Taking a tip from Johnson & Johnson
Q: BP chairman Carl-Henric Svanburg asserted today that his company "cares about the small people," yet the company has also decided to suspend payment of its quarterly dividend, a move that is sure to hurt small shareholders. How can a leader effectively convey empathy to constituents when he or she is not able to please them all?
BP's veritable existence is at stake. Hence, their leadership needs to be articulating to the company's investors that the only way to salvage any hope of a profitable future is to accept responsibility today, and do everything possible to make the situation right. Investors need to understand that suspending dividend payments so spill victims can be made whole is a step toward BP once again being seen as a responsible entity that is worthy of the public's trust. While stockholders could take their money and run with a dividend payout it would continue to erode confidence in BP's leadership and ultimately hurt their brand.
Consider Johnson & Johnson's now famous response to the Tylenol tampering episode of the early 1980s. After several learning that several caplets laced with cyanide had been found in and around Chicago, Illinois, the company voluntarily pulled every one of its over-the-counter medications from shelves across the country. It was a massively-expensive move - one that cost J&J investors millions of dollars. But at the same time, it was also a powerful statement about J&J's commitment to consumer safety. As a result, shareholders that stuck with the company through several tough quarters were later rewarded with nearly 30 consecutive years of market dominance.
While many CEOs and corporate boards are evaluated by their quarterly returns they have a deeper responsibility to create and protect enduring value. BP has great talent, resources and capabilities, but how they respond to this crisis in the short and long term will determine if it can keep its leadership role in today's oil-dependant society and leverage its capabilities to help build a greener energy future.
Posted by: CoughlinC | June 18, 2010 9:36 PM
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