President Obama’s speech to the nation Tuesday about the Gulf oil spill is yet one more example of how the public has become more demanding of a social conscience from private companies like BP – and not just simply the $20 billion fund asked of BP to pay claims from the spill.
BP has now joined Wall Street and Toyota as recent big examples of private industries being dragged into admitting they had put profits or reputation ahead of the public good – and then were forced to pay the price for their lapse of conscience.
Serving the public as well as investors and employees is not always easy for many companies. It’s a delicate balance that more firms are trying these days, especially when their misdeeds are easily exposed by online communities on the Internet. Many firms also want to recruit more young people set on making a difference for others and not just in their bank account.
Usually, however, executives leave any issue involving the public good to spin doctors, the company’s regulatory compliance office or, perhaps if they have one, the “corporate social responsibility” department. But that’s not enough.
BP itself has a history of responding to the public interest, such as its investments in renewable energies or its attempts to avoid human rights problems in guarding its oil drilling operations in poor countries. But as hearings this week in Congress will likely show, that sense of public service didn’t go deep enough.
A probe in the House accuses BP of sacrificing safety on its Deepwater Horizon rig in order to speed up oil production. Company officials who cut corners raised the risk of a major spill. They lacked the ethical sense to consider a spill’s damage to beaches, marshes, wildlife, and shore industries like fishing – let alone the 11 workers killed in the rig’s blast.
“Time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense,” Reps. Henry Waxman and Bart Stupak, both Democrats, wrote in a letter to BP’s chief executive Tony Hayward. One House hearing this week will look at whether all offshore oil companies have considered plans for the worst-case scenario of a major leak.
One BP drilling engineer wrote this in a memo about not putting the proper placement of cement around the steel pipe in the drill hole:
“[W]ho cares, it’s done, end of story, will probably be fine and we’ll get a good cement job.”
Those kind of statements deserve to be studied in business schools for their disregard of all the stakeholders in a company’s operations. More executives need to learn how to reach out to various interest groups long before a problem might come up. They must see a commercial advantage in having a range of employees collaborate with nongovernmental organizations, local civic groups, bloggers, and universities.
Such relations with nontraditional stakeholders may not always run smoothly, as the goals may differ. But partnerships are better than confrontation.
Nike shoe manufacturer, for example, has discovered that it is better to be out front of activists on factory conditions for workers who make the company’s products. Toyota has tried to recover from its secrecy about car defects by being more open with the public about its problems.
Companies that can break down the department silos and expose more workers to a range of social and ethical issues of concern to the public will be better prepared to deal with mistakes. Investors will notice, and reward these companies. Having a conscience pays.