How is BP responding to the Gulf Oil Spill? ¿Otra vez, Valdez?* Why not a mutual-gains approach to crisis management?

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How is BP responding to the Gulf Oil Spill? ¿Otra vez, Valdez?*
Why not a mutual-gains approach to crisis management?
By Luis E. Oré, JD, MA International Negotiation and Consensus Building Consultant
Many investors are trying to figure out the potential liabilities associated with various companies
associated with the Gulf oil spill. There are many liability concerns, companies all over the world deal
with potential and challenging situation such as the Gulf oil spill; some address these challenges with a
traditional public relations approach and others use a pure legalistic approach. Whether potential
investors consider either one as the right or wrong approach, there are other ways to tackle these
challenges; an approach with a risk management and conflict prevention mindset may be helpful. It
might be beneficial to factor an additional perspective while business lawyers offer advice to potential
clients. This can be a compelling topic to discuss within the legal and business community dealing with
issues associated with oil spills.
When incidents, accidents or disasters involving companies’ operations and performance occur, they
and their executives face affected people, angry communities, media and journalist questioning,
interest-groups and advocacy-groups organizing actions. Many want to know what happened, why it
happened and who’s at fault. Most likely, companies will see their reputation challenged, credibility
reduced and trust going down the hill. Companies will have to decide how to manage information and
could respond with diverse approaches based on traditional and conventional wisdom. A “traditional
legal” approach would recommend protecting information to protect the company from exposure to
liability; one may say, do not admit responsibility for things that probably the company has not done,
taking blame simply will increase exposure. A “technical” approach would recommend controlling
information; one may say, giving information to technically limited public will confuse them, do not
admit that a problem exists until is well defined and a solution is found, because saying there is a
problem without a ready solution suggests incompetence. Finally, a “public-relations” approach would
recommend creating information; one may say, shared information will be used against the company,
disclose information in small doses maintaining and creating an image to the company advantage.
On April 20 2010, eleven oil workers were killed when the BP-Gulf Coast’s Deepwater Horizon oil rig
exploded and sank rupturing a pipeline 5,000 feet beneath the surface of the Gulf of Mexico which
began the largest oil spill in United States history. Some may challenge how upfront BP was when
_____________________________________________________________________________________
** Luis E. Oré is founder of ORASI Consulting Group Inc., a training and development consulting firm specializing in
negotiation, consensus building, relationship management, and conflict prevention. Ore assists businesses with
cross-cultural and international negotiations, strategic alliances, organizational changes, dispute resolution system
design, and corporate stakeholder engagement especially with natural resources investment projects between the
United States of America and Latin-American countries. Ore has two Master of Arts degrees in conflict
management and in organizational and cross-cultural communication, a J.D. from the University of Lima (Peru),
and extensive training in negotiation and conflict management from CMI International Group, Western Kentucky
University, Lipscomb University, and the Program on Negotiation at Harvard Law School. Ore is Chair 2010-2011 of
the Association for Conflict Resolution’s International Section, collaborates with the Consensus Building Institute,
and is former chair of the ACR’s International Development Committee, and an associate of the American Bar
Association. He can be contacted via email: luis.ore@orasicg.com.
© 2010 by ORASI Consulting Group, Inc. All rights reserved. www.orasicg.com
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disclosing information regarding the incident. BP officials said that they did know whether oil or fuel was
leaking from the sunken rig. But BP Vice President David Rainey said "it certainly has the potential to be
a major spill." In a press release BP said it had dispatched 32 spill response vessels to the area, and that
wind patterns suggested the current oil slick would stay well away from land. In addition to being out of
the public eye, an oil spill at sea is much easier to clean up and has less of an impact on wildlife. Days
later, it was reported that a third underwater oil leak had been located in the pipeline that connected
the rig to the oil well, according to what said Doug Suttles, chief operating officer for BP. Two other
leaks were located within 36 hours of the April 20 explosion. There is no certainty on how much oil is
flowing into the Gulf of Mexico. Media reports that BP’s executives have declined invitations to news
programs such as CNN’s AC360.
While the scope and impact of one of the biggest environmental disasters in the history of the U.S.
remains a mystery, people are getting angrier. There are angry public around the Gulf coast concerned
about the effects of the oil spill, online communities and advocacy groups running campaigns though
internet, threatening lawsuits from concerned citizens, House of Representatives passing a bill that
removes limits on financial damages that can be awarded for accidents off the U.S. coastline, a bill
introduced in the Senate proposing spill penalties to force companies to give up a year's worth of
profits, and president Obama is expecting a report from a new presidential commission tasked with
investigating how to prevent future oil spills.
A different approach could bring about better risk management and better results. After an incident
occurs while the company is losing trust and credibility, its executives must deal with the challenging
situation with a strategic approach, an approach that is more effective than traditional and conventional
wisdom, to rebuild trust, credibility and manage potential exposure while dealing effectively with
diverse stakeholders concerns.
A mutual-gains approach would recommend disclosing information. In today’s world where internet and
networks are so pervasive concealing information is not only extremely difficult but counterproductive.
Honesty is the best policy because sharing information builds credibility and contributes to rebuilding
trust, and helps protect the public from further harm and accident-involved-companies from further
liability. If people have information available, they will be in a better position to protect themselves
from further damage. Sharing information contributes to open channels of communication, enables
feedback flow, and paves the path to regained trust and credibility; while concealing information and
admitting to actions only after others have discovered it, undermines credibility. If organizations want to
gain public’s trust, organizations need trust their public. Companies need to be mindful and strategic
when sharing information because too much information, poorly stated, and the timing of disclosure
can be counterproductive.
A mutual-gains approach not only recommends disclosing information but acting in a trustworthy
fashion, companies’ executives must say what they mean and mean what they say. Another key
principle and prescription to rebuild trust and credibility is to acknowledge the concerns of others, in
fact, downplaying angry people’s fears and worries, concerned communities, and those potentially
affected by an accident will raise emotions and escalate the situation. It seems president Obama follows
the recommendation of a mutual-gains approach when he decided to host the families of the 11
workers killed in the BP oil rig explosion at the White House, also when he went to visit the Gulf coast
area showing his concern regarding the incident, its consequences and response efforts, as well as when
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he addressed the nation with the latest on the BP oil disaster. Some may also say that when BP’s CEO
said he was sorry for the largest oil spill in U.S. history and the massive disruption it has caused the Gulf
Coast, he was also showing his concern to the Gulf residents. It is important to highlight that another
key prescription for companies from the mutual-gains approach perspective is that companies need to
select a good and credible spokesperson, one that is informed, experienced, clearly spoken and not
condescending to the public. A good and credible spokesperson speaks easily, confident, smoothly and
calmly while conveying honesty.
What about BP’s clean-up efforts and claims management for compensation? Many recall the 1989
Exxon-Valdez Oil Spill, 10 million gallons of crude oil into Alaska's Prince William Sound. After 2 months
of the Exxon-Valdez incident, Exxon spent $115 million on the clean up; after 2 months of the BP-Gulf
Coast incident, BP asserts it has spent $2 billion cleaning up the oil spill. At first, Exxon accepted
responsibility and then started finger pointing. Similarly, during the first week of BP-Gulf Oil Spill, the
head of BP Group said during a CNN interview that the accident could have been prevented, and he
focused blame on rig owner Transocean Ltd. CEO Tony Hayward said Transocean's "blowout preventer"
failed to operate before the explosion and that is the key issue here, the failure of the Transocean
[blowout preventer], describing the valve as "an integral part of the drilling rig," which is operated by
Transocean. "The responsibility for safety on the drilling rig is with Transocean," Hayward said. "It is
their rig, their equipment, their people, their systems, their safety processes." On the other hand
Transocean Vice President Adrian Rose had said its oil rig had no indication of problems before the
explosion.
Regarding the oil spill cleanup and mitigation efforts, BP says it takes responsibility for responding to the
Deepwater Horizon oil spill and it seems that BP takes the advice of a mutual-gains approach when
decided to work with the government; however, it seems BP has not engaged other concerned
stakeholders. BP could have convened a public forum with consensus building strategies to engage
diverse concerned stakeholders to harness community wisdom and obtain the best possible ideas. At
least the Coast Guard started an initiative separate from BP to seek the best ideas that industry,
universities, researchers, scientists and the public have to offer to try to contain the oil spill from the
Deepwater Horizon in the Gulf of Mexico.
Even though BP states that it will be responsible for the cleanup effort and with no cost to the tax
payers, someone may say that when BP says it will pay for all costs of cleaning up the oil spill that does
not necessarily mean it is committing to restoring the Gulf to its previous state. There are also concerns
about how the cleanup is taking place, some have questioned if BP is bringing the oil to the surface or
sinking it, and some may ask if BP might be using dispersants instead of skimmers for financial interests.
BP has established claim offices for managing claims for compensation for damages. However, there are
people who don’t trust in what BP is saying, complaints have increased and people want to file lawsuits
against PB. Even though someone may think about the Rolling Stones song “You Can't Always Get What
You Want”, a better liability and risk management approach might be implemented based on a mutual-
gains approach. This approach recommends that companies accept responsibility, admit mistakes, and
share power. On its website, BP states it "takes full responsibility for responding to the Deepwater
Horizon incident"; however, during questioning at a congressional hearing BP has attempted to share
the blame with some of its contractors, as its CEO did soon after the incident happened. Accidents will
always happen, but denying responsibility will only exacerbate people and communities’ anger. Once an
accident has occurred, no company can take it back; companies can only affect the future. Companies
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can certainly engage in efforts to prevent this from happening again but blame-games, finger pointing
and denying responsibility will make things worse and be a waste of time, energy and resources. Looking
backwards and seeking to blame other most likely will make companies loose more reputation,
credibility and trust in the eyes of the communities. A better approach to resolve this type of challenging
situations is to look forward, engage others and jointly decide on how to better deal with the challenge
at hand. Engaging a broad base of stakeholders is what a mutual-gains approach means by sharing
power. It is about sharing decision making power. By sharing power companies gain power and regain
trust and credibility.
When an accident of this nature occurs it is fundamental to establish clear lines of communications,
even though BP has online access, contact telephone numbers and is constantly updating its website
disclosing information regarding how BP is working, BP has not created a space for a public forum for
joint problem solving. Good communication is not just information-giving, it is more like a two-way
communication street, a back and forth process of gathering and disseminating information, listening for
feedback, and responding accordingly. Establishing this type of clear lines of communication means to
engage in direct dialogue, face-to-face dialogue between companies and the public.
The challenge is how companies deal with the consequences of unfortunate incidents. In general terms,
once an accident occurs, regarding compensation for damages companies have three alternatives:
Companies can do just what is required by law and wait until the courts decide the appropriate
compensation; or companies can decide to offer money to compensate the affected people and/or
other forms of assistance to mitigate the effects of the accident they caused, before litigation begin; or
companies can offer to make stakeholders better off than they were before the incident, to do so,
companies can take measures immediately to stop further harm and damages and wait to offer
compensation until after stakeholders and companies had an opportunity to meet to see whether and
how an equitable and fair standard for compensation can be agreed on.
BP has established claim offices to deal and manage claims resulting from the Deepwater Horizon
Incident. Its website says “BP is committed to paying all legitimate claims for damages resulting from the
oil spill and necessary response costs. This includes: Property damage, Net loss of profits and earning
capacity, Subsistence loss and natural resource damage, Removal and cleanup costs, Cost of increased
public services, Net loss of government revenue. BP also will evaluate all claims for bodily injury even
though they are not payable under the Oil Spill Pollution Act of 1990”. However, there are also concerns
regarding how BP is managing claims for compensation. People say that BP's checks to pay for lost
wages and income are not coming fast enough, if they come at all. The Adm. Thad Allen, retired Coast
Guard commandant overseeing the response to BP's oil spill, had sent a letter to Chief Executive Tony
Hayward demanding more information on compensation provided to people affected by the disaster.
The state of Louisiana is demanding that BP's claims database be made public so it can understand what
the reason for the holdup is. The state of Louisiana is also asking BP for $10 million to fund mental
health programs for those impacted by the Gulf oil spill. BP has not said whether it will fork over the
money or not. BP has established a 20 billion claims fund; however, the point is not how much money
will be paid, but how it will be paid.
It seems BP has opted for the second alternative; it has begun paying money to people helping with the
cleanup efforts and established several claim offices. But, when a company that has caused damage tries
to decide on its own what the appropriate response and compensation should be, a concerned
community is likely to resist. When compensation is seen as appropriate and fair by a concerned
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community, a sustainable agreement is likely to exist. As mentioned before and recommended by a
mutual-gains approach, a proven effective way to share decision-making power can bring about more
efficient and cost-effective results. A way to share decision-making power is thorough corporate
stakeholder engagement. In fact, people are more likely to accept decisions, even adverse results, if they
sense that the decision making process was fair and gave them an opportunity to have their concerns
heard and considered seriously. Therefore, BP could have opted the third viable alternative and convene
a stakeholder engagement process with the community affected by the oil spill.
A stakeholder engagement process as a public forum can help mitigate the oil spill and compensate the
affected community. The stakeholder engagement process can seek advice on how to calculate a fair
compensation, and can be used for joint problem-solving on a number of issues. Companies can seek to
derive agreed-upon community standards to guide the payment of compensation. The secret to having a
successful stakeholder engagement process is the use of a neutral facilitator with dispute resolution and
consensus building expertise. A neutral facilitator could help identify stakeholders, explore interests and
concerns, select representatives, and draft ground rules to govern civilized interaction during their
meetings. The stakeholders need to agree on how decision will be made – by consensus with company’s
veto power or advisory power – the group will need to agree on the design and operation of the process
– public forum. For instance, Susskind and Field (1996) use an example that can be adapted to the BP Oil
Spill to help determine compensation for lost fishing days; in this case, the stakeholders may decide that
a fisherman’s panel should be established. Representatives from fishermen’s organizations, the National
Marine Fisheries Service, and BP might be designated by the forum to sit on the panel. The panel could
bring in consultants to describe different ways of determining how losses should be quantified, and
what mechanism might best be used to expedite of the claims fishermen. The panel could have
reviewed options and presented alternatives to the full forum for consideration. Then, depending on the
group ground rules; they would have only advisory power, thus BP would not have delegated away its
right to make money-spending decisions. In other cases, the group might have decided to operate by
consensus, thus BP would have had the equivalent of a veto power over any recommendation of the
forum.
When potential investor, counselors and legal community are considering how to tackle challenging
situations such as the BP-Gulf Coast Oil Spill, they may be hesitant to decide and implement a corporate
stakeholder engagement with a mutual-gains approach to crisis and risk management, but in fact, time
and again, it shows that this approach produces better and more efficient results, strengthens
community relations, reduces the risk of exposure and liability, and improves the image and reputation
of the companies while contributing to rebuild their trust and credibility. The question is posted, why
not a stakeholder engagement and mutual-gains approach to crisis management?
*¿Otra vez, Valdez? Paraphrases the Spanish expression “¿Otra vez, Andrés?” which can be translated as a
surprised statement questioning: More of the same? Come on!
References
Consensus Building Institute (2010). CBI Involucramiento Corporativo de Actores Interesados: Soluciones
sostenibles para empresas y Comunidades.
http://www.wiserearth.org/uploads/file/f73b0d1b5e6c3d910a65618edcf7745c/CBI%20Involucramiento%
20de%20Actores%20Interesados%20y%20Stakeholders.pdf
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CNN (2010). http://edition.cnn.com/
ORASI Consulting Group (2010). ORASI Consulting Group, services and results
http://www.wiserearth.org/uploads/file/0539962adfd5e073ab5dbfbb1671c8e8/ORASI%20Consulting%20Gro
up%20SERVICES.pdf
Ore, L. (2009). Cross Cultural Negotiation & Consensus Building Strategies for Foreign Investment
Projects: Beyond Legal Systems. State Bar of Texas ADR Section’s Alternatives Resolutions Newsletter Vol.18,
No.2, 27-34 pp.
http://www.wiserearth.org/uploads/file/78ace89e643adbd327d11f1337f94a23/CROSS-
CULTURAL_NEGOTIATION_AND_CONSENSUS-BUILDING_STRATEGIES_FOR_FOREIGN-
INVESTMENT_PROJECTS%20Luis%20Ore.pdf
Susskind, L. , & Field, P. (1996). Dealing with an angry public: Mutual gains approach to resolving disputes. NY:
Free Press.
BP (2010). http://www.bp.com
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