Does CEO's Resignation Tarnish BP's Image?
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Does CEO's Resignation Tarnish BP's Image?

For four years, from 1999 to 2002, John Browne was named the U.K.’s most admired chief executive. He transformed BP, a company that was struggling when he joined in the mid 1990s into one of the biggest players in the industry, through a series of deals including the $62 billion acquisition of Amoco in 1998 and a visionary partnership with Russia’s TNK. He also became a business statesman, the first prominent oil industry executive to acknowledge the overwhelming evidence of global climate change and a leader in the social responsibility movement. Yet this week, Lord Browne was forced to step down from his position at BP For four years, from 1999 to 2002, John Browne was named the U.K.’s most admired chief executive. Yet this week, Lord Browne was forced to step down from his position at BP in disgrace.

Paul Holmes

For four years, from 1999 to 2002, John Browne was named the U.K.’s most admired chief executive. He transformed BP, a company that was struggling when he joined in the mid 1990s into one of the biggest players in the industry, through a series of deals including the $62 billion acquisition of Amoco in 1998 and a visionary partnership with Russia’s TNK. He also became a business statesman, the first prominent oil industry executive to acknowledge the overwhelming evidence of global climate change and a leader in the social responsibility movement.

Yet this week, Lord Browne was forced to step down from his position at BP two months ahead of his announced departure date (itself forced on him in part because of safety problems at the company’s U.S. operations) in disgrace, following revelations about his personal life and an admission that he had lied to the U.K. courts in an attempt to protect his privacy.

The shocking departure raised a series of questions about the risks and benefits of a celebrity CEO; the impact of a leader’s personal behavior on his organization’s reputation; the increasing (some would say unwarranted) scrutiny under which business leaders now operate; and the challenges of a leadership transition under such circumstances.

Browne’s reputation had already been tarnished by a succession of problems in the U.S., most notably a fatal explosion at a Texas City refinery in 2005 and last year’s Alaskan oil spill. Those incidents put an end to Browne’s plan to extend his tenure at the helm of the company beyond his 60th birthday in 2008, and led to the decision that he would step down this July.

His even earlier resignation was caused by newspaper stories about his relationship with Jeff Chevalier, and the admission that he had lied in his initial witness statements about the circumstances under which the two men first met. Browne had obtained an injunction blocking the tabloid Mail on Sunday from publishing Chevalier’s story, for which the newspaper reportedly paid the CEO’s former boyfriend, but the injunction was lifted on May.

While Browne’s misstatements to the court concerned the circumstances under which the two men had met, the most serious allegations contained in the Mail’s coverage revolved around suggestions that “BP’s resources were diverted for Mr. Chevalier’s use,” a charge Browne has strenuously denied and BP chairman Peter Sutherland says the company found to be “unfounded or insubstantive” after an review of the evidence.

Browne said his lies to the court were “prompted by my embarrassment and shock at the revelations…. [It] is a matter of deep regret. It was retracted and corrected. I have apologized unreservedly, and do so again today.” He reiterated that he was motivated by his desire to keep his private life private.

The Mail on Sunday said that it was Lord Browne who had “made his private life a public issue” by lying in court—a strange suggestion given that Browne was only in court to prevent the newspaper from making his private life a public issue.

“We would like to reiterate that the story we originally sought to publish was a business story involving issues of great importance to shareholders and employers of BP,” the paper said.

The decision to resign will lose Browne a severance package of up to $7 million and he will also be denied participation in a long-term performance plan that could have delivered a maximum value of $24 million. Will it also tarnish his reputation? Public relations experts are divided on how serious and lasting the damage will be.

“There’s no doubt that the BP worker deaths in the Houston plant accident put a chink in Lord Brown’s armor, and now, coupled with his failure to tell the truth under oath in court as to how he met his former partner, his reputation becomes permanently tarnished,” says Richard Torrenzano, chief executive of corporate and financial communications consultancy The Torrenzano Group.

But others believe his positive contributions to the company over the years will ultimately be seen to outweigh the difficulties of the past 18 months.

“Unfortunately, BP’s three difficult events—the Texas City refinery explosion killing 15 people, Alaska’s Prudhoe Bay oil pipeline leak and a propane trading scandal—coupled with revelations about Lord Browne’s personal life, have shattered his reputation,” says Leslie Gaines-Ross, chief reputation strategist at Weber Shandwick Worldwide, who cites the firm’s research showing that 60 percent of the blame for corporate reputation problems can be attributed to the CEO. As a result, “Browne’s reputation was already under siege for past events before the recent disclosure about his personal life.

“All of these events collectively call his judgment into question. However, despite these wounds, Browne’s reputation is not totally destroyed. He deserves credit for his many years of outstanding leadership and far-reaching visionary initiatives on global climate change and alternative energy. Browne is widely recognized for turning BP into a world-class company and changing perceptions of business’ commitment to society and the environment.”

Carreen Winters, senior vice president and head of corporate communications at MWW Group, agrees. “This is certainly not the first time we’ve seen people of prominence lie in order to protect secrets about their private life or sexuality, and public sentiment tends to be sympathetic toward people who are involuntarily outed,” she says. “The company has also indicated that the allegations about misuse of company resources were investigated and proven to be unfounded.

“Presuming this remains the case, Lord Browne is likely to be most remembered for his accomplishments in leading BP from a shrinking operation to a position of global leadership and prominence.”

In fact, most public relations practitioners expressed sympathy for Browne’s positions, coupled with criticism of the Mail on Sunday’s approach.

“Lord Browne had announced his retirement and named his successor,” says Adrian Wheeler, former head of European operations for GCI Group and now partner in consulting firm Agincourt Communications. “His record at BP was exemplary—for all his charm and good manners he is a ruthless businessman—marred only by some terrible corporate errors in his C-Suite twilight, which may or may not be attributed to his policies. There was absolutely no public interest to be served by giving space to the allegations of his ex-boyfriend.

Noting that the judge in the case had characterized Browne’s dishonesty about the way he and Chevalier met as a “white lie,” Wheeler says: “It’s not even that. “For goodness’ sake, what human being could, would or should admit that they met their partner on the Internet?

“Browne will recover,” he predicts. “Most people—apart from the U.K. press—think he has been pilloried by a despicable young man and a tabloid newspaper. The British middle-class, The Mail on Sunday’s readers, have a thing about homosexuality, which neither the establishment nor working people share. In fact, everyone knew about Lord Browne’s sexual orientation, and no-one cared.”

Michael Petruzzello, managing partner at Qorvis, a Washington, D.C.-based public affairs and strategic communications firm, expresses a similar view. “Personally, I’m offended by the very fact his personal life was made an issue,” says “Many others I talk to feel the same. I think Lord Browne’s reputation is reflective of his performance at BP and the character of his person, and for both I would give him very high marks.”

And Richard Levick, chief executive of crisis communications specialist Levick Strategic Communications, says that the revelations about Browne’s personal life would not have been enough to force his resignation without the other recent issues. “But today’s ‘gotcha’ media culture may not kick a person while he’s up but can’t wait until they are down. Issues of personal behavior are, increasingly, moving from the bedroom to the boardroom.

“To that end, it was the totality of these revelations plus BP’s widely reported safety issues that combined to put a sour note at the end of a career that saw an old line company vault into the 21st century, embrace green initiatives, and offer an important level of leadership, transparency, and disclosure in the energy sector.”

What about BP’s reputation?

“On the heels of safety concerns, any corporate scandal or event is a potential crisis for the company,” says Winters. “To date, BP has appropriately declined to comment on the private life of Lord Browne, and has focused its efforts on answering any allegations directly involving the company.”

That’s an appropriate response, most observers agree. “Regarding Browne´s personal situation, BP should say nothing,” says Heidi Sinclair, European chief of Burson-Marsteller. “The company should be gracious in acknowledging his leadership legacy and then work to build up the company and the new CEO’s stature.”

The crisis “will impact the company going forward for some time until senior management’s leadership and judgment are reestablished,” says Torrenzano. “The company has said what it needs to say on this issue by forcing Lord Browne to resign. It needs only to assure its stakeholders and the public that the company is in capable hands under the new CEO.”

Gaines-Ross agrees that safety lapses have hurt the company’s previously stellar reputation. She points to Weber Shandwick research that found 63 percent of a company’s market valuation is a result of its CEO’s reputation.” The halo that once hovered over BP and its CEO has without a doubt dimmed.”

At the same time, the fact that BP’s halo had been polished over the course of more than a decade will help the company.

“BP spent many years making significant deposits in the trust bank,” says Gaines-Ross. “The energy giant almost single handedly educated the world about global warming and carbon footprints. The company over-performed for investors and employees… BP will have an easier time mending its reputation now that Browne has officially exited. “

Weber Shandwick’s Safeguarding Reputation research found that responsible companies recover reputation faster than those that are less responsible. “BP’s recovery should be shorter than most due to the goodwill that has already been built.”

But one potential problem for BP is that Browne’s personal troubles could be used to undermine his credibility in the U.S., particularly if he is called to testify about the company’s safety record, at which time he would certainly be asked if he had ever lied to a court under oath. His homosexuality might also weigh against him with a Texas jury, some experts said.

There are also questions about whether the circumstances of the leadership transition will make things more difficult for Lord Browne’s success, Tony Hayward.

“There is no such thing as a normal succession in any company, and especially in this situation,” says Torrenzano. “The challenge for his successor, Tony Hayward, will be to restore the credibility of his office and demonstrate the leadership and judgment that is expected of a CEO of a multi-billion dollar global company. Hayward has to reassure stakeholders that this incident will not allow him or the senior management team from taking their eye off the ball and away from running the company. The faster that they can put this behind them the better since their short term goal is to restore the credibility of the company’s leadership.”

The good news for BP is that Hayward had already begun to take the reins. 

“There are fewer and fewer ‘normal’ successions today,” says Gaines-Ross. “CEO turnover continues to escalate and media scrutiny of new CEOs grows more intense. The real BP transition occurred in January, when Lord Browne announced that he was retiring earlier than expected. Browne’s power base probably shifted toward Hayward at that time and Browne became a lame duck CEO. Once the baton was symbolically passed, Hayward assumed greater responsibility and all eyes were on him. As Browne’s protégé, there should be few surprises for Hayward in managing the global enterprise.”

Having said that, Hayward now needs to emphasize more strongly that the new leadership team represents clean break with the problems of the more recent past.

 “Given the business issues, the successor must take pains to demonstrate new directions,” says Sinclair. “It is key to stay the course where BP has been successful and to not back away from its green agenda, but also to put the processes and operational structure in place to ensure that it is more than a thought leadership platform.”

The bottom line:  “This is not a crisis for BP,” says Levick. “The succession plan was in place and this merely accelerated it.”

Adds Winters, “The fact that this is actually more of an accelerated transition may provide BP with an advantage. First, this transition was already in the works, and scheduled for this summer.  A well crafted communications strategy could be accelerated effectively, with some adjustment for the circumstances. Second, from a reputation standpoint, it is a question of the ability to change the discussion from the issues surrounding Lord Brown to discussion of the company and its new leadership. Browne’s resignation actually provides Hayward with a potential ‘brand new day’ and a ‘clean break.’”

It seems likely that he will adopt a lower profile than his predecessor. He has already visited the company’s operations the U.S., Russia and China in his role as chief executive designate, meeting with employees, although he has limited his exposure to analysts and the media.

That’s appropriate, most experts say.

“The CEO must initially focus internally to ensure that there is cohesion within the organization,” Sinclair believes. “There must be alignment around the BP brand from within, but the company also must shore up major customer relationships and key partnerships. Then the messages can be rolled out to other stakeholder groups such as the media and analysts.”

When it is, the new CEO needs to set a new tone. “Following a ‘superstar’ CEO is a difficult challenge,” says Petruzzello. “The new CEO needs to quickly establish his own persona, style as well as clearly lay out his vision for the future.”

Leslie Gaines-Ross says the priorities for a new CEO “are always the same: putting employees first, building the senior management team, setting the agenda, tending to the board, communicating effectively and reaching out to key stakeholders. Hayward has reportedly been following these steps in his first several months as CEO-elect. He has been listening carefully to employees and focusing on safety performance.” 

In Hayward’s first e-mail to employees, he told them: “I am in no doubt that, while we face many challenges, there is a strong desire to get back to our winning ways.”

Over the long-term, Hayward will have to build strong relationships with all the company’s key stakeholders.

“Balancing the needs of multiple stakeholder groups is among the greatest challenges of leadership transition, with influencers, shareholders, customers and employees taking priority,” Winters says. “Suddenness of the transition doesn’t necessarily change the prioritization, but rather, makes the ability to reach each effectively, quickly and simultaneously critically important. Each stakeholder group needs to develop confidence in the new management team, and first impressions count.

“During sudden transitions, it can be helpful to focus first on the stakeholders that influence or serve as touch-points for the remaining key audiences: employees, who serve as the ambassadors of the message to the outside world; media, a universal touch point for all constituencies; and key influencers and thought leaders such as analysts, whose opinions guide the perspectives of investors and others.

“It is also imperative to maintain a two-way communication mechanism to monitor how well his message is being received, and how it is being interpreted in order to ‘course correct’ or fine tune the messaging, the delivery channels or the priorities along the way.

“Finally, any executive assuming a new role has the opportunity to establish the benchmarks from which he or she, and the Company, will be judged.  Those who define a vision of success, establish realistic benchmarks, and communicate progress along the way, can significantly enhance CEO Equity and their corporate reputation.”

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