British Petroleum Company’s Executive Retirement Issues

As the board chairman, how will you address the issue of the CEO’s early retirement and his severance package?

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When confronted with the issue of early retirement of the current chief executive officer, I will try to dissuade against the idea of early retirement. As presented in the report by Hunter (2), the company does not have a ready successor who can replace him. Although his performance has been poor, we will try to convince him to stay with us. This will enable us to look for an appropriate replacement to take over his position when he will retire after eighteen months. This decision is also guided by the fact that we are currently experiencing financial constraints. We are not able to pay for the heavy packages that he was promised by the end of his contract. In case he insists on quitting the firm, the firm, then we will invite our chief legal officer to review the terms of the contract. It was stated in the contract that the severance package would be paid by the end of the contract.

As the board chairman, how would you determine and approve severance pay?

Determination of severance pay for the chief executive will be based on a series of legal interpretations. The severance pay was supposed to come when the chief executive officer had completed his contract with us. However, he has decided to leave before the completion of his term, which will be considered a breach of the contract. Moreover, his departure is coming at a time that the company is experiencing a lot of difficulties. I believe that he deserves no severance pay because he has breached the very contract the protected this pay. Now that he is the party that has breached the contract, he deserves to bear the consequences (Galloway and Kwamena 97). However, I will be fair in judgment and will allow the chief legal officer to advise the board on the amount of money we should pay him.

As the board chairman, how will you tackle the shock of the announcement of the early retirement of the CEO and his severance package?

As the board chairman of this company, I will tackle the shock by engaging the chief executive officer to determine his reasons and the possibility of the decision being reverted. I will call a board meeting immediately if he insists on leaving the firm. The board will decide on how immediate replacement can be arranged to avoid leaving a vacuum in the firm. When the issue of appropriate payment has been addressed, the focus of the board will be on how to pay the severance package. According to the report by Hunter (1), the performance of Lord John Browne has been very poor over the past few years. His resignation from the firm in an unexpected manner only makes his legacy at this firm worse. He should, therefore, not expect the company to pay the severance as stated in the contract. If the firm decides to pay him any amount, the payment would be based on an approach that the firm would consider appropriate. I would propose an alternative payment approach known as ‘retention pay’ (Shapira 45).

As the chairman, will you consider filing a case against the chief executive for his acts of negligence?

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We would be justified to file a case against Lord John Browne for the acts of negligence that proved to be very costly. The acts of negligence of this chief executive have been confirmed by independent bodies that were conducting their independent investigation. As shareholders of this firm, we have lost a lot from this irresponsible behavior. We were paying him a lot of money to do proper work, but he failed us. The litigation would be perfectly justified both on legal and ethical grounds. However, I am not considering this option because of the past good experiences we have had with him. Litigation will not be considered unless he insists on getting the severance package.

As the board chairman, are you satisfied with the current monitoring and evaluation approach that this company is currently using?

After reviewing the current monitoring and evaluation approach that is used in this company, I register total dissatisfaction. The Texas Oil Refinery explosion would easily be avoided if the monitoring and evaluation process was effective enough (Hunter 3). I suggest that there should be a complete overhaul of the current ineffective system.

As the board chairman, which approach do you believe should be embraced in the monitoring and evaluation approach?

I am strongly convinced that the performance contract must be introduced in this company to help in monitoring and evaluation, especially among the top management unit. This would mean that every employee would have his or her performance evaluated regularly to determine if they deserve the salaries they are given (Carlson 75). The board will also develop a special monitoring and evaluation unit constituting engineers, lawyers, and business experts to regularly monitor operations of the firm to ensure that all structures are within the expectation of the law. Anyone or departments found to obey the set standards or procedures will face specified disciplinary measures.

As the board chair, how will you ensure that the in-coming CEO is appropriately monitored?

The board will be keen to monitor the activities of the new CEO to ensure that they perform. I will encourage the board members to develop a frequent monitoring system that will involve meeting the CEO and his office to determine their level of performance (Flynn 36). The system would involve summoning the CEO and his office four times every year. The CEO will be required to submit evidence of his performance, including the initiatives and programs made to achieve the company’s short-term and long-term objectives. I will ensure that the board members review and approve any significant corporate action. The board will be keen to ensure that the report given by the CEO and the top management is a true reflection of what is taking place within the firm. Their report will be compared with the report of independent consultants to determine its accuracy.

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As the board chairman, what would you do to solve the issue after the incident?

I will consider a radical change of the company’s management structure, operational policies, and strategies used in hiring and assigning employees to various assignments. The report was given by Hunter (6) reveals that the poor policies of this company were to blame for the accident. Since the report indicates that there was a lack of leadership and an open communication system within the company, it would be my responsibility to ensure that this unfortunate situation is reversed. The board will ensure that the top management unit of the company has proper leadership, functional oversight authority, and an appropriate communication system to ensure that the protection and safety of the people and facilities are achieved. Specific employees in this firm who played a role in the error of omission that resulted in the explosion must also share the responsibility. This is because they failed to provide measures that would have avoided this accident. The necessary infrastructure needed at this plant will have to be purchased.

Do you believe that there is an issue between the board and management that is affecting the firm’s performance?

I believe that the issue between the management and the board of directors that is affecting the operations of this firm has been a poor communication system. The board of directors is out of touch with what is taking place in the firm. The management unit has not developed a structure that can improve communication between the top management and the board of directors. Some of the revelations made by the independent body were shocking. The board has also been relaxed on its role as the supervisory body over the top managers.

How can these issues be addressed to improve the efficiency of the firm?

The first step that should be taken to address the above issues is to develop an integrated communication system that would improve communication between the management and the board of directors. The system should enable the board to understand specific activities taking place in the firm (Paetzold 78). The board will also have to take its supervisory role seriously. Any failure on the part of the management should be addressed as soon as possible. The board should consider making a complete change of the management and maintain leaders who were reported to be committed to their work. Secondly, the company structure should be changed to ensure that lower-end employees and managers are encouraged to communicate their problems and the issues they find at the workplace. Also, the top managers must ensure that investment in other areas goes in line with investment in oil production. Risk management and facility maintenance must go hand in hand.

What should be the reporting structure between the board and top management?

The management must appreciate their responsibility to make regular reports to the board on issues of governance. As mentioned earlier, I propose that there should be an integrated communication system that would enhance communication between the management and the board of directors. Given the fact that the CEO is the board’s secretary, he should furnish us with a strategic report annually, quarterly, or after every six months. The report should provide a comprehensive overview of the current issues. In this clause, any significant issue should be reviewed. It should aim at informing the board members. However, the main aim is to seek inputs and feedbacks from the board members. Also, the CEO report should have a matter of approval section. This section should present all the matters that are expected to be approved in the board meeting. Other matters such as the management’s leave, expenses, and personal issues affecting the top management may be discussed.

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How should the CEO involve the board in decision-making?

The management should be actively involved in strategic decision-making processes. The regular reports should be used to update the board members on the strategic plans and their implementations. The key performance indicators, risk, and risk compliance update should be provided (Carlson 58). The board will have the liberty to determine whether or not the firm is operating within the expectations. It is important to ensure that the CEO participates in the decision-making process of the board because he will be expected to take part in its implementation. This will help in eliminating any conflict of interest that may affect the implementation process.

As an external analyst, what is the major problem facing BP’s corporate management structure?

According to the report given by Reed, Stanley, and Alison Fitzgerald (78), the main problem of BP’s management is that it is putting profits before public and employee interests. The 2005 explosion that took place at BP’s Texas City at Galveston, killing 15 employees and injuring over 170 people provides an example of the company’s problems facing its security measures. According to the investigation by Hunter (5), it is evident that the company has had a history of ignoring or failing to invest heavily in safety and risk management and mitigation. While this issue is primarily a problem facing the company’s risk management protocols, it is equally a problem facing the overall corporate social responsibility. First, the company is working in a high-risk industry that involves oil production and distribution. Yet, the report indicates that the company has underinvested in facility maintenance. Therefore, it exposes the public and employees to risks involving fire, explosions, and exposure to gases. On the other hand, the report indicates a history of the high level of oil production and huge profit margins over the decades. This implies that the company invests in oil production at the expense of protecting employees and the public.

As the Chairman of the new CEO, what would you do to repair the image of the company?

To protect the company’s future, I would start by addressing the structural and management problems that are affecting the firm. I would convene a strategic meeting with the board and the new management with an agenda of making a complete overhaul of the company’s corporate structure. In this case, my agenda would convince all the stakeholders to support a new initiative designed to make the company focus on the three pillars of sustainability which include planet, people, and profits (Paetzold 70). This means that although we will be focused on earning attractive profits, we will not ignore our responsibility to the environment and to the people who are directly or indirectly impacted by our operations. I would encourage the board members to approve a substantial amount of resources to finance CSR initiatives within the company and its environs. I would direct the CEO to determine the best CSR initiatives that would involve all members of society. This would help in repairing the image between the company and the public.

What is public issues management and how can companies use it to solve crises?

According to Shapira (51), public issues management involves a process through which, managers or other corporate leaders identify the current, emerging, or anticipated issues that are likely to affect organizational performance, goals, or position within the industry or the society. Once the corporate leaders have identified these issues, they are required to analyze and identify their trends. Also, they are required to develop comprehensive plans for preventing or preventing their impact on the company.

Texas City Refinery explosion was a major public concern that forced many to question the structural systems at this firm. The news of the company’s irresponsible behavior is an example of public issues affecting the company. It affected the interest of members of the society and the employees of the firm. During the explosion crisis at BP, the public was concerned with the company’s failure to accept its bad culture that put profits before safety. The management should use this incident to be a starting point in developing policies that would protect the interest of its employees and the society at large. Measures should be put in place to ensure that such occurrences are adequately mitigated (Paetzold 49).

Do you believe that there is a CSR crisis at BP?

An analysis of the report given by Flynn (57) reveals that there is a serious CSR crisis at BP. The management has ignored the other two pillars of sustainability, choosing to focus only on profitability at the expense of the infrastructure is a clear indication that this firm has no concern for the people working within this plant. If this firm cannot sacrifice to take care of people within its plant, then this is a clear indication that the firm would try to avoid any responsibility to the society that would involve extra expenses to the firm. This is a policy that cannot allow the firm to spend on such issues as environmental conservation or helping the poor. According to Reed and Fitzgerald (67), oil refineries are the leading firms in the pollution of the environment. They owe society a lot in terms of social responsibility. However, the current corporate structure of BP may not allow it to participate actively in corporate social responsibility.

How will BP use public issue management to solve the CSR crisis after the exposition?

The top management unit of BP must commit itself to solve the corporate social responsibility crisis that is affecting the image of this firm. The company should initiate a strategy of collecting from the public on how its operations affect it. For instance, it should collect information from the media, the government, research, and other enthusiasts to develop an evidence-based approach to public issue management. Once the information is collected, the company should analyze it to determine the key issues that should be addressed in its new CSR protocols. In this case, the company’s inability to protect the employees as well as the public should be the main public issue. Apart from improving the internal aspects of safety and maintenance, the company should also determine the best methods for improving its public image (Paetzold 87). To do this, it should engage in corporate social responsibilities that involve environmental conservation. This may involve initiating tree planting events in major forests in the country or other protected areas. It would be necessary to engage the public in such activities.

Works Cited

Carlson, Robert. The New Rules of Retirement: Strategies for a Secure Future. Hoboken: John Wiley & Sons, 2004. Print.

Flynn, Nancy. Blog Rules: A Business Guide to Managing Policy, Public Relations, and Legal Issues. New York: American Management Association, 2006. Print.

Galloway, Christopher, and Kwamena Kwanash-Aidoo. Public Relations Issues and Crisis Management. Southbank: Thompson, 2005. Print.

Hunter, Trevor. British Petroleum (Plc) and John Browne: A Culture of Risk Beyond Petroleum (A). Ivey Management Services. 908.2 (2008): 1-13. Print.

Paetzold, Kolja. Corporate Social Responsibility (CSR): An International Marketing Approach. Hamburg: Diplomica-Verl, 2009. Print.

Reed, Stanley, and Alison Fitzgerald. In Too Deep: BP and the Drilling Race That Took It Down. Hoboken: John Wiley & Sons, 2011. Print.

Shapira, Zur. Organizational Decision Making. Cambridge: Cambridge University Press, 2002. Print.

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