Bp Deepwater Horizon

BP Deepwater Horizon

This case details the infrastructure and the situation leading up to the BP Deepwater Horizon oil spill. It takes into account all of the factors that led to the oil spill and how the proceedings at BP and Transocean caused them. To get a more specific view of this case the stakeholders will be identified and analyzed, as well as problems, alternative solutions, and finally recommendations will be given.

Stakeholders

The company’s workers do not feel as though they work in a safe environment. According to the case, workers called “into question the effectiveness of the company’s safety practices.” Workers also felt uncomfortable relating safety concerns to their supervisors. They felt as though drilling was a higher priority than performing the necessary maintenance to ensure a safe work environment.

Upper management is tasked with being as profitable as possible, while simultaneously inputting standards of safety that adhere to regulatory guidelines. CEO Tony Hayward spoke of this dichotomy of realities when he stated that the company would deliberately slow down their operations to ensure safe standards are followed, and followed that up with saying he wanted to cut costs and restore revenue in the short term.

One of BP’s major stakeholders is the federal government. Due to BP’s various issues, multiple agencies became involved with the company. The U.S. Occupational Safety and Health Administration (OSHA) fined the company $21.3 million for their role in the Texas City incident. OSHA gave BP a list of violations that needed to be corrected. However, when OSHA did a safety check several years later nearly 300 of the violations were still uncorrected. Additionally, over 400 new violations were found. This resulted in another fine totaling $87.4 million. Amongst major oil companies, BP had the highest number of OSHA violations in 2009. The U.S. Justice Department fined BP $50 million for discharging oil into US waters. In the wake of the Deepwater Horizon Accident the Coast Guard, Justice Department, Environmental Protection Agency, and United States House Committee on Energy and Commerce each launched their own separate investigations to determine the root cause of the explosion.

Shareholders were concerned with the multiple safety violations and major accidents that occurred at BP. Safety violations increase company costs due to governmental fines assessed as well as the need to resolve the violations. Major accidents are very expensive as well. The cost associated with lawsuits and other claims are high, while revenues are reduced due to damaged equipment and injured or killed members of the workforce.

Oil rig workers believed that their teamwork on the rig was effective. Their assumptions and biases lead them to believe that the company’s safety issues lie with their management and not with them. Additionally, they assumed that they had only had influence on issues that could be resolved on the rig, and had little influence at the middle to upper management levels.

Upper management assumed that all of the safety data they were receiving was correct. They assumed that workers input all information correctly, however workers input incorrect data intentionally in an effort to circumvent already faulty safety reporting systems.

The various governmental agencies had several assumptions regarding their dealings with BP. After the Texas City incident, it is likely that OHSA assumed that BP would actually try to correct the many violations that were found. Government agencies also may have assumed that the fines they levied against BP would be enough of an incentive to cause BP to fix the hundreds of violations they had. The government may have been somewhat biased in believing that the fines they assessed were the correct punishment for the violations that were committed.

Shareholders assume that management will be able to improve the current situation of the company. If management is able to improve the current situation of the company, shareholders assume that this will be reflected in the value of the share price. Shareholders may be biased about their own level of investing knowledge/ability. Since they invested in BP, they may feel that selling shares would be admitting that they made an investing mistake.

Workers want to work in a safe workplace environment. However, workers seemed to be more interested in job security than in workplace safety. At the very least, they feared backlash from management more than they feared potential issues.

The goal of corporate management is to make the company as profitable as possible, while simultaneously fostering an atmosphere of safety company-wide.

The goal of the various governmental agencies is for all companies under their respective domains to follow their regulations. The governmental agencies enforce laws that have been made, and ensure that companies either adhere to those laws or are punished for non-compliance.

Shareholders are concerned with how well BP’s management runs the company. There goal is for the company to increase revenues while simultaneously cutting costs to maximize profitability.

The workers feared backlash from management more than they feared a safety issue occurring on their job. This is evidenced by the fact that employees routinely intentionally reported incorrect information regarding safety data to management. The fear of backlash from management may be tied to employees desiring a better financial situation. The case stated that a portion of some employee’s bonuses were calculated based on down time on the rigs.

The underlying concern of upper management is the profitable running of the business. Safety procedures can be viewed through the lens of profitability. BP was assessed tens of millions of dollars worth of fines for safety violations, however if ignoring the safety violations helped them to generate hundreds of millions of dollars in revenue, it may have been worthwhile to them.

The regulations that the governmental agencies use are in place to protect the citizens of the United States of America. Adherence to those regulations should be in the best interest of the country. OSHA wants all workers to have a safe workplace environment. The Environmental Protection Agency, as the name implies, wants to protect the environment, because a cleaner environment is in the best interests of the nation.

Shareholders are concerned with two goals. First, the preservation of capital, and secondly the growth of capital. Events that affect the company’s share price are the primary concern of shareholders. Increasing revenues and decreasing costs each affect how profitable the company; this in turn, affects the value of company shares.