Naked in the Crystal Palace: CEO Tony Hayward's Fall from Grace
Since 2004, the rate of CEO turnover has averaged around fifteen percent, which means that on an annual basis about one in six CEOs will retire, become redundant due to a merger or acquisition, or be forced out. Fortunately, few of these departing CEOs will experience as public or dramatic a fall from grace as BP’s Tony Hayward, the beleaguered chief executive whose spectacular loss of power was witnessed by television audiences globally and cheered by millions of people whose lives were affected by BP’s Deepwater Horizon oil spill.
Hayward had come to power three years earlier as BP’s remedy for deal-making CEO Lord John Browne, who was criticized for ignoring day-to-day operational issues and instituting cost-cutting measures that compromised safety. Browne was BP’s chief executive when 2005’s Texas City Refinery explosion killed fifteen workers and is considered to be most responsible for BP’s appalling safety record during the last decade.
When Hayward was named CEO, he promised to improve safety and make BP more transparent. However, he soon introduced more cost-cutting measures that increased profits but may have also led to the management failures that contributed to the Deepwater Horizon accident—the largest marine oil spill disaster in history. On April 20, 2010, methane shot up the oil column on this deepwater oil rig and ignited, causing an explosion and massive fire that killed eleven workers and injured seventeen more. For three months, oil spewed into the Gulf of Mexico at an estimated rate of around 60,000 barrels per day. By the time the well was finally capped, nearly 5 million barrels of oil had spilled into gulf waters.
BP’s initial response to the accident was typical—the company sought to shift the blame to the rig owners (Transocean) and the casing and cementing contractor (Halliburton Energy Services). However, an investigation of the accident revealed that BP chose to save $7 million by installing a less-expensive layer of well casing and chose not to use a casing hanger to tie down the top of the well, apparently because that would have required several extra days, and they were already weeks behind schedule. Further, BP elected not to run a safety case (risk assessment) on the well, did not test the integrity of the cement, and failed to take other actions that might have prevented the accident or lessened its impact. Since the accident, investigators have laid the blame squarely on BP’s broad shoulders.
After the accident, CEO Tony Hayward made some right decisions. He recognized that he needed to be front and center and began devoting the majority of his time to the accident. However, he also made some stupendously stupid remarks that the media and the public seized upon. On May 18, he announced that the environmental impact of the spill would be very, very modest. As he said this, live cameras on the Internet showed oil gushing into the ocean at an alarming rate, and scientists were warning of catastrophic environmental impacts in a region where millions of people depended on fishing and tourism for their livelihood. This single gaffe permanently damaged Hayward’s credibility and made people wonder if he was bizarrely out of touch with reality or just brazenly trying to limit BP’s liability in future lawsuits.
Then on May 30, Hayward complained publicly that he wanted his life back. The grim aside being spoken at the time was that, if they could speak, the eleven men killed in the explosion would no doubt wish they had their lives back as well. Memo to all chief executives: when you are handling a public crisis, do NOT give the impression that you even have another life. Handling the crisis IS your life for as long as it takes.
When it became clear to BP that they couldn’t avoid culpability for the disaster, Hayward began appearing in television spots looking heartfelt and sincere, saying that BP will do everything to “make this right.” On the one hand, this was a good PR move, but then it came out that BP spent $50 million on these ads, an amount that President Obama said should have been paid to the gulf coast fishermen and small business owners who had lost their livelihoods while struggling through the worse economic downturn since the Great Depression.
In later testimony before Congress, Hayward, who had promised greater transparency in BP, refused to answer more than sixty questions regarding the cause of the accident, thus appearing either implausibly ignorant or secretive and evasive. The final blow to his credibility and reputation—at least among the American people—came two months after the spill when he was photographed sailing his yacht around the Isle of Wight while oil continued to gush from the Deepwater Horizon wellhead.
Not long afterwards, BP announced that Tony Hayward was stepping down as CEO but would play a role in one of its Russian subsidiaries (the leadership equivalent of being exiled to Siberia).
If we could rewind just six months, we can imagine Tony Hayward in the enviable position of running one of the largest oil companies in the world. In his mid-fifties, he is the lord of the manor, king of a far-flung empire with all the accoutrements, power, and benefits of a global CEO. He is shielded by the staunch stone walls of the corporation, buffeted by an army of subordinate executives, assistants, lawyers, accountants, marketers, and public relations experts and their firms. Then an unimaginable disaster strikes, in a part of the empire he barely knew, and before he is prepared for it, his palace walls turn from opaque stone to transparent crystal, and he discovers, to his dismay, that he, the emperor, is in fact not wearing any clothes, which scores of people are gleefully pointing out.
He learns in the most difficult way possible that everything he says, no matter how innocent or well intentioned, will be magnified, analyzed, scrutinized, criticized, and broadcast around the globe. He longs for the good ole days when life was simpler and he wasn’t squirming naked under the glaring eye of a magnifying glass, where every move and every statement are blown out of proportion, where he can’t even innocently wish for a return to normal life without that statement adding to his enemies’ arsenals.
As powerful an executive as Tony Hayward was, he was ill-prepared for the public role he was forced to play, for the intense public scrutiny that came with it, and his mistakes cost him his job.
I recently spoke to college theatre students about professionalism in the performing arts. During my presentation, I said that the finest actors know how they come across to audiences. Whether or not they practice in front of mirrors, they understand what their face, body, tone, and mannerisms convey. They have the remarkable ability to know how audiences will react to the totality of the character they project, and they are skilled enough to change their appearance and their affect to achieve the results they desire. Few executives are as skilled in this art of reflective self-projection. They, like Tony Hayward, make well-intentioned statements that sound sincere but which audiences interpret in ways the executives would never have imagined.
When crises occur, events are often moving too quickly. People panic, and executives who were always so smart and capable, so seasoned and articulate, suddenly find themselves at the center of a storm they could not predict and cannot control. In short, they find themselves naked in a crystal palace. And the scrutiny they endure, the enmity with which they are suddenly treated, can take them down a winding path that quickly spirals out of control.
BP has a poor safety record. The company has been fined nearly eight hundred times by U.S. federal authorities for health and safety violations. Hayward should have fixed this and didn’t, and for that he is truly culpable. He failed in many respects as the CEO of BP, although some people regarded him highly. One senses that behind his façade as BP’s CEO may have been a genuinely decent fellow. Decent, perhaps, but woefully unprepared for his most serious debut in the public eye and unable to see himself and his company as a skeptical and panicking public would see him—unable to reflectively self-project and understand how he would come across to his most important audience—unable to do or say anything right when he suddenly discovered that he was naked in the crystal palace.