BP Corporate Governance

BP unified GovernanceThe concept of integrated politics is the dodge by which blood corporation argon directed and go outled. The deuce-ace main aspect of good bodied judicature are seen in constituentholder right, transparency and come on circularability. (Corporate institution by Alan Calder 2008).Definition Corporate politics is concerned with holding the balance between economic and friendly goal and between individual and common goal and aim is to order as nearly as possible the interests of individual, corporation and society (Sir Adrian Cadbury, 1999). use the British cover colour case, we develop a personate of efficient embodied administration talking toing every facets of the society in which corporations exist such as economic, respectable, political, and fond. These facets posit the norms by which corporal decisions are judged. Without incorporating every facet into decisions, companies provide eventu aloney f either short and telephoner ju st cant do the things in profit motive by sacrificing the moral and ethical issuesBritish oil failed in averting the Mexico oil spill due to deprivation of coordination between board and chairperson and interlacing all(a) the facets of society in the corporate decision making process. This failure contributed to the mis attention of the ships association by a relatively detached board of directors who failed to assimi latish high ethical focus standards into the foundation of decision making process. This model developed present allowing help companies in addressing the appropriate system of corporate governance which serves as a foundation to avert failure through the utilise of high ethical patterns of behavior which are needed to survive in the modern business world.Case analysis and discussionBy late 2010,the British Pet fictional char locomoteerum has become a cause clbre amongst those concerned with corporate governance and particularly with the social, ethical and e nvironmental responsibilities of business In the 2 world-class century, corporate governance has become critical for mean(a) and large organisation. The organization which fallows corporate guidelines strategy per stages well than compared to organization which does not adhere to the guidelines. Corporation use with governance framework which is prototypical slump by law and then by regulation emanating from the regulatory bodies to which they are subject.The chairman and come alongs of directors are responsible for the Mexico accident as they not decent scrutinised the outsourcing to the partner and we call as leadership failure. The responsibilities of the board include desktop the companys strategic aims, providing the leadership to put them into effect, supervising the care of the business and insurance coverage to shareholders on their stewardship. It willing be critically analyses the corporate governance organize of British crude and its related issues regarding the corporate social responsibility.British crude Corporate Governance structure panel structureBritish crude oil visiting card fallows unitary board structure, characterized by one single board comprising both executive and non executive directors. The unitary board is responsible for all aspects of the company activities and all the directors are workings to achieve the same ends. The shareholders elect the directors to the board at the company annual superior general meeting.The get on with of British Petroleum focuses more on Agency system which take into account of dogma- agent framework. The work of Jensen and Meckling (1976) in particular, and of Fama and Jensen (1983), are associated with this Agency theory (Corporate governance -Christine A Mallin).In Agency Theory, in the context of corporation and issues of corporate command, agency theory sees corporate governance mechanisms, especially the board of directors as agent to varan the functioning of caution or th e corporation. The focus of the theory is on design proper incentives measure and implementing those incentives and supervise the exertion. Economic operation is vital, and increasing shareholder value is deemed good. Agency theory, however, is not able to address the issues of non-direct shareholder interests such as political pressures and societal expectations from blind drunks such as British PetroleumThe corporate governance structure of a square should provide the medium of norms and scoop practices which balance the needs of all stakeholders of the firm. Therefore, the model of corporate governance structure for firms must include economic, political, social and ethical norms for decision making in order for firms to gain and retain authenticity which leads to resources and survival.British Petroleum Plc board government activity principle is as fallows.The BP notice is responsible for the direction and oversight of BP plc (BP) on behalf of the shareholders and is acc ountable to them, as owners, for all aspects of bps business. The room recognize that in make outing its business, BP should be receptive to former(a) germane(predicate) constituencies.British Petroleum believes that good corporate governance involves to allege the role and responsibilities and the proper utilisation of distinct skills and processes. The card therefore focuses on activities that enable it to promote shareholders interests, such as the consideration of long-term strategy, the monitoring of executive action, and ongoing bill of fare and executive management succession. The board gives eject guide lines for the allocation of authority for the executive management of BP through the assemblage Chief Executive (GCE) and these can be seen in the Governing principleThe BP GoalThe Goal of British petroleum is to maximize the shareholders value by investing the resources to activities in the oil, natural gas, petrochemical and energy business.The role of the mountTh e carte is collectively responsible for pursuing the BP Goal and is accountable to shareholders for all the actions of BP. The identity cards role is to govern BP by discharging its sole responsibilities, which includeFocus primarily on strategic issuesRegard to economic, political and social issues and any other applicable externalMatters which may influence or affect the development of bps business andExemplify through these Board Principles and its expectations for the conduct of the BP business and its employees.The Board and its processesThe Board will take into agency and seek to obtain the view of the shareholder as a whole, the board will decide the agenda for the monetary year and these will be done with consultation of chairman, general political boss executive and company escritoire. Discussion at Board meetings will be open and constructive and the record will be unploughed confidential, unless there is a specific decision or legal essential to make disclosure. The entire director can obtain autonomous professed(prenominal) advice relating to directors own responsibilities and the affairs of BP.Board Composition and CompensationComposition, Size, Independence and upgradeThe Board comprise a experienced individuals with appropriate range of noesis and working principle inExperience in dealing with strategic issues and long-term perspectivesLeadership experience, a superior knowledge of business principles and electrical condenserIndependent thoughtAbility to participate constructively in deliberations andWillingness to use authority in a collective manner.The director are select annually by shareholder and half of director excluding the chairman, are non-executive director.Board and Director EvaluationThe Board will evaluate its own working condition and murder including the work of its missions and this is done to keep the efficiency of the board. The motion and contribution of individual directors as members of the Board will be reviewed periodically, with the presidents performance being reviewed annually. The non executive will monitor the work of General chief Executive, the performance of theExecutive directors will be monitored by the GCE and Non-Executive directors.Board inductive reasoning and EducationAll the directors will be assumption induction and prep program for enable them to fulfil their responsibilities as directors, all the directors especially non-executive directors are prepared give sufficient time for the discharge of their BP responsibilities. The board will be kept informed by the directors through company secretary. The nominating speech military commission will keep under review the commitments of Non-Executive directors and make suggestations to the Board if the charge concludes that a directors other commitments are inconsistent with those required by BP.Role of the ChairmanThe Chairman will the leader of the board and act as facilitator, and has authority to act and spea k for the board meeting on matter relating to the board principle. The Chairman is empowered to make any decision, tack together any policy, take any action or enter into any obligation which is consistent with the Board Principles. and, in so doing, may empathize the Board Principles in any reasonable manner. The Chairman will get a line that systems are in place to provide directors with accurate, timely and absolve data to enable the Board to consider properly all matters before it. The Chairman is responsible for ensuring the integrity and effectiveness of the Board Principles.The chairman role is all the trend followed as per Sir Adrian Cadbury observation the primary task of chairman is to chair the board. This is the work they create been appointed to do and, however the duties at the top of the company may be divided. Chairing the board is their responsibility alone (p. 78). He figure out highlights an important difference between CEOs and chairman.This principle i s adhered by the British Petroleum as per Sir Adrian Cadbury statement on chairman.Role of the delegate ChairmanThe Deputy Chairman will play as role of chairman in his absence and deputy Chairman normally serve as the Boards of age(p) Independent Director and will be approachible to shareholders who have concerns that cannot be communicate through normal channels.The Company SecretaryThe company secretary is selected by the nomination committee and all the board members have access to the advise and service of company secretary.The Company Secretary is responsible for advising the Board and the Committees onall governance matters, ensuring that Board procedures are followed, that the applicable laws and regulations for the conduct of the affairs of the Board are complied with and for all matters associated with the maintenance of the boardBoard CommitteesThe Board consists of permanent committee which are asThe Chairmans Committee,Safety, Ethics and purlieu Assurance Committee (SEEAC),Remuneration Committee,Audit Committee,Nomination CommitteeChairmans Committee Consist of chairman and all non-executive Directors and it work includeEvaluate the performance and the efficiency of the GCEReview the structure and systems for senior executive development and determine the succession plan for the GCE, the Executive directors and other senior membersof executive managementDetermine any other matter which is appropriate to be considered by all of theNon-Executive directorsSafety, Ethics and Environment Assurance Committee consist of quadruplet to half-dozen Non-Executive Directors and it work includeMonitor and obtain assurance that the management or mitigation of significantBP risks of a non-financial nature is appropriately addressed by the GCEReceive and review regular taradiddles from the GCE or his delegate, the theme familiarAuditor and the Group Compliance and Ethics Officer regarding the GCEs devotionto the relevant Executive Limitations and his ma nagement in responding to riskReview material to be placed before shareholders which addresses environmental,safety and ethical performance and make recommendations to the Board abouttheir adoption and publicationRemuneration Committee Consist of at least tercet Non-Executive Directors and it work includeDetermine the terms of escort and remuneration of the GCE and the Executive directors and to report on those to shareholdersDetermine on behalf of the Board matters of policy over which BP has authorityrelating to the establishment or operation of bps pension scheme of which theAudit Committee Consist four to six Non-Executive Directors and it work includeMonitor and obtain guarantee that the GCEs internal control system is in place and implemented effectively in the service of the study and relevant toExecutive LimitationsReview regular reports from the GCE or his delegate, the Group inbredAuditor and the Group Compliance and Ethics Officer which evidence the GCEs adherence t o the relevant Executive Limitations and his management in responding to riskReview all financial disclosure documents including quarterly results, annual accounts, prospectuses, information and offering memoranda to be placed before shareholders or filed with regulatory bodies and make recommendations to the Board about their adoption and publicationNomination Committee Consist of chairman and chairs of SEEAC, Audit and Remuneration committee and it work includeCategorise recommend candidates for appointment or reappointment as directors and company secretaryReview the immix of knowledge, skills and experience of the Board to ensure the orderly succession of directorsEvaluate alfresco directorship/commitments of the Non-Executive directorsRisk and Internal ControlThe GCE will not cause or permit BP to operate without a comprehensive systemof controls and internal audit to identify and manage the risks that are material to BP,to protect BPs assets and to monitor the application of BPs resources in a mannerwhich meets the standards of external auditors. (BP governing plc extract from bp.com)Weakness of corporate governance structure in British petroleumIn the wake up of Gulf of Mexico oil spill, the corporate governance structure and the governing principle collapsed , the oil giant accuse uncharismatic leader, chief executive Tony Hayward to placate its major partners and stakeholder. Instead, BP should quickly provide fresh leadership and replace its ineffective top decision-makers. That would be just the first step in trying to win back the confidence of its partners and damages investors trust while it continues to work on stopping the massive oil leak in the Gulf of Mexico and cleaning up the environmental disaster its created,The Financial Times in an editorial on July 6 verbalize theres an urgent need for sorts at the top of BP. And foremost investor Warren Buffett has verbalize Hayward needs to be replaced for the good of both BP and the U.S.The FT made clear what it believes BP should do There is no question that top management will have to be changed following the Gulf of Mexico oil spill. It noted that BPs response has exposed shortcomings in leadership and presentation.(Gene Marcial, financial columnist in Daily finance 7/12/2010)Analyst Lucy Haskins of Barclays Capital in a recent report noted that there are solid corporate governance questions given the magnitude of events at BP, which she describes as structurally disadvantaged.Haskin advises BPs nonexecutive directors should should change the whole corporate governing system of the company, kindred appointing new CEO and new leadership team.(Analyst Lucy Haskins of Barclays Capital in financial times December 2010)As we can see, on paper, BP addressed the management teams responsibilities in their corporate governance program. It is this same program that is being rated by Management Excellence and ranked accordingly. BP ranked number three on the list and surpri sing to many as BP morals are base solely on board structure and policies. If the rating were based on management actions then we would have a new ranking, as ethics should be based on the verbs that management take in the day-by-day operations of the company not the policies.Olsen (2005) points to BP having more fatalities than compared to other company and excessively the recent 11 death in the April 20, 2010 explosion of the Deepwater Horizon (Casselman, 2010). Considering death toll of BP and disaster like the Texas Refinery explosion, pipeline leaks, illegal doming, and the Gulf edge oil leak, we feel some things out of place and the rating system has it wrong, as environmental issues cannot be measured by policy and purpose but the actual action and their day-to-day activities to gauge the ethical behaviour. legal boardrooms need to be able to perceive fraud and misdeeds within their organization. To obtain this, directors need to make sure they have internal controls that monitor, detect, and measure the service program of red flags. Employees and management must be properly trained to second red flags within the scope of their job functions. Properly trained employees and management should be able to spot red flags sooner leading to a reduction in cost per incident for fraudulent activities within the organization.Creating an effective board, by utilizing Leblanc and Gillies (2003) model, can strengthen the overall sustainability of an organization. Effective boards have to actualize the ethical risks, red flags, and internal controls within their organization. As failure to do so, often leads to a road, no one wishes to go downAs per Tony Jackson review in Financial times British Petroleum has a stubborn nature of corporate culture which is difficult to change and also has defective safety culture. If we go through BP annual report which shows its top priorities are safety but it has not adhered to this statement as seen from Texas refinery explosion and Gulf of Mexico oil spill. Independent safety expert has given advise about BP US refinery safety upto to scratch and from we can gull there specific problem of corporate governance, several(prenominal) investment professionals have said of late that the BP affair underlines the duty of owners to examine companies on safety. The recently refurbished UK Corporate Governance engrave lays out the official position. The board, it says, is responsible for determine the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems.In other words top level management policy is not carried in execution below and this will make us believe the hypothesis of weak corporate governance in BP. Several institutional investors didnt buy BP share because of before the disaster because of safety worries.These all indicate weakness in safety, Ethics and environment As surance Committee and actual fact the work is not up to mark of the committeeRecommendation for good corporate governance in British PetroleumIn general, we would recommend that corporate governance structure should establish a relationship among a company, its shareholders, and society in order to promote a fair, transparent, and accountable principle in an enterprise. Furthermore, the board of directors should be independent from the stadium of influence of the CEO and senior management. The board must bear no material relationship between the corporation and major independent directors. The Board should fallow the combined code of UK and Sarbanes-Oxley act of US as per the company operation of BP Refineries.Corporate governance structure for a particular firm must fulfill with societal norms to maintain legitimacy and resources in that society. In the model of corporate governance structure for firms developed in this manuscript, norms include economic, political, social and eth ical normsFurther, compliance by all the five groups of corporate governance structure -the Board of Directors external analysts, regulators, outside advisors and management form the model of corporate governance and all the group should remain independent in order to maintain check and balanceThe more proactive role is needed by the states and companies for the development process aimed at fit economic growth with environmental sustainability and social cohesion, has motivated the following three interlinked business movementsThis can be done by the following wayWorldwide reforms on corporate governance.Corporate social responsibility compendIn critically examining the case of British petroleum we have discussed with type of how corporate governance failures directly led to the fall in share price and loss of confidence in investor community. Though it is a assistive example to study and provide a scholarly discussion of the bad effects a failure of corporate governance structu res and corporate social responsibility can have on a companys shareholders, stakeholders, and society in general a broader analysis leads us to conclude that having a governance structure in place that blends all appropriate norms of ethical, social, political and economic facets of society will have the most lasting and positive disturb on all stakeholders.The interaction of all groups in the corporate governance structure is needed to help a corporations abide by best practices at all times. Sound corporate governance give confidence in the investors that the business environment in which the company operates is fair and transparent. It tells investors that that the company is made up of conscientious employees who respect the rights to ethics of care, justice, rights and utility. Overall, the notion of corporate governance is contained in the ethics of care, justice, rights and utility, and this is why it is of supreme importance in all business entities.Reference and Bibliogra phyNew UK Corporate Governance Code in force from 29 June 2010BP plc -Board Governing Principle, September 20,2010 from bp.comTakis katsoulakos and Yannis Kat soulacos, Emerald Group publishing Ltd, multitude. 7 no. 4 2007,pp-355-369,Uche Nwabueze and Joan Mileski, Emerald group publishing Ltd, Volume 8 no .5, pp 583-594Tony Jackson (2010), BP must ensure Its good connotation become reality. Financial times, 27 JuneOil spill Panels Reilly Fault Regulator, palisade street Journal(online), New York, March 4th ,2011Leblanc R Gilllies J(2003), The coming renewal in corporate governance, Ivey Business JournalBP leads nation in Refinery Fatalities, Retrieved (2010), 1st OctoberRoss, M (2008) 1st April, Fraud Red FlagsMallin A C (2010) third edition, Corporate GovernanceGuler Aras David Crowther (2009), A Handbook of Corporate Governance and amicable ResponsibilityRobert G Monks and Nell Minow(2004), 3rd edition, Corporate GovernanceJoseph. B. White, Proquest Document ID 2282002181, origin , NewspaperBritish Petroleum Annual Report 2011