BP’s creaky ethical machinery

Management attitudes behind the Deepwater Horizon disaster suggest another problem the company needs to address.
Carolyn Moynihan | Jun 18 2010 | comment  



It has been an eventful week in the 60-day history of the Deepwater Horizon oil spill disaster. President Obama delivered a solemn speech from the Oval Office to the nation. The head honchos of BP arrived in Washington with apologies to the American people and agreed to a $20 billion compensation fund for people whose livelihoods have been affected. The British company’s chief executive, Tony Hayward, has fronted up to Congress and admitted that the explosion and sinking of the oil rig “never should have happened” but that “we are unwavering in our commitment to fulfil all our responsibilities.”

Responsibility is a key word in this crisis, although the specifics of whom it attaches to have been elusive. During his grilling by Congressional committees yesterday Hayward stuck to a prepared script and answered many questions with “I can’t answer that question,” “I can’t recall,” “That’s a decision I was not party to,” and “I don’t know.” “I’m not stonewalling,” he told one questioner, “I simply was not involved in the decision-making process.” Why, after almost two months, doesn’t he know these things?

Earlier this week, however, in a letter to Hayward, the House Energy and Commerce Committee detailed a number of findings from its investigation into “the decision-making process” that left 11 workers dead and the US suffering its worst oil spill ever. “Time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time and expense,” the letter said.

These seem to be the basic facts: the project was late and costing at least $500,000 a day in overruns; engineers were hurrying; they cut corners on the well design and safety features and tests. According to an AP report, in an email four days before the well exploded a BP official wrote of an engineer’s recommendation to use 21 “centralisers”: “It will take 10 hours to install them. I do not like this.” Later that day, another official recognised the risks of proceeding with only six centralisers but commented: “Who cares, it’s done, end of story, will probably be fine.”

Who cares? Call it a throwaway line from a harried underling if you like, but this expression does more to illuminate the decisions leading up to the disaster than Hayward’s avowal of the company’s “unwavering … commitment to fulfil all our responsibilities”. Isn’t it very like the attitude behind the sub-prime mortgage crisis? “Who cares if these people don’t have the money to pay for this property and never will, so long as business is booming and our stocks are riding high?”

Don’t we have here the signs of an ethical leakage which is far more dangerous than deep water drilling as such?

At the height of public fury with Wall Street “greed and corruption” last year some faculty and students at Harvard Business School launched an initiative to promote ethical MBA graduates. Building on a professional tradition dating from the Hippocratic Oath, they came up with the MBA Oath, a voluntary pledge to strive for a high standard of ethical and professional behaviour. One of its eight points is this: “I will take responsibility for my actions, and I will represent the performance and risks of my enterprise accurately and honestly.”

So far there are over 3000 signatories to this excellent code from more than 300 universities and the idea is spreading rapidly. One Harvard graduate told Business Week last month: “For me, it was a stake in the ground, to say here are my values, here’s what I believe in. … When I have a tough decision, I want to be in a position where I have my own personal oath.”

This is very encouraging, but one needs more than a list of good ideas about what constitutes ethical behaviour and a promise to apply it; one needs practice in living that way. Oil rig managers were students once -- how much practice do students get at living from day to day with ethical responsibility? One reads of the culture of binge drinking and sexual promiscuity that is taken for granted at leading universities in the US, and elsewhere. Does the standard of virtuous living at Harvard go beyond cabs home after a night on the town and condoms to follow?

And what about the regulators? Last month we learned that members of the Minerals Management Service, the federal agency meant to oversee oil and gas drilling, accepted tickets to sports events, lunches and other gifts from oil and gas companies and used government computers to view pornography -- just like the guys at the Securities and Exchange Commission who fiddled with porn while the economy crashed and burned. Poor personal standards and habits cannot be corralled off from the workface and the boardroom.

Businesses have to take risks, and the oil business more so than others, but the risks have to be weighed in the scales with the common good, preferably by people of personal integrity. All the oaths, regulations and incentives in the world are useless without individuals who have solid ethical convictions and experience in living them.

Accidents will happen, but we have to try a lot harder to produce a culture where people do not shrug off responsibility with a “Who cares?” or “Probably will be fine.”

Carolyn Moynihan is deputy editor of MercatorNet.



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