BP has been in the news recently, in fact off and on since the Deepwater Horizon oil spill of 2010, which cost the company over $65 billion.
The current focus, however, has been on the rapid turnover of very senior staff, and consequent questions over whether this reflects the ungovernability of the company or the incompetence of the board.
Our interest is in governance, and assessing the board’s performance holistically, so this article addresses the board’s role rather than the company’s performance per se.
Role of the Board
The UK Companies Act 2006 spells out the responsibilities of a company’s board and the directors, and these are extended by the Corporate Governance Code and the Stewardship Code and all the related industry regulations. Moreover, companies operating in different countries round the world are governed by local laws and cultural practices. So the board of a giant global corporation like BP has to comply with a myriad set of regulations.
The UK has led the world (excepting the USA) in introducing codes of corporate behaviour since the Cadbury Report of 1992, so we can use the principles of good corporate governance as applying in the UK for assessing board effectiveness in driving corporate performance of a global company like BP. In essence, the regulatory guidance for the role of the board is:
- staff the board with appropriate skills and experience and motivations, supported by suitable resources and procedures
- recognise the over-riding duty to look after the long-term future of the company
BP’s organisational response
In addressing corporate governance, BP’s website says its board meetings are structured around four pillars: strategy, performance, people and governance, and it spells out the responsibilities of the chair, the CEO and the SID.
The chair’s responsibilities are summarised as: management of the board, external relationships, succession planning, director development and evaluation.
The website describes the “principle” (sic) role of the SID as being to support the chair and lead the NEDs in the review of the chair, and act as a trusted intermediary for other NEDs when necessary.
The responsibilities of the CEO are summarised as: strategy and performance, risk and compliance, and people and culture.
The website summarises:
- the board’s role, membership, numbers of meetings and agendas
- the role of the Company Secretary
- obtaining independent advice
- potential conflict with the articles, and
- responsibilities of the board, which runs to 27 sections, and matters reserved for the board, which runs to 18 sections.
The first item in the Board’s Role is “establish bp’s (sic) purpose, strategy and its beliefs”
The first of the Matters reserved for the board is: “bp’s purpose, strategy and beliefs, and any changes to them”.
So BP has ostensibly taken on board the key elements of the Companies Act and the Corporate Governance Code, and its website ticks the boxes.
Is BP’s board operating effectively?
The key elements by which the operating effectiveness of the board can be judged are the directors’ individual competences in role, backed by the skills and experience they bring to that role, and the performance of the person in the chair.
The skills which directors (including NEDs) are expected to bring to their role are:
- familiarity with company legislation, governance codes, industry regulations and the company’s constitution
- understanding of corporate strategy
- familiarity with financial management and reporting
- understanding of risk management
In monitoring the company’s performance, they should be addressing:
- corporate culture
- the on-going viability of the business model
- compliance with laws and regulations
How well have the chairmen and directors of BP conducted themselves in the last few years? Judging by the major flip-flopping in strategy, followed by the departure of key people, often at short notice, or after a short tenure, the conclusion must be that the board’s internal functioning has not been good.
The catastrophe in the Gulf of Mexico was blamed on cultural failures which allowed regulations to be ignored and led to a colossal financial impact. The decision to go full-on in getting out of the traditional oil business, and which was later largely rowed back on, was a bet the farm approach to the business model.
Board effectiveness re company performance
Notwithstanding the controversy over the rapid changes in board membership, the over-riding measure of the board’s effectiveness must be the holistic performance of the company over an extended period of time.
A useful way to judge this is by comparing the growth and valuation of BP over recent years with its peer, oil major, Shell. The following LSE graphs compare the price performance of BP and Shell over the last 35 years, which is reflected in the increase in their respective market caps.
The market cap figures are:
BP
- year 2000 market cap c$119 billion
- current market cap c$100 billion
- growth c15% decrease
Shell
- year 2000 market cap c$130 billion
- current market cap c$240 billion
- growth c85% increase
Both companies have suffered a big hit to their reputations since the turn of the century. In 2005, Shell disclosed that it had overstated its oil reserves by over 4 billion barrels of oil equivalent, an overstatement of over 40%, resulting in a fine and financial settlements, the removal of the chairman and a big hit to the share price. In 2010, BP was hit by the Deepwater Horizon disaster, which cost it orders of magnitude more than Shell’s embarrassment with its financial misrepresentation. But, overall, Shell’s value has risen steadily and BP’s has plateaued in the past 25 years.
This would appear to indicate that Shell has been governed by a far more effective board than BP since the turn of the century.
The second measure, which is a guide to the likely performance of the company over the long term, is how well the board works in terms of its operating effectiveness in and between meetings.
After the Deepwater Horizon episode, there was a period of stability as the company applied the lessons learned under the leadership of a long-time BP man, though the value plateau continued. Then, with new leadership, under another BP lifer, a “bet the farm” strategic decision was made to work toward a major move into renewables, starting immediately. The board, with a new chairman who was a big supporter of action on climate change, backed this questionable decision, and continued to back it, even as the global market changed with the post-Covid boost in energy consumption, which boosted profits from oil, and the rise in interest rates, which threatened the viability of big new investment projects.
There followed a succession of board mishaps, as the CEO was removed due to personal indiscretions, and the interim CEO began steps to reverse the rapid move into renewables, which caused the chairman to offer his resignation. Then the appointment of the chairman’s successor, a person with no oil industry experience, but a hard driver from the property sector, caused the interim CEO to resign. A few months later, apparently due to clashes with senior staff, the new chairman was fired. Then the newly appointed CEO, a person from outside BP but with an oil industry background, started a “back to basics” reset of strategy to focus back on oil.
And the new, interim chair, is a person with an infrastructure background
Comparing the boards of BP and Shell, at the time of writing, are there any significant differences in composition which might cast a light on the reasons for the superior performance of Shell? Here are some points of comparison:
- career servers: the key executive roles of CEO, CFO and Company Secretary are filled by “lifers” in Shell; this applies just to one NED in BP
- industry experience: both Shell and BP boards have a similar mix dominated by the energy industry and financial services
- nationality: again, both Shell and BP similarly have British as the biggest share, though Shell has a bigger North American representation
So, on paper, the executive corporate continuity at Shell may have been a contributor to avoiding BP’s leap into renewables, though for the earlier part of this time period the BP CEO was a company man.
Lessons to be drawn
Under S 172 of the UK Companies Act 2006, the board of directors is responsible for the long-term health of the company, and since 2006, the difference in performance of BP and Shell is very clear. So the performance of the board of BP is plainly at fault.
The current focus is on the recent board shenanigans, and, clearly, the appointment of the recent chairman, whose personality seems more suited to a privately owned company than a major listed one, was a big mistake by the board which approved it. But taking a longer-term view, it is surely evident that BP’s underperformance goes back decades, and the board members over this longer period should surely be held to account. Their assessment of the corporate strategy was clearly faulty, and their risk management at key points was, for all practical purposes, non-existent.
But who is holding them to account for their professional performance? The investors have been hit and have recently made their complaints publicly. But surely someone ought to be critically analysing the board for two decades of corporate flatlining. The directors have presided over a progressive loss in company value, approved a business model which wasn’t viable, appointed unsuitable board members, and all the while drawing the level of pay that goes with being members of the board of a global company.
The evidence points to the board: two decades of underperformance against a true peer, Shell, operating under the same regulatory regime, is a governance failure, not bad luck.
An ungovernable company or an incompetent board?
Commonly asked Questions
Why has BP fired so many chairmen and CEOs in recent years?
A sequence of forced departures since 2023 reflects an underlying, decades-long strategic drift the board failed to correct, not just clashing personalities.
Is BP’s underperformance the company’s fault or the board’s?
Since 2000 BP’s value has fallen while peer Shell’s has grown roughly 80%, under the same regulatory regime — pointing at governance, not just circumstance.
What does UK law actually require of a board?
Under s.172 of the Companies Act 2006, directors must act to promote the company’s long-term success, not just comply with process.
Useful resources
Governing framework & primary sources
- Companies Act 2006, s.172
- UK Corporate Governance Code 2024 (FRC)
- UK Stewardship Code (FRC)
- The Cadbury Report, 1992 (ICAEW summary)
- BP Board of Directors — Terms of Reference (2025)
Market data
Recent developments
- Bloomberg — BP’s Long History of Management Turmoil Makes a Comeback With Chairman Firing
- Fortune — BP’s new CEO Meg O’Neill rips up the playbook
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