Recovering from Scandal
For years the most prominent public role for Peter Sutherland as chairman of BP PLC was hosting the company’s annual meeting. But after a run of oil spills, deadly accidents and an energy-trading scandal at BP, the 60-year-old one-time rugby player has charged head first into the scrum.
Last year, the Irish politician and prominent banker forced Chief Executive John Browne to publicly identify his retirement date. After Lord Browne’s unanticipated decision last month to depart a year and a half earlier than planned, Mr. Sutherland must now buff BP’s image and manage the company’s first executive-suite transition in more than a decade.
Despite a persistent rise in oil prices its shares rose just 4.5 per cent in 2006, compared with a 36 per cent increase by Exxon Mobil Corp. and 15 per cent at Royal Dutch Shell PLC. Yesterday, the company announced fourth-quarter net income decreased by 22 per cent, in part this can be seen as indicative of lower natural-gas prices and lower production.
BP, in the mean time, faces U.S. criminal probes on multiple fronts — oil spills and corrosion in Alaska; a a refinery explosion in March 2005 which claimed the lives of 15 in Texas; and its energy-trading practices, with federal officials alleging BP traders manipulated propane markets in 2004. BP denies manipulating markets and says it is cooperating with investigators on all three inquiries.
Mr. Sutherland’s prominent public standing also underscores a trend that goes further than BP: a transition in the boardroom dynamics at many of Europe’s largest publicly traded companies. Nonexecutive directors here have in the past been criticized for leaving too much decision-making in the hands of powerful executives. Now, many companies are moving to strengthen their boards with strong and independent directors.
Until the point at which Shell faced an accounting controversy in 2004, Shell’s British holding company had as its chairman a professor of geology. After the drama, it employed Jorma Ollila, former chief executive officer of Nokia Corp as chairman. Unilever appointed an external chairman last month to cap a restructuring at the Anglo-Dutch consumer-goods giant.
The goal of Mr. Sutherland at BP has always been to establish a “robust” and independent board structure he said in an interview recently. After stints as Ireland’s attorney general and Europe’s competition czar, Peter Sutherland in 1993 was instrumental in taking forward the General Agreement on Tariffs and Trade in Geneva. There, he clinched the Uruguay Round, an important trade agreement that set the foundations for today’s World Trade Organization. For a man who has achieved so much it is difficult to forsee where he will find his next challenge.
