After days of chaos, BP ended the week without a permanent leader and its strategy in serious doubt.
Chief Executive Bernard Looney’s shock resignation has forced the energy giant’s board into a rushed hiring process, sensitive investigations into employees’ personal relationships and a battle to convince investors and employees They are able to control crisis activities.
There are few signs that these problems are close to being resolved.
“Poor management,” said William Granger, a partner at law firm Wedlake Bell who specializes in corporate governance, reputation and boardroom issues. “Of all the ones we’ve seen over the years, this one is unusually fast.”
Shocked resignation
Looney, 53, told BP on Tuesday that he would step down as chief executive effective immediately after telling the board earlier in the day that he had not been fully transparent in disclosing past relationships with colleagues. Chief Financial Officer Murray Auchincloss also serves as interim CEO.
The announcement was sudden, shocking and disjointed. BP shareholders and employees first learned of Looney’s departure from the Financial Times and waited more than an hour for public confirmation from the company. As the market digested the impact, stock prices rose, then fell, then rose again.
Within 24 hours, BP Chairman Helge Lund and his investor relations team were calling top shareholders, including BlackRock Inc, Vanguard Group Inc and Norges Bank Wait for the company to explain what happened.
Lund told investors that the company would stick to its strategy of searching for a new CEO among internal and external candidates and ruled himself out of the running for the top job. That leaves many unanswered questions about the company’s trajectory.
“The board is not communicating clearly about timing, replacements, search pools, strategy, etc., and those are important issues,” said Bret Bero, assistant professor of the practice of management at Babson College in Boston.
BP shares eventually stabilized, ending the week little changed from Tuesday.
unanswered questions
In a webcast with staff the same day, Auchincloss reiterated the message of continuity. “Today, like every day at BP, we are working in the field, in the refinery, in offices, offshore, in retail locations,” he said.
He was joined by Lund and Kerry Dryburgh, executive vice president of people and culture. However, the call was brief and did not give employees a chance to ask questions, leaving many of them wondering about the future of the company, particularly in its clean energy business, according to people who participated in the call.
Employees in BP’s low-carbon and sustainability division need only look at Shell’s rivals to see the difference a new chief executive can make. It has followed a similar trajectory to its London counterpart, announcing ambitious “net zero” plans under now-retired boss Ben van Beurden. Wael Sawan, who took the top job at Shell on the first day of the year, has begun selling some businesses related to the policy.
Relative Strength
BP is no stranger to dramatic exits.
Three of four recent CEOs resigned under pressure. In 2007, John Brown lied in court to try to stop a newspaper from publishing details of his personal life. His successor, Tony Hayward, was forced out in 2010 over his mishandling of the Deepwater Horizon disaster.
The business itself is healthy, despite the big hit from the recent CEO exit.
“Rooney’s successor will inherit a relatively strong position to some extent,” said Russ Mould, investment director at AJ Bell. “BP is already profitable, generating much less cash and debt than a few years ago, while oil prices are rising. Things are looking even worse after the 2010 Gulf of Mexico oil spill.”
But whoever becomes BP’s new CEO will have more than just operations to handle. Bello said the ongoing investigation into the reasons for Looney’s departure could be lengthy and could raise questions about whether the company conducted appropriate due diligence.
If that’s the case, BP’s bad week could be just the beginning.
“The board must continue to investigate because the stock market has a right to know what happened here,” Granger said. “These things take months or even years.”
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