BP: Morals and Success Are Mutually Exclusive

The anger toward BP is misdirected. We shouldn’t expect an oil company to do business morally. That’s a matter for politicians.

Anyone who became enraged by BP over the past few months is being naïve. Of course the oil contamination is a disaster for the environment, and clearly it took far too long before the undersea leak in the Gulf of Mexico was capped. If it’s found that the company disregarded safety procedures, it should be found guilty — that’s also clear. But no one can justly accuse the company of wrongdoing, because it was doing precisely what it was designed to do: drill for oil, take risks and make profits.

It’s naïve to blame BP solely for the Gulf catastrophe. Of course the dangerous operation thousands of meters below sea level should be criticized, but no one can demand that BP cease such operations, whether they’re in the Gulf of Mexico, off the East African coast or in the Mediterranean near Libya. The company won’t forego profits to benefit the environment.

Sustainable environmental management is the central dilemma of our capitalistic economic system: We all want it, but it doesn’t always pay. The dilemma extends beyond the environment. We can’t expect a corporation to forego profits in favor of some morally upright decision.

Management Is Responsible Only to the Shareholders

Corporations are not entities set up on the basis of morality. Even if he had wanted to, BP’s CEO couldn’t have abandoned deep-water drilling. He is not answerable to society for what he does; he is answerable to his bosses — those that own BP. The influential BP stockholders, most of which are British and American pension funds, would fire him if he made decisions that decreased their dividends or caused a collapse in the market. Even if the fund managers decided deep-water drilling was too dangerous, the pensions of countless policemen in Louisiana and thousands of government employees in New York City depend on it.

And that’s the way stockholders choose their CEOs. They don’t get to the top by thinking especially green or being popular with their employees. He was put in power to make money for BP’s shareholders. Neither would anything else be in society’s best interest. If a corporation makes a decision based on morals, and that decision reduces the corporation’s bottom line, it wouldn’t remain competitive for very long — it would be driven out of the market by less scrupulous competitors. The wrong side would survive.

When It May Be Lucrative to Deal Morally

Naturally, there are instances where morally correct decisions still pay off. Rejecting child labor is profitable because customers tend to reward companies they find morally upright — or they punish companies that are not by boycotting their products. Those that invest in environmental protection can easily find new employees. This creates a genuine interest in companies to do business morally.

Public relations people like to popularize these decisions and enjoy talking about “corporate social responsibility.” But the impulse for socially responsible business dealings never comes from the businesses themselves. A decision is only moral if it happens spontaneously. There is no such thing as “corporate social responsibility.” Morals and success are mutually exclusive.

This “market economy correction” of immoral behavior doesn’t always work. There are those instances where it’s profitable to pollute the environment or to exploit the labor force. When it comes to the oil industry, the tactic breaks down. Those who boycott BP just fill their cars up elsewhere, but hardly anyone can do without petroleum products in today’s society. That’s why it will always pay for BP to drill ever more deeply, even if that raises the danger with every additional meter of drilling. The demand won’t fall, accidents are few and far between, and the costs of cleanup are too low.

This Wouldn’t Have Happened in Europe

In cases like this, strong governments are necessary. It’s the responsibility of lawmakers to reconcile morals and economic success; it cannot permit the two to stand in opposition to each other. Elected officials are responsible for making the rules by which every marketplace competitor must comply, according to society’s moral standards. The political world must set international standards to ensure that proper morals in the business world don’t suffer from competition. And it must also provide for sanctions if these rules are broken. So the anger toward BP is misdirected. We should have expected no different from the corporation, but we should have expected more from the politicians.

Nothing like this would have been likely to happen in Europe — the safety standards here are more rigid, the controls stricter and the politics more independent of industry. Europe has a framework that forces corporations to behave properly. The core of the European social market economy is precisely the recognition that corporations don’t always operate voluntarily in society’s best interest. The BP case has proven that the American model is a failure — a failure of the free market economy.