BP CEO Tony Hayward Testifies Before Congress: Will the BP Witch Hunt Yield Long-term Sustainable Change?

This morning, BP CEO Tony Hayward faced the US Congressional Energy Sub-Committee. Panel members pushed, prodded, and attacked the embattled CEO, accusing Mr. Hayward and BP of malfeasance, deliberate harm, risk taking, and corner cutting, while calling out BP's culture of risk and poor safety record. It is clear that the failure at the Maconda well has been catastrophic. It has destroyed thousands of lives, changed the face of the US Gulf Coast, wasted billions of dollars of Federal and corporate dollars, while damaging the pensions of many individuals whose retirement funds were invested in BP stock. BP's market capitalization continues to erode, and new reports of take-over and bankruptcy surface daily. Recently, BP announced a $20 billion USD fund to help cover damages from the disaster, a fund that is nearly ¼ the total of BP's global market capitalization. While this is a positive first step, more questions need to be asked regarding the implications of this disaster. Are congressional hearings a good use of time and resources, or, is the search for blame simply an exercise in political egotism? Will the fund proposed adequately compensate businesses and families impacted by the disaster, and who will ensure that the mechanisms to transfer funds remain strong? And finally, will this disaster and ensuing witch-hunt change business practices within the oil & gas industry globally?

Depending on your position, the words sustainability and sustainable finance mean different things. For many businesses, sustainable finance is defined by the continuation of regular cash flows and profits achieved by pursuing goals that balance risk and reward. As we have learned from this and previous disasters, hierarchies with a large span of control and many layers often slow the conversion of sustainable policy into practice. Personal and stakeholder pressures frequently create further challenges. Consider the pressures that the exploration team faced when deciding on the optimal shaft design, casing, concrete, and well structure. In a tough economy where resource are becoming scarce, is it realistic to expect the drilling team to forgo $7 - $8 million in drilling cost savings, while providing competitors an opportunity to gain access to a well that holds over 50 million barrels of liquid gold? I don't doubt that the managers involved in the decision weighed the risks and alternatives, but understand how difficult it would have been professionally to choose the higher cost, longer time option.

It is vitally important that all readers consider risk when analyzing this, and other disasters. Businesses in every industry have grown and prospered by taking calculated risks that provide them with competitive advantages. Unfortunately, one can quickly amass a long list of corporations in every industry that have taken calculated risks which resulted in unintended economic, social, and environmental damage. So often, we forget that every decision, regardless of intention, can carry negative consequences. The pharmaceutical industry is one example where the potential benefits and risks of drugs are continuously being managed. In the oil & gas industry, and many others, accidents, happen. While I intend to in no way excuse BP's behavior or the role it played, I believe it is important to acknowledge the larger climate in which decisions are being made before blame is placed. This oil spill is the worst environmental disaster America has ever faced, and unlike an earthquake or a hurricane, it is an event whose damage will continue to perpetuate itself for months, and even years. The millions of gallons of oil that have spilled into the Gulf of Mexico have become an epidemic, and swift justice must be delivered to those responsible for making the decisions. Yet, we must be cautious in our approach to change. Do I believe that a ban on deepwater drilling is realistic and sustainable? No, because the American people and others across the globe rely heavily on the oil & gas industry for jobs, and many of their pensions rely on the success of resource companies for the growth of their retirement funds. Do I believe that Tony Hayword is responsible for the disaster? In part yes. Unfortunately, as CEO, he is only one piece of the puzzle. As emerged during the congressional hearing, Mr. Hayword was not informed that the drilling of the Macondo well had challenges, nor informed of the risks early enough to intervene. Like a good leader, he trusted and empowered the people working with him to make the right decisions that would minimize financial, environmental, and social risk. Unfortunately, it appears those entrusted to act made the wrong decisions. While unexpected, a cascade of errors occurred, causing a disaster that the fail-safe mechanisms could not stop.

While I believe that the congressional hearing this morning is vitally important, sadly, I am unconvinced that it, as well as the surrounding hearings, will create fundamental change. As economies around the world seek to develop and shareholders demand increasing profits, deep-water drilling, as well a resource harvesting from isolated areas, will expand. Moreover, many of the companies drilling in the Gulf, including Shell, Chevron, and ConnocoPhilips, use the same configuration for well design and are likely to continue doing so in the future. As a society, the most important thing we can do is pressure those in power to find out as much as they can regarding the incident, share information, and impose - potentially legislatively - policies that encourage industry change. BP has stated that it is dedicated to working with its competitors to enhance operational safety, while re-evaluating BP's culture, values, and practices. While these statements provide hope, that fact is that this congressional hearing cannot guarantee change, increase accountability, ensure collaboration, or impose the adoption of sustainable financial and operational models. The fundamental drivers within our economy must be changed so that individuals, forced with making tough decisions, will be able to adequately factor in social, environmental, and economic impacts, without having to solely fixate on market based drivers. Without change, it is only a matter of time until a similar disaster strikes again.