Expect to hear a surprising amount in coming days about how “unlucky” Tony Hayward was. It goes like this: the outgoing BP chief executive was correcting the flaws of the latter years of Lord Browne’s reign. But when Deepwater Horizon exploded, he was the wrong man in the wrong place at the wrong time.
That line won’t play beyond a circle of BP supporters in the City. Mr Hayward, despite his mild manner, fought to become chief executive of one of the largest companies in a risk-prone, politically sensitive industry. In the event of a disaster, he knew he would pay the price.
Which brings us to his “compensation”. When the company is about to set aside up to $30bn (£19.4bn) to cover the costs of the oil spill, including compensation for genuine victims of the incident, even to use the term invites criticism. Yet if Mr Hayward walks with nearly £11m of accumulated pension benefits, plus a year’s salary of more than £1m – and a consolation seat on TNK-BP’s board – it would be a relatively modest bill. It would be nowhere near the top 10 payments to outgoing US chief executives, such as the disgraced chiefs of the crisis-hit US banks, and substantially less than Lord Browne took away, after scandal cut short his tenure in 2007.
As irate UK politicians discovered in the case of Sir Fred Goodwin, former Royal Bank of Scotland chief, pension benefits are extraordinarily hard to claw back. Quite right: a contract is a contract. Mr Hayward’s benefits reflect nearly 30 years of work at BP. His contribution to the humbling of the company was far less than Sir Fred’s to the RBS catastrophe.
But perhaps this is the moment for the sort of British self-deprecation that went down so poorly in the aftermath of the Deepwater disaster. Rather than risking the accusation that his pension will help pay for an extra coat of varnish on his yacht, Mr Hayward should consider renouncing part of his retirement pot. Consider it a small downpayment on the cost of repainting his peeling reputation.
Fraught at Connaught
A team of hired experts and an outside accountancy firm; a scramble to keep suppliers and customers sweet. Connaught is not in administration, but the methods being applied by Sir Roy Gardner, the social housing maintenance group’s chairman, are very similar to those used by administrators as they try to prevent a bad situation getting worse.
In Sir Roy’s favour is the likely reluctance of banks to foreclose on a business that was, until last month, apparently trading normally. Against is the obligation to keep the market informed about a fast-moving and uncertain situation. This need not bother shareholders: the risk-averse should have already made their excuses. But it is bound to bother suppliers, whose reluctance to trade with Connaught on anything other than punitive terms would turn good contracts bad very quickly.
For suppliers to put excessive pressure on a significant client could be self-destructive. Sir Roy’s job is to persuade as many as possible to maintain a stake in Connaught’s future rather than put a stake through its heart.
The government’s plan to restructure financial regulation is built on a simple principle: if it cuts the probability of a repeat financial crisis, it’s worth doing.
That’s admirable. But in its zeal to reduce “underlap” – the gap in the old regulatory system through which financial stability fell – the Treasury risks producing a huge amount of overlap elsewhere. The chief executive of one large financial institution fears a trebling of the administrative burden as macro-prudential, micro-prudential and consumer protection officials with clipboards cram into the lifts up to the boardroom.
I commend to him and to other worryworts Box 3.B on page 26 of the government white paper. It lays out a cunning co-ordination plan for the new watchdogs: statutory requirements to keep each other’s interests in mind; cross-membership of boards; memoranda of understanding; “college-style” joint supervision; “information gateways”; and lots and lots of consultation.
Leave aside the fact it was a poorly drafted MOU that doomed the tripartite authorities – Bank, Financial Services Authority and Treasury – to fumble the Northern Rock crisis. At least financial stability will be in safer hands next time. But it’s clear that those FSA staff who resist the blandishments of City recruiters during the long and disruptive transition to the new structure will have to develop a taste for internal meetings that would test even die-hard insomniacs.