Thursday, June 17, 2010

• What Congress Should Be Asking Of BP

Congress is performing its requisite role on the nation’s worst environmental disaster. Congressmen from both sides of the political divide attack BP with a certain resolute and earnest energy that plays well for the cameras, and may provide some traction with the folks back home. For the long term, this circus in Washington is actually dropping the ball on behalf of America.

Rep. Bart Stupak (D-Mich.), and Rep. Henry Waxman (D-Beverly Hills), led the charge with repeated accusations and other attempts to extract response from BP’s CEO, Tony Hayward. With his company’s stock trading at about $31, well below half of the high it once enjoyed, Hayward looked and acted lost and confused, as he deflected questions. The optics were also negative as he disavowed any knowledge of events that might have led to the calamity that killed 11 of his employees. Unfortunately for America, he provided nothing that could be used against him in any court of law.

It may be useful for Congress to become educated through these hearings and perhaps oversight bodies will be pressed to actually do their jobs in future, however, the nature of the questions serves little purpose toward ensuring the long term reparations that will inevitably need to be provided to all those who have really incurred losses on the gulf coast.

For purposes of grandstanding, Congress is getting itself stuck in macro details that in effect leave Hayward and his Board of Directors off the hook.

Here is the direction the Congressional questions should take and why:

The most critical element in the management of a corporation is the structure of its executive lines of command.

When a CEO issues instructions, missives, or policies, and re-structures the company, as he or she deems appropriate to implement plans to achieve the company’s mission, the line of command and its “walking papers,” are clearly delineated, stated and evident.

Whether such instructions are in writing or verbal, each senior manager is given direction and parameters. The trickle down process permeates the corporation, and unless there is abject incompetence, even in a quarter of a trillion dollar enterprise like BP, each employee from the CFO to the local technician knows his or her job. Each employee understands the scope of the decisions he or she can make.

This may sound obvious, however Congress it ignoring this critical reality as it discharges indignant shame toward BP. Stupak and his committee should delve into Tony Hayward’s decision and policy distribution process. The sub-committee should question how Hayward has actualized his leadership of one of the world’s largest corporations. Congress should pull evidence on how and how much responsibility has been delegated to each executive, and how the process is in turn pushed down the various lines of command.

With such facts in hand, the legal process can place responsibility on specific individuals who will not be able to pull a “Tony-Hayward-side-step” once the details are collected. If there has been willful negligence or worse, the specific details pertaining to the chain of command will become critical to extracting cash and compensation - through legal means. Knowledge on the decision process will provide Congress much clout that it currently doesn’t have. The information will provide legal recourse.

Congress will also need to make sure that along the path of assigning blame to specific employees, it doesn’t make the mistake of destroying a whole company. In most large corporations there are some bad apples. Even if the rot goes to the very top of the company including its Board of Directors, this rarely means the whole company is blamable or culpable.

Congress should take care that it does not destroy the world’s fourth largest refiner. There are countries like China waiting on the sidelines who would welcome a “fire sale” on BP’s assets, and who would welcome overnight expansion into the Gulf’s oil and gas reserves. Congressional and White House rhetoric should temper itself, and act with a little more command of common sense.

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