Describing and analyzing BP (British Petroleum): Corporate Social Responsibility and Ethics as well as Organizational Structure
Introduction
BP CSR and ethical behaviors are running on both positive and negative sides of the scale. On one side, they have been getting awards for being socially responsible, and on the other hand, their activities have mainly contributed to the pollution of the environment (Balmer, Powell, & Greyser 2011, p.7). For the environmental safety violation, the company has been slapped with huge fines to compensate for damages caused (Newsdesk 2010, n.p.). This paper reports on the state of BP CSR and ethics as well as its organizational structure through description and analysis.
BP Corporate Social Responsibility (CSR) and Ethics
Positive Contributions
BP has contributed positively on several issues. British Petroleum Company is engaged in corporate social responsibilities initiatives at large (Dudovskiy 2012, n.p.). The company promotes projects aimed at alleviating renewable energy sources, invests in projects, which are directed towards tackling climate change issues among others (Dudovskiy 2012, n.p.). The company undertakes part in these activities particularly in the areas where they operate. Their CSR projects focus mainly on socio-economic projects and investments, economic development promotion, sponsorship, and capacity building (Mishin 2014, p.10). According to Mishin (2014, p.10), the BP CSR policies in Azerbaijan are mainly concerned with community investment and supporting the private enterprise. Therefore, it is clear that BP acts ethically and takes part in CSR. The top rankings of the company by on the ethical and CSR ranking indices affirm its social responsibility and ethical behavior. For example, in 2009, BP Company was ranked on top “on Fortune and Accountability’s annual rankings of the world’s most responsible companies in 2007,” (Newsdesk 2010, n.p.).
CSR and Ethical Issues Facing BP Company
Although the company has received awards and it participates in CSR projects oriented, the company has contributed to disasters that to some extent negates its reputations and tarnishes its image. Thus, the company may be viewed to be behaving unethically and not contributing well to the societal issues.
The primary challenge BP faces today is the adverse ecological effects the company is causing the host regions (Dudovskiy 2012, n.p.). For example, on April 20, 2010, Deepwater Horizon oil spill catastrophe took place in the Gulf of Mexico; and this became the most far-reaching spill ever witnessed in the United States (Dudovskiy 2012, n.p.). Eleven people died in this disaster and 4.1 million barrels of oil spilled into the Gulf of Mexico (Bagley 2015, p.32). The disaster lasted for more than three months and contributed to temporary unemployment to over ten thousand persons (Dudovskiy 2012, n.p.). This is a critical issue and negatively paints the company's image. In the words of Chairman Carl-Henric Svanberg, “The work of the board was challenging in 2016 as we had to focus on some distinct issues in a changing global environment,” (BP 2017, p.62). This shows that the board found it difficult to handle the environmental issues surrounding the company, and especially handling the Gulf of Mexico oil spill.
The Gulf Mexico disaster has taken the company far much back in the CSR and ethical issues. However, this is not the only incidence that has negatively affected the company concerning the environmental pollution. Other incidences include the explosion at the British Petroleum oil refinery in Texas which happened in 2005; resulting in the death of fifteen employees (Bagley 2015, p.32). The spill of 5,000 barrels of oil in Alaska from BP’s pipelines (Bagley 2015, p.32). In 1997 and 1998, the BP Company contributed to 104 oil spill in the region of Arctic (Newsdesk 2010, n.p). In 2008, the company was highly fined to the tune of 87 million dollars for failing to adhere to the OSHA regulations (Newsdesk 2010, n.p). Therefore, the environmental concerns are weighing down BP on matters of CSR and ethics.
Communicating CSR to the Public
CSR goes beyond the way a company behaves; it also includes how a company communicates its actions to the public or chief audiences (Hill & Langan 2014, p.158). Therefore, organizations should formalize CSR policies and communicate them widely within the firm. The dissemination of socially responsible efforts to the public and employees is vital (Hill & Langan 2014, p.158). Communicating CSR is not an easy task. This is because it may be viewed as a form of public relations engineered for concealing or diverting attention from the previous corporate misdeeds (Hill & Langan 2014, p.158). Therefore, before a company tries to promote itself through as an excellent corporate citizen, the company should ensure it walks the talk. BP attempted to defend itself in the aftermath of the Gulf of Mexico.
For instance, the company issued reactive messages conveying their actions towards cleaning the spill, their ethical perspective concerning ecology and new sources of oil, and even issues regarding CSR (Hill & Langan 2014, p.158). However, the NGOs and press conveyed an opposite message; the social irresponsibility of the company (Hill & Langan 2014, p.158). This shows that communicating CSR may not be the best way to go. According to Hill & Langan (2014, p.159), the public was skeptical about the company, NGOs, and the press; therefore, many consumers discounted the information from all the three parties. The past activities and its attempts to clean the spill from Gulf oil spill have helped it retain its reputation.
Organizational Structure
The BP organizational structure is mainly composed of the board of directors and executive management. The diagram below captures the hierarchical position and relationship between the two teams.
Figure 1: BP governance framework (BP 2017, p.63)
Composition and Qualification of the Members
In BP corporate governance, the board of directors plays a crucial role since they act on behalf of the shareholders as the diagram depicts. Therefore, in this section, the focus is given to the board of directors. The BP board is unitary structure because of it only one board. The board is composed of the non-executive and executive directors (BP 2017, p.52). The BP board has an experienced team who are appointed on merits. For example, Carl-Henric Svanberg (the chairperson) has high experience of leadership in global corporations (BP 2017, p.53). Carl- Henric has served in the position of CEO and chairperson in high profile business where he led in times of restructuring and growth (BP 2017, p.53). Therefore, his experience has earned him a diverse range of skills and knowledge that is useful in running the board to act on behalf of the shareholders.
The group chief executive (Bob Dudley) has spent his entire career life in oil and gas sector; thus, equipping him with the necessary skills to take the BP Company to the next level (BP 2017, p.53). David Jackson is the BP Company secretary. He is a solicitor (BP 2017, p.57). His profession and qualifications enable him to discharge the duties of advising the board and committees on issues relating to law and governance. Another board member is Cynthia Carroll, an independent non-executive committee. She has experience and relevant skills because her career revolves around the extractive industries (BP 2017, p.55). Therefore, she contributes significantly to the work of SEEAC. The description has only captured a few members of the board. However, all board members have relevant knowledge, qualifications, and skills needed for the progress of the industry.
Role of the Board of Directors
The BP board of directors is responsible for the conduct of the business, and their duties are guided by “both the United Kingdom company law as well as the British Petroleum’s Articles of Association,” (BP 2017, p.64). The board is entrusted with the following key roles.
Strategy consideration and direction, and approval of yearly plans: For example, in 2016, the board worked together with the executive team in exploring the potential of evolution BP markets of operations. Furthermore, the board considered the implications of transiting to the low carbon economy (BP 2017, p.64). Monitoring company’s performance against the existing plans and strategies: For instance, the board reviews the company’s operational performance in every meeting (BP 2017, p.64). Risk management: the board reviews the processes involving risks for risk identification, evaluation, and management. The board does this directly or through the relevant committees (BP 2017, p.64). Succession: the board in collaboration with the executive management reviews the succession plans of all the directors (BP 2017, p.64). This enhances identification and evaluation of potential directors to replace the directors who either has reached the end of their term of office or has left the office for whatever reason.
Principal-Agent Theory and BP Organizational Structure
Different aspects of companies are guided by theories, and organizational structure is not an exception. Many theories guide the organizational structure. In our case, the theory that suits the situation of the Deepwater Horizon oil spill of 2010 is the agency theory.
The principal-agent theory is to some extent an extension of neoclassical theory (Foss 2005, p.30). The theory provides helpful insights for exploring contractual arrangements of in the internal organization of industries (Foss 2005, p.30). Therefore, the theory does not allow the discrimination between the intra-firm and inter-firm transactions. The BP governance framework is guided by the principal-agent theory because the board of directors acts and monitors the activities of the industry on behalf of shareholders. The focus should be on sustainable management including societal, ecological, economic, and political aspects. According to Neill and Morris (2012, p.630), the agency theory can explain why the BP 2010 incidence took place.
In the BP industry the society, BP, the Minerals Management Service, and BP’s partners are related (Neill & Morris 2012, p.630). Neill and Morris’ study revealed that there was lack of monitory and willingness of the Minerals Management Service to configure its goals with those of the company instead of the public interest (Neill & Morris 2012, p.653). As a result, laxity in regulatory environment occurred hence the BP was allowed to conducts its operations without the public oversight. The BP board was probably concerned with the economic factors and failed to consider the ecological issues.
Recommendations
The recommendations are focused on two issues: improving the BP corporate framework and ways forward for BP to prevent or mitigate the environmental pollution, which is clouding its corporate responsibility. The following are the recommendations that can help BP to place BP in a better place in the future.
Adoption of a proactive approach: the company should consider adopting the proactive approach I handling the environmental matters in the regions of where the company is situated. It is always advantageous to avert an incidence instead of waiting to react upon an occurrence of a catastrophe. The company should, thus, be alert at all times and employ a qualified technical team that will aid in the analysis and prediction of the potential threats. Through this, the company will stand a chance of solving the environmental issues it faces.
The BP board of directors should be independent and not influenced by the senior offices such as the top management office and the BP chief executive, and the members of the board must have not shared in the company. In this way, the BP board will be independent and impart substantial changes that will see the company makes positive transformations in issues concerning the society, shareholders, and the executive teams among other stakeholders.
BP should work in close relationship with external stakeholders concerning avoidance of potential ecological disasters. Examples of such external stakeholders are local governments and universities. The two will considerably contribute to the success of eliminating the ecological threats through research by university academia and scholars and through the influential power, the local governments possess.
Conclusion
This paper aimed to report on the BP CSR and ethics as well as the BP structure through description and analysis. The objective is accomplished, and it is evident that the environmental issues have contributed negatively and painted BP to some extent as a socially irresponsible and unethical. However, some projects such as supporting renewable sources of energy have portrayed the company as a socially responsible and ethical firm. The organizational structure of the company primary composed of the board of directors and executive management. For the company to overcome the environmental issues, it should adopt the proactive approach, form networking with external stakeholders, and enhance the independence of the board.
References
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Neill, K.A. and Morris, J.C. (2012). A tangled web of principals and agents: examining the Deepwater Horizon oil spill through a principal–agent lens. Politics & Policy, 40(4), pp.629-656.
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