Lessons from Hayward’s departure
SHOULD we fell sorry for Tony Hayward, BP’s beleaguered chief executive? His departure from the firm, which he joined in 1982 as a rig geologist in Aberdeen, will be announced imminently; the 53-year old is being sacrificed to allow the oil giant to move on and try and rebuild itself after the catastrophic damage to its reputation, prospects and finances caused by the spill in the Gulf of Mexico.
Given the hysterical and nationalistic vilification campaign launched against Hayward in the US, including most disgracefully of all by Barack Obama, there is no simple answer to my question. On balance, however, we should not feel sorry for him. He is BP’s boss; the firm, together with its US contractors and associates, shared responsibility for a horrendous oil spill (we still don’t know all the details); as a result, and in the interest of his shareholders, Hayward is taking full responsibility and quitting, a dignified and appropriate decision.
It is always unfair when a CEO steps down because some of his underlings made a mistake; but that is the nature of responsibility. It should also be remembered that Hayward – a former head of exploration at the firm – took over as CEO promising to sort out BP’s corporate culture and poor safety record; and that the PR effort surrounding the spill left a lot to be desired. Hayward kept putting his foot in it, a performance which contributed to his looming departure.
What is unfair is that the US authorities have deliberately downplayed the involvement of American firms, including Halliburton and others, in the crisis; and much blame has been assigned before a proper, rigorous inquiry into what really happened has had time to be held. The bosses of BP’s US partner firms should also all be stepping down. It is right that Hayward is carrying the can; it is wrong that he is the only CEO involved in this mess to be doing so.
Even more dubious is that regulators have long known about the risks of deep sea drilling and that any solutions to underwater catastrophes are few and far between. Yet they agreed to BP’s project, as a result of a basic (and sensible) cost-benefit analysis: the world (and especially the US) needs oil, and the chances of something going this badly wrong are low. Governments and regulators agreed that this was a risk worth taking; so it is a bit thick of them to now pretend that the spill had nothing to do with them and to act all outraged with Hayward. The hypocrisy is sickening.
But there are other reasons why we shouldn’t feel sorry for Hayward. He had the opportunity to run one of the world’s top firms; he is leaving a wealthy man; his payoff will be £1m, plus a £10.8m pension contribution. His earning potential will be barely dented by his departure: he will find it easy to jump into another job, perhaps in private equity.
The events at BP show that there are good justifications for very high rewards for CEOs of very large firms. Hayward’s family required police protection at their Kent home, a horrid state of affairs. It is a tough, all-consuming job to run any multinational; a crisis is possible at any time. A plane could crash, a product could be contaminated or an office blown up by terrorists. It makes sense to pay bosses lots – but in return they must take the heat without whining when things go wrong. There were times when Hayward didn’t seem happy with this trade-off; it is right that he is leaving.
allister.heath@cityam.com