Friday, 18 June 2010

What is BP really responsible for ?

Yesterday was a theatre that has now become a regular feature of US political life. A self righteous and pompous Committee of the US House or Senate “summons” a CEO of some company and harangues him. Political windbags fall over themselves to misbehave with a foreign national. Yesterday was the turn of BP’s CEO Tony Hayward. It got so bad, that one of the Representatives in the Committee, Joe Barton, actually apologised to Hayward and then the howls from the lynch mob made him recant the apology.

The White House and the US Senate and Congress has forced BP to fund a $20 bn escrow account for “damages” with regard to the oil spill and for it to be administered by an “independent” third party and pay out claims. What they have essentially done is to ask BP to write a blank cheque. BP has no choice really; and it duly has written a blank cheque.

Make no mistake. BP is at fault. For taking safety too lightly. For not having a backup plan at all – in the companies I have worked in, you get sacked for not having a Disaster Recovery Plan. BP had clearly short circuited disaster recovery. You don’t think of alternate recovery measures after the disaster has happened. That’s virtually a crime in business. They have to suffer the consequences. If companies are allowed to get away with it lightly, they’ll take more and more short cuts. They cannot be allowed to.

But what is BP really responsible to pay for ? The cost of plugging the leak. Sure. The clean up; without a doubt. Some penal damages for all this mess; absolutely.

But then wait. This is after all the US of A. All sorts of claims are likely to emerge. More uncertain , but credible, claims are fishermen whose catch is affected. Oil workers who don’t have a job because drilling is stopped. There’s a strong case to be made for compensation to both.

But then loud claims are being made for much more. Because the beaches are closed, tourism is falling. So the hotel operators are suffering. Shops catering to tourists have seen decreased sales. Entertainment clubs are doing slow business. What about them ?

Even better – The Governor of Alabama is claiming that the state's tax revenues are down because tax revenues from tourism are down. The consequence is that he has to cut funding for schools. Some teachers will lose their jobs. BP must pay them. Next I am sure will come the airlines. Not enough people are flying to the area. They should be compensated.

This is the problem with creating such a fund which will be managed by somebody “independent”. Whoever manages this, will have to cater to “public opinion” which at the moment is little better than a lynch mob. As the saying goes, if you give a flower garland to a monkey, don’t be surprised at the consequences. Handing $20bn to politicians to manage is deadly stuff.

Now, BP can afford this. Very likely its final bill will be way in excess of $20 bn. Even that won’t kill the company. But this is a dangerous trend. Just because somebody can afford to pay, demanding the money is not right. Establish who is to be compensated and by what amount. Determine it by just and fair evaluation, not because paying everybody wins you an election. Don’t accept a claim from everybody under the sun. Once this is established, make BP pay.

Creating a slush fund and then inviting everybody to dip his snout in the trough is no way to run anything.


zeno said...

One humble request!Can you please think of one way and let only me know, how even i can make a claim?

Durga said...

This is asking the BP to pay not just for its recklessness, but also for the domino's effect created by its recklessness!!! That is taking things rather too far.

RS said...

Now the cost of the bills to BP is rising up with a certain popular TKT writing a post on the issue and his readers commenting on it. Thank God, the creatures in the waters didnot know of a concept called 'money'. Cannot even think of the total sum if they were to make a claim too.

The extent of man's greed. sigh!!

Ramesh said...

@zeno - Mental agony and torture at having to read such a post !

@Durga - Well, if you listen to the howlers who are yelling abuse at BP, nothing is too far.

@RS - That's interesting. Why shouldn't the shrimp and pelican sue BP for incalculable harm, agony and anguish ?? Nice idea. Any lawyers out there wanting to represent S. Shrimp and P.Pelican ??

ambulisamma said...

Very well written! Who can stop US's Big B attitude.
Like vadivelu says " Oruthan sikkirukkan,romba nallavan,evalo adichalum thangaran" fits BP at this stage for going thru accident,cleanup,recovery and now fund escrow.

KC said...

I wish if BP has some say in where $20 Bn would be channelised. Ideally, the cliams should be jointly evaluated and reimbursed by BP executives and some unbiased mind from US Govt. BP is at fault for not having the DRP, but they shouldn't sideline BP for the disaster, after things are under control, it would still be operating in US or gulf region. Take into consideration the employment opportunities, taxes and fuel it provides to US. BP has suo moto established a claim website, where people can file claims. Those are being evaluated and being paid for.

But what BP or anyone in the world can do, when current king of US, Mr. Obama has promised people of united states that he will get what they need from BP. It is good that he assured people, but he also has to ensure that the way his commitment will be fulfilled is righteous.

Deepa said...

I find this injustice to BP much smaller infront of the Union Carbide getaway! Companies in America know that one slip up and the mob will start skinning them, justfully or unjustfully. And in India, a company is responsible for deaths and diseases to 1000s of people, did a shoddy job of cleaning up; compensations were a shame; and still no justice to the victims.

Makes me feel, a more than severe punishment is acceptable in comparison to no punishment at all.

Compare the 2 CEOs. The BP CEO is definitely stressed and scared. The UC CEO, has lived his life to the fullest in his homeland. Fearful of consequences? Not in the least.

Even if the American politicians are potheads, atleast they know which side is their goal-post. I'd say the americans have Shylock for their advocate. In India, our own politicians are the ones who've back-stabbed us.

Damn! Maybe I am just too worked up with Bhopal Tragedy updates.

Sandhya Sriram said...

I have got completely converted by Deepa's comments. I would not have felt this way on my own though, but Deepa is very right. People, Safety, Environment cannot be taken for granted by anyone and it is better to punish a lil more than pardon.

having said this, what struck me when i initially read the post is that in every country, the politician has the final say. in the US of A, probably it is a transparent summon, somewhere else in the world, it would have been a under cover summon on what is the cut to cover up the piece with an affordable compensation. it is a dirty world of power and politics out there every where. where we know, we comment, where we dont, we ignore.

zeno said...

@Ramesh, not good enough reason :(

@All we(Indians) obviously tend to draw parallels between Bhopal and BP. Of course our politicians let us down.

Two links on bhopal tragedy, which i felt worth reading

To summarize the second link,if there is someone to be blamed for this accident, it is none else than USi.e indians! We just did not enforce the laws strictly

Change the laws for liability, GOI should have asked for the 3.3 billion liability claimed during 1984[will 3.3 billion @1984 be equivalent to 20 billion in 2010? inflation adjustment etc etc...]

just dont blame Anderson or the other directors but our Indian politicians!

And the first one defends the politician to an extent.

Ramesh said...

@ambulisamma -I am not so sure that BP can be classified as a nallavan, but still they don't deserve dharma adi !

@Kapil - Hey, good to see you here. Yes, if BP is paying, they should at least have some say in who gets what. Not the only say, but some say.

@Deepa - Union Carbide happened at a different time and in a different environment. I have a slightly different take on that - see my earlier post on this here.

@Sandhya - Absolutely right that in the US, its not a summons in the dark and you getting quietly shot or buying your way out. That's what is great about America. But it still does not make what US politicians do, right.

@zeno - Thanks for the nice links. I don't think Bhopal and BP are comparable. Bhopal was on an altogether different scale and was a criminal event; not just an accident.

Deepa said...

Oh no, I didn't mean to compare both the incidents. What I am saying is, I prefer these senators to the bunch of MPs we have back home. They may be creating a ruckus of the whole deal, but in a situation like UC this very act is probably needed by the representatives of the people. It may not be right in BP's case, but I'd rather have them, than the ones we have, for representing the victims in Bhopal.

Vishal said...

Absolutely ridiculous demands and not a fair deal for any company under the sun. Just unfair.

A company is indeed liable to put in place enough safety measures and corrective plans so that any kind of disaster can be avoided. And in case, they fail to do so, they can be brought to court and they can be charged with all penalties and recovery costs. But forcing them to pay a lump sum beforhand is just too much.

Dangerous trend for sure. May give birth to most wierd possible claims for any act of non-compliance.

Ramesh said...

@Vishal - If you aired this view in public in the US, you are likely to get lynched !!!

zeno said...

w.r.t the UC,your opinions and bseshadri's opinions are almost same! The only difference in the link i gave and your UC post is, urs is in english, it is in Tamil.I am humbled by your humbleness in not pointing that out!

Ramesh said...

@Zeno : Badri's is a very well researched and comprehensive piece. Really enjoyed reading that , although I realise how bad my Tamil is when I struggle to read ! Much impressed by Badi's blog. Thanks for pointing it out.

RamMmm said...

Anything that I could think of reading this post, automatically covered in the comments. That was interesting. :)

Ramesh said...

@RamMmm - Comments from you and the others are so rich in this space ; a real delight.

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