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Introduction
On April 20, 2010 the Deepwater Horizon offshore rig, operated by British energy company BP
exploded in the Gulf of Mexico. This incident has been viewed as one of the worst offshore oil
disasters in the United States (Lustgarten, 2010; Weisman, 2010). Eleven human lives were lost.
The Deepwater Horizon drilling rig toppled, and an estimated 4.9 million barrels of oil spilled
out into ocean waters (New York Times,2012; US Environmental Protection Agency, 2013). It is
estimated that in addition to the reputation damage suffered, this incident cost about
USD65billion in payouts from BP (Bousso,2018). The then US President Obama described the oil
spill as the nation's "worst environmental disaster" and an "epidemic" with damage that would
have to be fought for months or even years (Lee, 2010; Weisman,2010). Undoubtedly, it was
one of the most expensive manmade corporate disasters that nonetheless could have been
Drawing on relevant corporate governance and ethical literature, this essay critically discusses
the key failings that led to this disaster. It is anticipated that by examining BP's ethical and
corporate governance framework ante and during the Deepwater Horizon disaster, some key
2. BP's Ethics and Corporate Governance- Ante and Amid Deepwater Horizon Disaster
It is not unusual that BP was perceived as a company with an inclusive and admirable ethics
and corporate governance stance (Blumberg and Lin-Hi, 2011). In the wake of consumer
boycotts in 2000, the company rebranded with a "Beyond Petroleum" tagline and the logo of a
company. The BP Annual report (2005) also documented a series of policies like a governance
process policy, a board executive linkage policy, a board goals policy and an executive
limitations policy. Furthermore, a critical look at BP's Sustainability Review (2009) detailed a
behaviour.
"we are committed to the safety and development of our people and the
communities and societies in which we operate. We aim for no accidents, no
harm to people and no damage to the environment".
(BP, 2009a, p.2)
Notably, Tony Hayward, the then Group Chief Executive unequivocally reiterated the company's
resolute commitment to ethical business practice by considering the triple bottom line concept
excellent financial and operational results. He further explained how the focus on this "how"
was central to building the trust and accountability required for BP's long term success (ibid).
This affirms that ethics is an essential component of good governance (Solomon, 2013; Perry et
al, 2015).
Some key internal control mechanism adapted from BP Sustainability Review (2009) are:
Mechanism
Safety, Ethics and Global Non Executive Advises the board and monitors
operations function.
Executive
(OMS)
Table 1:Other Internal Control Mechanism, Adapted from BP Sustainability Review (2009)
Independent bodies also lauded BP's introspective and evaluative reporting standards. In
particular, while the Cadbury Report (1992) encourages a voluntary "comply or explain"
approach to promote compliance in spirit rather than in letter, BP's annual report often
and inclusive stakeholder perspective (Solomon, 2013; Driver and Thompson, 2018). Following
"the system of checks and balances, both internal and external to companies,
which ensures that companies discharge their accountability to all their
stakeholders and act in a socially responsible way in all areas of their business
activity" .
(Solomon, 2013, p.7)
The stakeholder theory emphasizes that an organization's success is often dependent on how
well it manages its relationships with a range of groups who hold a stake rather than only a
share (Freeman, 1984; Bonnafous-Boucher and Rendtorff, 2016). It should be noted from this
theory that management's responsibility is to support and balance the long term interests of
Since the stakeholder theory approach has been established for BP's corporate governance
stance, it can be implied that BP's code of ethics and other policies provides guidance to
choosing actions that are beneficial to stakeholders and long term sustainability (BP, 2009).
This projects a principle based approach as depicted in BP's comprehensive set of best practice
Likewise, this essay will also consider the philosophical branch of ethics called normative ethics.
As normative ethics prescribes standards for the rightness or wrongness of actions, inferences
will be drawn largely from the teleological and deontological ethical theories(Deigh, 2010;
Crane and Matten, 2016). Additionally, from an applied ethics perspective, business ethics will
be highlighted.
From a business ethics stance, the irony of "appearing" to be ethical through well worded code
of ethics and policies rather than "being" ethical reiterates the pragmatic question; Can
businesses be ethical? (Fisher and Lovell,2006; Dimmock and Fisher,2018). While Bauman
(1993) and Bevan and Corvellec (2007) argue that it is impossible to translate ethics into
organizations, Dimmock and Fisher (2018) explain why many businesses chose to "appear"
A business will attract most customers (at least in the West) if it appears to be ethical;
Thus, a business will make more profit if it appears ethical than actually being ethical
Luk Bouckaert conceptualised this as the paradox of ethics management. He simplified this
concept as, the more ethics management, the less ethics in management (Bouckaert, 2015).
the US Coastguards and the Bureau of Ocean Energy Management, Regulation and
systems deficiencies and acts of omission or negligence by the Deepwater Horizon crew, clearly
pinpointing the absence of an effective safety management system and safety culture
(BOEMRE, 2010). While Transocean owned the Deepwater Horizon rig, Halliburton cemented
the oil well with BP owning the well, it was concluded by this joint task force that BP was
Where then was the lacuna? Why did a robust and extensive ethical and corporate governance
framework on paper neither guide corporate behaviour nor translate into practice?
Generally, there is a consensus that top management's myopia and excessive risk appetite
the heart of this disaster (Bendell, 2010; Blumberg and Lin-Hi, 2011; Kay Review, 2012; Thamo-
A close examination of top management's morality to pursue financial wins over other social
and environmentally factors, resonates Ethical Egoism. Ethical Egoism is a form of teleological
or consequentialist theory. Crane and Matten (2016) point out that in ethical egoism, an action
is morally right if one decides to pursue either their short-term or long term interests. A key
supporter Adam Smith highlights that in the economic sphere, the pursuit of self interest is
acceptable. He affirms:
“It is not from the benevolence of the butcher, the brewer, or the baker that we
expect our dinner, but from their regard to their own self-interest. We address
ourselves not to their humanity but to their self-love, and never talk to them of
our own necessities but of their advantages”
(Smith, 1776)
It is worth mentioning that pursuit of self interest does not connote the same meaning as
"The egoist can be moved by pity for others in seeking to remove his own
distress caused by their plight [whereas] the selfish person is insensitive to the
other”.
(Crane and Matten, 2016)
In BP's case, we can infer that in pursuit of: financial emoluments, company profits, earnings
per share and other probable self interests, top management clashed with other stakeholder
interests like employee safety, environmental concerns, regulatory guidelines and so on. This
conflict of interests resulted in poor decisions. This portrays a major drawbacks of ethical
egoism.
top management were well informed about the safety risks on the oil well and chose to
proceed "as usual" (Casselman and Gold, 2010; Urbina, 2010; Congress of the United States,
2010). Clearly, several of BP's decisions suggested that these safety risks were shoved aside and
necessary risk avoidance measures were not considered (Congress of the United States, 2010).
This clearly infers that such decisions were driven by short term goals to reduce cost and save
time as the rig operations were already over budget and behind schedule (Blumberg and Lin-Hi,
2011). Solomon(2013) advocates a holistic view of governance to combat myopia and deliver
Conversely, the case for an "enlightened shareholder" approach addresses this drawback, as it
considers the long term impact or sustainable profits while prioritizing shareholder interests
Safety, Ethics and Environment Assurance Committee (SEEAC) and Operations Risk Committee)
and external regulatory body called the Minerals Management Service (MMS) were "captured".
In business ethics, social capture is a term used to describe the mechanism by which a
"watchdog" - committee or regulatory body, becomes heavily influenced by the very sectional
interest this "watchdog" was intended to monitor or control (Fisher & Lovell, 2006; Potter et al,
2014).
Crucially, a salient point from the oval office address by the then President Obama, was the
prevalent behaviour of oil companies showering regulators like MMS - an agency of the US
Department of Interior saddled with offshore drilling regulations and permit issuance; with
gifts and favours essentially allowing these companies write their own regulations and conduct
their own safety inspections (Weisman, 2010). This clearly implies an even broader systemic
failure where corporations were allowed to play by their own rules and police themselves.
Prior to the Deepwater Horizon incident, BP had a history of unethical practices. Some past
safety and health violations in BP resulted in an explosion and fire in Texas and Ohio refineries
in 2005 and 2006 respectively. The Occupational Safety and Health Administration (OSHA)
records from 2007 to 2010 revealed that BP's safety and health violations comprised 97% of
"deliberate" violations (Thomas et al,2010). This intentional negligence is often too difficult to
Similarly, past employees and contractors attested that colleagues who often escalated issues
were blacklisted or fired (Lustgarten,2010). Undoubtedly, this instilled fear and led to the
absence of true transparency and accountability key drivers of good governance (Solomon,
staff are encouraged to challenge and hold management responsible (Crane and Matten, 2016;
Fryer, 2011).
3d. Prioritization of financial considerations over other stakeholder considerations
Zeroing in on this failing, Kay Review (2012) explicitly points out:
"BP became at this time one of Britain's most admired companies...After the
millennium, however, it became apparent that the pressure on costs had led
the company to devote insufficient attention to environmental and
health and safety issues.
(Kay Review, 2012, p.20)
As revealed by internal documents retrieved from BP, the company saved about USD7million to
USD10million by opting for a riskier well casing (Congress of the United States,2010). BP also
decided not to repair the blowout preventer's rubber seal which was reported as damaged a
month before the explosion (Casselman and Gold,2010). It is worth highlighting that the oil spill
could have been prevented but for the failure of the "fail safe" devices like the blow out
preventer and the blind shear ram (Bendell,2010). All these clearly indicate that financial
remains the aspect of prioritization of which stakeholder group over the other (Freeman, 1994).
responsibilities of board members in setting the direction of an organisation for long term
sustainable impact. While there was an obvious lapse on the part of BP's board members in
igniting the admirable policies into action, it was also observed that the Group Chief Executive
also held the position of Chairman of the Operations Risk Committee (BP, 2009). This created a
conflict of interest, as the same person was held accountable for company safety and profits
Needless to say, neither institutional investors nor non-executive directors were actively
highlighting that in examining the need for independence of non-executive directors(NEDs), The
Higgs Report (2003) stipulates that NEDs must be and willing to challenge and probe issues.
Notably, there is a divergence and convergence on the role of NEDs. While there is a consensus
on their contribution to good governance (Rosenstein and Wyatt 1990; Byrd and Hickman,
1992; Higgs Report, 2003; Tyson Report, 2003), there is a divergence on the usefulness of their
Wyatt, 1990; Agrawal and Knoeber, 1996). The ACCA (2008) framework advocates a balance of
promotes integrity of organisations. Also, it highlights that good ethical and corporate
emphasizes the need for a holistic governance approach as this approach ultimately promotes
the Triple Bottom Line by fusing social and environmental issues with traditional financial
institutional investors whose roles must influence good corporate governance and provoke
bottom up ethics.
Most importantly, the exponential growth in clamours for good corporate governance and
ethics have ushered academic studies and research. An early introduction to this discipline is
critical, as it stimulates the need for accountability, transparency and readiness for transitioning
Lastly, as BP continues to remain a going concern years after this debacle. Further
governance and ethical framework ante and post the Deepwater Horizon explosion.
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FEEDBACK
This essay is an excellent piece of work, it is well structured, and the argument
flows very well. The reference list is adequate and the citing is correct. Some
paragraphs could use better transition or length and the use of bullet points and
quotes may seem excessive. Nevertheless, it is an excellent essay, well
structured, with good sections, a good flow of argument, a good analysis of
theories and referencing.