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Tuesday, March 1, 2011

Decoupling Responsibility from Power: The Case of Transocean in the BP Disaster

With much power comes implicit responsibility. Hence, on February 21, 2011, the world recoiled when Gaddafi violently turned on his own people--using his power sans responsibility in a selfish attempt to stay in power. So too, the world had been shocked in April, 2010 when BP's Deepwater Horizon oil rig exploded in the Gulf of Mexico and that the Gulf itself was at risk. That a company could ruin something as big as the Gulf of Mexico came as a surprise to many. That a company, or three in this case, could have minimized such a risk by, for example, sending the U.S. Government contingency plans on Gulf clean up that included rescuing sea animals that actually live in the artic, shocked the public just as much. How could people holding such power treat its use with such carelessness concerning any downside?  The defense of having followed company policy or having excuted business procedures pales in comparison with the societal demand that power, whether public or private, be handled responsibly.  In other words, people take it for granted that power is given to adults rather than to children.  I think we would be surprised how often this has not been the case.  The case of Transocean demonstrates this thesis.

Transocean, which owned the Deep Water Horizon that exploded in April of 2010,  was the subject of a criminal investigation into possible tax fraud in Norway. The company indicated in S.E.C. filings that Norwegian officials could assess it about $840 million in taxes and penalties. The filings also contended that a final ruling against Transocean could have a “material impact” on the company. The company was also the target of tax inquiries in the United States and Brazil. Furthermore, drilling equipment from Transocean was shipped by a forwarder through Iran and until 2009 the company had held a stake in a company that did business in Syria. The State Department claimed at the time that Syria and Iran sponsor terrorism.

In reaction to these charges,  a Transocean statement simply claimed that the managers at the company had always acted appropriately and that they would prevail in any investigations. This is interesting, for “always” is quite an accomplishment.  Once I took a self-inventory and one question was “I always tell the truth.”  Of course, no one always tells the truth, so the question was geared to assessing how truthful one is in taking the test.  Had I answered yes, I would have been lying. The transocean statement, taken by itself, indicates a proclivity to lie, for no human being always acts appropriately. Transocean's statement evinces a certain arrogance, as if to say, "We are above reproach."  Such an attitude is dangerous where there is sufficient power at one's disposal that one's actions can do real damage to the planet.

Transocean, which drilled in some 30 countries and employed more than 18,000 people, owned nearly half of the 50 or so deepwater platforms in the world in 2010. “These people are capable and considered the gold standard of deepwater drilling,” said Peter Vig, managing director at RoundRock Capital Management, an energy hedge fund in Dallas.  I contend that expertise in drilling does not sufficiently counter the kind of charges that were brought against the company. To focus only on expertise in operating machinery or in managing a company as though they were all that matters in business is to hold an extremely narrow perspective on what counts. Furthermore, to let blantantly false asseverations stand (such as of always acting appropriately) is to enable a pattern that can literally destroy a major marine ecosystem.

Source: http://www.nytimes.com/2010/07/08/business/global/08ocean.html?_r=1&hp

See related: http://euandus3.wordpress.com/2010/06/10/bp-dividends-to-stockholders/   http://euandus3.wordpress.com/2010/06/17/tony-hayward-sticking-to-script-safety-is-bps-priority/