Corporate Governance and Corporate Social Responsibility - BP - Case Study Example

Corporate Governance Name: Course: Institution: Date: Table of Contents Table of Contents 2 Introduction 3 Outline and summary of arguments 3 Context of the reading in relation to corporate governance 4 Why did the arguments appear in the media? 6 Corporate social responsbility 6 Sustainability 7 Corporate performance 9 Conclusion 10 References 11 Corporate Governance Article: After Settlement, Relief at a Diminished BP, Stanley Reed and Clifford Krauus, 2015. The New York Times Introduction The process of implementing corporate governance initiatives often attracts public attention especially when a reputable company is involved. The activities of the board and the management during and in the in any decisions are determinants of the ability of a company to ensure the realization of effective corporate governance, which is essential in realizing high-level corporate performance, corporate social responsbility and sustainable policies. When making profits, or implementing polices, a corporation is therefore often attempting to seek more ways of realizing and upholding the initial objectives of the company and maintaining a legacy. The main objective of essay is to assess the relevance of corporate governance with regard to BP in the aftermath of the 2010 Gulf Mexico oil spill. Outline and summary of arguments This corporate governance article focuses on the initiatives BP has developed to help mitigate the effects of the 2010 deep-water horizon disaster at the Gulf of Mexico. In addition, the article also focuses on corporate governance initiatives taken by the company to prevent the possibility of another disaster in the future and the corporate social responsibility strategies developed by the company since the accident. Since the massive BP oil spill of 2010, the company has been developing initiatives aimed at environmental conservation and the promotion of the livelihood of the communities around the Gulf and other regions where the company has been drilling its oil and acquiring natural gas. From the perspective of BP, the best way that the company can demonstrate its commitment to the development of corporate social responsbility is by acting on the long-term desires of the company’s shareholders, its partners, and the surrounding communities. Through its values aimed at expressing shared understanding, the company communicates its behavior objectives and its aspirations as an organization. In the aftermath of the Gulf of Mexico oil spill, the company continues to experience environmental and economic recovery in areas affected by the oil spill. Through the natural resource damage assessment process, the company has been able to monitor bird population in the Gulf while at the same time developing strategies that would limit the environmental hazards facing the bird population in the Gulf (Reed & Krauus 2015, p. 1). Until 2014, the company together with its trustees had agreed on the implementation of more than 50 restoration projects costing about $700 million. The work-included efforts aimed at the restoration of wildlife and habitat. Through these restoration initiatives, the company aims at the provision of access to fishing sites and other recreational platforms. Context of the reading in relation to corporate governance The operations of BP while realizing its objectives are based on the company’s core values and corporate governance guidelines. Strategy is a core value defining the practices of the organization with regard to corporate social responsbility and governance. Through its safety initiatives, BP believes that all its activities revolve around the workforce and the surrounding communities. The company has also declared its commitments in the delivery of safe energy to the world (British Petroleum Inc. 2014, p. 1). The value of respect declares the company’s desire to comply by the laws and regulations by holding itself to the highest ethical standards as a way of gaining the trust of the governments and the surrounding communities. The process of acting in accordance with the requirements of corporate social responsbility is based on the belief that societies, governments and surrounding communities should benefit from the presence of the company (British Petroleum Inc. 2014, p. 1). This explains why the projects initiated by the company aim at the creation of employment for the locals and tax revenues for the government. In the aftermath of the Gulf of Mexico oil spill, the company continues to experience environmental and economic recovery in areas affected by the oil spill. Through the natural resource damage assessment process, the company has been able to monitor bird population in the Gulf while at the same time developing strategies that would limit the environmental hazards facing the bird population in the Gulf (Reed & Krauus, 2015). Until 2014, the company together with its trustees had agreed on the implementation of more than 50 restoration projects costing about $700 million. The work-included efforts aimed at the restoration of wildlife and habitat. Through these restoration initiatives, the company aims at the provision of access to fishing sites and other recreational platforms (Reed & Krauus, 2015). The company has also been involved in the restoration of the economies of the Gulf States. This has been facilitated by the payment of all the legitimate claims originating from the oil spill and providing financial support to the tourism and seafood industries in the Gulf coast states. As part of its corporate social responsbility, BP has been an active supporter of the regional and national campaign initiatives for the Gulf States (Reed & Krauus, 2015). Despite the differences in opinion concerning the stage and progress of Gulf recovery, most of the affected areas in the Gulf coast continue to experience improvements in the tourism sector. For instance by the end of 2014 the Gulf coast states such as Alabama, Florida and Louisiana experienced 26%, 64% and 41% growth respectively in the tourism sector (British Petroleum Inc. 2014, p. 1). As a company BP operates in a diverse environment, BP has developed a strategy on how to understand and manage bio-diverse and sensitive areas. This is based on the realization that some of the protected areas in which the company engages in deep-sea oil drilling are home to endangered species. When operating in such areas, the company compiles a bio diverse management plan by consulting relevant experts and agencies with regard to the most effective solutions and actions (Reed & Krauus, 2015). Why did the arguments appear in the media? Corporate social responsbility The process of implementing corporate governance initiatives often attracts public attention especially when a reputable company such as BP is involved. The activities of the board and the management during and in the aftermath of a disaster are determinants of the ability of a company to ensure the realization of effective corporate governance, which is essential in realizing high-level corporate performance (Monks et al 2011, p. 17). From the stewardship theory of corporate governance, the owners of an organization engage in different business activities as a way of honoring the founder of the initial vision of a corporation (Brink 2011, p. 100). When making profits, a corporation is therefore often attempting to seek more ways of realizing and upholding the initial objectives of the company and maintaining a legacy (Brink 2011, p. 100). BP Inc. can be perceived as acting in accordance with the stewardship theory especially after the 2010 Gulf of Mexico disaster. This is based on the realization that part of the initial vision of the company was to ensure the maximization of profits with limited effects on the environment. The decisions to engage in environmental conservation initiatives in areas of the gulf coast are therefore a demonstration of the stewardship’s role of the business (D’Amato et al 2014, p.12). To enable its continuity, BP must continue to act in accordance with the demands of the environment (British Petroleum Inc. 2014, p. 1). However, the future of this business can only be guaranteed if the environment is protected to enable continuous flow of essential resources and the protection of human and marine life around and within the most affected areas (Rezaee et al 2012, p. 12). The stewardship model employed by any business is always subjective and dependent on its area of specialization. Part of BP’s technique of acting in accordance with the demands of the stewardship there is in its ability to engage communities in areas around oil drilling zones (Fernando 2011, p.17). Sustainability It is also possible to attribute the role of the media in exposing BP and its activities from the sustainability perspective. For the media, the objective was to encourage the adoption of environmentally friendly initiatives in the processes that define the operations of companies. The commitment of BP in operationalizing appears in its Credo, which requires that every business decision taken by the company must take the needs and the interest of the customers first. One way by which the company has been able to realize its sustainability objective is through sustainability reporting using different media channels. This reporting approach provides the shareholders with information on the strategies employed by BP on sustainability. In addition, sustainability reporting also serves as a technique of engaging in information sharing with stakeholders (British Petroleum Inc. 2014, p. 1). For BP therefore the role of the media in exposing its activities surpasses the obvious objective corporate public relations. The intangible benefits of sustainability reporting can be related to the perceptive of the stakeholders living around the oil drilling plants (Sarbah 2015, p. 5). Without the report, it is possible for the stakeholders to assume and adopt negative aspects regarding the company’s safety and health measures with regard to environmental conservation. Through the production of its sustainability reports, BP Inc. has the ability of satisfying of its stakeholders and advocacy groups (British Petroleum Inc. 2014, p. 1). Through the sustainability reports exposed by the media, the company also has the ability of mitigating emerging and probable risks (Weiss 2014, p.18). The media helps in reducing the possibility of dealing with negative promotional campaigns by non-governmental organizations on issues that could affect the company’s reputation by reducing its sales and profit margins (Arjoon 2014, p. 6). To ensure efficiency and effectiveness of the sustainability reporting, BP through the media does not engage its stakeholders in the reporting process but considers stakeholders as valued participants in the definition of strategies and goals (Zimmerliet al 2014, p. 11). The organization has the responsbility of organizing meetings with its stakeholders to assist in the development of goals (Brink 2011, p. 111). Sustainability reporting through the media is therefore an all-inclusive approach that BP uses in engaging its stakeholders and in providing them with essential information on the strategies employed by the company in the promotion of sustainability objectives (Hirschey et al 2009, p. 99). The provision of such information not only improves on the levels of transparency and accountability of the executives and the board of directors, it also improves on awareness levels among stakeholders (Cornelius 2003 p. 8). Corporate performance Matters of corporate governance make it to the media because they affect the levels of corporate performance of a company. For BP, corporate performance refers to the ability of the management and the board to engage in an effective decision making process as a way of promoting the ability of an organization to realize growth and development by using available resources (Arjoon 2014, p. 4). For BP, effective corporate governance can be realized if the management and the corporate board to act in the interest of the company and those of the shareholders while at same time assessing the performance of the company in relation to the needs of different stakeholders (Idowu et al 2014, p.120) Effective corporate performance is therefore not only realizable in the profits but also in the ability of the organization to serve the interest of the surrounding community. Companies such as BP have been able to realize high-level profits and growth because the strict adherence to matters of corporate governance, ethical codes of conduct and the development of sustainability initiatives (Evans and Evans 2011, p. 4). BP has been able to ensure effective corporate performance by serving the interests of its customers and those of its shareholders. This has been through the development of sustainable organizational and environmental goals and objectives (Brink 2011, p. 121). For BP, quality decision-making processes and adherence to the ethical consideration have been essential in ensuring high-level corporate performance. Successful corporate performance in BP has also been because of sustainable corporate social responsbility initiatives aimed at improving the reputation of the company in the public domain following the Gulf of Mexico oil disaster in 2010 (Urlacher 2014, p.10). Conclusion Effective corporate governance in the context of BP is a major contributor to sustainable economic development due to its ability to enhance company performance. It is important for BP to adopt effective and efficient corporate governance structures and processes to facilitate growth. In the context of any organization, the objective of corporate governance is often to build an environment of confidence and trust among those with competitive and conflicting interest. As a company BP operates in a diverse environment, BP has developed a strategy on how to understand and manage bio-diverse and sensitive areas. This is based on the realization that some of the protected areas in which the company engages in deep-sea oil drilling are home to endangered species. When operating in such areas, corporate governance dictates that the company compiles a bio diverse management plan by consulting relevant experts and agencies with regard to the most effective solutions and actions. 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Open Journal of Business and Management, 2015, 3, 40-57 Weiss, Joseph W. 2014. Business ethics: a stakeholder and issues management approach. http://www.books24x7.com/marc.asp?bookid=62385. Zimmerli, W., Ritcher, K and Holziger, M. 2014. Corporate Ethics and Corporate Governance. Springer-Verlag: Berlin Heidelberg Read More