As Day 52 passes on the nation's worst-ever environmental crisis, it's time to understand how leadership situations such as this one are allowed to manifest into full blown disasters.
This posting will not attempt to do what the legions of other more talented hands have done to encapsulate events. No individual blame will be placed, no screams will be made for heads or CEOs nor will any investigations ensue. It will simply ask a few questions and then attempt to provide deeper perspective from both known facts and sources who work with corporate boards vs. opining from inside universities and think tanks.
And the question is...
Where was the British Petroleum (BP) board when this crisis first happened? Followed by...
What was or has been their response since then? Finally...
how does what's known today inform future actions?First, it should be noted that as bad as this operational crisis may be, what's always far more telling is how a company responds to a crisis. Going back to the worst domestic non-response case of all-time, Three Mile Island, letting the phones ring off the hook for days is the obvious worst while deft handling of the Tylenol crisis continues to rank as the most effective. Where the BP case study ends up will depend heavily on a final, still to be resolved outcome.
Back to the main question: Where was BP's board?
Looking over the company's official communications, since the explosion on April 20, at least 50 releases have been issued. Other than a joint statement between the Chairman and CEO on June 4, no board position has emerged nor has any communique indicated what the board has been doing since the outset. It's unclear how many board meetings have been convened nor is anyone at BP willing to confirm an official number. It should be noted that this is normal behavior. Boards generally speak as one through their Chairmen and CEOs and meet quarterly or more as issues demand.
Our view, however, is that this situation is anything but normal. In fact, had the BP board decided to openly challenge the validity of what management was telling them at the outset, chances are the leadership criticism would not be as severe. Even despite the 700,000+ gallons of oil spewing forth killing wildlife and scaring everyone to the height of "Jaws," the movie.
BP directors have no further to look than themselves (for a listing of the 14-member board, which includes six internal directors and seven non-executive types, go to
http://www.bp.com/managedlistingsection.do?categoryId=9021801&contentId=7040608) and the rash of governance ineptitude during the market collapse of 1998 for a guide on how not to act. Back when the financial system was in a free fall, not a single board member at Lehman Brothers or Merrill Lynch came forward to ask tough questions. Or at least they didn't publicly. Chalk another one up to attorneys who now manage the personal matters of board members as closely as their corporate clients.
Put more simply in the BP case, even if the board has been deliberating about whether to replace CEO Tony Hayward, what good is it to do so without full transparency? Especially when the company has already lost its reputation and a third of its equity value. Look at this way. Hayward could be the second coming of Jesus Christ right now and it wouldn't matter. The system that led to the current response is what needs changing, not the talent. A single governance standard across cultures might not hurt either.
The worst duplicity may lie in the fact that a majority of Fortune 500 board members tell public surveys that reputation is extremely important, yet when the proverbial blank hits the fan, they somehow develop amnesia with their own rhetoric.
This typical governance pattern is unacceptable during a crisis turned disaster. Real or perceived, nothing ever changes during a time when people are livid at institutions and want better solutions. Instead we're treated to heightened rhetoric and the blame game while Rome burns. Or in BP's case, while rescue workers wash oil off pelicans, and tourism officials rush to assure vacationers via promotional ads while oil sheens gather off the coast line.
Speaking of self interest, where are ExxonMobil, Texaco and Chevron? Couldn't their interests be BP's interests at this point? It's amazing that industry hasn't realized what the rest of us now know: Public opinion will never return in their favor no matter what happens. BP's crisis is now a national crisis, which means industry has lost another generation. No cagey spin can reverse this trend, which originates in the mismanagement of enterprise-wide risk, a key board competency.
The final takeaway here is that while reputation can obviously vanish overnight it's generally a slow crawl of leadership incompetency up to that point. With typically a raft of characters floating nearby who could have stepped out of their "best and brightest" institutional suits to demand something better. It's the least anyone could do to help improve a system that remains mired in outdated, group think behavior.
Heck, if nothing else, as a wise friend suggests, why doesn't BP just start giving away free gas to the Gulf's fishermen? To borrow a mangled phrase from a maligned former U.S. president, that's just common sensical!
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