Question 3[TOTAL MARKS 20]

On 20 April 2010, the Macondo oil well in the Gulf of Mexico blew out, causing an explosion on its oil rig, Deepwater Horizon. The rig caught fire and sank, killing eleven people and creating the biggest oil spill in American history, threatening environmental catastrophe. A few days later, while the oil polluted beaches on Americas southern coast, destroying fishermens livelihoods and killing wildlife, BP CEO was pictured in cap and sunglasses sailing his yacht off Britains south coast. The Deepwater Horizon oil rig was owned by Transocean Company, which lease it to British Petroleum(BP). BP plc is the UK-based holding company of a group that includes BP Holdings North American Ltd, which has a subsidiary BP North American Inc., the parent company of BP Exploration and Production Inc. which owned the Macondo well.

The outcome

On 28 July 2010, Tony Hayward stepped down as CEO, with his annual 1 million salary and 10 million pension pot built up during his 28 years with BP. The board felt that having both the chairman and the CEO involved might confuse Americans, who were used to having major companies led by a single chairman/CEO.

On 25 September 2010, BP claimed officially that the well was sealed. Nearly 5 million barrels of oil had been released. BP had incurred huge costs with more impending court actions.

BPs legal battles continued throughout 2013 and 2014. The companys initial response to the catastrophe had been conciliatory, setting up a $20 billion fund for damages, penalties and legal costs.

Following the disaster, the US government banned BP from winning federal contracts in the United States, including the supply of fuel to the military.

Required:

1. Determine FOUR (4) possible responses BP plc could do to reduce the disaster and its loss of reputation in the United States. [12 Marks]
2. Would the outcome have been different if the roles of board chairman and CEO in BP had been combined, as in many large American public companies? Define the role of board chairman and CEO. [8 Marks]