The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Monday, September 9, 2013

Strategic CSR - BP

The article in the url below offers a defense of BP. Not in terms of attempting to excuse the company for the Deepwater Horizon oil spill, but in terms of how it reacted in the aftermath of the disaster and how the people and companies of Louisiana (or, more specifically, the lawyers who represent them) have attempted to take advantage of BP's goodwill:
 
“You can actually pinpoint the moment when the oil company BP began to get hosed in Louisiana: March 2012. By then, BP had paid out around $6.3 billion to some 220,000 people and businesses in the Gulf Coast region for damages suffered as a result of the 2010 oil spill.”
 
But, in March 2012, BP was forced to settle with a group of Louisiana lawyers who had sued the company, seeking more money for people and companies with only a loose connection (if any at all) to the spill itself. BP suspected this would lead to an increase in fraudulent claims, but did not anticipate the extent to which this abuse would be carried. In July, 2013:
 
“BP finally said ‘enough.’ Over the ensuing months, the company had come to realize that … businesses that not only weren’t affected by the BP disaster but hadn’t even suffered losses were getting millions of dollars. Some had seen increased profits during the oil spill — and still got money. Lawyers started trolling for new clients, trumpeting the fact that claims didn’t have to have any connection to the disaster. Suddenly, BP was facing the prospect of paying tens of billions of additional dollars to people who had no justifiable claim on the money.”
 
As the article correctly points out, we should be outraged at this behavior – not because we should feel sorry for BP, but because of the message it sends to other firms and how it might encourage them to react if they commit a similar transgression in the future:
 
“The next time a big company has an industrial accident, its board of directors is likely to question whether it really makes sense to ‘do the right thing’ the way BP has tried to. Any board comparing BP’s response to the gulf oil spill with Exxon-Mobil’s response to the Exxon-Valdez spill is going to come to the obvious conclusion: Exxon-Mobil’s litigation-to-the-death strategy — which ultimately cost it $4 billion rather than the potential $40 billion liability BP is now facing — was the right one. Is that really what we want as a country?”
 
The definition of CSR we advocate in Strategic CSR emphasizes the importance of a dual responsibility (Chapter 1: What is CSR? p6) – a responsibility on the firm to act, but an equal (if not more important) responsibility on the firm's stakeholders to hold it to account for its actions:
 
“A view of the corporation and its role in society that assumes a responsibility among firms to pursue goals in addition to profit maximization and a responsibility among a firm’s stakeholders to hold the firm accountable for its actions.”
 
An important aspect of any particular stakeholder’s responsibilities, therefore, is restraint – the willingness to subjugate individual benefit in favor of social value, broadly defined. While its actions were the direct cause of the initial problem, BP's actions post disaster were as close to exemplary as I think we can expect:
 
“… although BP’s negligence was unquestionably a significant reason for the spill, its response has been the opposite of the unfeeling corporation. It waived the $75 million liability cap that federal law allows. It has spent, so far, $14 billion cleaning up the Gulf and another $11 billion settling claims of various sorts. It has taken its medicine willingly. Yet its efforts to do right by the Gulf region have only emboldened those who view it as a cash machine.”
 
As a result, it is in our own best interests (as a society) to acknowledge this post-disaster behavior and reward it so that other firms are encouraged to act similarly in the future.
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


Justice, Louisiana Style
By Joe Nocera
July 9, 2013
The New York Times
Late Edition – Final
A21