The paper tries to evaluate BP's corporate governance framework. It tries to identify what responsibilities the Board of Directors and Senior Leadership should undertake before and during crisis management situations.
Before the spill
British Petroleum is an industry where accidents occur and given the complexities of such an industry, it is critical that the Board remain vigilant about company affairs and that it learns from its previous mistakes. This note tries to evaluate actions that a Board should have taken after the resignation of Lord Browne through the current crisis in the Gulf of Mexico. The makeup of the BP board in 2007 showed a good mix of expertise and impressive credentials but was it really a glory board or did people on this board actually spend time governing BP? One important step as the chair of the Board is to reassess the Board composition to see if the existing board has the right skills, is right mix and is able to devote time to the company. Appointing the right CEO is an important board responsibility. The actions of both the current CEO Tony Hayward and the previous CEO Lord Browne have not been consistent with the vision and priorities of the company. “Beyond petroleum” which talks about being innovative and environmentally friendly has become more of a marketing tagline rather than a way of life at BP. Lord Browne has been an aggressive risk taker and in a highly risk prone industry; does that really make him the right choice for the CEO? While both may have impressive credentials, are their personal values in line with the firm’s values? Are they principled enough to not take the easy way out and think long term for all the stakeholders of BP? Executive compensation should be re-evaluated to see if important goals such as safety have been built into the compensation or is it just driven by short term financial metrics. The fact that Lord Browne received a severance package of $50 million despite a lacklustre performance must...
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