THE BP OIL SPILL IN MEXICAN GULF 2010 - Essay Example

? and Introduction Business reputation is a very important aspect in today’s competitive world. Some of the most successful businesses are the ones that have been able to uphold their first impression, the impression that made it stand out among others. The reputation of any business is enhanced by many factors, among which include communication and a sound crisis management (Abratt, 1989). A crisis refers to an undesirable and unfortunate position that a business finds itself in, and which poses a great threat to the organization (Benoit, 1995). The value of communication in any company is very important, and this importance cannot be understated. The major concept of this work is crisis management, and will employ a special focus on the BP oil company, and the oil spillage crisis of 2010. It shall take keen interest on how well, or otherwise, the crisis was handled by the company. Two theories are important in this work. First is the structural function systems theory which provides an in depth insight in crisis management. It implies that those companies that have a very effective information and communication model are more likely to succeed in crisis management (Lightstone and Driscoll, 2008). The second theory, the diffusion innovation theory, which is a widely applied theory, helps to structure the framework of this work, theoretically. It shows how businesses communicate and disseminate information through specified networks, or after a period of time which results to consistency (Hooghiemstra, 2000). Accounting theories lay great value in communication, and sets up assumptions, methodology and frameworks, to ensure timely, reliable, efficient and consistent information (Islam and Deegan, 2010). The crisis that BP found itself in was a great test to the company’s reputation, which has taken many years to build. The case The case study chosen, in this context is about BP oil spill in the Mexican Gulf in 2010. BP Ltd has operation sin over eighty companies. Statistics reveal that in 2012, it was the fifth largest company in terms of market share, and has over 87, 000 employees globally (BP, 2010). According to this report, on the morning of 20th April 2010, there was a huge explosion at the Macondo Prospect. A drilling rig had exploded, which resulted to the death of eleven people and seventeen others being injured. This was the worst marine accident in the oil industry, which put the reputation of the company at stake. The BP Company addressed the issue through several press releases, interviews, updates via new media including Facebook and Twitter and also through their annual financial report. The use of these means can be attributed to several accounting theories including the stakeholders and legitimacy theory, the systems oriented theory and the positive accounting theory, which will be discussed in the methodology section. Data After the accident, the company CEO, Tony Hayward, was interviewed by several media houses. In the interview, he consoled the family of the bereaved and the injured. The company also issued press releases regarding the accident. The press releases thereafter were released after a period of time, and each of it gave updates about the accident. For instance, between the day of the accident and the beginning of the year 2011, the company had released about thirty or more press releases on the same issue (Landau, 2001). New media has also boosted communication. The company therefore took its chances and continued to communicate via Facebook and twitter, updating all recent developments and photos of the progressing work. The other disclosure vehicle chosen was the annual report of 2010. In this, the chairman, Carl Henric Sanberg addressed the issue. In the same report, there is a summary of the accident, and a detailed explanation of what has been done, and what continues to be done (BP, 2010). The vehicles chosen for corporate analysis in this particular crisis were effective, though not fully. Methodology The methodology discussed below was drawn form the themes that were seen during this company’s crisis. As earlier mentioned, three accounting theories can be used to explain corporate vehicles used to release the information. The stakeholders’ theory is the first one. This theory emanates form the idea that to the stakeholders, information is very crucial to them. They need it to make informed and sound decisions. They deserve and demand to know what transcends in the business, and they can only do this when the company furnishes them with this information (Freeman, 1984). In the case of BP Oil Company, the company had to discuss the crisis in the annual report so that the investors and stakeholders can be assured. The annual report showed the financial position of the company, and they would then be able to make informed decisions (BP, 2010). The Systems Oriented theory is another theory. It insists that the company is part of the society, and must explicitly or implicitly, supply them with any information (Lightstone and Driscoll, 2008). In this case, the citizens and the community needed reassurance, which meant an urgent need to communicate. The use of social and new media was thus adopted since this is where many people would access the information. It also explains the rationale behind the use of frequent press releases to assure the people, and to update them on what was happening. The third accounting theory is the positive accounting theory. It is objective, based on facts and is used to show the past financial position of a company, as well as reflect the causes for the present status (Hoogmiestra, 2000). The business world needed to know that BP might have been down but definitely not out, and the use of interviews and the annual report clearly showed this. Findings and analysis An analysis on how BP Oil Company handles this crisis leaves much to be desired and lessons to be learnt by other companies. To begin with, people will always feel more reassurance when the head of an organization or a company addresses them in times of crisis. This was not the case with the company. The chairman, Carl Henric Sanberg did not address the issue in person. Most of the press releases, the new media posts and updates and the interviews were all handled by the company’s CEO, Tony Hayward. Landau (2011) asserts that during a crisis, the overall head is the one who should address the issue first, to prove to the people that the company is important to hi too. He or she must not give room for the people to ask of their whereabouts. Secondly, the words of the CEO did not make things better. He was brave enough to say that the company would definitely honor and respect all claims that were true and legitimate (BP, 2010). Lives had been lost, marine life destroyed, many people as a result had become jobless, there was ecological damage and the environment placed at a great risk, yet he still had room to think that there would be people who would make illegitimate claims. The CEO should have known that the world was watching and listening before making such a statement. This did not help to improve the company’s reputation that slowly getting tarnished. The press releases also showed some central themes in the crisis. It proved that bolstering, attacking one accuser and corrective action could all be used in the middle of a crisis (Islam and Deegan, 2010). Bolstering is where a company reminds its market of its earlier achievements, what it has done earlier and shows that it withstood the test of time earlier. During the crisis, the company’s CEO did not forget to remind people what they had done in the past, and this helped to keep the people’s faith in a way. Lastly, the issue of corrective action was seen, which a plus was for BP. It owned up and assured the people that it would handle the clean up process, and also compensate the affected people. The company also got involved in creating the Deepwaterhorizonresponse.com, which was a great initiative in reassuring the people that efforts were being made (BP, 2010). However, it shifted the blame to the oil drilling company, Transocean Ltd. This was not the time to shift and hurl blames, it should have owned up first and settle its issues with the Transocean Company later. In addition, the CEO should have shown some empathy, understanding and a level of competence while addressing the issue. As much as he was remorseful, his words did not clearly echo this. Another failure was on the use of new media for communication. The mainstream media is always the best option, especially when the crisis threatens the reputation of the company. Research shows that some people said that the pictures of the CEO working with the other workers did not look real or genuine. Press releases, annual report and interviews would have been enough (Smith et al, 2011). Conclusion This crisis did not spare the BP Oil Company. It was charged and pleaded guilty to eleven counts, and was fined money to the tune of $ 4.5 billion in terms of fines and penalties (Allison and Reed, 2010). It also suffered face damage of an estimated $ 17.6. In addition, it was charged for violation and damage (Smith et al, 2011). The year 2010 was a big blow for the BP Oil Company as its chairman was keen to note. But with time, it has managed to rise and stand through the tough economic times (BP, 2010). Compared to other companies, its crisis management is better placed, but it still needs to do more. All businesses should know that crises can happen at any time, and they should plan well in advance to curb any occurrence of one. Customers value the reputation and image of a company, and this might be the one thing that might get it through crisis (freeman, 1984; Benoit, 1985). References Abratt, R., 1989. A new approach to the corporate image management process. Journal of Marketing Management, 5(1), pp 63-76. Allison, F., and Reed S., 2010. In Too Deep: BP and the Drilling Race That Took it Down. New York: John Willey and Sons. Benoit, W., 1995. Accounts, Excuses, and Apologies: A Theory of Image Restoration Strategies. Albany, NY: State University of New York Press. BP, 2010. BP Annual Report and Form 20F Financial Statement. [online] Available at:< http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/I /BP_Annual_Report_and_Form_20F.pdf> [Accessed 18th December 2013]. Freeman, R.,1984. Strategic Management: A stakeholder approach. Boston: Pitman Hooghiemstra, R., 2000. Corporate communication and impression management – New perspectives why companies engage in corporate social reporting. Journal of Business Ethics, 27, pp.55-68. Islam, M., and Deegan, C., 2010. Media pressures and corporate disclosure of social responsibility performance information: a study of two global clothing and sports retail companies. Accounting and Business Research, 40(2), pp. 131-148. Landau, E., 2011. Oil Spill! Disaster in the Gulf of Mexico. London: Millbrook press Lightstone, K. and Driscoll, C., 2008. Disclosing Elements of Disclosure: A Test of Legitimacy Theory and Company Ethics. Canadian Journal of Administrative Sciences, 25(1), pp. 7-21. Smith, J., Lawrence, C., Smith, L., Murphy, A., and Paul, A., 2011. Analysis of Environmental and Economic Damages from British Petroleum’s Deep Water Horizon Oil Spill. Albany Law Review, 74(1), pp. 563-585 Read More