Ahead of tomorrow’s anticipated release of BP’s second-quarter
financial statements–and of the massive losses–BP is expected to
appoint Managing Director Bob Dudley to replace Tony Hayward as CEO
during tonight’s board meeting in London.
Hayward
is rumored to be leaving his post with $18.5 million–the equivalent of
a year’s salary and a guaranteed pension. (On top of that, he is slated
to be nominated to run TNK-BP, BP’s Russian joint venture–why BP would
trust Hayward to run anything at this point is beyond my imagination.)
But while the amount itself is unsurprising in this day and age of CEO
packages totaling hundreds of millions of dollars, $18.5 million is
certainly unconscionable in the context of the Gulf Oil Spill. Indeed,
it begs the question–how does Hayward’s tenure, beginning with the
entrenching of a culture of recklessness and ending with the permanent
scarring of BP’s corporate name, merit an $18.5 million golden
parachute?
Aside from the obvious objection that much of the
$18.5 million could go toward accelerating the relief effort, it also
seems financially imprudent for BP’s board to not have saved the money
for the mountains of impending litigation costs. Why not let Hayward
leave with the bare minimum rather than risk public excoriation by
giving Hayward an unwarranted, multimillion dollar exit package?
The
only explanation that comes to mind is that BP’s board feels–and
indeed is–complicit in the events that have compelled Hayward’s
departure. As Hayward paid little attention to safety during his
tenure, infamously decrying excessive cautiousness, BP’s board sat
tight as his risk-taking delivered greater profitability. The board
undoubtedly had Hayward’s ear, and could have opted to steer the
company in a different direction, but alas, as is too often the story
these days, the green obfuscated its vision. It seems clear that
Hayward, in the eyes of BP’s shareholders, investors and boardmembers,
isn’t seen to have done anything wrong so much as to have been
unlucky. The practice across corporate boardrooms of profit-seeking
undermining the fundamentals of good business has taken hold around the
world, and has only one remedy–sound regulation–but as we know far
too well by this point, the MMS simply wasn’t up to its job.
As for Bob Dudley, many are praising his appointment as politically
astute. Indeed, on the most basic level, Dudley is an American who grew
up in Mississipi and can be seen to have more focus on the oil spill’s
aftermath than a Briton who produces comments like, "I want my life
back." But Dudley’s selection sends a few important signals about what
BP views as its current priorities and the direction in which it is
seeking to go.
First, Dudley will be relied on to convince Congressmen to refrain from
passing a bill that will limit the sale of leases for drilling in the
Gulf to companies with good safety records. After Hayward’s abysmal
showing in Congress last month, and his credibility tarnished, BP
needed someone new–and American–who could lead the lobbying effort to
save one of their most vital enterprises, deepwater drilling in the
Gulf of Mexico.
Dudley’s appointment also signals, at a broader level, that BP will
focus on America and its shores as the site of its operations in the
future despite the public backlash. BP’s current presence here as the
largest oil company in the U.S. will not be abandoned, and presumably
with Dudley, likely redoubled. Dudley will be expected to expand
aggressively.
And finally, of course, Dudley’s selection is notable because the very
act of cleaning out the old house is seen as integral to BP’s future
success. Dudley will face a lot of pressure to replace Lamar McKay, CEO
of BP America, and the executives in BP’s Exploration and Production
Division–and indeed he will need to if expects to convince Congressmen
that allowing BP to drill in the Gulf in the future won’t lead to
another Deepwater Horizon catastrophe.