If Hayward beats a retreat, it's unclear who could lead BP

BP, the government and an army of volunteers are fighting to contain and clean the millions of gallons of oil spewing from the site of the Deepwater Horizon explosion in the Gulf of Mexico.
By Steven Mufson
Washington Post Staff Writer
Sunday, June 27, 2010

In the course of two months, BP chief executive Tony Hayward has gone from paragon to punching bag.

The oil geyser in the Gulf of Mexico has indelibly blotted his leadership. It has doused hopes he had for building a safer, more profitable company than the one he inherited when he became chief executive in 2007. It has overshadowed the dispute he settled in Russia, the streamlining of upper and middle management and the contract in Iraq that brought BP back to a giant field it helped discover half a century ago.

Since the April 20 drilling-rig blowout that triggered the oil spill, any investor applause for strong first-quarter profits has been drowned out by anger and calls for his resignation. A 55 percent dive in the stock price, a series of clumsy comments, a standoff in Congress and an outing on his yacht in England put the finishing touches on a lousy stretch for the British executive.

"Does a CEO who has presided over . . . almost $100 billion in loss of shareholder value, in the suspension of a $10 billion annual dividend, who's lost the confidence of shareholders and regulators and, most importantly, the families and citizens of the gulf, does that person enjoy the confidence necessary to continue acting as CEO, or is it time for that CEO to resign?" said Rep. Peter Welch (D-Vt.) during a June 17 hearing at the House Energy and Commerce subcommittee on oversight and investigations.

Hayward responded quietly: "I'm focused on the response. I'm focused on trying to eliminate the leak, trying to contain the oil on the surface and defend the beaches and to clean up the spill and to restore the lives of the people on the Gulf Coast. That's what I intend to do."

But questions about Hayward's leadership -- and who might replace him -- continue to hang over BP.

"If you take it from the standpoint of the board of directors . . . you have to ask yourself whether there is somebody better because Hayward has been so damaged," said Michael Useem, director of the Center for Leadership and Change Management at the University of Pennsylvania's Wharton School.

"The image of what BP stands for is capitalism at its worst," said Warren Bennis, an expert on leadership at the University of Southern California Marshall School of Business. "How does BP redeem itself to its investors, to its markets?"

BP's past troubles

This isn't the first time BP has endured upheaval at its top ranks. Hayward became chief executive after a tabloid scandal involving the gay personal life of his predecessor, John Browne. Once hailed as the model British industrialist, Browne also faced a series of accidents, including the massive Texas City refinery explosion and Alaska pipeline leaks, and friction between him and Peter Sutherland, the non-executive board chairman. Searing U.S. government and independent reports blamed the accidents on a corporate culture of penny-pinching.

"The top of the organization doesn't listen hard enough to what the bottom of the organization is saying," Hayward wrote in a late 2006 memo. "The mantra of 'more for less' says that we can get 100 percent of the task completed with 90 percent of the resources; which in some cases is okay and might work but it needs to be deployed with great judgment and wisdom. When it isn't, you run into trouble.''

In many ways, Hayward has followed the corporate playbook for catastrophe. He rushed to the scene. He expressed deep sorrow about the 11 lives lost in the drilling disaster and accepted the company's obligation to, in his words, "put things right." He has cooperated with more than half a dozen investigations and brushed aside suggestions that BP would try to cap its liability despite the Oil Pollution Act limit of $75 million for economic damages.

The two months Hayward devoted to the Gulf disaster contrasted with Browne's response to Texas City. Browne paid a visit, but later took a low profile, leaving his North America chief to take the brunt of the bad publicity. That executive, John Manzoni, once considered a contender to succeed Browne, left BP; he is now chief executive of Calgary-based Talisman Energy. (He declined to comment for this story.)

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