British Petroleum Public Limited Company - Case Study Example

THE CORPORATE GOVERNANCE STRUCTURE APPROACH OF BRITISH PETROLEUM PUBLIC LIMITED COMPANY: BOARD OF GOVERNANCE PRICIPLES Basic Information British Petroleum plc Setting: United Kingdom Age of Company: 100 years Date: 1909 - 2009 Activity: Oil, natural gas, petrochemicals, and energy business The Board and the executive management of British Petroleum public limited company led by Peter Sutherland, the Chairman of the chairman's and the nomination committees has created, written, and implemented the Board of Governance Principles to afford them seamless maneuver of business within a comprehensible control structure. The British Petroleum Board and the executive management undoubtedly accept the role to drive and supervise the company in lieu of the owners. As well, the Board is committed to the concept and principle that company governance includes elemental specifications on functions and responsibilities with contemporaneous employment of diverse expertise and courses of actions. This is the manner, with which the Board ensures revenue for the shareholders' investments with consistent and regular review of long-term plans, decision-making achievements, and replacements for Board members and executive management personnel. At British Petroleum public limited company, the members of the Board entrust their decision-making management authority to the company's Group Chief Executive led by Tony Hayward, the Group Chief Executive, member of the BP board of directors, head of the BP executive management team, and steered by the Board of Governance Principles. Prior to efficient management, the company's Group Chief Executive Tony Hayward must have understood the business ethics of British Petroleum Plc prior understanding the company business, as theoretically, trade is directly related to ethics. In comparison, a good number of commercial executives recognize article of trade-based type of business ethics. This is well-liked by the communication industry, the courses offered in business schools, colloquiums, and educational prose. But, the other type of business ethics called sense-based has been overlooked by the majority in the industry. These two different types of business ethics are supposedly inseparable duo (Pava, 1999). Nonetheless, British Petroleum Plc Group Chief Executive Tony Hayward clearly implements article of trade-based and sense-based types of ethics as an indivisible pair which is clearly invoked in the Board of Governance Principles. "The power and success of business are ultimately dependent on manager's beliefs about life's meanings" (Pava, 1999) Corporate success then that is driven by moral code collectively practiced among managers, employees, and shareholders (Pava, 1999) seamlessly fits into these principles. At the British Petroleum Plc, corporate governance structure style is underpinned by the concept of the approach the company manages the business. First, the Board and the executive management of British Petroleum public limited company led by Peter Sutherland, the Chairman of the chairman's and the nomination committees benchmarked image of prominence as the driver of the primary aspiration of the British Petroleum Plc, together with the idea that the company has built through time market edge and asset for advancements. Second, the company is anchored on the conviction that its existence will assists in crafting better opportunities for the human race. For instance, the company will in some way lend a hand to humanity by providing access to heat, light, and transport. All these are achievable with low cost of energy production that is safe for mankind and ecosystem friendly (BP plc, 2009). This is being mindful of the chief responsibility of commerce to civilizations. While the business concerns are those of the material needs of a society of people, the corporate company likewise embraces what is beyond substantial wants and desires. In fact, this is the most significant aspect of the company. It is within this realm that company aptitude is manifested through its competence to be of assistance in people's generation of wants, inclinations, and uniqueness, thus cultivating the same, and varying accordingly (Pava, 1999). British Petroleum Plc responds to the theory of stakeholder. So, as Pava in 1999 puts it that while the corporate entity supplies demands, it is also within the realm that people finds the fundamental nature of existence. British Petroleum Plc as a corporate company is motivated by the basic ideas of the probabilities of expansion bottom-lined by the principles of sensitiveness and modernization for superior services (BP plc, 2009). By chance, this may be akin to all the other companies but, by and large, to be progressive for British Petroleum Plc means a give-and-take link coupled with the idea that the joint undertaking is constructive for the associates, and the consumers. Equally, dependability for British Petroleum Plc stands for the company's dedication to the welfare and growth of the company's staffs and employees as well as the society where the company has subsidiaries. The company endeavors to steer clear of all forms of misfortunes towards humanity and the ecosystem (Pava, 1999). Through the company's staffs and employees, British Petroleum Plc consistently supports research undertakings. Subsequently, marketable products are assured to be of high quality, up-to-the-minute, and safe for consumption (BP, 2009). As Pava quoted the words of James March, a Stanford University professor, peoples' participation within the decision makers circle in the study of marks, traditions, and habits is driven by their concern. In all business dealings, the British Petroleum Plc's is always directed by the established company standard of values contained in the company "Code of Conduct", which certainly means that the company supposed they would be reciprocated by their clients. British Petroleum Plc's assurance of high quality products is in keeping with the company standing in the world market. Despite the great challenge of holding up to the name established considering the complex world of the global market, the company code of conduct upheld all efforts in the realization of company targets. The individual workers and the company executives are one in the belief that their dedication to uphold the name of the company sustained them (BP, 2009). The British Petroleum Plc's code of conduct embraces 5 broad principles guiding the workers and executives along every company transaction. Every business deal is reckoned upon the health, safety, and security of the population within the neighborhood of the area where British Petroleum Plc operates. As well as keeping intact the viability of the environment by responsible operational activities. The company also ensures the same and reasonable opportunities to all its employees by having its own Human Resource Department, task to uphold the guidance, security, and privacy of individuals. The business partners of British Petroleum Plc are likewise made aware of the company's guiding principle when it comes to dangers brought about by gifts and entertainments, divergence of concerns, rivalries, business limitations, fiscal nuisance such as keeping money in safe havens, and collaborating with dealers (BP, 2009). The British Petroleum Plc's code of conduct strictly negates any form of enticement regardless of stature, commitments to any social groups that would defy the rule of just dealings, links to outsiders, and power struggles. Finally, the company emphasizes the keeping of complete and accurate documents, preparation of complete and accurate reports, safeguard of company assets both physical and intellectual, and safeguard of company insider trading and information technology systems (BP, 2009). As a result, Peter Sutherland's Governance Principles afforded them seamless maneuver of British Petroleum Plc business within a lucid control structure enabling the company to meet demands of a very competitive domestic market, and the company is able to supply the demands for the global market. This is reflected on the annual report on 'Governance: Board Performance Report', and accounts. This strategy minimizes the risk on stakeholders' or owners' company share, minimizes the risk of stakeholders' or owners' interest on other companies, minimizes the risk of stakeholders' or owners' personal assets which are not invested, and subsequently opens more avenues for investments considering the orderly manner of revenue driven blueprint (Taylor, 1995). Besides, the British Petroleum Plc as a corporate entity regularly shells out corporate tax based on the profit earnings and based on the predetermined equitable taxation margin (Taylor, 1995) imposed by the British government per '. So, profits before dividends are tax. The corporate entity distributes dividends to stakeholders' or owners' based on the number of shares held and based on the profits earned (Taylor, 1995). But, at some points, parts of the profits are retained (Taylor, 1995) by the company. This could be used by the British Petroleum Plc to allocate some budgets that is required to cover developmental projects, to add to the company capitalization, or to be used for acquisitions of companies which can be turned into productive subsidiaries (Taylor, 1995). On the part of the stakeholders' or owners', they also pay their personal income taxes, based on their corporate share earnings (Taylor, 1995). The tax would be as predetermined equitable taxation margin (Taylor, 1995) imposed by the British government per '. This means that profits of the British Petroleum Plc as a corporation are tax twice. First when the corporation paid income taxes, and second when the stakeholders paid income taxes. In other words, without having to input any contributions for capitalization, the government benefits more from British Petroleum Plc in addition to avoidance of labour related complications. Obviously, this is one big contribution of the company to the government or governments where its subsidiaries operate. Peter Sutherland leave many of the daily decisions such as hiring, firing of employees and purchase of new equipment to the company's Group Chief Executive Tony Hayward in collaboration with the different managers of the different corporate departments, which has become a common practice among the different corporate institutions (Taylor, 1995). So, the British Petroleum Plc exists following the protocol and chain of command, and as long as it makes profit, as the organization is revenue driven. This ensures the British government can continuously collect taxes from the company as well as the stakeholders. Conversely, British Petroleum Plc corporate governance which is decisions relative to mergers, alliances, acquisitions, pursues the usual practice of collaborative efforts of Peter Sutherland in cooperation with the Board members, together with Group Chief Executive Tony Hayward in teamwork with his cohort. This is because these are relatively enormous decisions that are quite complicated in nature considering configurations of probable risk and revenues plus capitalizations. Meanwhile, the members of the board of directors led by Peter Sutherland approve and endorse or disapprove and reject plans of chief executive officers and managers for growth and development or scale down for rationalization (Taylor, 1995). Levine in 2002 indicated that in the United Kingdom, "governance begins and ends with the board of directors". In as much as the British Petroleum Plc is based in the United Kingdom, then the probability that the principle is adopted by the corporation is favourably high. Besides, the United Kingdom Institute of Chartered Accountants in England and Wales were the ones who created the parameter (Levine, 2002). A deeper analysis of the practice of Peter Sutherland as chairman of the board in terms of British Petroleum Plc governance structure and approach, prominently exposed delegation of responsibilities. In addition, Chairman Peter Sutherland sees to the corporation's business transactions through task designations. Assignments are consistent with department categorization. And reports are given during board meetings by the GCE or group of chief executives. For example, the Chief Executive of the Finance department sees to a probable deal with fellow countrymen as creditors like banking institutions, capable of financial lending for funding projects, or for capitalization, saving corporate income in banks, conveyance of finances to companies where the British Petroleum Plc have obligations to pay through banks, conveyance of dividends to shareholders through banks, and income tax payments through banks (Dine, 2000). This entire task is contained in the well-defined corporate Board of Governance Principles. Subsequently, feedbacks are given through reports to the Board. As a supplier company, Chairman Peter Sutherland in collaboration with the members of the board and the GCE have evolved a line of products not only for its British consumers, but, also for international markets. Certainly the corporation now does not only serve its end, but it likewise makes available many different opportunities to the society at large, and to the global consumer community. Online, BP plc listed the industrial products the company regularly supply to its patron all around the world. These are petroleum products, chemicals for processing of crude oil into refined forms, gas, and solar cells. Conversely, the company is involved in oil and gas exploration and subsequent production, refining, marketing, manufacturing of chemicals for refining petroleum products, gas and power generation, and manufacture of solar cells (BP plc, 2009). This is the outcome of the efforts done in the early part of the 1990's. In 1990, the chief executive officer of the British Petroleum Plc Robert Horton initiated a company organizational transformation plan which was eventually implemented through workshops with the objective of changing the manpower culture, vision, values, and behaviours in the midst of a transitioning organization after privatization. This was primarily to enhance exceptional human resources assets, to learn from the old firm and to welcome the new organization with enthusiasm to be productive (White, 1992). Among the behavioural traits that were the centre of development were those of commitment and transparency. To facilitate the realization and achievement of the program's goals, experts in the area were employed. This activity was indicative of the new company's dedication to uplift the old company's service group led by the president of the Human Resource department, the vice-president of the Human Resource department, assisted by experts in the art of helping people developed the attitude of ease in fitting into the new and modified structure of the company. Additionally, the transformational program headed by the Human Resource Department was in close collaboration with the Corporate Strategy Team. This was to make certain that the participants will be aware and absorb the ideas that the new organization will be directed and focused (White, 1992). After the training program exceptional candidates for higher corporate positions were further trained to enhance capabilities of handling sensitive corporate task. From another perspective, the program was deemed necessary by the senior management group of the new company to tap human resources from within the corporate organization to man future positions that need to be filled up in case of expansions. Taken as a whole, the1990 chief executive officer of the British Petroleum Plc Robert Horton supposed "that the key factor in sustaining competitive advantage in the future will be the ability of BP to release the talents of all our employees" (White, 1992). Furthermore, this underpins company movement towards the realization of its vision which is to be the "Most Successful Oil Company in the World" (White, 1992). The current chief executive officer of British Petroleum Plc - AMOCO, Sir John Browne clearly said that the company strategy is actually their organizational structure, where, "Strategy = Structure = Implementation" (Organizing for Growth, 2001). This fashioned company equation formula obviously manifests the humble acknowledgement that no one can accurately forecast, not even the top-notch corporations in the world, or the most experienced expert in the field. But, as the current practices details, outputs from multifaceted linkages of institutional leaders, supporters, and the business environment, practically create what is in store for the future (Organizing for Growth, 2001). Sir John Browne clarified that the old maxim where a business institution should work along a corporate strategic plan is no longer applicable in the 21st century. What is apt today is for a corporate entity to have a leader within the principle and structure of teamwork, where manpower is aptly tasked in accordance with the mental, physical, and attitudinal capabilities. The impact of an organization's structure is relative to the diversified approach driving the market these days. This innovative approach effectively and efficiently links big corporations to small enterprises, making capital available and ensuring availability of diversified supply to meet diversified market and consumer demands (Organizing for Growth, 2001). Finally, the global economy now appears to require the dual functioning of the big and the small businesses. For example, the business of British Petroleum plc is on petroleum products, chemicals for processing of crude oil into refined forms, gas, and solar cells. Additionally, the company is involved in oil and gas exploration and subsequent production, refining, marketing, manufacturing of chemicals for refining petroleum products, gas and power generation, and manufacture of solar cells. British Petroleum plc has established a market name and has captured a market share. But, the company is now bordered by small entrepreneurs in the same business actually influencing production and marketing forms and styles, and even competitive prices. Sometimes, the small entrepreneurs come out with more innovative designs. Nonetheless, British Petroleum plc persisted to exist in such a business milieu, broadly accepting competitions as natural events, and taking the same as a challenge to come up with more competitive products. Conversely, the small-time business entrepreneurs saw opportunities in the same market. These were their motivating issues to further expand and find access to entry in the international market. These too indicate the significance of diversity in the 21st century business markets (Organizing for Growth, 2001). In Organizing for Growth conceptual framework 2001, the same degree of significance is the current trends of networks, joint ventures, alliances, mergers, and acquisitions. But, the most prominent, progressive and successful features of contemporary business organizations are the abilities to integrate the many and varied small business enterprises into a corporate business creating the assortment of goods and services aimed at supplying even the most trivial demands, making business marketing efficient (Organizing for Growth, 2001). The corporate governance structure approach of British Petroleum Public Limited Company thus, is broadly explained and covered in the Board of Governance Principles. Conclusion The organizational constitution of British Petroleum Plc is its current corporate governance structure specified in the Board of Governance Principles headed by an open minded leader who team works with highly trained and apt management and staffs, and does not stop at monopolistic activities, but encourages joint ventures among the big and small enterprises, thus coming out with assortment of supplies to ensure an efficient global market. 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Human Resource Planning 15, no. 1: 3+. Website Alexanders' Gas & Oil Connections. BP - AMOCOMerger http://www.gasandoil.com/goc/features/fex84248.htm rets: 4/23/09. British Petroleum plc. www.bp.com rets: 4/16/09 Corporate Watch. http://www.corporatewatch.org/'lid=287 rets: 4/16/09 BP. 2009. Governance. http://www.bp.com/marketingsection.do'categoryId=2&contentId=7013628 Read More