By Steven Pearlstein
Friday, May 28, 2010; A18
BP is coming in for plenty of abuse these days, and certainly much of it is deserved. Mistakes made by BP officials, or contractors and suppliers they engaged and supervised, led to a preventable explosion that killed 11 people and unleashed an environmental disaster of immense but still unknown proportion. Compounding those initial mistakes has been a failure to anticipate such a disaster and have an adequate response plan in place.
It is now clear that the ecosystem in the Gulf of Mexico has been badly damaged, perhaps irreparably, affecting the livelihoods of hundreds of thousands of people in the region.
The future of offshore oil drilling is now in question, with implications not only for the rest of the oil and gas industry but also for energy prices and energy policies here and around the world.
So extensive is the damage, and so great are its potential liabilities, that BP's very existence is now at stake -- a company that until a few weeks ago was posting annual profits of $14 billion with a market valuation in excess of $180 billion.
As corporate screw-ups go, it just doesn't get any bigger than this one -- and the damn hole still isn't plugged.
My purpose today, however, is not to bury BP but to praise it.
When confronted with such crises, corporate executives instinctively head for the bunker, withhold information, deny responsibility and drag their feet on efforts to clean up the mess they've created. That's a natural human reaction, particularly when people have died, jobs are on the line, the stock price is plummeting and the whole thing is playing out 24/7 on cable television. This bunker mentality is further encouraged by the army of lawyers who inevitably show up on the scene, whose sole concern is preventing criminal sanctions and reducing civil damages.
But to their credit, rather than respond in ways you would expect them to, BP and its executives have generally responded in ways you'd want them to.
From the start, the company has declared that it is ultimately responsible for what happened and responsible for making things right, waiving any liability limits it might be entitled to under federal law.
The company's chief executive, Tony Hayward, moved from London to the gulf, personally overseeing operations, visiting with government officials and conducting regular news interviews where his contrition seemed genuine.
At its own expense, the company mustered a private army, navy and air force to disperse the oil, contain the spill and clean up the damage on shore.
It flew in experts from around the world to devise and execute strategies for capturing the leaking oil and plugging the leak, sparing no expense.
It opened multiple centers where fishermen and business owners can file claims for lost income and walk out an hour later with a check. Those whose claims are denied will be able to appeal to an independent mediator.
It initiated an internal investigation into the causes of the explosion, waived any attorney-client privilege and shared with congressional committees its preliminary findings that BP officials made numerous mistakes that probably contributed to the explosion.
It committed $500 million for research into preventing and mitigating oil spills.
It sent checks for $25 million to each of five states along the Gulf Coast to jump-start their cleanup efforts, and $70 million in grants to tourist businesses, with promises of more to come.
It promptly provided hundreds of thousands of internal documents to nine congressional committees investigating the disaster.
Its top executives provided almost daily press briefings that, for the most part, were noteworthy for their lack of spin and defensiveness. After prodding from Congress, it also provided a continuous live video feed of the underwater leak.
And, according to President Obama, all of this was done in coordination with, and under the direction of, the various federal agencies legally charged with overseeing the disaster response.
BP's response has not been perfect. Almost from the beginning, the company has either underestimated or understated the amount of oil leaking from the underground well and the environmental damage it was likely to cause. It didn't take long for Hayward to regret his comment that the damage would be "very, very modest," or that the oil slick was small compared with the vastness of the oceans. And a House committee released an internal BP memo from a month ago estimating that the volume of oil leaking into the Gulf was anywhere from 1,000 to 14,000 barrels a day, well above the 5,000-barrel estimate that the company has clung to in its public statements.
Despite these missteps, BP's handling of the gulf spill is looking far better than Exxon's handling of the Valdez, Massey Energy's handling of its deadly mine explosion or even Wall Street's response to the recent financial crisis. Even the president was forced to acknowledge at his news conference Thursday that some of the criticism hurled at BP has been unfair or overly harsh. And while this crisis is far from over, it is possible that BP's Deepwater disaster will one day replace Johnson and Johnson's Tylenol scare as the classic business school case study on crisis management.