BP axes Tony Hayward: Should investors flock back?
Remember social investing’s good old days?
Before Apartheid was struck down, a growing number of socially conscious investors refused to own shares in Chase Manhattan and other companies that invested in South Africa. No one particularly cared who was running the companies, they cared about the policies.
Many social investors still refuse to own shares in companies that sell tobacco — or in mutual funds that hold shares in such companies. “Green” funds have become a staple of the investor landscape, comprised of shares of companies that have been deemed environmental good actors by the environmental movement. (Ironically, I think BP was once considered good to go for such funds…) Again, none of those investors buy or sell shares because of who is or is not occupying the corner office, only on the company’s proven track record on the particular issue in question.
Which explains the jaundiced reaction I am having to the reason that BP has decided to toss its foot-in-mouth-disease-afflicted CEO:
This uncertainty about BP’s future business, its ultimate liabilities and its public relations debacle continue to weigh on the company’s share price, which is down about 40 percent since the spill started.
“The key issue now is whether investors and BP’s board think Tony Hayward is the right person to move the company forward,” said Matthew J. Slaughter, a professor at Dartmouth College’s Tuck School of Business. “Is this a BP problem or is this a Tony Hayward problem?”
Regardless of who leads the company, BP’s top executives have a lot to tackle. They need to convince the company’s constituents — its shareholders, regulators and government officials in the United States and other countries where BP has operations — that BP can pay all costs related to the spill, clean up the Gulf Coast, and still manage to grow its business around the world, analysts said.
Yeah, well, it should have to convince investors of one heck of a lot more. The “problem” here is the fact that BP has demonstrated flagrant disregard for the safety or its workers and of the oceans in which it operates. That it appears to be stalling on paying damages to fishermen and others whose livelihood the oil spill has pretty much destroyed. That it doctored the photographs of its spill cleanup that appear on its web site.
All this is reprehensible in its own right, whether or not it can afford its liabilities, or whether Robert Dudley, the guy who is replacing Hayward, turns out to be a slick, smooth talker.
Dudley, in fact, is a pretty slick choice on the part of BP’s board. He is BP’s most senior American executive, in charge of BP’s Gulf of Mexico operations. Presumably he’ll have a better idea of how to deal with the American press, of how to properly use American idioms (e.g., he’ll know better than to use “small people” as a synonym for hard-working folks), of how to position BP as simultaneously blameless and deeply remorseful (in the world of spin, there is no such thing as an oxymoron). And he undoubtedly has experience hobnobbing with American politicos — experience that BP sorely needs right now, since Congress has been rumbling about banning the company from new offshore ventures.
There’s no indication that he has any firmer moral compass than any other BP executive. But to hear analysts speak, that does not — and should not — matter one whit to investors:
Bruce Lanni, an energy portfolio strategist at Nollenberger Capital Partners, said the fact that no more oil was spilling the gulf was “an inflection point” for BP.
“There are a lot of good things now going in BP’s favor,” Mr. Lanni said. “There has been an overreaction to the cost of the spill. BP has the opportunity to emerge as a stronger company. I think this is where investors are missing a window of opportunity.”
Some investors, however, are still concerned about the ultimate price tag for the spill. Uncertainty over BP’s liabilities is keeping its shares under considerable pressure, although they rebounded somewhat in recent weeks. BP stock closed at $36.86 on Friday, valuing the company at $115 billion.
“Right now the market is just guessing what the liability might be for BP,” Jay Singhania, a vice president at Westwood Management. “If BP could help outline exactly what the costs would be, then investors could gain more confidence.”
This would be a pretty good time for the socially conscious investing community to wake up. Say you don’t want a change in faces and accents, but a demonstrable change in policy and behavior. And if you don’t get that, publicly, loudly, dump the shares.