A furor has erupted in the U.K. over suggestions that the Obama administration's criticisms of BP over the Gulf oil spill are evidence of some sort of anti-British sentiment. In particular, calls for BP to suspend dividend payments are being portrayed as a threat to the numerous British pension funds (and therefore, millions of British workers) who are heavily invested in the company.
In his New York Times column, meanwhile, Andrew Ross Sorkin starts out
with a blockbuster claim: "The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street."
The issue is a huge red herring--if the spill had been caused by Exxon, the criticism would be just as loud--but the debate over wounded national pride is masking a much more significant issue, which is that BP shareholders, including these British pension funds, absolutely should pay some price for the company's negligence.
Let's get one thing clear. These people--these pension funds, and the individuals who invest in them--are the owners of BP and as such they are responsible for the actions of the company. In other words, they are ultimately to blame for the disaster that is currently befalling the Gulf Coast as a result of their company's cavalier attitude toward regulation and lack of crisis preparedness.
Rather than complaining about the statements coming out of the Obama administration--which for my money has been taking it pretty easy on BP up to this point--the company's owners ought to be apologizing for this catastrophe. They were apparently quite happy to accept the short-term benefits of a company that sought to weaken environmental regulation and even then ignored much of it; they should now be prepared to accept the downside risk from that behavior.
Indeed, if there is any good to come of this whole sorry episode, it might be necessary for BP's investors to lose not only their dividends but also their company. If BP is forced into bankruptcy and its shareholders are forced to forfeit their investment, it might finally compel those who invest in companies--either directly or through pension funds--to think a little bit harder about the kind of companies they own and to place more of a premium on socially responsible management.
And all available evidence suggests that BP's operations were being run in a blatantly irresponsible manner. As Andrew Sullivan points out in points out in this Times (of London)column, "Over the past three years, the U.S. government department that monitors compliance with health and safety regulations has cited several companies for negligence or corner-cutting. Sunoco and ConocoPhillips have had eight 'egregious, wilful' safety violations apiece. Citgo had two. Exxon had one. BP had ... 760."
Given the laxity of U.S. regulations to begin with, that's a staggering number.
This information was not secret. It's a matter of public record. Any BP shareholder with a conscience could have noted those safety violations and urged the management of their company to make more of effort to adhere to the law. They didn't do so, of course, and the main reason they didn't do so is probably that as things stand there's very little incentive to do so: most investors are remarkably detached and disengaged from their companies they own and would probably be shocked at the suggestion that they are responsible for the way those companies behave.
Perhaps the loss of a dividend or even the bankruptcy of BP would send a valuable signal to these people, and in the absence of any meaningful or effective regulatory regime, companies might find themselves with an incentive to do the right thing.
Finally, this AP article provides a pretty comprehensive overview of BP's public relations woes. This ThinkProgress blog post provides a useful round-up of all the various protests against the company as a result of its missteps. And this YouGov Brand Index demonstrates how precipitously the spill has impacted the company's once proud image.