What Should Happen To BP

Three simple words: “Corporate Death Penalty”

BP should get what Arthur Andersen got in the Enron fiasco. A fine amounting to all their U.S. assets. Their shareholders should take a bath.

If we don’t have the will or the wit to regulate companies whose operations take the environment hostage at this sort of scale, at least we can is create a precedent that will get shareholder attention.

If BP gets destroyed for their unreadiness and negligence in the Gulf, then perhaps the shareholders of Exxon, Texaco, etc. will come to regard unmitigated environmental risk as tantamount to a due diligence failure. They would presumably demand to know what corporate officers are doing to protect the environment, because environmental protection is now equivalent to shareholder-value protection — the highest (and perhaps only) mandate that is recognized by our otherwise thoroughgoingly sociopathic corporate culture. Corporate officers would then require the highest disaster readiness, because to do otherwise would invite a shareholder lawsuit.

I wish it were otherwise. I wish we could rely on Government regulation to hold corporations’ feet to the fire. But regulator quality oscillates on timescales dictated by the public’s attention span, as expressed by administration ideology. If we want a stable regime of corporate attention to environmental duty, corporate officers and shareholders must be persuaded that failures to perform those duties jeopardize their assets. The way to accomplish that is to bring BP to the brink of disaster, and then give them a push.

To amplify a bit, here’s where I’m coming from:

Corporations recognize two sets of responsibilities and constraints: legal/regulatory, and obligation to shareholders. Of the two, the second is the higher, non-game-able obligation, tantamount to a “value”, whereas the first is viewed more as a series of negotiable and occasionally circumventable (or in the case of regulation, corruptible) nuisances.

I’ve lost my faith that regulation will work long-term. Environmental protection is as strong as its current political support. When the public forgets about it, we get colossal regulatory lapses like the fiasco at Minerals Management. Even if the current administration acknowledges a more urgent duty to regulate, future ones could undo their work again.

So if regulations won’t work, what’s left? To me the answer seems clear: Make environmental protection a matter of shareholder value protection. Then it will become a part of the core values that corporate officers recognize as their true duty. The way to do that is to create a legal precedent where _failure_ to exercise due diligence with respect to environmental protection jeopardizes the wealth of a corporation.

BP has just volunteered to be made an example of, “to encourage the others”. I say that long-term we can only benefit as a society by giving them the chop.


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2 Responses to “What Should Happen To BP”

  1. Paul Ricker Says:

    Yes, but willingness to administer the corporate death penalty would also fluctuate with changes in administration. I don’t think there’s any substitute for public will when it comes to making sure corporations are held accountable, one way or another.

    Also, BP is a much easier target than some other companies, since it is mostly foreign-owned (I think). Apparently in the UK it is widely held by pension funds. Our own retirements in the US are now yoked to the market, and if people saw a corporate death penalty as a threat to their financial security, their ardor for environmental justice would no doubt cool, given Anglo-American values.

  2. Carlo Graziani Says:

    Hi Paul.

    As to the first point, I would say that legal precedent is a more stable motivator than the political inclinations of the moment. Certainly from the point of view of creating risk perception in the minds of shareholders, one corporate gravepost seems likely to outweigh even a government run by the chamber of commerce.

    In terms of BP being “easy” because it’s “foreign”, one shouldn’t mistake foreign management (or a foreign origin) for a foreign company. BP is NYSE-listed, and its ownership is probably indistinguishable from that of any comparably-valued company, in terms of nationality. Investors care about value, not flags. If it’s “easier” than, say, ExxonMobil, that’s because it’s smaller, not because it’s “foreign”.

    I am no more sanguine than you about people placing environmental values above the safeguarding of their money. I’m just more optimistic that one spectacular flame-out by a criminally irresponsible company will put the sort of fear in investors that will make them demand environmental due-diligence work by the management of the companies that they own. We do all kinds of destructive things out of fear, it be nice if it were used constructively, for a change.

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