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Corporategovernance
Corporate governance
3. Liquidity
TheeventsintheGulfofMexico,particularlytheearlyinabilitytocapthe
well,hadamajorimpactonthecompany’sstandinginthenancial
communityanditsabilitytoraisecashonhistorictermsafteritscredit
ratingwasdowngraded.Thiswascloselymonitoredbytheboardsothat
promptremedialactioncouldbetaken.
Withtheuncertaintyinthenancialmarketsandtheestablishment
ofthe$20-billiontrustfund,theboardconsidereditnecessarytoreviewits
dividendpolicy.Despitethecompany’sstrongunderlyingnancial
performanceandassetposition,theboardbelievedthatadditional
condencewasneededthatthecompanycouldmanagetheuncertainty
overthetimingandextentofthecostsandliabilitiesrelatingtothespill
goingforward.Theboarddecidedthatinthesecircumstancesitneededto
takeaprudentandconservativeapproachtothecompany’snancial
position.Accordinglyitdecidedtocanceltherst-quarterdividendandto
announcethattherewouldbenointerimdividendsinrespectofthe
secondandthirdquartersof2010.Theboardindicateditwouldconsider
theresumptionofdividendpaymentsin2011atthetimeofthefourth
quarter2010results,whentheboardexpecteditwouldhaveaclearer
pictureofthelonger-termimpactoftheincident.On1February2011,it
wasannouncedthatquarterlydividendpaymentswouldrecommence.
Tofurtherincreasethecompany’savailablecashresources,the
boardsignicantlyreducedthecompany’sorganiccapitalspendingin2010
andincreasedplanneddivestmentstoatargetof$30billion.
Theboardensuredthatthemarketwaskeptfullyinformedofthe
company’sposition.
4. Investigation
MarkBly–headoftheSafetyandOperationsfunction–wasaskedbythe
thengroupchiefexecutivetoundertakeaninvestigationaimedatanalysing
thechainofeventssurroundingtheincidentontheDeepwaterHorizonand
tomakerecommendationstoenablethepreventionofasimilaraccident.
TheinvestigationteamwastaskedtoworkindependentlyfromotherBP
spillresponseactivitiesandseparatelyfromanyinvestigationconductedby
othercompaniesorinvestigationteams.
TheDeepwaterHorizonAccidentInvestigationReport(BP’s
InvestigationReport)waspublishedinSeptemberandoutlinedeightkey
ndingsrelatingtothecausesoftheaccident;forfurtherdetail,seeGulfof
Mexicooilspillonpage34.Thereportdidnotidentifyanysingleactionor
inactionthatcausedtheaccidentandconcludedthatacomplexand
interlinkedseriesofmechanicalfailures,humanjudgments,engineering
design,operationalimplementationandteaminterfacescametogetherto
allowtheinitiationandescalationoftheaccident.Aseriesof
26recommendationsweredevelopedtoaddresseachofthereport’skey
ndingsandthesehaveformedthebasisofanactionplan.Theboard
taskedthegroupchiefexecutiveandseniormanagementteamto
implementthisactionplanacrossBPandaskedSEEACtooversee
thisprocess.
Theboardismonitoringthehearingsofother,non-BPinvestigations
andwillconsiderhowtheconclusionsfromtheseinvestigationstwithin
theframeworkofndingsandactionsarisingfromBP’sownreport.
5. Internal initiatives
Followingtheaccident,anumberofinternalinitiativeshavebeen
commencedbyexecutivemanagement,withfrequentreportingbackto
theboardincludingexaminingwhatcanbelearnttofurtherimproveBP’s
riskprocessesandthecompany’soversightofcontractors.Anumberof
theseinitiativesarestillongoingandwillconcludeinthecourseof2011.
Asincomingchiefexecutive,BobDudleyannouncedthatanew
safetyandriskdivisionwouldbecreated(theSafetyandOperationalRisk
Function)andthattheExplorationandProductionsegmentwouldbe
restructuredfromasinglebusinessintothreefunctionaldivisions
(Exploration,DevelopmentsandProduction).Splittingtheupstream
businessintoseparatefunctionsisintendedtofosterthelong-term
developmentofspecialistexpertiseandtoreinforceaccountabilityfor
riskmanagement.
6. Reputation
Duringthecrisisandafterwards,theboardhadextensivediscussions
aboutthereputationalimpactoftheevent,includinghowitmightaffect
BP’slicencetooperatebothintheUSandelsewhere.Thisworkcontinues
tofocusonBP’srelationshipwithshareholders,governments,
communitiesandindeedallthosewhocomeintocontactwithBPthrough
itsbusinessoperations.
Thechairman,thechiefexecutive,thechairmanofSEEACand
seniormanagementhavebeenactivelyinvolvedindiscussionswith
shareholdersandothergroupsinanendeavourtoaddressconcernsandto
starttorebuildtrust.
7. Strategy
TheeventsintheGulfofMexicoledtheboardtoundertakeareviewof
strategy.Ledbythegroupchiefexecutiveandhisteam,theboard
attemptedtoaddressthekeychallengeofhowtoregainshareholdervalue
andaddresscoreissues,including:
• Simplication(howtofocusthecompany’soperationsacrossawide
geography).
• Howthecompanycouldmanageriskmoretightly.
• HowBPcouldfocusonitscorecapabilities.
• Theopportunitytoresetthecompany’sportfolio.
Theboardheldthreeaway-daydiscussionsonstrategyduringtheyear;
thesewererobustandexploredawiderangeofstrategicoptions.The
outcomeofthesedeliberationsonstrategywaspresentedtotheinvestor
communityon1February2011.Fordetailofourstrategypresentation,see
Ourstrategyonpage19.
Managementandorganizationalchanges
InlateJulytheboardandTonyHaywardagreedthathewouldstepdownas
groupchiefexecutiveon1October,tobesucceededbyBobDudley,and
wouldleavethecompanyandtheboardattheendofNovember.This
decisionwasmadefollowingaseriesofextensivediscussionsbytheboard
astowhatstrategicfocusBPasacompanyshouldhaveinthelongerterm
andwhatleadershipwasbestequippedtoembarkonthisnextphase.
Throughthenominationcommittee,theboardengagedexternal
adviserswhoidentiedanexternalcandidateandexistingexecutive
director,BobDudley,forthepositionofgroupchiefexecutive.After
interviewsanddetailedconsiderationitwasconcludedthatBobDudley
hadthestrongindustry,operationalandgeopoliticalexperiencerequiredfor
theroleand,asaresult,wasappointedasgroupchiefexecutive.Bob
DudleyhashandedoverhisdutiesasheadoftheGulfCoastRestoration
OrganizationtoLamarMcKay,presidentandchairmanofBPAmerica.
InSeptembertheboardagreedwithAndyInglis,executivedirector
andheadoftheupstreambusiness,thatinordertofacilitatethenew
organizationalstructure,hewouldrelinquishhisroleandstepdownfrom
theboardattheendofOctober–leavingthecompanyattheendof2010.
Theexecutivevicepresidentsheadingthethreenewupstreamdivisions
reportdirectlytoBobDudleyandtheboarddecidedthatonthebasisof
thisreportinglineitwouldnotreplaceAndyInglis’spositionasanupstream
executivedirectorontheboard.From1November2010,executivedirector
membershipoftheboardhasbeenreducedtothree.
BPAnnualReportandForm20-F2010 91