The Magazine of Corporate Responsibility

Opinion: A Punishment BP Can’t Pay Off

by Abrahm Lustgarten, ProPublica

This story was first published as an op-ed in The New York Times and is republished with permission.

Two years after a series of gambles and ill-advised decisions on a BP drilling project led to the largest accidental oil spill in United States history and the death of 11 workers on the Deepwater Horizon oil rig, no one has been held accountable.

BP_discover_enterprise_flaring_375Sure, there have been about $8 billion in payouts and, in early March, the outlines of a civil agreement that will cost BP, the company ultimately responsible, another $7.8 billion in restitution to businesses and residents along the Gulf of Mexico. It's also true the company has paid at least $14 billion more in cleanup and other costs since the accident began on April 20, 2010, bringing the expense of this fiasco to about $30 billion for BP. These are huge numbers. But this is a huge and profitable corporation.

What is missing is the accountability that comes from real consequences: a criminal prosecution that holds responsible the individuals who gambled with the lives of BP's contractors and the ecosystem of the Gulf of Mexico. Only such an outcome can rebuild trust in an oil industry that asks for the public's faith so that it can drill more along the nation's coastlines. And perhaps only such an outcome can keep BP in line and can keep an accident like the Deepwater Horizon disaster from happening again.

BP has already tested the effectiveness of lesser consequences, and its track record proves that the most severe punishments the courts and the United States government have been willing to mete out amount to a slap on the wrist.

Prior to the gulf blowout, which spilled 200 million gallons of oil, BP was convicted of two felony environmental crimes and a misdemeanor: after it failed to report that its contractors were dumping toxic waste in Alaska in 1995; after its refinery in Texas City, Texas, exploded, killing 15, in 2005; and after it spilled more than 200,000 gallons of crude oil from a corroded pipeline onto the Alaskan tundra in 2006. In all, more than 30 people employed directly or indirectly by BP have died in connection with these and other recent accidents.

In at least two of those cases, the company had been warned of human and environmental dangers, deliberated the consequences and then ignored them, according to my reporting.

None of the upper-tier executives who managed BP - John Browne and Tony Hayward among them - were malicious. Their decisions, however, were driven by money. Neither their own sympathies nor the stark risks in their operations - corroding pipelines, dysfunctional safety valves, disarmed fire alarms and so on - could compete with the financial necessities of profit making.

Before the accident in Texas City, BP had declined to spend $150,000 to fix a part of the system that allowed gasoline to spew into the air and blow up. Documents show that the company had calculated the cost of a human life to be $10 million. Shortly before that disaster, a senior plant manager warned BP's London headquarters that the plant was unsafe and a disaster was imminent. A report from early 2005 predicted that BP's refinery would kill someone "within the next 12 to 18 months" unless it changed its practices.

Such explicit flirtation with deadly risk was undertaken as part of Mr. Browne's effort while chief executive to expand BP as quickly as possible. Mr. Browne relentlessly cut costs, including on maintenance and safety. Then he hastily assembled a series of acquisitions and mergers between 1998 and 2001 that added tens of thousands of employees, blurred chains of command and wrought chaos on his operations. His methods - and the demands of Wall Street - became overly dependent on quantitative measures of success at the expense of environmental and human risk.

After each disaster, Mr. Browne pledged to refresh his focus on safety, investment in maintenance and commitment to the environment. His successor, Mr. Hayward, followed suit, saying that BP's culture had to change. But the Deepwater Horizon tragedy - which bears many of the same traits as the company's past accidents - shows how difficult it has been for the company's leaders to shift BP's corporate values and live up to their promises.

The question becomes: did they try hard enough, and did the mechanisms of oversight, regulation and law enforcement work sufficiently to provide a recidivist organization the deterrent that could guarantee its compliance?

After its previous convictions, BP paid unprecedented fines - more than $70 million - and committed to spend at least another $800 million on maintenance to improve safety. The point was to demonstrate that the cost of doing business wrong far outweighs the cost of doing business right. But without personal accountability, the fines become just another cost of doing business, William Miller, a former investigator for the Environmental Protection Agency who was involved in the Texas City case, told me.

The problem then (and perhaps now) is that it is the slow pileup of factors that cause an industrial disaster. Poor decisions are usually made incrementally by a range of people with differing levels of responsibility, and almost always behind a shield of plausible deniability. It makes it almost impossible to pin one clear-cut bad call on a single manager, which is partly why no BP official has ever been held criminally accountable.

Instead, the corporation is held accountable. It isn't clear that charging the company repeatedly with misdemeanors and felonies has accomplished anything.

At more than $30 billion and climbing, the amount BP has paid out so far for reparations, lawsuits and cleanup dwarfs the roughly $8 billion that Exxon had to pay after its 1989 spill in Prince William Sound in Alaska. And BP will likely still pay billions more before this is finished.

And yet it is not enough. Two years after analysts questioned whether the extraordinary cost and loss of confidence might drive BP out of business, it has come roaring back. It collected more than $375 billion in 2011, pocketing $26 billion in profits.

What the gulf spill has taught us is that no matter how bad the disaster (and the environmental impact), the potential consequences have never been large enough to dissuade BP from placing profits ahead of prudence. That might change if a real person was forced to take responsibility - or if the government brought down one of the biggest hammers in its arsenal and banned the company from future federal oil leases and permits altogether. Fines just don't matter.

Abrahm Lustgarten, a reporter for Pro Publica, is the author of “Run to Failure: BP and the Making of the Deepwater Horizon Disaster.”

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

 

Post to Twitter

Related Posts:


Tagged as: , , , , ,

1 Responses »

  1. Is it possible to identify who is individually morally responsible for the actions of a Company?

    Living outside of the USA, I was appalled to learn that BP was responsible for so many environmental incidents prior to the massive oil spill in the Gulf of Mexico which I was aware of.

    How many more times will the recidivist BP’s lack of prudence contribute to the destruction of the environment and even worse - human lives?

    It’s continued poor safety record due to cost cutting in maintenance has lead to constant reoffending which will continue if the Company and those who are responsible for the incidents taking place are not taken to task. Imposing a fine on a Company that makes huge profits is no more than a slap on the wrist as the fine is so small in comparison with their earnings and the destruction caused. It certainly is not a deterrent as we have seen that this has happened more than once although even though there have been empty promises made to clean up their act.

    I am deeply concerned about the behavior of the senior managers in this Company. It appears that the culture of this Company is to gain maximum profits at whatever cost. An act utilitarian would be asking what the consequences of their action would be, what would the amount of happiness or suffering likely be compared with the happiness or suffering likely to be caused by alternative actions to decide on an action that is morally acceptable.
    In the Texas City case, it appears the alternative action was chosen - ignore the warnings and scrap the maintenance where for $150,000 the repairs could have been made, in comparison with a human life calculated to be worth $10 million. Its choice of the alternative action by not proceeding with the maintenance required resulted in 15 deaths. Surely anyone with a moral conscience would tell us not to place lives at stake wouldn’t it? When looking at $150,000 compared with $10 million I would have thought that this would be an easy choice to make. So how do you hold the individuals’ that made the poor managerial decisions accountable for their actions, and is it possible to do so?

    Although you state that senior executives including John Browne and then his replacement Tony Hayward were not malicious, their relentless pursuit to earn greater profits by tuning a blind eye to the maintenance of equipment and safety of their staff is surely reckless endangerment. Where was their virtue of integrity, responsibility? Manuel Velasquez wrote in is paper on “Debunking Corporal Moral Responsibility” published in Business Ethics Quarterly 2003 (Open Polytechnic, 2012) about moral responsibility being a causal responsibility which is a responsibility that can be attributed to an agent that acts intentionally. Both Mr Browne and Mr Hayward could be classified as intentional agents as the positions they held within BP made them ultimately responsible for the day to day operations of the business. They intentionally did not act on the maintenance issues. They had a duty of care towards their staff. Although, they did not set out to deliberately cause these disastrous events, it was their failure to act when warned of the dangers with the equipment that led to these disasters taking place. This would surely then make them responsible as it was a direct result of their failure to act that caused the event, wouldn’t it? Some would say that as employees of BP they were acting under the guidance of Company policy which appears to have some corporate cultural problems, so should we make them scapegoats for what happened? I disagree with this. Everyone has their own set of values moral code of what is right and wrong and this behaviour was clearly wrong.

    Velasquez also states” Attributions of responsibility have real consequences on who is punished when things go wrong.” The problem lies therein of how the law attributes liability. How do you determine who is at fault in a large organization like BP that is diverse and subject to many different laws in different countries? Surely though, the senior management team should have to take some form of responsibility for the actions that took place.
    After reading this I looked up the BP Global website and their number one strategy listed under Business Strategy is– “A relentless focus on safety and managing risk”
    Under Sustainability – “We are working to enhance safety of risk management, earn back trust and grow value.”

    The key word here is trust and that they have made recognition that they need to earn it due to recent events is a step in the right direction. The commitment from BP towards the restoration of the Gulf of Mexico and the payouts still being imposed on them for this latest disaster may well have been what was needed to take them to task and change the way in which it operates and make a well overdue change in its corporate culture and will cost the Company for many years to come.

    Neither, Mr Browne or Mr Hayward his replacement is now employed by BP with Tony Hayward leaving only months after the Deepwater Horizon oil spill in the Gulf of Mexico, so the clean up has been managed by new CEO Bob Dudley. I have read that the Deepwater Horizon Task Force investigations continue to investigate what went wrong and will hold accountable individuals that broke the law, and I have just recently read that the first charge against an individual has been made.

    Ultimately, those individuals that are investigated and held to be morally and criminally responsible should be held accountable for their actions. It serves the purpose to others that this type of behaviour is unacceptable and that there are consequences.

    FBI News, Deepwater Horizon Task Force, retrieved May 7, 2012:
    http://www.fbi.gov/neworleans/press-releases/2012/former-bp-engineer-arrested-for-obstruction-of-justice-in-connection-with-the-deepwater-horizon-criminal-investigation

    BP Company website, retrieved May 7, 2012:
    http://www.bp.com/bodycopyarticle.do?categoryId=1&contentId=7052055

    The Open Polytechnic of New Zealand. (2012). Module Three. In 71203 Business ethics. Lower Hutt, NZ: Scholes.

Leave a Response