Deepwater Horizon's Deep Impact on Pension Schemes

by Thomas A. Dubbs

June 01, 2010

While much has been made of the technological causes of the disaster, investors should take a close look at the role that the company's corporate culture played in the crisis as well. That corporate culture led to an undisclosed change in its business model that always balanced profits as more important than environmental and safety risks.

This year has already seen much attention to the notion that intangible aspects of management performance can wreak havoc on share prices. Toyota's recent plague of recalls was exacerbated by a corporate culture of obfuscation that accelerated the public's loss of confidence in the formerly blue-chip company.

As more information about the spill becomes public, it has become increasingly apparent that BP had cultural problems of its own—a focus on generating short term profits at the expense of long-term risk management. Indeed, the rig explosion is just the latest event in BP's long record of accidents including an explosion at its Texas City facility in 2005, which killed 15 people, and the 2006 Prudhoe Bay, Alaska spill, which resulted from a leaky pipeline.

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