Professor Dorothy Brown has recently posted an opinion piece on CNN.com in connection with British Petroleum's decision to suspend dividend payments to shareholders based on its continuing oil spill debacle in the Gulf of Mexico, as detailed in this blog space by Professor Joseph Grant. On CNN, Professor Brown argues that BP's shareholders, by virtue of their investment in the petroleum powerhouse, must recognize that a risk of ownership includes the possibility that the corporation will be called upon to pay for massive environmental accidents that it causes. Per Professor Brown:"Shareholders who own stock in an oil company that drills offshore without adequate plans in place, should disaster strike, have made a risky investment indeed. Given the potentially catastrophic impact of the oil spill, how can BP really know how much all of the costs will be? And the safest course of action is to wait until the company gets a better handle on its potential liabilities, which seem to be growing daily.
Between the business owners in the Gulf with their very livelihoods being threatened, the workers who are unable to earn a living and the looming environmental cleanup costs (once the oil actually stops spilling into the ocean) on the one hand and BP's shareholders on the other hand, the choice is easy: The shareholders should wait for their dividends. After all, isn't that why their tax rates are so low?"
To view the entire story see "BP Right to Stop Paying Dividends."
I agree 100% with Professor Brown. Some of my classmates and I just attended a presentation at our law school a few days ago on this issue, and this same concern was raised: There is no binding agreement or court ruling (or anything!) that binds BP to make these yearly payments from its $20 billion fund. Considering the damage it has done to the life of the Gulf (wildife and human life alike), and how long it will take for this to be resolved, it should conserve its resources. I read Professor Brown's entire article using the link you provided, and the numbers don't lie. It seems like keeping greedy shareholders happy is really the driving force here, not ensuring that senior citizens who rely on dividends able to survive. It seems as though the system we have in place just isn't design to deal with problems like these, and it surely isn't designed to make companies feel accountable either. For the sake of the future of our environment, I hope BP makes the right decisions for itself, and for those who have been damaged by its actions (or lack thereof).
ReplyDeleteI dont agree that investing in an oil company is a risky investment at all. Having looked at the legal history of big oil and how the conservative courts favor them, it is clear that the suspension of dividends is a marketing ploy to make the public think that the company is frightened and to show vulnerability.
ReplyDeleteThe company has such high coffers put away in case of situations like these, that to cut dividends would not even make a slight difference to the company.
Firstly, the oil companies have president such as with the Exxon Valdez case in Alaska where 90% of punitive damages were slashed by the Supreme Court. This alone is enough to make the oil companies confident that they will not need to pick up the tab for their mess.