Restoring legitimacy in order to remain
sustainable- BP CASE
Presented by Yulhendri Saputra & Marcel Bernadi
Introduction of the paper
Purpose of the paper:
While sustainability from a
medium to long term perspective
has been the focus of the majority
of research this paper focuses on
steps taken by the BP oil
Company, when facing the worst
environmental disaster in history,
to restore their legitimacy.
Findings of paper:
The analysis found that nonfinancial disclosures together with
image repair discourse strategies
were used by BP, to repair
organizational legitimacy.
Practical Implications:
With renewed emphasis on the
importance of sustainability to the
business environment, this paper
contributes to an understanding of
how
organizations
use
sustainability reports to restore
legitimacy
Originality value: Complimenting
Hearit's strategy with semiotics,
this
paper
adds
and
extends the literature by studying
the use of image repair discourse
and
semiotics
in
the
annual and sustainability reports
Introduction of Deepwater horizon - US
Deepwater Horizon was an ultradeepwater, dynamically positioned, semi-submersibel offshore oil
drilling rig own by Transocean.
Built in 2001 in South Korea by
Hyundai Heavy Industries, the rig
was commissioned by R&B
Falcon, which later became part
of Transocean registered in
Majuro, Marshall Island, and
leased to BP from 2001 until Sept
2013. Deepwater Horizon was
built for R&B Falcon (which later
became part of Transocean).
Construction started in December
1998, the rig was delivered on 23
Feb 2001 the rig was registered in
the Republic of Panama
Introduction of Incident
On 20 April 2010 an explosion on
Deepwater Horizon, off the Gulf of Mexico
sank the deep water oil rig and killed 11
workers. The Deepwater Horizon spill was
not the first oil spill in the gulf, but what
made the Deep Water Horizon disaster
different, was that for the first time in history
the public could view live streaming of an
environmental disaster on television.
Initially, after the explosion Hayward, CEO
of BP at the time of the disaster estimated
that the oil spill would have very little
impact. Estimates of the quantities of the oil
spill were not clear and varied greatly,
what soon became clear, was that the
parties involved quickly blamed each other
for the spill, which had resulted in the
widespread pollution
Introduction of Incident (cont)
The drilling contractor company, Halliburton cemented the well, after it
was decided to temporary abandon the well, despite it being found to be
commercially viable. The cement was supposed to stop any oil
and gas from bursting into the well pipe. Owing to numerous errors the
oil and gas vented onto the rig directly, causing the heating ventilator
and oil air conditioning systems to carry a gas rich mixture into the
engine room and 2 huge explosions to occur. The explosion not
only injured 17 and killed 11 workers, but also led to the worst offshore
oil spill in the United States (US) history (De Gravelles & de Gravelles,
2011). Estimates of the oil spill varied greatly ranging from an initial
conservative 1000 barrels a day to anything between 35 000 to 60 000
barrels per day (King, 2010) with at the end of 86 days, an estimated 4.9
million barrels of oil leaking in to the Gulf of Mexico destroying
over 400 species of wild life and hundreds of meters of fragile coastline.
(Guarino, 2010). The three companies, BP, Transocean and Halliburton
blamed each other for the disaster and Transocean also blamed
Cameron, a manufacturer of valves (Milbank, 2010). Others blamed the
Departments‟ Minerals Management Services for rubberstamping BP‟s
drilling projects without ensuring that BP has a proper response plan in
place in case of an oil spill (Eilperin, 2010). According to the
Washington Post, (2010).
A theory of organisational legitimacy
A number of dimensions to legitimacy have
been identified (Shoemaker 1982; Yoon,
2005). These include legality, evaluation,
viability, stability and credibility. Yoon (2005, p.
765) goes so far as to suggest that “legitimacy
may be a reflection of whether an organization
has the competence and resources necessary
for achieving its goals”
If institutional legitimacy matters at the macro
level of analysis, actionable legitimacy matters
at the micro level of analysis. Actionable
legitimacy is achieved when an action is
perceived by publics as being undertaken
within the institution's realm of authority and
thus inspires public confidence in the
institution. Boyd (2000)
The case of BP
According to the 2009 Annual report BP
operates at the forefront of the energy
industry. BP mentions that it operates
from deep beneath the ocean to complex
refining environment. In both its 2009
Annual review (p. 5) and its 2010
Summary review (p. 12) BP highlights it
capabilities and strength but also refers
to the risk of operating in areas which
provide severe physical, technical,
intellectual and geopolitical challenges.
Hayward (2009, p. 7) said that “We
continue to show our ability to
take on and manage risk, doing the
difficult things that others either can door
choose not to do.
Result and discussion of result
The question then was not was BP having
a legitimacy crises, but what type of
legitimacy crises. This section examines
what type of legitimacy BP faced and how
the legitimacy challenge BP faced was
repaired through the use of image repair
discourse supplemented by semiotics.
From the section 4 discussions and media
remarks it was evident that the messages
in the public arena about BP were not
favorable. From the 2010 Summary (p 12)
it is evident that BP understands the role
that legitimacy plays in its operations.
Result and discussion of result (Cont)
Although Boyd says actional
legitimacy is more common, and
that institutional legitimacy only
occurs when organizations have
to demonstrate legitimacy of their
entire enterprise.
In contrast to the group photo of
the board of directors in the 2010
Annual report the 2009 Annual
report contains individual photos
of both the Chairman Svanberg
(p. 2) and depicted in image 3
below, CEO Hayward
Result and discussion of result (Cont)
The resignation of Tony Hayward can be
classified as a matter of institutional
legitimacy, but rather that of actionable
legitimacy. With the chairman's words in the
2010 Annual reports he attempts to
demonstrate the legitimacy of his action of
replacing Tony Hayward.
Reading the annual reports it is clear that in
the matter of the edited images, it became a
matter of actionable legitimacy
Establishing from the annual exports that BP
faced both actionable and institutional
legitimacy challenges, it is clear that action
had to be taken to restore legitimacy
Tony hayward
Result and discussion of result (Cont)
Summary review (2010, p1) the
Chairman says “the accident
should never have happened.
We are choked and saddened
that it did.” yet does not admit
BP‟s mistakes.
“..Was a very, very low
probability event, by BP and the
entire industry…?” however
Dudley acknowledged BP„s role
in this event by saying “As a
responsible party,…we knew
we would face wide ranging
claims and potential fines”
(Annual report 2010). But again
does not admit BP‟s mistakes.
Sustainability Review (2010) BP made
extensive use of images, placing 57
pictures dealing with the disaster. Of the
total pictures only 10 depicted no humans
and the majority of the pictures were of 2
or more individuals looking either
concerned or caring.
Result and discussion of result (Cont)
In resignation of Tony Hayward The board
was saddened to lose someone whose longterm contribution to BP was so widely
admired. These words seem to indicate no
form of apologetic behavior either in the form
of apology or apologia, it rather appears that
BP is defending its former CEO and hence its
action.
Flicker account (2010) providing information
on the altered images, clearly tries to lay
blame for this on BPs contract photographers
and the terms of use of any of the images
state “that the images are provided in good
faith and that amongst others these images
will not be used in connection with any
purpose that is prejudicial to BP… “This
signals that BP did not take an apologetic
view to repairing its image regarding the
altered image matter.
Conclusion of paper case
The objective of this paper was to
establish whether BP used institutional or
actionable legitimacy repair strategies in
response to the Deepwater Horizon
incident. For an organization to have
institutional legitimacy, its stakeholders
must perceive it to be responsible and act
in accordance with societal norms.
These conditions not only made the public
question BP‟s actions, but also appeared
to threaten BP‟s sustainability. This paper
draws on the theories of organizational
legitimacy and image repair discourse.
Reference
Vida L Botes and Grant Samkin
University of Waikato, Hamilton, New Zealand
vidab@waikato.ac.nz
+64 7 838 4466 x 8102 Or +64 7 854 1003 ( A/h)
Thank you