BP plc (NYSE: BP) may be in desperate trouble, but its CEO Tony Hayward will not be fired. According to Reuters, he has the full support of the company’s board.
It does not matter that the Deepwater Horizon disaster happened on his watch. He has, after all, only been at the helm of the BP for a little more than two years. His predecessor John Browne, Baron Browne of Madingley, had an awful track record for safety which included a deadly explosion of one of the company’s refineries. The firm’s pipeline in Alaska had also experienced safety problems.The fact that Hayward will stay on is an implicit admission that BP’s safety issues predate him, and he is not responsible for them. It is like Barack Obama and the Afghanistan war. George Bush stated it, so the severe problems there belong to him. A recent poll of American shows that view is actually the prevailing sentiment
The list of aftershocks that the leak in the Gulf will have reads as it is like an improbable string of events, but like all strings, it has a beginning. The fiasco will cause BP to sell billions of dollars or assets. It has already agreed to offload some of its operations to Apache for $7 billion. BP has begun the three-year process of building at $20 billion escrow fund to cover costs of the clean up and related liabilities The firm has also spent $3 billion to date on direct clean-up costs.
BP faces fines from the federal government that could reach above $10 billion. The US should be careful not to bankrupt BP. In that case, those hurt by the incident could collect nothing or may have to wait in line for year. BP has some lines of credit to tap and could raise money in the capital markets, but many institutional investors and sovereign funds might find it a poor risk.
As Hayward keeps his job, Robert Dudley, a BP managing director, is sent to the America as the new head of what the company calls its Gulf Coast Restoration Organization. The chain of blame is further obscured.
Browne and the lax safety controls that plagued his tenure as head of BP may be much of the cause of the Gulf leak and the trouble that led up to it. In that case, he got Hayward his job, which is the excuse for BP’s board to allow him to keep it.
Douglas A. McIntyre
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