Category — Corporate Governance

“The BP incident highlights big differences in how socially responsible funds prioritize various causes. Some of these managers considered BP’s stance on climate change a strong positive. ‘BP was the first to break the logjam on climate change policy’ and had been a leader on alternative energy, says Mark Regier, director of stewardship investing for MMA Praxis.”

- Quoted in Eleanor Laise, “Oops: ‘Socially Responsible’ Funds Hold Big Stakes of BP,” Wall Street Journal, July 17–18, 2010.

The greenwashing strategy of BP and Enron has been the subject of three recent posts at MasterResource:

They Loved BP and Enron: Climate Alarmism as the Great Environmental Distraction (Part I: Worldwatch Institute quotations)

BP’s ‘Beyond Petroleum’: Climate Alarmism as the Great Environmental Distraction (Part II: Why the ‘greenwashing’?)

Harvard Business Review Article: BP as Environmental Role Model (Part III on global warming as the great environmental distraction)

Don’t believe that “Beyond Petroleum” BP fooled the politically correct after Enron and even all the way up to the Deepwater  Horizon explosion/Gulf spill of May 2010? Then consider the Wall Street Journal’s “Oops: ‘Socially Responsible’ Funds Hold Big Stakes of BP” (reprinted below as Appendix A). [Read more →]

[Editor note: Part I in this series reviewed the praise for BP and Enron from the Worldwatch Institute. Part II delved into the reasons that BP tried to rebrand itself as "beyond petroleum."]

“Such [progressive] leadership [on climate change] may give BP Amoco better access to government-controlled oil deposits and more operating flexibility.”

- Kimberly O’Neill Packard and Forest Reinhardt, “What Every Executive Needs to Know About Global Warming,” Harvard Business Review, July/August 2000.

The Worldwatch Institute sang the praises of BP’s it’s-a-problem, we-can-solve-it approach to climate change. Far Left environmentalist Joe Romm featured John Browne/BP in his book Cool Companies as a leading example of corporations going green for profits and virtue.

Both Worldwatch and Romm were wrong–dead wrong–about BP, just as they were also wrong about climate-alarmist Enron and Ken Lay.

It turns out that a lot of political profit-making and greenwashing was going on at both rogue companies. Remember what Jeff Skilling told one of Enron’s coal executives who complained that the company’s greenwashing was hurting his division:

“We are a green company, but the green stands for money.” [Read more →]

Today, the House Energy and Commerce Subcommittee on Energy and Environment will hold a hearing on the Blowout Prevention Act of 2010. A draft of the legislation and other pertinent documents are available on the Subcommittee’s Web site.

Although the draft legislation and hearing documents address serious problems brought to light by the Committee’s ongoing investigations, the Blowout Prevention Act would throw the baby out with the bath water.

To restate the obvious, although oil spills are bad, oil is good. Without oil, there would be no modern commerce and no mechanized agriculture. Life for most people would be “nasty, brutish, and short,” and many of us would not even be alive. Another obvious point — British Petroleum (BP) is to blame for the worst environmental disaster in U.S. history, not the oil industry as a collective entity.

Yet the draft legislation that Chairmen Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) will promote at today’s hearing could shut down all offshore drilling in the United States.

The draft text says the federal government “shall not issue a permit to drill for a high-risk well unless the applicant for such permit demonstrates . . . and the appropriate federal official determines that . . . the applicant has an oil spill response plan that ensures that the applicant has the capacity to promptly stop a blowout in the event the blowout preventer and other well control measures fail.”

Sounds innocent enough. However, the bill defines as “high-risk” any “offshore oil or gas exploration or production well,” not just ultra-deepwater rigs. In addition, at both the June 17 Oversight and Investigations Subcommittee hearing and the June 15 Energy and Environment Subcommittee hearing, Chairmen Waxman, Markey, and Bart Stupak (D-Mich.) emphasized that none of  the major oil companies, individually or in combination, could have stopped the spill after the blowout preventer failed:

• “BP failed miserably when confronted with a real leak, and ExxonMobil and the other companies would do no better.” — Chairman Waxman, June 15
• “It could be said that BP is the one bad apple in the bunch. But unfortunately, they appear to have plenty of company. Exxon and the other oil companies are just as unprepared to respond to a major oil spill in the Gulf as BP.” – Chairman Stupak, June 15
• “Yet when you’re asked can you stop the massive quantities of oil that are now ruining the beaches and marshland, killing the wildlife, and devasting the economy, you [BP, ExxonMobil, Chevron, Shell, ConocoPhillips] say no. You say you’re not well equipped to deal with it, and these catastrophic impacts are simply unavoidable.” — Chairman Markey (hearing transcript, pp. 220-221), June 15

The implication is obvious: The federal government ”shall not” issue any more permits for offshore drilling, because nobody knows how to “promptly stop a blowout in the event that the blowout preventer and other well control measures fail.” Rep. G.K. Butterfield (D-N.C.) put it this way: “BP ignored a very simple rule. If you can’t plug the hole, don’t drill the well.” But, as the BP disaster shows, some holes cannot be plugged, at least not in time to prevent gigantic spills. Logically, the bill implies that no permits to drill should be granted and that existing permits should be revoked.

How might Chairmen Waxman, Markey, and Stupak reply to this criticism? [Read more →]

[Editor note: Part I in this series examined praise for BP and Enron from the Worldwatch Institute. Part III examines a Harvard Business Review article linking BP's 'beyond petroleum' strategy to special government favor, including drilling on government domain.]

Consumer boycotts of Shell and pressure from Greenpeace … [and] speculation that Shell might shift its position on climate change led BP CEO John Browne to look more closely at climate change. He decided to set a new company policy that would set BP apart from the competition—the product differentiation strategy.

- Gary Gardner, “Accelerating the Shift to Sustainability.” In Worldwatch Institute, State of the World 2001 (New York: W. W. Norton, 2001), p. 101.

With great big blobs of oil washing up on the shore, it is almost comical—no, it is comical—to see some of BP’s erstwhile friends in academia and other centers of high-minded thought running for cover. To cite one example, thanks to BP sponsorship, 300 researchers in white lab coats at Berkeley are busily searching for ways to make green fuels that will reduce our dependence on oil. In 2007, BP set up the Energy Biosciences Institute, saying it would spend $500 million over the next ten years to support research into plant-based fuels at Berkeley and two other universities. This is the largest corporate donation ever for university research.

- Andrew Wilson, “Beyond Pathetic.” The Weekly Standard, June 28, 2010.

For more than a decade, Left environmentalists and trendy business ethicists have touted BP’s “beyond petroleum” mantra as an example of public-interested corporate progressivism.

For example, Joe Romm in Cool Companies: How the Best Businesses Boost Profits and Productivity by Cutting Greenhouse Gas Emissions (Island Press: 1999) devotes several pages near the end of the book to “climate leadership at British Petroleum.”

Romm refers to John Browne’s “remarkable May 1997 speech at Stanford University” (p. 206) before describing this episode:

Browne noted in a February 1998 speech that immediately after the Kyoto conference, he wrote to all 350 leaders within the BP group, the people who run BP’s business units, to get their ideas on how BP could reduce carbon emissions. Browne said, “Two weeks ago I got the response and I was stunned by it. It consisted of 200 pages of the most detailed and serious proposals…. Every single one reflected the view that we were doing the right thing in trying to tackle our own emissions and to make a positive constructive contribution to the public debate” (p. 207).

Romm continues: “One of the primary messages of this book  [is what] Browne has learned… ‘It is clear how frequently environmental logic and commercial logic coincide” (p. 207).

BP’s Misdirection

But now we know what happens when a corporation gets distracted and tries to be all things to all people. It happened to Ken Lay and Enron, and it happened to BP.

Tony Hayward cut back BP’s renewables push, which put pressure on the company’s ‘beyond petroleum’ greenwash. But evidently Hayward did not or could not do enough to reverse the unfocused corporate culture toward safety and true environmentalism. [Read more →]

[Editor note: Part II in this three-part series delves into the reasons that BP tried to rebrand itself as "beyond petroleum." Part III examines a Harvard Business Review article linking BP's 'beyond petroleum' strategy to special government favor, including drilling on government domain.]

“A growing number of corporations are moving beyond denial to acceptance and action on climate change, some seeking competitive advantage by anticipating rather than responding to future policy changes.”

- Seth Dunn and Christopher Flavin, “Moving the Climate Change Agenda Forward.” In State of the World 2002 (New York: W. W. Norton, 2002), p. 25.

Just imagine if John Browne had used the time and resources BP spent on climate alarmism and ‘beyond petroleum’ on real safety and environmental issues.

BP might still have a capitalization of $150 billion and not face a potential worst-case scenario of bankruptcy and ruin. And more importantly, the U.S. Gulf would not be in an environmental crisis.

Just imagine if Enron’s Ken Lay had used the time and resources spent on climate alarmism and forced energy transformation on accounting, risk control, and the real things that promote business sustainability. (Lay was a big Christopher Flavin/Worldwatch fan too.)

Enron might still be with us today.

Diverted management attention has an opportunity cost. Left environmentalists lobbied and praised BP and Enron for putting form over substance. A few shouted ‘greenwashing’, but most applauded their coveted split within the fossil-fuel industry on climate and energy.

Enron is no longer around. Instead it has become the poster child of political capitalism run amuck. And the Deepwater Horizon accident–for which, in an effort to save about $5 million, BP will pay tens of billions of dollars–may sink BP as an independent company.

What an irony: fake environmentalism driving out real environmentalism. Climate and energy reality, anyone?

A sampling of quotations from the mainstream Left Worldwatch Institute praising BP, Enron, or both follows. [Read more →]

“We’re trying to minimize the package,” [Sen. John] Kerry said yesterday of the 987-page bill. “We’re trying to keep it simple. We’re trying to keep it transparent and open and understandable for why something took place.”

- Darren Samuelsohn, “Kerry-Lieberman Bill Uses ‘Fewer Buckets’ in Giving Out Highly Prized Allowances,” E&E News, May 14, 2010.

“One often speaks without seeing, without knowing, without meaning what one says.”

- Jacques Derrida, quoted in Mitchell Stephens, “Deconstructing Jacques Derrida; The Most Reviled Professor in the World Defends His Diabolically Difficult Theory,” Los Angeles Times Magazine, July 21, 1991.

The late postmodern philosopher,  Jacques Derrida (1930–2004) would find intellectual kinship in the political debates about climate and energy coming from the party in power. If alive today, Derrida would nod approvingly at Senator John Kerry’s above I-say-it, it-is-true inversion of reality. It ranks right up there with Ken Lay and Jeff Skilling telling the world after the Enron collapse that Enron was a great company.

Donway Unmasks Enron’s Inner Philosophy

Roger Donway was the first person to identify Enron as a postmodern company. In “The Collapse of a Postmodern Corporation,” he wrote:

But if Enron’s executives were neither incompetent nor crooked, what brought Enron down? I believe it was a culture of corporate values rooted in postmodernism. These were not your grandfather’s businessmen.

He explained: [Read more →]

Over the past few weeks, with more dents accumulating in the armor of warmism, a new battle line is taking shape: ” The U.S. economy is ill, energy is important, green jobs will save us, promote green jobs, give us your money.”  Or something like that.

In fact, the shock troops of the green job army are now promoting the phrase “global weirding” to replacing global warming.  There is also terminological retreat on the green jobs side. You see green tech is not actually going to do much positive for the economy, you should think of it rather as a form of “insurance,” against global weirding, I suppose.

As we limp into our second year of crony capitalism under Barack Obama, with small businesses loath to risk their funds in what is increasingly a rigged crapshoot, and the importance of having friends in Washington all the more vital, government-backed green jobs appear to many as the only way out.

Indeed, as the skirmish lines have formed up the green jobs proponents have tried to imbue the subject with the same kind of political insulation that AGW theory previously enjoyed.  Criticizing money spent on green jobs is tantamount to rooting for America to fail.  Don’t believe me, here’s Tom Friedman of the New York Times, chief cheerleader for government-backed (coerced?) green technology promotion quoting Joe Romm approvingly: “China is going to eat our lunch and take our jobs on clean energy — an industry that we largely invented — and they are going to do it with a managed economy we don’t have and don’t want,” And then there’s Tom Friedman’s approach to international economic competition: “Mr. Wen, I just have one thing to say to you: We are going all in on clean tech. I’m going home and I’m going to get through the U.S. Senate a cap-and-trade bill, a carbon price, a carbon tax, whatever it is that will trigger massive scale investment in clean tech in America. And please take this message back to China: We will bury you. We are going to bury you in clean tech.”

This will be the first trade war in history over insurance. [Read more →]

With little fanfare, an earthquake has rippled through the United States Climate Action Partnership (USCAP). Three significant members, two of them being integrated oil majors, are no longer planning the cap-and-trade (aka, cap-and-tax) game. And if energy affordability and reliability is a metric, expect more companies to bolt. Social corporate responsibility, anyone? After all, there is no climate gain from a unilateral U.S. cap by the alarmists’ own math.

Here is the background. According to its website, USCAP is “a group of businesses and leading environmental organizations that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions.” Others of a less charitable bent would characterize them as central headquarters of the U.S. Climate-Industrial Complex, a group of corporate rent-seekers (the bootleggers), made whole by the environmental scaremongers (the Baptists) hell-bent on slapping the United States into a carbon rationing scheme.

Members of USCAP include AES, Alcoa, Alstom, Boston Scientific Corporation, Chrysler, Deere & Company, The Dow Chemical Company, Duke Energy, DuPont, Environmental Defense Fund (EDF), Exelon Corporation, Ford Motor Company, FPL Group, General Electric (GE), General Motors Corporation, Honeywell, Johnson & Johnson, Natural Resources Defense Council (NRDC), The Nature Conservancy, NRG Energy, PepsiCo, Pew Center on Global Climate Change, PG&E Corporation, PNM Resources, Rio Tinto, Shell, Siemens Corporation, and the World Resources Institute (WRI).

It doesn’t take a great deal of analysis to see who hopes to get what from cap-and-trade. The environmental posse– EDF, NRDC, Nature Conservancy, Pew Center, and WRI–get their ultimate dream: control of the U.S. economy by environmental bureaucrats who can determine who gets to buy carbon permits, who gets to sell them, how many can be bought overseas, who gets to slurp from the giant trough of government permit sales, and so on.

It’s not much harder to figure out what the corporations get, whether it’s simply “green” bragging rights to use in commercials (PepsiCo), or the hope to sell subsidized hybrid cars (Ford and GM), or the chance to sell new thermostats to millions of houses and businesses (Honeywell), to build nuclear plants, windmills, or solar farms (GE, Exelon), or to get in early in the hopes of getting free permits from the government (coal, oil, and other high GHG emitters). Again, a sober comparison of social costs and benefits should get these ‘greenwashers’ to bolt.

Three groups that used to be on that list which you won’t find mentioned at USCAP’s website are Caterpillar Inc., BP America, and ConocoPhillips which have made a relatively quiet exit, stage left. [Read more →]

“Politically oriented capitalism, whatever particular form it takes, involves the granting by the state of privileged opportunities for profit. Such openings are available only to those with connections or to those who can pay for influence.” 

-          Scott, James. Comparative Political Corruption. Englewood Cliffs, NJ: Prentice-Hall, 1972, p. 52.

Joe Romm at Climate Progress (Center for American Progress) is holding out hope against hope that a climate bill–just about any climate bill–will be passable in 2010. He regurgitates a Boston Globe piece under the headline, Graham, Kerry, Lieberman meet with Rahm Emanuel — and then Chamber of Commerce, whose VP of Gov’t Affairs said, “generally we were in synch”!

This brings up the question: why is the Chamber of Commerce negotiating with the enemies of true (consumer-driven) economic recovery?

This incident reminded me of a section from my book Capitalism at Work (chapter 6, pp. 172–74) that deals with the Chamber of Commerce in a historical sense. (There is a Ken Lay surprise–read on.)

A collection of speeches given in 1966/67 by the president of the U.S. Chamber of Commerce was published by McGraw-Hill as The Business of Business: Private Enterprise and Public Affairs. M. A. “Mike” Wright, chairman of Humble Oil & Refining Company (now ExxonMobil), urged his fellow executives to be more proactive in public and government affairs to improve the business environment and better society. “Virtually every business decision today is affected by public laws, regulations, and policies,” he stated, yet industry leaders were often “indifferent” or “negative” rather than “creative” and “positive” toward lawmaking. [Read more →]

Editor note: This post from one year ago is reprinted for its continuing relevance to the climate-change debate. The “bootleggers” are hard at work in the post-Enron era with nearly 150 companies, lead by Exelon Corp., Entergy Corp., and Constellation Energy Group Inc., buying 30-second television spots running from today through President Obama’s State of the Union address on Wednesday. 

The climate-change public policy debate might be thought of as a straightforward morality play. In one corner, we have the good guys laboring mightily against all odds to save the planet from rampant consumerism, human short-sightedness, and corporate greed. In the other corner, we have the bad guys, laboring mightily to preserve their profits by stoking materialism, economic selfishness, and fear of big government. Behind the curtains of this morality play, however, is a fascinating dance between the “good guys” (the Baptists) and “bad guys” (the bootleggers) to pass some form of mutually beneficial prohibition.

The emergence of the bootlegger and Baptist coalition in climate change politics has never been more obvious than last week, when the United States Climate Action Partnership (USCAP – a coalition of big business and big environmental groups) put forward its plan to reduce greenhouse gas emissions by 80 percent below 2005 levels by 2050 through a mandatory, economy-wide cap-and-trade program. While this is somewhat less ambitious than President Obama’s proposal (an 80 percent reduction over that same time period relative to 1990 levels), the real give-away about what’s going on can be found in the proposed emissions standards for new coal-fired power plants. To wit:

• any such facility permitted after Jan. 1, 2015, could not emit more than half of the carbon dioxide emissions now considered normal for coal-fired power plants; and

• any newly permitted coal-fired power plant today would have to have the ability to be retrofitted to meet that standard.

This, dear readers, is little but a replay of the old-source/new-source standards incorporated in the Clean Air Act (CAA), which likewise established tough emissions standards for future power plants but much lighter rules for plants currently in operation. The best review of what happened then and why is the classic Clean Coal/Dirty Air, pointedly subtitled How the Clean Air Act Became a Multibillion-Dollar Bail-Out for High-Sulfur Coal Producers and What Should Be Done about It (Yale University Press, 1981). The authors, Bruce Ackerman and William Hassler, were environmentalists with sterling credentials who simply could not stomach the deal necessary to bring the business community into the pro-CAA camp. Alas, their whistle-blowing operation gained so little attention and had such little impact that, today, environmentalists cannot discuss the Clean Air Act without making the sign of the cross and whispering in awed reverence. [Read more →]