By Rich Smith (TMF Ditty) May 7, 2010 | Comments (18)
Recs
David Gardner called it. He's up 1,334%! See what David's recommending that you buy NEXT.
A few years back, salesforce.com CEO Marc Benioff urged America's corporations to view philanthropy and community improvement as missions equally important to the eternal search for profits. He summarized his thoughts in a little book titled "Compassionate Capitalism: How Corporations Can Make Doing Good an Integral Part of Doing Well."
And while I doubt anyone would argue that last week's Deepwater Horizon disaster qualifies as "good," or that the underground oil reservoir now spewing its contents into the Gulf of Mexico is the "well" that Benioff had in mind, I do believe that in this case, in the depths of this particular PR nightmare, there's one company that's living up to Benioff's standards of corporate stewardship: BP (NYSE: BP).
BP?! Are you insane? They're the bad guys!Yes, yes, I know. The conventional wisdom on this story reads opposite. BP's the outlaw oilman, reaping billions in profits from destroying the Earth. It's the cowboy wearing the black hat, the starring villain in There Will Be Blood -- I get it. But if you'll lay aside the pitchforks and torches for a moment, I'm going to explain to you why I think BP's doing a standup job in this here crisis.
You see, when a PR disaster blows up in its face, any corporation's standard operating procedure is to: "Admit nothing, deny everything, and make counter-accusations." As the lawyers will tell you, admitting guilt is no way to beat a lawsuit.
Mea culpa? Heck no! Somebody-elsa-wasa-culpaThat's why, when caught with its hand in the mortgage market cookie jar, rather than issuing an immediate mea culpa and lamenting how a relentless drive for profits caused it to lose its moral compass, Goldman Sachs CEO Lloyd Blankfein instead responded with the improbable assertion that he was "doing God's work."
It's why Toyota threw everything plus the kitchen sink into the defense against charges of shoddy workmanship on its automobiles, blaming first floor mats and then gas pedals -- anything to avoid admitting that it was potentially a software problem, and very expensive to fix.
Most pertinent of all, however, it's why ExxonMobil (NYSE: XOM) -- BP's predecessor in the field of mega-oil PR blowups -- spent the better part of two decades arguing somebody-elsa-wasa-culpa for the 1989 Exxon Valdez incident. It's why Exxon denied that it did anything really and truly culpable and worthy of punishment, and then paid millions of dollars to what seemed like trillions of lawyers in an all-out effort to reduce the $5 billion punitive damages award originally levied against it.
Round up the usual suspects Given the corporate track record, and Benioff's admonitions notwithstanding, what's truly surprising about BP's reaction to the Gulf of Mexico disaster is ... well, that it's taking responsibility. After all, there is no dearth of decoy targets to which BP could have directed the public's attention in this mess. Chief among them, Transocean (NYSE: RIG) owned and operated the rig under contract to BP, drilling the well and pumping out the oil. It was on Transocean's watch that the disaster occurred. BP could easily have pointed the finger at Transocean, accused it of ecological murder most foul, and diverted the public's outrage "thattaway."
Or consider the case of Halliburton (NYSE: HAL). It has been rumored that the company's potentially poor cementing of the well may have allowed natural gas to escape to the surface of the rig, causing an explosion. While the investigation is ongoing, Halliburton is likely responsible for a similar incident last year off the Australian coast. After the Deepwater Horizon blew up and sank, a fail-safe device called a blowout preventer manufactured by Cameron (NYSE: CAM) was responsible for shutting down BP's well, and preventing the environmental disaster that resulted. It failed.
My mess. I'll fix itRegardless, when describing the disaster and what BP intended to do about it -- how it would compensate those harmed by the oil slick and repair the environmental damage -- the company's bull's-eye-in-chief made no bones about his intentions: "This ... is our responsibility," promised CEO Tony Hayward. "Where there are legitimate claims for business interruption, we will make them good."
Amazing.
According to Hayward, it doesn't matter that: "This wasn't our accident. This was a drilling rig operated by another company. It was their people, their systems, their processes." Regardless, BP is: "responsible for the oil and for dealing with it and for cleaning the situation up."
And speaking of dealing with it, Hayward's deputy, chief operating officer Doug Suttles, advised that BP has already begun drilling a relief well, whereby BP will seal the original leak. He promised on Tuesday that BP would have a multistory steel containment system installed over the main leak "within a week." In fact, BP began deploying said oil cap last night.
Foolish takeawayThe oil industry in general, and BP in particular, have suffered a massive public relations hit over Deepwater Horizon. So as you're motoring to the protest rally this weekend, the hatchback of your internal combustion engine-powered automobile stuffed full of placards decrying BP's greed for profits, I'd urge you to remember:
So far, BP's response to this crisis has been beyond reproach.
salesforce.com is a Motley Fool Rule Breakers pick. Fool contributor Rich Smith owns Benioff's book -- but does not own shares of (nor is he short), any company named above. The Motley Fool has a disclosure policy.
Read/Post Comments (18) | Recommend This Article (31) Recommended 31 Times
Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.
Even 21 years later, the Exxon Valdez cleanup has not been completed. The killed fish and marine animals have not been brought back to life, and many fishermen have not gotten their jobs back. People continue to find the remaining crude oil very near the surface, under rocks, in the sand ... .
Will BP do a better job than Exxon? I have no idea, but I doubt it. Recall that legally, other than obeying legally mandated regulations, they must act as fiduciary agents of their shareholders, and act solely in the interest of the shareholders; pension and retirement funds depend on their doing just that. The larger community is not part of their legally mandated duties.
"Where there are legitimate claims for business interruption, we will make them good." -- There'a a lot of wiggle room in that statement ... legitimate, business interuption, make good. Lawyers, grab your briefcases.
BP is playing the spin game well, keeping control. It's learned, I hope, from the Exxon Valdez and Toyota and JNJ. But PR is just words. If BP can make Halliburton and Cameron pay for part of this, I'm sure it will.
And while BP is working to stem the flood of oil, I don't know yet whether its reaction over the 2 weeks has been appropriate and timely.
Kris -- TMF copyeditor
Rich, I'd like to hear your opinion if BP is a good buy or not at the current price.
bp is more concerned with getting the oil than stopping it.they should be completely removed from the area.when the wind picks up and the ocean gets rough it will be a total disaster...
I'll agree that BP is doing a better job than many of its O&G industry brethren in prior situations at taking responsibility. The real question(s) (and problem(s) is/are. Did this have to happen in the first place? We know there are tremendous reserves of O&G in the gulf and off the US coastlines..so, is it worth destroying an entire industry (the gulf coast fishing industry) and entire ecosystems to get at it? It's a difficult question and the answer is yes for many..
If Energy companies spent half as much on planning/prevention of these types of accidents as they do on finding and extracting o&g they simply wouldn't happen. They obviously DO NOT because this stuff keeps happening year after year and nobody seems to learn anything.
We haven't just had words from BP, they seem to be putting a lot of resources into tackling the problem. Obviously time will tell how true to their word they are, but I agree with Rich that it's been refreshing to see executives at such a large corporation not trying to avoid the blame
I think you are rewriting history in your depiction of Exxon and the Valdez accident. Exxon failed to recognize the seriousness of what it did, but that is very different from your picture of "Admit nothing, deny everything, and make counter-accusations." I feel like I am reading a comic book with villians like that.
In fact I believe you are wrong about your depiction of "any corporation's standard operating procedure". What you describe is the attitude of an irresponsible politician, for whom words are the major reality and dollars and physical reality are to be denied.
BP has performed moderately well in their words to the press but I really don't think they would ever have credibility in blaming their business partners. Not to mention that unfair blame would result in higher reluctance for some companies to do business with BP in the future. There is not a very long list of contractors the calibre of Halliburton or Transocean in this business.
It does not help that BP has been conspicuously involved in several very bad accidents and a number of worker deaths, apparently their attitude toward safety is poorer than comparable companies. There is reason to suspect BP has a corporate culture which contributed to the problem (and no I do not think they all are the same way!).
This is a calamity for the industry the way Three Mile Island was for the nuclear generating industry in 1979. In all probability we will define the industry's history in terms of "before" and "after" the spill. We can expect a strong governmental pushback with new regulations, designed to make sure this particular type of accident would not have happened... let us hope they are fairly good at foreseeing other types of accidents as well. In the case of the nuclear industry, it laid the groundwork for an eventual rebirth. In the case of the oil industry we really have few alternatives to drilling somewhere in the world. But I look forward to some very good safety ideas to be standard as the result of examining this accident in detail.
Clearly many people do not understand the measures taken by companies like BP, Exxon, etc in this day and age when it comes to prevention of things like this. It seems unfathomable that multiple system failures can occur at the same time but, with everything, there is a non-zero chance. I've been reading multiple commentaries about this situation - some putting an amazing assertion that BP intentionally 'cut corners' when it came to prevention -- the money pales in the face of massive billions that to which now BP is exposed. Lets not forget that every oil company that works offshore is just holding their breath, hoping things work out ok.
What makes their response even more unexpected is how it differs from the Texas City explosion where they clearly were the only ones to take responsibility. This is how it should go down. Those who sign the lease should take all responsibility. I doubt seriously that BP will eat the expense without litigation with the other companies. However, at the time of crisis, BP should stand up and say, "We're good for the bill so let's get on with fixing the problem. After the situation is resolved, we businesses will work out the final billing."
On the bright side the south paws can clean their shores, it'll give them work and something to do.
BP will probably be unaffected by this whole accident First because it's a major energy company with ties to the Govt. and Second because nobody cares about those south states to begin with.
BP is doing what a responsible company should always do: take responsibility. Some of the comments I've read must be from either Sierra Club members or anti-oil companies. BP is currently responsible for the problem and has taken all available action to mitigate the situation. Why all the safety systems have failed is for future determination. Ultimately they are NOT financially responsible for this accident and they will and should go after the subcontractors who are responsible, just like any other "general contractor" would. This is why any general contractor asks subcontractors for certificates of co-insurance. Sub-contractors, after all, are hired for their expertise, why else would they be on the job?
I live on the Gulf Coast
I agree the long term deeds of BP will define their response. So far I feel they did the right thing on defining the difference between the clean up and the accident cause.
You contract experts to do tasks and the process seemed to have caused blowouts elsewhere. I believe BP and TransOcean should have been asking questions instead of blindly accepting Halliburton's methods after a number of problems
Delegation of tasks does not mean delegation of responsibility.
TransOcean should be asked why a 1/2 million piece of equipment was not installed in any Ocean rig they build since it is required elsewhere for what reason?
In the meantime we will have people losing their way of life for this 1/2 million dollar piece of equipment and by the time the courts award any monies it will be long over.
Yes BP and RIG are buys at this time. I believe in one month after the spill is contained they will return to their former levels prior to the explosion as Exxon did to the Valdez spill.
I'll give the author credit for having nuts. Defending Oil companies is like defending Charles Manson in a lot of peoples minds (not mine). I like Oil companies they give me and what 90% of Americans want cheap energy and a higher standard of living. For all the drilling and transportation of oil going on in the world there are relatively few large spills. How many large oil rig spills have there been in the US in the last 30 years? One? two? Granted I'm not happy about the environmental impact of this one bit, but life is not without risk, and if the oil industry can learn from this it can be safer going forward. Sorry IMO we need to learn from this, make drilling safer and expand drilling.
Read Full Article »