was not occurring, a process that is simple to conduct, should have been routine, and could have easily prevented these incidents from happening (2011, p. 588). Tragically, another incident occurred in Alaska just a little more than a year later, in October 2007 - “This time it was 2,000 gallons of toxic methanol, a deicing agent, that spilled into the tundra and killed many plants and animals,” Thorne et. al. cites (2011, p. 588).
Flashing forward to April 20, 2010, an explosion and ensuing fire occurred at the company’s Deepwater Horizon rig in the Gulf of Mexico. Approximately 17 people were injured during this catastrophe, and 11 went missing (Guardian research, 2010). The resulting oil leak lasted approximately three months, and the findings of a study conducted by scientists released on September 23 placed the estimated amount of oil spilled into the gulf at around 4.4 million barrels (Guardian research, 2010).
Further fanning the flames, so to speak, were a number of public relations mishaps that came to portray company leaders as insensitive and, at times, even catching them in outright lies to the public during the Gulf of Mexico spill. For example, then-chief executive Tony Hayward, in a statement on May 30, caused widespread anger when he told reporters, “There's no one who wants this over more than I do. I would like my life back” (Guardian research, 2010). He was seen less than a month later, on June 20, at a yacht race with his son, and developed a reputation for not appearing at meetings and functions with government and industry leaders (Guardian research, 2010). Additionally, it was learned on July 21 that the company admitted, “…to using Photoshop to exaggerate the level of activity at the Gulf oil spill command centre. The picture, posted on the company's website, shows staff monitoring 10 giant video screens. In reality, three of the screens were blank” (Guardian research, 2010).
It was reported on January 6, 2011 that a commission put together by The White House reached the conclusion that the Gulf spill was caused by, “ …systematic management failure at BP, Transocean and Halliburton” (Guardian research, 2010).
Finally, in August 2012, in what is perhaps the latest incident to plague BP, motorists in four states purchased bad gasoline, forcing the company to recall the affected gas supply and begin paying out claims on car repairs. According to a news station that reported on the recall, the gas contains, “high levels of a polymer residue” and affected cars in Wisconsin, Illinois, Indiana, and Ohio (WLS-TV Chicago, 2012). In a statement on a Web site that BP set up in order to address the situation and encourage affected customers to submit claims, the company states, “We have significantly increased our normal testing and sampling program throughout our Whiting distribution system to verify the fuel BP sells meets our rigorous quality standards” (BP p.l.c., 2012). With a past track record of poor management and not following basic procedure, one is unfortunately forced to wonder what “normal testing and sampling” actually means.
To its credit, BP has attempted to repair its image over these past few years. Thorne et. al. notes the resentment many stakeholders had come to hold against, not only BP, but the entire industry, coming into the twenty-first century, stating:
The twenty-first century found stakeholders more wary of companies, especially after decades of repeated violations and misconduct on the part of the oil industry. Oil leaks, toxic emissions, dead animals, refinery fires, wars in the Middle East, rising gas prices, pollution, and dwindling supplies all have combined to paint a very ugly picture of the oil industry as a whole (2011, p. 589).These efforts at reputation repair by BP have included, among others, more investments in alternative energies like solar power and biofuels; developing technologies that trap carbon emissions, known in industry jargon as carbon sequestration; and launching a number of programs and initiatives designed to teach high school students and others the importance of sustainability (Thorne et. al, 2011, pp.589-592). A simple glance at its main Web site highlights BP’s efforts to get it right, so to speak, with its various stakeholders around the world (BP p.l.c., n.d.). However, even with these various initiatives, as meaningful as they are, one still wonders how truly loyal to procedure, policy, and the collective good some BP employees really are, given how so many seemingly-avoidable incidents have occurred since the company’s ground-breaking 2005 code of conduct. With each catastrophic event comes ramifications for each of the company’s stakeholders, which include partner firms, franchise owners, shareholders, scientists and researchers, governments, and countless retail consumers across the globe, among others.
The Gulf of Mexico Spill Enters the Political Arena: A Personal Experience
In June 2010, this student attended the Democratic Party of Wisconsin’s (DPW) annual convention as a delegate. Held in Middleton, Wisconsin that year, a resolution concerning BP was approved by the convention, stating the following:
WHEREAS, on April 20, 2010 an explosion of a BP leased oil rig led to an unabated flow of oil into the Gulf;
WHEREAS, the spread of oil has led to the destruction of small businesses, livelihoods, and ecosystems; WHEREAS, the total costs will be billions of dollars and last for decades; and,
WHEREAS, BP appears negligent for making irresponsible decisions and not taking effective precautions; THEREFORE, RESOLVED, the DPW calls on the Obama administration to hold BP responsible for all costs relating to the spill and calls on all Americans to boycott BP (Democratic Party of Wisconsin, 2010).
This student, one of only what appeared to be a handful of moderates on this issue, voted in the “nay” on the final vote, clearly in the minority (Robertson, personal communication, September 2012). At the time, this student’s reasoning, which remains the same today, was deeply concerned with the final line of the resolution calling on all Americans to boycott BP. While it is understandable to be angry at BP officials for their negligence, incompetence, and insensitive handling of some major situations, we as a country need to understand that the BP business model – and this line of reasoning should be applied to any major, well-known corporation – not only consists of a corporate-level entity that’s handing down policies, procedures, and the like, but includes independent franchise owners, as well, and many at that.
While those who called for a blanket boycott on BP may genuinely feel that this is the best way to get the company to finally listen to their grievances and get its act together, so to speak, they are not taking into account the franchise owners and their own employees who would become innocent victims by such an act. Many of these franchise owners are hard-working, middle-class, average, everyday people, just like many of those who called for a boycott. These franchise owners are not wealthy oil executives. They are small business owners who reside in our communities and who simply want to experience the dream of owning a business.
These independently-owned businesses support little league teams, help sponsor community events, serve as hubs for local news and information, and so much more. Additionally, they rely on other businesses for a variety of operational needs, ranging from food and beverage vendors to credit card processors, and from cleaning supply merchants to information technology (IT) providers, with many kinds of businesses in between. A boycott, then, would have damaging effects on both individual communities and the broader economy. Of course, with BP being a multinational company in an increasingly globalized economy, one can only imagine both the political fallout and the economic ramifications across the globe, not just here in the United States, if a serious, well-organized boycott threat were to actually take hold. This is the position that leaders at the corporate level could have easily put their franchise owners in because of their inability to effectively manage and communicate, as well as their failure to comply with routine safety checks and procedures. And there can be no doubt that countless individuals went ahead with their own self-imposed boycott during this tumultuous time, likely impacting franchises around the world anyway, however small that impact may have been.
Conclusions
Though BP has made seemingly-sincere efforts these last number of years to portray itself and the broader oil industry in a more positive light, it is clear that additional progress in the areas of ethical management, enforcement, and communication must be made. This is especially true given the fact that a number of catastrophic events, which appear to have been easily preventable, happened after a sweeping commitment by the company in 2005 to overhaul its code of conduct. Being a multinational corporation in an ever-increasing global marketplace, every incident brings with it ramifications for all of its stakeholders across the world, producing a domino effect that the company simply cannot afford if it wishes to foster goodwill and remain an industry stalwart.
References
BP p.l.c. (2012). Station lists. Retrieved from http://www.bpresponse.com/go/doc/5207/1525999/
BP p.l.c. (n.d.). Sustainability. Retrieved from http://www.bp.com/sectionbodycopy.do?categoryId=3311&contentId=7066754
Democratic Party of Wisconsin (2010, June 12). Democratic party of wisconsin 2010 resolutions approved by convention June 12, 2010. Retrieved from http://www.wisdems.org/about/issues/
Guardian research. (2010, July 22). BP oil spill timeline. The Guardian. Retrieved from http://www.guardian.co.uk/environment/2010/jun/29/bp-oil-spill-timeline-deepwater-horizon/
Thorne, D.M., Ferrell, O.C., & Ferrell, L. (2011). Business & society: A strategic approach to social responsibility & ethics (4th ed.). Mason, OH: South-Western Cengage Learning.
WLS-TV Chicago, IL (2012, August 29). BP releases list of stations with bad gas in recall. Retrieved from http://abclocal.go.com/wls/story?section=news/local&id=8790677/
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