A 374 page report on the cause of the fatal 2005 BP refinery explosion in Texas City was issued yesterday by an independent safety review panel headed by former US secretary of state James Baker.  The accident claimed 15 lives and injured 170 people.  At the time it was considered to be the worst US industrial accident in nearly a decade.

Although the goal of the report is to make recommendations concerning all of BP’s US refineries, the report is noteworthy for what it says about the relationship between corporate policy and leadership:

While BP has an aspirational goal of ‘no accidents, no harm to people’ BP has not provided effective leadership in making certain its management and US refining workforce understand what is expected of them regarding process safety.  The panel believes that BP has not proved effective process safety leadership and has not adequately established process safety as a core value.

In other words, the panel believes BP has put profits ahead of safety.

BP top brass vehemently deny they put profits over plant safety, saying they never turned down a request for safety funds.  But the real question BP leadership needs to ask itself is whether the corporate culture encouraged legitimate requests for safety funding or whether it had a chilling effect.  After all, if employees are afraid to ask, the question doesn’t get raised, and the request doesn’t get “denied.”

No news is not the same as good news.  Pent up safety needs do not evaporate.  They grow and fester in a reservoir of unmanaged legal risk.  If you look at the video re-enactment of the accident you see that there were multiple safety failures.  And that’s the problem with any unmanaged legal risk i– evenutally it reaches a tipping point, a point of no return.  For BP it was a fatal explosion.

Employees will generally do what they are told and what they are rewarded for: 

• How often was the cost cutting message sent?
• How often was the safety message sent?
• Which message was louder?  More frequent?
• Which message ruled when the two collided?

For better or worse  it is leadership that fills the white space on an organization chart and determines what is between the lines of corporate policies and mission statements.  THAT’s what creates corporate culture.  Policies are not enough.

How is your company’s corporate culture?  Could it use more transparency?  More consistency between policy and performance?

For more information about the reservoir of unmanaged legal risk and the role of leadership see chapter 12 of The Business Guide to Legal Literacy: What Every Manager Should Know About the Law (Jossey-Bass, 2006).

It started out as a racial harassment suit when two Lebanese-American contractors brought suit against their employer, and their immediate supervisor and the company decided to hire one law firm to represent both parties and mount a joint defense.  Unfortunately, when the company hitched its fate to the supervisor’s defense it severely limited the defense strategy.  All they could say was that it didn’t happen.  There was no way for the company to distance itself from a rogue employee and the case quickly turned into a nightmare.

The ”it didn’t happen” strategy did not sit well with the jury.  The California Superior Court held for the contractors and awarded them $11 million in compensatory damages, TWICE as much as they asked for.  They also said the defendants acted with malice and THAT opened the door to big buck punitive damages.  The company was slammed with $50 million in punitives and the supervisor $56 million.

While the judge did reduce those amounts he still upheld the jury’s message.  The company “showed no remorse” wrote the judge.  “It’s trial strategy was to deny everything, and this was not believable.”

When you mess up you need to fess up.  It’s that simple.  It’s part of the power of apology.  Unfortunately, decision making psychology and ego can trip us up and prevent us from seeing what is obvious to a jury of our peers.