Tony Hayward: The fall guy
TO PRESERVE BP's position in the US and rescue what is left of its credibility in the country Tony Hayward had to go
But his departure says as much about the lynch-mob mentality on display in Congress in recent months as it does about his failings as a chief executive.
To be sure, Hayward made gross errors in the aftermath of the disaster in the Gulf of Mexico (GOM). Comments about wanting his "life back"; about the small size of the spill compared with the vastness of the ocean; and his decision – fatal in a world consumed with PR, but otherwise understandable – to go sailing with his son while the oil was still spewing into the Gulf lacked tact.
In another era, when captains – of industry as well as politics – went down with their ship as a matter of honour, his exit once the scale of the disaster became evident would have been unremarkable. Hayward's firm messed up and, as its chief executive, so did he. To his credit, he acknowledged this in the statement confirming his departure from BP: as "the man in charge", he said, "I will always feel a deep responsibility, regardless of where blame is ultimately found to lie".
But he also showed guts in his willingness to confront the disaster and promise to make amends for the spill. It can't have come easy to him. Hayward did not have the gifts of his predecessor, John Browne, in speaking to the media. This was well known inside BP. But until the Macondo well blew up he had been successful in rejuvenating BP's operational reputation, as well as its share price.
BP, said Hayward after taking over as chief executive in 2007, had forgotten that its business depended "on someone, somewhere, everyday putting on boots, overalls, a hard hat and glasses, and going out and turning valves". His task was to focus on safety "like a laser" and improve operations at BP to prevent failures of the kind that had caused an oil spill in Alaska in 2006 and, worse, an explosion in 2005 that killed 15 workers at the Texas City refinery.
No-one yet knows what caused the Deepwater Horizon disaster: what compromised the well; what prevented the "failsafe" blowout preventer from doing its job; which engineer's decisions proved fatal; or which, if any, of the companies involved in the complex operation to drill Macondo was negligent. Most of all, no-one knows if the failure was BP's and, if so, whether it stemmed from systemic problems at the company; human error; or whether the failure was the oil industry's itself.
Establishing what happened, however, has become a casualty of US politics. Congressmen and women eyeing midterm elections in the autumn have pounced on BP and its British boss. Hayward, invited to a grilling by a congressional committee investigating the disaster, was humiliated. He did his position no favours by offering lawyerly answers to his questioners, which included the publicity-craving congressman Henry Waxman. But the kangaroo court of self-publicists that examined him hardly graced itself either.
And within BP, there ought to be some embarrassment, too, at the way in which Hayward has been sacrificed. Andy Inglis, the head of BP's upstream business, which recently relocated to Houston to be closer to the GOM, was the divisional head responsible for the Macondo well, not Hayward. Yet Inglis's low profile has left him mostly unscathed by the disaster that took place on his watch.
And Carl-Henric Svanberg, who became chairman of BP in January, has also been spared the axe, apparently because of his success in negotiating with the White House to limit BP's liabilities. Yet he, too, has otherwise underwhelmed in his stewardship of the company. One feeling within BP is that he left his chief executive repeatedly exposed. Many within BP still speak highly of Hayward. The same cannot be said for the chairman.
Most of all, Hayward is a victim of his legacy. As one of John Browne's "turtles" – the nickname given to the executives closest to the former chief executive – Hayward was always an unlikely figure to push wholesale changes on BP's culture. Yet it was Browne who entrusted the gradual restructuring of BP to outside consultants. Indeed, Ian Davis, a former chairman of McKinsey, recently joined BP's board.
In making Hayward the scapegoat for BP's troubles in the US, the company and its shareholders will hope that the anger of the politicians in Washington begins to dissipate. The two-month transition period before Hayward leaves his post and Robert Dudley replaces him may be critical to this. Any failure of the relief wells in the coming weeks must be associated with Hayward, not his successor. And, in the meantime, the colossal effort that BP has made to clean up the spill and lessen its impact – an effort that few, if any, other companies could have matched – will increasingly be associated with Dudley, who has been in charge of the company's response since June.
Perhaps just as critically for BP's PR efforts in the US, the Mississippi-born Dudley speaks with the right accent. "I know what crabbing, shrimping and fishing is all about," Dudley said recently. "I know what it's like to jump off and swim off a boat in the gulf."
If Dudley proves more acceptable to American politicians competing for TV airtime, it will save BP's business in the US – home to 40% of its shareholders, half of its oil reserves and a quarter of its gas. For such pragmatic reasons alone, his accession at Hayward's expense is strategically justified.
But once the BP hysteria dies in Washington, US politicians will have an opportunity to stop blaming Hayward and start exploring their own culpability for the toxic mess still spreading across the Gulf's fisheries. The lax regulations governing drilling in the GOM are one thing. But they exist because without them, the high risk of failure associated with exploration in a pricey region will deter the drillers. And, in any case, the moratorium on new drilling in place across the GOM now suggests that the government believes Deepwater Horizon was symptomatic of an industry-wide problem, not one specific to a UK company.
If there are systemic problems to be examined, they can start with the way Americans consume oil – and the way their politicians continue to endorse their behaviour, as if energy obesity were an inalienable right. Consumers want cheap energy, and politicians want stable supplies. Deepwater Horizon has revealed that such demands are increasingly perilous. No wonder the politicians are angry. BP's disaster exposed the world's biggest oil addict to reality. That wasn't Tony Hayward's intention, but he pays the price for it anyway.