Despairing shareholders in BP might want to cast their minds back 25 years to the Exxon Valdez disaster. An oil tanker ran on to a reef in Prince William Sound, Alaska, spilling an estimated 11m gallons into a remote and environmentally sensitive area.
A jury in Anchorage decided that Exxon, the tanker’s owner, should pay $5bn (£3bn) in punitive damages. Exxon appealed, and appealed, and appealed. Eventually, it paid just $507m, one tenth of the original award.
This story should perhaps provide a ray of sunshine for investors in the British oil company, but it’s hard to be hopeful. BP has already paid out $35bn over its disastrous and tragic 2010 blowout in the Gulf of Mexico. On top of that, last week’s ruling that found it to have been grossly negligent may add a further $18bn. The shares closed on Friday at 466.8p, losing in the past week most of the ground they had made up in the past year.
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The judgment — you can find it on the website of the Louisiana eastern district court, laed.uscourts.gov — is worth reading. BP always argued that gross negligence was a high hurdle; in essence, plaintiffs would have to prove BP acted wilfully in the disaster that engulfed the Deepwater Horizon drilling rig.
Judge Carl Barbier found BP grossly negligent not because of a wilful act of destruction, but because of a string of errors and omissions that in his view amounted to gross negligence, as we report in this week’s Focus.
BP will appeal, and it may eventually have the same success as Exxon. But that is a long way off and, given the scale of the damages involved, cold comfort to investors. With America pressing on one side, and sanctions enveloping its other strategic partner, Russia’s Rosneft, BP is in a lonely place.
Tanks for the fantasy
THERE are lies, damned lies and the jobs promises made by companies eager to win lucrative government contracts. Five years ago General Dynamics, a big American defence contractor, was competing hard to grab a new tank contract. If its vehicle were chosen, it said, close to 11,000 British jobs would be secured. An astonishing number, which I queried at the time. Even allowing for the normal (and dubious) inclusion of jobs at third-party suppliers, it would have made the project one of our biggest industrial employers, on a par with Airbus or Jaguar Land Rover.
Imagine my surprise last week when General Dynamics finally clinched the £3.5bn tank deal from the Ministry of Defence. It said it would “underpin nearly 1,300 jobs across the UK”. Where did the other 10,000 go?
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This time round, the company said, it was focusing on direct employment — direct in the sense of its own employees and “tier one” suppliers. If you dig further, there will be only 100 new staff at General Dynamics’ UK operations.
It just goes to show that all claims about job generation should be treated with sackfuls of salt.
Companies eager for work will say just about anything, knowing such promises are catnip to politicians eager to be seen creating work for voters, and that once the contract is awarded, no one will keep the score.
In the frame for Barclays
NOW she has opted for the BBC chairmanship, Rona Fairhead is out of the running for the same post at Barclays. We have already mentioned Sir Howard Davies, cerebral chairman of the Airports Commission, and here are two other names to conjure with. They are far from racing certainties, but they are being tipped as candidates by senior banking sources. The first is Glen Moreno, 71-years-young Pearson chairman and a former Citigroup banker. The other is David Morgan, former chief executive of Australian bank Westpac, now running JC Flowers’ operations in Europe and Asia.
Recognising Sorrell
AS part of our 50th anniversary celebrations — in 1964, we were Fleet Street’s first stand-alone business section — we are asking bosses to choose their most admired business leader of the past 50 years.
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Some great names have emerged — Lords Weinstock and Hanson, Sir Ernest Harrison and Sir John Harvey-Jones, to mention a few. But it’s interesting that not many current names feature. One seasoned City observer wrote in last week to say this showed how public recognition of bosses is now almost non-existent. Twenty years ago most people knew Lord King was the head of British Airways, Lord (Lew) Grade ran ATV, Lord Kalms ran Dixons, Sir Ralph Halpern was at Burton and Gerald Ratner was the boss of Ratners.
These days FTSE 100 bosses are a faceless lot, in place for five years if they are lucky before moving on to their next position. One exception is Sir Martin Sorrell, chief executive of WPP for 28 years. It’s no coincidence that he is one of the few modern names to attract votes. He has also made sure to get his vote in to our poll.