‘The thing to remember is that BP don’t own the rigs, they rent them. The way the rigs are organised, and the way the different companies work together, is fascinating. It’s a complex social organisation of subcontractors, who have different jobs on the rig at a given time.
…
The lawyers’ argument was: if you say the cement bond was cracked, the subcontractor who made the bonding solution will sue… If you say the test wasn’t done, the company that was sent home will say that’s slander’.
Anyone following the papers this month would be forgiven for feeling a creeping sense of Déjà vu.
In the Business pages, we’ve followed the unfolding calamity of Wells Fargo: Wallstreet’s last golden child – the ‘solid, Main Street lender that avoided the excesses of the financial crisis’ – now being fined $185m for illegal sales practices that included opening as many as two million fraudulent accounts.
The subsequent (secret) firing of 5,300 of ‘rogue’ low-level employees who continue to be firmly scapegoated by its executive team; the apparent ignorance of the then-head of community banking; the stubbornly maintained innocence of the senior leadership; and the entirely lacklustre apology issued to both customers and Congress all conspire to cast a distinctly nostalgic light over proceedings.
To the Entertainment section now, and the Big Screen, where the notorious BP oil disaster of 2010 that killed 11 crew members of the Deepwater Horizon rig and leaked 3.19 million barrels of crude oil into the Gulf of Mexico has finally, after much legal wrangling, been immortalised. Critics might squabble about its accuracy – and BP about its representation – but key facts can’t be spun. Looming large in a perfect storm of issues is BP’s text-book failure of short-term thinking: neglecting to check the cement at the bottom of the well, likely motivated, as the film’s director Peter Berg explains, by the desire ‘to save the $125,000 (£98,000) it would have cost… If there was a problem they would have had to pull up all the cement and redo the job, which could take another three weeks at $1m a day.’
In June this year, BP’s total costs for this disaster hit £61.6bn – the largest environmental settlement in US history. Noted one financial commentator: “Before the accident, BP had a market capitalization of $180 billion. The accident actually shaved off one-third of the market capitalization of the company”.
Taken together, the Great Recession feels depressingly fresh.
And yet what feels distinctly old – amid the hastily dusted-off opinion pieces making the rounds – are the abundant failures of corporate culture and the toxic short-termism that fuelled both of these events from the top ranks, at huge cost to business, society and environment.
Wells Fargo and BP’s filmic reincarnation reminds us that businesses are supply chains of accountability. Like any supply chain, the bigger and the more complex, the higher the risk of corruption. Both Wells Fargo and the BP oil spill were crises of perilously short-term focus; the quick win, the buck saved, the buck passed; slipping through crack after crack, unchecked, until the point of explosion.
The lessons are clear; and yet – in the continued graceless denial of responsibility – the students remain resistant. Leadership is an accountability catch-22. Any leader who can claim, through scale or complexity, that they genuinely do not know the activities of their employees must implement systems of governance to manage this blind spot – or they are negligent; any leaders without these systems of governance must know the activities of its employees – or they are negligent. There is no debate to be had.
Mission-led business movements like B-Corp and metrics like the External rate of Return are working to correct the shareholder focus (once, The Wall Street Journal notes, ‘a useful corrective to self-satisfied managerial mediocrity’; now ‘a corrupting, self-interested dogma peddled by finance professors, money managers and over-compensated corporate executives’) that continues to justify the persistent myopia of modern business. B Corp UK Is now calling for a shift to the stakeholder economy, enshrined in UK law, that foregrounds sustainable profit and community-wide value creation.
B-Corp can break the short-term chokehold, and this is an important step – but it needs our collective support and our hard-won wisdom.
Read James Rutter, CEO of B-Corp COOK, here to learn more.
