A scandal occurred this spring when the British CEO of BP, British Petroleum, the British petrol giant which branded itself as green; Beyond Petroleum 'its a start', Lord Browne was outed for being gay, and supposedly lying about it in court.
The reality is that his resignation had less to do with covering up his homosexuality then covering for BP. Which had not gone Beyond Petroleum as a result of Lord Browne's corporate decisions but had become a Bad Player in the oil business.
British Petroleum used the cover of a post-Hurricane Katrina refinery bill in Congress for a sneak attack on legal protections against supertankers in Puget Sound. Reps. Jay Inslee and Dave Reichert thwarted it.
You will remember that BP had faced a number of oil field scandals prior to the outing of Lord Browne by his Canadian lover and rent boy; Jeff Chevalier.
A long list of misfortunes has battered this venerable company, including an explosion at its Texas City, Texas, refinery that killed 15 workers and injured scores more, and protracted outages at other refineries. There was also an Alaskan oil spill resulting from a corroded pipeline, along with 2005 hurricane damage to its big Gulf of Mexico Thunder Horse production platform, which delayed that facility's production start-up.
As if that weren't enough, the company's longtime CEO Lord John Brown stepped down abruptly this spring amid allegations about his private life. And more recently, BP was pressured by Russian authorities to sell much of its stake in a big natural gas field to state-run gas company OAO Gazprom.
Lord Browne the ultimate company man was still that despite his lovers outing of him. The reality was that his corporate maneuvering of BP in the oil business had been less an economic success than a failure in protecting the environment and workers.
As they say here is the rest of the story.
Blackmail, Sex & Corporate Secrets
While much has been written in Britain about the seedier side of the scandal, the critical role that BP and its executives played in it has been largely overlooked. Company officials, for instance, reportedly encouraged the C.E.O. to out himself on one of the BBC’s most popular radio shows, a plan that fizzled when Browne lost his nerve in the studio. Before that, BP leaders were secretly enlisted to serve on the board of Chevalier’s company, which was underwritten by Browne. And in the end, the disclosure of corporate secrets was as much a concern to Browne as the revelation of his homosexuality. The threat that internal BP matters might be leaked led Browne to lie in a court statement, which in turn led to his humiliating resignation and public shaming. Among the secrets Browne wanted to protect: He was considering relocating BP overseas—a potential economic disaster that would have been a huge blow to Britain’s corporate psyche—and he placed a dollar value on the heads of his workers in the event that they were injured or killed in an accident. In one memo, company executives gamed out different disaster scenarios for BP, comparing them to the outcomes in The Three Little Pigs.
Now the company is trying to right itself under a new C.E.O., Tony Hayward, who has taken over amid a growing outcry over BP’s shoddy environmental and safety record, which Browne managed to keep as secret as his private life.
Throughout the 1990s, he made a series of acquisitions that won him enormous praise in Britain and heralded the consolidation of the major oil companies. It seemed novel then that British Petroleum grew not by increasing its oil exploration and development but by taking over American oil companies such as Standard Oil of Ohio and Amoco. The BP-Amoco merger was the largest of its kind and launched the company into the big leagues overnight. When Exxon bought Mobil the next year, Browne quickly retaliated by purchasing Atlantic Richfield for $32 billion.
Browne was also, like any great C.E.O., a P.R. genius. In 1997, to the horror of many of his oil-industry peers, Browne admitted in a speech that he believed global warming was real. He then hired a San Francisco firm to rebrand British Petroleum and come up with a new corporate slogan. The old BP logo was replaced with a green-and-yellow sunburst, and ads suggested that BP now stood for . . . Beyond Petroleum. It was a masterstroke: BP had only $100 million invested in solar power at the time of the renaming, compared with at least $10 billion invested in conventional energy. But thanks to BP’s green logo and green C.E.O., its reputation as a green company flourished.
Browne was not quite so popular in the U.S., where experience on the ground is more important than a taste for fine art. “They pounded their chests a lot, but they didn’t know how to run refineries,” a former Amoco employee says of the BP executives. Because refineries are among the most intricate and dangerous workplaces on the planet, the old-timers feared that the BP executives’ ignorance would compromise safety, especially as BP cut jobs and budgets to reduce redundancy and raise profits for shareholders. (Similar allegations would later take center stage in the Texas refinery explosion lawsuits.) Other executives were skeptical of the hierarchical management structure at BP; they particularly complained about the handpicked “turtles” (named after the mutant ninja variety), who served as interns to Browne and were supposedly fast-tracked to replace other executives. There was also something known internally as the promise: a written business plan that could be used against employees who didn’t meet their projected goals. “They would use it to cut your throat if you failed,” a former engineer explains. Gradually, the company’s culture became less about innovation than intimidation. Fearful of losing their jobs, few spoke up about deteriorating conditions at some of the refineries. Behind Browne’s back, employees nicknamed him the “elf,” an acronym for “evil little fucker.”
Browne had his critics outside the oil industry too. The company was accused of committing human rights violations while building a pipeline in Colombia, and concerns were expressed about North Sea pollution. Greenpeace selected Browne for its Best Impression of an Environmentalist award. Matt Simmons, whose Houston-based Simmons & Co. is one of the largest investment-banking businesses serving the energy sector, was deeply skeptical of Browne’s 1999 prediction that, because of a worldwide market glut, oil prices would never reach $40 a barrel. “There was a vision of unreality in John Browne’s business plan,” Simmons says. “That generally works until you slip up.”
No one would dispute that Texas City, Texas, is a very long way from St. James’s Square. It is a rough-and-tumble blue-collar town on the Gulf Coast, where people know all too well that refinery work is often life threatening but just as often the only work available. On March 23, 2005, something went very wrong at BP’s Texas City refinery, the third largest in the U.S. An aging tank used to separate gas and fluid overflowed, filling the air with flammable vapor. A driver unwittingly left his truck running, igniting a fireball that by the end of the day had killed 15 people and injured more than 200. Not surprisingly, the blast led to the launch of hundreds of multimillion-dollar lawsuits and several investigations, including one by a commission that former secretary of state James Baker headed. A probe by the U.S. Chemical Safety and Hazard Investigation Board specifically blamed BP’s closed culture for the explosion. In 2006, the U.S. Occupational Safety and Health Administration fined the company $21.3 million, the largest penalty of its kind ever issued.
That wasn’t all that would befall BP. The next several months brought a cascade of problems, almost all blamed on lax oversight and poor management. In March, 200,000 gallons of crude leaked out of a BP pipeline at Prudhoe Bay, Alaska, forcing the company to partially shut down a major field. The pipe, it turned out, hadn’t been cleaned in years. In April, the U.S. Department of Labor fined BP for unsafe operations in an Ohio refinery. Also during this time, the company was unable to capitalize on its Thunder Horse offshore oil platform—the world’s largest—which was damaged during Hurricane Dennis in 2005. And in June, the government charged some of BP’s traders in Houston with trying to manipulate the price of propane in the Midwest and Northeast.
All these incidents inevitably prompted this question: How could a company that was supposed to be a model of corporate citizenship have gone so wrong? The answer that emerged was simple, and the weakness of Browne’s highly praised policy of acquiring big companies and instituting massive cost cuts was suddenly, fatally exposed. Instead of putting excess cash into maintenance and safety, the executives in London had ordered the company to “bank the savings.” But as plaintiffs’ attorneys have alleged, a rubber band can be stretched only so far before it breaks. BP led the industry in refinery deaths from 1995 to 2005. For 10 years, there was a fire a week at the Texas City plant, and many were afraid to work there, fearing that disaster was imminent. As an employee explained in a survey, “No one here in management cares. . . . We have been very lucky so far with this.” At the same time, the arrogance of BP executives was easily recognizable. One memo, prepared for a meeting held before the Texas City explosion, insisted on cost cuts, a familiar refrain at the plant: “Which bit of 25 percent don’t you understand??? We are going to be wasting our time on Monday unless you come prepared to commit to a 25 percent cut.”
In the end, Browne lied less to save his image than to save the image of his company. It’s notable, for instance, that there was no talk of resignation when word first emerged that the press had its hands on Chevalier’s story. Only after Browne learned that the corporate secrets could leak did he finally decide to step down.
Browne’s early departure will not prevent continued legal battles for BP, but it is perhaps as close to a sacrificial act of love as Browne is capable of, and it has allowed the company to start fresh. Though Browne also resigned from the board of Goldman Sachs, he still works for Apax Partners, a global private equity firm, and goes to his office when it suits him.
And as usual in the corporate world despite his fall from grace Lord Browne has landed on his feet.
FORMER BP boss Lord Browne has walked away with a pension worth just over £1million a year.The disgraced peer tops the list of 100 leading execs who look forward to pensions of £200,000 a year or more.
The former chief executive of BP PLC Lord Browne of Madingley has resigned as non-executive chairman of the advisory board of private equity firm Apax Partners to join energy and power private equity specialists Riverstone Holdings LLC.
His appointment at Riverstone Holdings, which specialises in the energy sector, comes almost four months after he quit oil giant BP when it emerged he lied to the High Court during a battle to block stories about his private life.
Lord Browne takes on the post of managing director and managing partner of Riverstone’s European business and will be based in London, where the group is soon to open an office.