British Petroleum (BP) is among the world’s leading gas and oil companies that operate in seventy countries worldwide. With headquarters in London, Great Britain, it produces and sources oil and gas both offshore and on land, which makes it possible for the company to have a wide scope of operations. The manufactured and marketed fuel and raw materials provided by BP are used in multiple products of everyday use. Founded in 1909 by William Knox D’Arcy, BP is a public limited company that made it to the list of the world’s oil and gas giants.
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Corporate governance plays an exceptionally large role in the operations of such companies as BP because it represents a system of rules and guidelines by which a company is controlled and managed. In cases of a corporate governance failure, the trust of the public and stakeholders decreases, leading to potentially harmful consequences for the overall success of an organization. BP had an issue with its lack of corporate governance in 2010 when an explosion and fire took place in the oil rig in the Gulf of Mexico and killed eleven workers as well as set off one of the largest oil spills in the history of US operations (“The Oil Spill by the Numbers”). According to the estimates, the Deepwater Horizon incident resulted in “about 4.9 million barrels of oil gushed into the Gulf waters, destroying hundreds of miles of fragile coastline and threatening the livelihood of the local population” (“The High Cost of BP’s Lack of Corporate Governance”). The impact of such a disaster on the company was vast. The company pleaded guilty to eleven counts of felony manslaughter and agreed to pay a pre-tax toll of $40.9 billion to cover the consequences of the spill (“The High Cost of BP’s Lack of Corporate Governance”). To this day, the deal is considered one of the largest resolutions in the history of the United States court system. In addition to this, three dividend payments to the company’s shareholders were canceled while BP also initiated some significant shifts in the board of members.
The main contributing factors to the failure in corporate governance referred to BP’s inability to ensure the appropriate safety of its workers and prevent environmental disasters that are a risk during oil and gas-related operations. The company’s board put the lives of employees in danger by not giving safety the required level of rigor in terms of planning and implementation. During the investigation, it was revealed that the BP oil well was sealed after eighty-seven days of leakage, which also points to the lack of consideration of the corporation for environmental issues and the well-being of residents affected by the disaster.
From the described case of British Petroleum failing to establish cohesive corporate governance, it can be learned that companies that deal with dangerous products should be more aware of their impact on the environment. Corporate governance efforts should not be solely based on catering to the interests of stakeholders or suppliers but also account for workplace risks. A better system of internal controls should be put in place to ensure that dangerous situations do not escalate and result in an adverse impact on workers, the environment, and the community. Transparency can be an effective tool for managing corporate governance efforts as it provides companies with greater accountability.
“The High Cost of BP’s Lack of Corporate Governance.” RGRD Law. 2012, Web.
“The Oil Spill by the Numbers.” YouTube, uploaded by Time. 2010, Web.