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BPs Continuing Saga – What Dividends?

August 26, 2010

If basic research on oil-consuming microbes in the Gulf of Mexico got a nickel for every ad seen – in newspapers, on TV, on live-streaming, on other web-properties, in magazines – on how hard BP is working to clean up the mess from the Deepwater Horizon, we would all be better positioned for the future.  Instead the saturation gives citizens the impression that BP has very deep pockets, and chooses to spend its dollars on polishing its image rather than truly addressing the Gulf issues.

For example, BP’s continues to be less than forthcoming on sharing its high quality video feeds on the well leak.   Obviously, as a corporation it is seeking to cloud the estimates of gallons leaked which are the basis for penalties.  It had rather spend its resources on PR than true resolution.

Contrast BP’s behaviors to that of Chevron’s Kutubu project in New Guinea as described by Jared Diamond in Collapse.

Clear business principles guided Chevron:  First, Chevron recognized that “spending each year an extra few million dollars on a project, or even a few tens of millions of dollars, they would save money in the long run by minimizing the risk of losing billions of dollars in such an accident….or losing its whole investment” (pg. 447).

Apparently BP’s strategic planning  understates such risks.

Secondly, Chevron managers appear to understand that cleaning up pollution is usually far more expensive than preventing it in the first place.  The ounce of prevention is worth a pound of cure philosophy.  That assumes there are appropriate regulations in place or that will be in place before the end of the project’s lifespan to ensure thorough clean-up.

BP apparently plays the delay, blame and obfuscate, and political games.

Thirdly, Chevron managers recognize that a good reputation sometimes provides a competitive advantage in obtaining future contracts.  Some believe Chevron’s reputation in Kutubu helped it win Norway’s North Sea contract.

It will be interesting to see how BP fares in its contract campaigns in the future.  Their Gulf performance is already complicating their Alaskan drilling.

In addition, New Guinea had some local implications that would reward a strong “good neighbor” position (Collapse, pg. 448).  The relatively weak central government would not be able to prevent disruptions by local landowners.  It was then important to work with local communities, so that they would believe “they are better off with us [Chevron] there than they would be if we were gone”  (pg. 448)

BP has been very important to Louisiana’s economy.  Do Louisianians still believe they are better off with BP than they would be if BP were gone?   Time will tell.

Good corporate citizenship does pay dividends.

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