In Applied Leadership we define “License to Operate” as the sanction by shareholders, governments, and communities under which a company has permission to operate.  It is one of the three key boundaries that great leaders establish within their companies.  The other two are Employee Welfare and Inclusion.

The WSJ article below notes that BP has been blocked from obtaining new contracts with the U.S. government because of a “lack of business integrity” stemming from the Deepwater Horizon explosion and oil spill in 2010.  This is real-world example of a company’s license to operate being at risk and illustrates how a single incident can put a company’s very existence in jeopardy. 

In addition to this recent action by the government, it’s stunning to reflect on the cumulative fall-out at BP since the incident occurred:

·         Several senior executives pushed out of the company including the CEO

·         Three employees indicted on criminal charges

·         $ billions paid in direct damage claims

·         $ billions paid in a settlement with businesses and individuals

·         $ billions paid in a criminal settlement with the government

·         $ billions to be paid in a potential settlement of civil fines

·         A partial and substantial liquidation of the company to fund losses

·         A suspension or loss of future possibilities as the company struggles

In the seminar we examine how different decisions and actions by a handful of people in the 40 minutes leading up to the explosion could have prevented the incident.  When we dig deeper, however, and hypothesize about root causes, we ultimately come down to leadership.  Our hypothesis about leadership issues and take-away learning include:

·         Setting Direction – “language” can blind a work team and create a stopping point for further inquiry about what is occurring – in the moment.

·         Process – unintended consequences of a flawed performance management system build slowly and occur suddenly.

·         Behaviors – Intolerance, i.e., “you get what you tolerate.”

·         Conversation – when it stops between companies and teams within an industrial situation all possibilities become smaller until one day a disaster occurs.

·         Organization Structure – excessive changes can confuse direction, pace, and priorities.

Remember, “At the root-cause level all we have is leadership – be that divine or human.”

Al Bolea

 

 

…and for those who want more please read on below

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BP Blocked From Deals

WSJ 11/27/12

By Tom Fowler

NEW ORLEANS—The Obama administration has temporarily blocked BP from obtaining new contracts with the U.S. government, citing a “lack of business integrity” that resulted in the Deepwater Horizon explosion and oil spill in 2010. But the public reprimand won’t affect BP’s existing operations and oil leases in the Gulf of Mexico, the company said, adding that it expects the suspension to be lifted soon.

The Environmental Protection Agency imposed the suspension in the wake of a $4.5 billion settlement of all criminal and some civil charges that BP entered into with the Justice Department earlier this month. The charges included a misdemeanor violation of the Clean Water Act.

The government imposed more than 100 such sanctions in the 12 months ended Sept. 30, but a suspension involving such a well-known company is “fairly uncommon,” according to an administration official.

BP said it was working with the EPA to lift the contract suspension. A draft agreement to resolve the agency’s concerns will be available soon, the company said. BP said it “has made significant enhancements since the accident.” The suspension would have prevented BP from bidding on offshore drilling leases in the western Gulf of Mexico, which the government awarded Wednesday. A BP spokesman said, however, that the company had decided not to bid before it was suspended. The lease sale attracted $133.7 million in winning bids on 652,522 acres from 13 companies.

Analysts said BP’s suspension would probably be short-lived. “We would be surprised if this suspension lasted beyond a few weeks or months, leaving no discernible effect on BP’s drilling or development pipelines,” said analysts with Wells Fargo in a research note.

The suspension came as three men who were employed by BP at the time of the Deepwater Horizon disaster pleaded not guilty before a federal judge here to criminal charges stemming from the explosion that killed 11 and unleashed the worst offshore oil spill in U.S. history. Each remains free on $250,000 unsecured bonds.

Donald Vidrine and Robert Kaluza, BP engineers who were on board the rig at the time of the deadly explosion, each pleaded not guilty to 11 counts of manslaughter, 11 counts of involuntary manslaughter and one violation of the Clean Water Act. The charges are related to their alleged failure to properly interpret a key safety test on the drilling rig.

“I think about the tragedy of the Deepwater Horizon every day,” Mr. Kaluza said outside the courthouse. “But I didn’t cause the tragedy. I am innocent and I put my trust, my reputation and my future in the hands of the judge and jury.”

Robert Habans, Donald Vidrine’s attorney, said outside the courthouse on Wednesday that his client “worked next to these men who lost their lives in this terrible tragedy, yet the government has seen fit to indict these totally innocent men.” He added that, “Don Vidrine has two lawyers while the government has hundreds of lawyers, but they are at a terrible disadvantage against him because he has innocence and truth and justice on his side.”

David Rainey, the former head of Gulf of Mexico exploration for BP, pleaded not guilty to obstruction of Congress and making false statements to a law-enforcement officer. He is accused of lying about the company’s estimates of how much oil was leaking from the well. His lawyer declined to comment.

The indictments against the three men were unsealed Nov. 14, the same day BP announced the $4.5 billion criminal settlement with the government. That agreement must be approved by a judge but it clears the way for Transocean Ltd., the owner of the drilling rig, to resume settlement talks with the Department of Justice over possible criminal and civil charges, said Tom Claps, an analyst with Susquehanna Financial Group.

Transocean said it has set aside a $2 billion noncash reserve for all Deepwater Horizon-related claims. Halliburton Co., the cementing contractor on the doomed project, said in public filings the Justice Department is looking into its actions following the accident, including record retention and post-accident testing of cement samples. But so far, government filings don’t appear to indicate the company is being targeted criminally.

Transocean and the Justice Department declined to comment on future settlement discussions. Halliburton said it is cooperating with investigators and remains confident that all the work it performed on the project “was completed in accordance with BP’s specifications for its well construction plan and instructions.”

BP must still settle civil claims with the government, including civil fines related to violating the Clean Water Act. Those fines could top $21 billion, legal experts have said.

The company has also reached a settlement with thousands of Gulf Coast businesses and individuals who say they suffered losses because of the spill. That settlement, which could cost BP more than $7.8 billion, is awaiting court approval.

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