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BP and Deepwater Horizon: Lessons Learned for the Compliance Department

Deepwater Horizon on April 21, 2010. Photo courtesy of United States Coast GuardBy Thomas Fox

As a Texan and an attorney who has worked in the energy industry for most of my legal career, I found some interesting points in the book Drowning in Oil-BP and the Reckless Pursuit of Profit by Houston Chronicle business reporter Loren Steffy.

Steffy details some of the recent history of BP, which he believes led to the Deepwater Horizon disaster last April. One of his points is that BP had an entire failure of its safety culture for a lengthy period leading up to the sinking of the Deepwater Horizon. This was a structural failure that set the stage for a major catastrophe.

Some of Steffy’s key points may be summarized as follows:

  • Lack of accountability. Safety decisions were made by a committee with no specific person accountable. This led to input by persons up and down the management chain. As noted by one Coast Guard investigator, “When everyone is in charge, no one is in charge.”
  • Wrong lesson learned. The CEO of BP wanted the company to adopt the financial discipline that Exxon had shown after its own environmental disaster, the Exxon Valdez spill. However, he failed to also understand that “as closely as Exxon’s management watched costs, it also made clear to every worker that the one cardinal sin was skimping on safety.”
  • Tick the box. BP focused on safety statistics such as the number of slip-and-falls and lost man-hour days, “but it glossed over the importance of installing a safety culture.” There was a good written safety policy in place but no culture to make safety the number one priority of the company. There was no one, or even no one group, who could ‘connect the dots’ on safety to try and prevent a systemic failure such as the Deepwater Horizon.

The points Steffy raised are equally valid when placed in the light of a corporate compliance culture. Some of the questions you might raise are:

Does your Chief Compliance Officer have authority to stop a transaction?

If safety is Number 1 at your company, is compliance 1A?

Does your company just ‘talk the compliance talk’ or does it really ‘walk the compliance walk?’

I commend Loren Steffy’s book to you as very good lesson in total system failure. 

Thomas Fox is an attorney in Houston, Texas, specializing in FCPA compliance, risk management and international transactions. His blog can be found here and he can be reached at [email protected].

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