BPs Response to the Deep Water Horizon Disaster - Case Study Example

Accounting Theories to Explain the Organization’s Response to an Event: BP’s Response to the Deep Water Horizon Disaster The multinational oil company, BP’s history is laden with crises and disasters but none was affected the company as the 2010 oil spill disaster in the Gulf of Mexico which came to be known as the Deep Water Horizon catastrophe (Goldenberg, 2010). The oil spill not only caused considerable damage to the environment, it also carved a huge dent on BP’s image. The situation was made worse by the inefficient way in which the company dealt with communication of the incident to the media and the general public (Coombs, 2007). BP’s communication ineptitude started long before the explosion that caused the oil spill occurred. For a long time, deep water drilling for oil had been a major cause of concern to environmentalists and the general public. To support its deep water oil drilling activities, BP argued that a catastrophic oil spill in the deep waters was highly unlikely. In case an accident occurred that resulted in the spill, the company actually promised that it was well prepared to cope and in the long run assure that there was as little damage as possible (Honnungar, 2011). These arguments were normally communicated through press releases and official reports from the organization. When the spill did finally occur in 2010, BP was not able to contain the situation. This was compounded by the fact that the company did not make effectual use of the communication tools at its disposal to address the crisis as it was. Several news agencies in the US carried the news of the oil rig explosion that occurred on April 20th 2010 killing 11 people (Ulph, 2011). At first BP seemed reluctant to comment on the issue, but immediately after the rig sunk, the company seemed to be in control of the situation. There were official assurances that everything was under control from the company itself and from its collaborative efforts with local authorities. The then C.E.O. Tony Hayward is on record saying that BP was ready to take full responsibility of the consequences of the spill. He said “we are taking full responsibility for the spill and we will clean it up, and where people can present legitimate claim for damages we will honor them” (Honnungar, 2011). He made this statement on April 30 and two 7 days earlier, he had promised that BP “would do everything in its power to contain the leak and resolve the situation as soon as possible” (Ulph, 2011). During these first early days, the organization took a communications path that indicated clearly that they were ready to take responsibility for the accident and were committed to do whatever they could to manage the disaster. This communications approach during a crisis is one of those that are recommended in order to build an image of a responsible business, as BP was professing itself to be (Walaski, 2011). The communication strategy that involves taking responsibility right at the onset of a crisis may seem as an obvious tactic for organizations; especially those that are actively include corporate responsibility communication in their policies. However, internal implementation of the strategy can be quit challenging when a disaster like the oil spill that happened on the Gulf of Mexico occurs (Hale, Dulek and Hale, 2005). Although BP started well at the onset of the crisis, things quickly got out of hand. The company’s press conferences, most of which were addressed by Hayward himself became a channel of miscommunications that swiftly eroded any gains that had been made during the initial communications (Ulmer and Sellnow, 2000). The problem mainly lay in the way the C.E.O handled the whole reassuring messages approach. It all seemed too reassuring and thus lost its genuineness. The message that the company presented to the general public through press releases and posts on its official website was that the oil spill would present very little disturbance to daily lives of people since, as Hayward put it, the spill was very small. BP was following the standard principles of communications during a crisis; however, the manner in which the information was relayed made a bad situation worse (Seeger, 2006). It seemed that the top managers in the company were not in touch with what was happening on the ground. This made them look impersonal to the effects that the oil spill was having on the local economy and in particular the fishing sector that was dependent on the Mexican gulf for a substantial amount of its income (Honnungar, 2011). BP made a huge mistake by officially reassuring the residents of the areas affected that everything would be back to normal even when they themselves were not so sure that it would. BP also chose to use some communication channels that were not helpful at all. For instance, they ran adverts on commercial TV stations retailing how they were committed to controlling the spill. However, people were not interested in the adverts, rather they wanted to see money being spent on managing the crisis. The company also concealed a lot of crucial information pertaining to the oil spill (Ulph, 2011). This information was later divulged to the public by other sources, including the local authorities and scientific researchers. This kind of half-baked truths presented in news conferences only discredited the company (Walaski, 2011). For instance, in one of its official press releases, the company claimed that the daily spillage was 1000 barrels when in fact it was ten times more than that. This kind of misinformation strengthened the public’s perception that the company’s management was not controlling the situation as it was supposed to (Honnungar, 2011). Presenting misinformation through official channels such as press releases may have contributed to the company’s prolonged crisis. The executive manager was forced to step down as it was ascertained that he was inept at handling crisis communication under such intense pressure. The failure to effectively communicate or pass on information that the public and authorities needed to hear badly damaged the image of BP. Hayward was forced to leave the company, not because he was a bad manager, but because of his failure to offer the kind of crisis communication on behalf of the company that was expected during such a serious disaster (Ulph, 2011). The new manger quickly lay down and implemented communication procedures to arrest the situation, but it was a difficult task since many people had already seen and been put off by Hayward’s almost lack of empathy and understanding. The press releases were more accurate and timely. They also contained crucial information about the extent and nature of the spill. The company’s crisis communication team also adopted the use of social media to update the public on the company’s effort to mitigate the spillage. This proved quite effective as people used it as a tool to get updated information about the disaster (Taylor and Perry, 2005). Accounting principles and theories as they relate to the BP crisis There are several theories and principles that are engaged in accounting. One principle that really applies in the BP case is that of sincerity (Riahi-Belkaoui 2004). Instead of BP maintaining sincerity from the beginning, it issued statements that were false. Very closely related to this principle, the company ignored the accounting principle of prudence (Riahi-Belkaoui 2004) given that it misrepresented the actual events and therefore the magnitude of the crisis in reality. As such, BP went against the principles of sincerity and prudence that are paramount in accounting discipline. Given that the company failed in some cases to disclose some information within its knowledge, the company went against the accounting principle that demands full disclosure of information (Riahi-Belkaoui 2004). Yet again, the company acted in bad faith in trying to conceal or provide wrong information regarding the crisis. In accounting, an organization is assumed to be an entity distinct from those who own it (Riahi-Belkaoui 2004). In relation to the case of BP, the shareholders of the company are not considered part of the company during the crisis and are not asked to take responsibility. Instead, the management of the company is called out to take full responsibility of the situation in a manner that suggests that the business is an entity separate from its owners. Yet again, the business is treated based on the accounting theory of going concern (Riahi-Belkaoui 2004). I spite of BP’s woes, it is assumed that BP will continue to exist and will continue doing business. It is asked to take responsibility of the crisis without respect to its financial position. The manner in which organizations control their initial moments of business crisis is very important. One major aspect of crisis management is efficient communication (Seeger, 2006). Despite the level of pressure the company might be under, it is important to issue the correct and accurate response and effectively communicate relevant and updated information to the media, clients, staff, authorities, victims and their families. To a great extent, BP failed to execute a fail safe communication plan to the authorities and the general public about the real state of events before and after the oil spill incident occurred. This lack of a communication plan on BP’s side led to what was perceived to loss of control which gave way to widespread public outrage in the affected areas. BP seemed to be delivering its information through instantaneous press addresses and releases and this increased its exposure to controversy. References Benoit, W.L. 2002. Image Repair Discourse and Crisis Communication. Public Relations Review,Volume 23, No. 2, pp. 177-186. (Benoit, 2002) Coombs, T. 2007. Protecting Organization Reputations During a Crisis: The Development and Application of Situational Crisis Communication Theory. Corporate Reputation Review, Vol.10, 163–176. Goldenberg, S. 2010. BP Oil Spill Blamed on Management and Communication Failures. Accessed 12 December, 2011: http://www.guardian.co.uk/business/2010/dec/02/bp-oil-spill-failures Hale, J., Dulek, R. and Hale, D. 2005. Crisis Response Communication Challenges. Journal of Business Communication April . Vol. 42, No. 2, pp. 112-134 Honnungar, V. 2011. British Petroleum Oil Spill Crisis and Aftermath: Corporate Governance and Communication at BP during the Disaster. Berlin: GRIN Verlag. Riahi-Belkaoui A., 2004, Accounting theor, Cengage Learning EMEA. Seeger, M. 2006. Best Practices in Crisis Communication: An Expert Panel Processes. Journal of Applied Communication Research. Vol. 34, No. 3. Pp. 55-60. Taylor, M. and Perry, D.C. 2005. Diffusion of traditional and new media tactics in crisis communication. Public Relations Review, Vol. 31, No. 2, pp. 209-217. Ulmer, R. and Sellnow, T. 2000. Consistent Questions of Ambiguity in Organizational Crisis Communication: Jack in the Box as a Case Study. Journal of Business Ethics, Volume 25, No. 2, pp. 143-155. Ulph, C. 2011. PR Analysis of British Petroleum. Berlin: GRIN Verlag. Walaski, P. 2011. Risk and Crisis Communications: Methods and Messages. Hoboken, NJ: John Wiley & Sons. Read More