Organizational Apologies: BP as a Case Study

Abstract

On April 20, 2010, the Macondo oil well ruptured during the final phases of exploratory drilling. Methane gas and other substances spewed from the well onto the Deepwater Horizon drilling platform causing an explosion and fire that killed eleven crewmen and ultimately sank the platform. Over the next three months, the well, located approximately 250 miles southeast of Houston, Texas, spilled as much as 184 million gallons of oil into the Gulf of Mexico. In the aftermath, the U.S. government banned deepwater drilling for several months while applicable regulations were toughened. The well’s majority owner was BP PLC, formerly known as the British Petroleum Company. Since the spill, BP has paid out as much as $60 billion in cleanup costs and in reimbursements for the lost livelihoods of people and companies on the Gulf Coast. In addition, BP’s stock price plummeted to a fourteen-year low—slashing the company’s pre-crisis market value by half. Public opinion of BP and employee morale also plummeted, the latter creating a risk that many employees would seek jobs elsewhere. In addition to the drilling ban, Congress appropriated several million dollars to increase federal inspection and monitoring of drilling operations. In its most recent annual report, BP states that it may face additional U.S. regulations that would increase its costs of regulatory compliance and decrease its ability to pursue new exploration. That report also identifies reputational damage making it more difficult for BP to secure investment opportunities from other governments. Thus, as a result of this explosion, BP has incurred substantial liabilities, has diminished its human capital, and has increased its regulatory burdens. This Article argues that BP could have prevented some portion of these losses through more effective public relations (“PR”). In particular, despite remarkable efforts to express regret and to take full responsibility for the damage caused by the rupture and spill, BP created the impression that its statements were insincere through a series of public images and comments that dampened and counteracted the effectiveness of its apologies. Recent experimental studies show that we ascribe more positive behaviors and motives to ingroup members than to outgroup members. This Article posits that BP harmed itself through its public appearances and statements by enhancing the degree to which members of the public viewed the company as outside their socioeconomic and national group (as well as the group of individuals and organizations that share their basic values). BP’s situation suggests that the effect of ingroup and outgroup triggers on apology, liability, and regulation warrants more study. Part II identifies an evolutionary approach to apology. Conciliatory efforts can be seen as a way to economize punishment costs in the face of defection. Viewing apology from an evolutionary perspective generates insight into many apology practices, including the very careful scrutiny of apologies, the similarities in audience reception between individual and organizational apologies, the consequent advantage that organizations can garner when proffering apologies, and the role that ingroup and outgroup biases can play in the success or failure of apologies. Part III turns to BP’s public relations statements and situates these communications in apology discourse, including the acceptance of responsibility, expression of remorse, and offer of repair. This Part then contrasts BP’s executive conduct with Exxon’s executive conduct following the Exxon Valdez oil-tanker spill to show that, although BP avoided some of the Exxon executives’ PR mistakes, BP made other costly mistakes. In addition to providing PR lessons for the future, BP’s mistakes suggest fruitful avenues for further research regarding apologies and their connection to liability and regulation. Part IV concludes.

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