Consequences of Presidential Bluster and Blame

Since the Gulf of Mexico oil disaster began, President Obama has restated many times that BP is responsible for stopping the oil leak at the bottom of the Gulf, cleaning up the oil in the water, as well as the environmental damage to the Gulf Coast, and for paying claims to those harmed by the loss of business, property and income due to the crisis that began with the oil rig explosion on April 20, 2010. He emphasized this point in his press conference on May 27. The next day, he said it again:

"We have ordered BP to pay economic injury claims, and we will make sure they deliver.... As I’ve said before, BP is the responsible party for this disaster. What that means is they’re legally responsible for stopping the leak and they’re financially responsible for the enormous damage that they’ve created. And we’re going to hold them accountable, along with any other party responsible for the initial explosion and loss of life on that platform."

Nevertheless, President Obama also noted in May that:

"I ultimately take responsibility for solving this crisis. I’m the President and the buck stops with me. So I give the people of this community and the entire Gulf my word that we’re going to hold ourselves accountable to do whatever it takes for as long as it takes to stop this catastrophe, to defend our natural resources, to repair the damage, and to keep this region on its feet. Justice will be done for those whose lives have been upended by this disaster, for the families of those whose lives have been lost -- that is a solemn pledge that I am making."

Basically, the President is saying that BP is responsible, but he will make sure they take all the necessary action to fix the problem and pay for it.

For BP, its CEO Tony Hayward has said:

"[W]e are doing everything we can to do the right thing. We are going to stop the leak. We're going to clean up the oil. We're going to remediate any environmental damage and we are going to return the Gulf Coast to the position it was in prior to this event. That's an absolute commitment, and we will be there long after the media has gone making good on our promises."
http://news.bbc.co.uk/2/hi/programmes/andrew_marr_show/8724549.stm

That firm commitment by BP to make things right has not been good enough for Obama and his team, however. After Obama said that he does not want to hear that BP is "nickel and diming" the people of the Gulf Coast filing claims for harm suffered due to the oil spill crisis, the President and many other Democrats want to tell BP how to pay for its obligations, including urging BP to cut or cease paying dividends to its shareholders.

An article on the Washington Post last week indicated the widespread implications of any government imposed restriction on BP's ability to pay its dividends:

"Smaller dividend payments would have a broad impact. The London-based giant accounts for about 12 percent of all dividends paid in Britain. A cut would be most keenly felt among pensioners there. But the impact would also reach the United States, where about 40 percent of the company's shares are held. At the end of March, major institutional holders of BP stock included State Street and Wellington Management; the Bill and Melinda Gates Foundation also had a substantial stake." http://www.washingtonpost.com/wp-dyn/content/article/2010/06/05/AR2010060500727_2.html?hpid=topnews&sid=ST2010060503052

Many of the shareholders of BP stock are pension funds, mutual funds held in 401k accounts and individual retirees in the US and the UK. Many people of average or modest means would be adversely affected by forcing BP to stop its dividend payments.

The Obama team's drumbeat of comments criticizing BP have also caused negative reactions from some UK political figures:

"Former Conservative Party chairman Lord Tebbit accused [Obama] of giving a 'xenophobic display of partisan political presidential petulance against a multinational company'.
London Mayor Boris Johnson said there was 'something slightly worrying about the anti-British rhetoric that seems to be permeating from America'." http://news.bbc.co.uk/2/hi/politics/10303619.stm

The pressure on BP to stop its dividends and to act more quickly to resolve all of the problems caused by the oil spill is still not enough for the Obama team. On "Meet the Press" today, Obama's top political adviser, David Axelrod, said that Obama is planning to demand that BP set up an escrow account with substantial funds to pay all claims that will result from the Gulf oil spill. Axelrod said: “Our mission is to hold them accountable in every appropriate way.”

Axelrod stated that the White House wants an independent, third party to administer the escrow account and to assure that those with “legitimate” claims for damages will be compensated. Then he went on to say:

“We’re not interested in undermining the integrity of their company, but this disaster is having an impact on their company. We believe that BP has the resources to meet the claims, and we’re going to make sure that they do. They’re a highly profitable company. They’ve got lots of assets. They have the prospect of continuing, but they have to meet their obligations here.”

This type of rhetoric raises the question of whether BP can survive this disaster in the Gulf. BP executives, as well as Wall Street analysts, have all confirmed that BP has the financial strength to meet its obligations to plug the leak, to clean up the environmental damage and to pay those affected by the Gulf oil spill, but when a high ranking White House official makes a statement about "the prospect of [BP] continuing", it will raise questions in the minds of many investors that should not have been raised by a political adviser.

The consequences of this irresponsible statement by Axelrod will likely cause further erosion to the value of BP's stock, which has already dropped by about 50% since the oil rig explosion, because it is extremely probable that that his comments will appear in news media all around the country tomorrow.

The real cause of the delay in more effectively addressing the crisis in the Gulf was revealed in another statement by David Axelrod: “I don’t consider [BP] a partner.”

This statement clearly demonstrates what many with crisis management experience have noticed about the Obama team. They don't play well with others! They do not know how to work cooperatively with other interested or affected parties to resolve issues.

They cannot work with Republicans to achieve bi-partisan legislative objectives. They do not want to hear any outside advice or criticism. They only want to dictate action by others to meet their goals. This became very clear when the health care bill was rammed through Congress with legislative tricks, back room deals and no Republican votes.

Now they are using the same tactics to push a multi-national corporation to do things the Obama way, regardless of the consequences. The problem is that their ignorance of how corporations work and how to work in partnership with a non-governmental entity to achieve effective results in a timely manner has been exposed every day that this crisis continues.

This should have been a joint cooperative effort using all appropriate resources of BP and the US government from the start. Instead, more than 50 days later, the White House still does not consider BP a partner in the effort to resolve the biggest environmental disaster in US history! How tragic for the Gulf Coast, BP shareholders and our once "special relationship" with Great Britain. Sphere: Related Content