How Scandal Has Impacted on an Oil Giant
For years the most visible public role for Peter Sutherland as chairman of BP PLC was hosting the company’s annual meeting. But after a run of oil spills, deadly accidents and an energy-trading scandal at BP, the 60-year-old one-time rugby player has rushed into the scrum.
Last year, the Irish politician and banker forced Chief Executive John Browne to publicly commit to his retirement date. After Lord Browne’s shock decision last month to leave a year and a half earlier than planned, Mr. Sutherland must now buff BP’s image and manage the company’s first executive-suite transition in more than a decade.
Despite soaring oil prices its shares rose just 4.5 per cent in 2006, in comparison with a 36 per cent increase by Exxon Mobil Corp. and 15 per cent at Royal Dutch Shell PLC. Yesterday, the company announced fourth-quarter net income decreased by 22 per cent, in part this can be seen as indicative of lower natural-gas prices and lower production.
BP, meanwhile, faces U.S. criminal probes on three fronts — oil spills and corrosion in Alaska; a a refinery explosion in March 2005 which claimed the lives of 15 in Texas; as well as its energy-trading practices, with federal officials alleging BP traders surreptitiously influenced propane markets in 2004. BP denies manipulating markets and says it is cooperating with investigators on all three inquiries.
Mr. Sutherland’s higher profile also underscores a pattern that goes beyond BP: a shift in the boardroom dynamics at many of Europe’s largest publicly traded companies. The criticism is often leveled that nonexecutive directors leave too much of the decision making to the executives. Now, many firms are moving to shore up their boards with strong and independent directors.
Up until Shell were shaken by an accounting scandal in 2004, Shell’s British holding company had as its chairman a professor of geology. After the drama, it recruited Jorma Ollila, former chief executive officer of Nokia Corp as chairman. Unilever appointed an outside chairman last month to cap a restructuring at the Anglo-Dutch consumer-goods giant.
The goal of Mr. Sutherland at BP has always been to focus on establishing a “robust” and independent board structure he remarked in an interview recently. After short periods as Ireland’s attorney general and Europe’s competition czar, Peter Sutherland in 1993 was instrumental in taking forward the General Agreement on Tariffs and Trade in Geneva. There, he clinched the Uruguay Round, a pivotal trade agreement that set the stage for today’s World Trade Organization. For a man who has achieved so much it is difficult to forsee where he will find his next challenge.
