The story of the Great Gulf Oil Spill is the stuff of epic movies, television specials, and congressional hearings. It is also the stuff of lawsuits and financial disasters. Part of this great epic is deciding who is to blame for the disaster. That decision would not be difficult were it not for the innocent victims involved in the tragedy. Sometimes it is even challenging to determine just who those victims might be. Certainly, some of the victims include those who suffered because of the initial explosion. Identifying and compensating these victims and their families should be uncomplicated.
However, there are other people who, through no fault of their own, were victims of the Great Gulf Spill, but who are often overlooked in the rush to judgment that generally surrounds these situations. Among those people are the shareholders of the main corporate players in the disaster-BP, Transocean , and Anadarko. Technically, the shareholders are the real owners of these corporations. They hold shares in each enterprise and they expect to profit from those shares.
For some of these shareholders that profit comes from dividends, while for others it comes from the sale of the stock. When the value of the shares drops, that potential profit drops accordingly, regardless of its source. A case in point would involve the shareholders of BP who, within a month of the disaster, saw the value of their shares drop eight points. Similarly, Transoceanshareholders saw a drop of 16 points and Anadarko experienced a drop of 12 points. The most interesting aspect about these losses is that they were not issued as punishment by a court of law or a congressional committee but resulted, instead, from random market forces within the economy, forces that react to rumors, innuendo, and lies.
Thus, as soon as investors learned that the oil spill would take at least three months to fix, BP stock dropped in value, and the shareholders of BP had to absorb that loss. Is this not an excellent argument for increasing the power of the shareholders? Should they not be more involved in corporate decisionmaking? Should they not have more power to sue corporate managers? The manger-control theory of corporate power suggests that corporate managers should be insulated from shareholders because the managers know what is going on in the corporation while the shareholders do not. How convincing does that argument sound in the wake of the Great Gulf Oil Spill?
(See Andrew Bary , "BP, TransoceanPriced for Disaster," Barron's , May 3, 2010, p. 26. See also Thomas G. Donlan , "In the Face of Disaster," Barron's, May 10, 2010, p. 62.)
Opening Case Questions
1. Is it fair for corporate shareholders to be penalized for decisions that they had no hand in making? Why or why not?
2. Some experts argue that both groups-shareholders and corporate managers-are too biased by selfinterest to make corporate decisions properly. Does this argument mean that the government should control corporate decision making? Explain.
3. Is permitting shareholders easier access to the courts for the purpose of suing corporate managers a good solution to the problem of corporate decision making? Explain. Would increasing the shareholders' voting power be a more effective, less disruptive strategy? Explain.
4. No one believes for a moment that drilling for oil from ocean platforms will cease because of the Great Gulf Oil Spill. Why then should anyone be penalized for the accident in the Gulf? Explain.
5. Individuals who support special interest group control would like to see representatives from employees' unions, consumer protection organizations, and environmental protection groups on corporate boards. Would this have helped prevent the Great Gulf Oil Spill? Why or why not?