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April 20, 2011
Inside BP's Annual General Meeting
    by Robert Kropp

One year after the oil spill, BP's annual meeting draws protests from Gulf Coast residents as well as a campaign by sustainable investors to vote against the company's annual report. First of a two-part series.

One year ago today, the Deepwater Horizon oil rig exploded in the Gulf of Mexico, killing 11 workers and injuring 17 others. An estimated 5 million barrels of crude oil subsequently flowed into the Gulf, devastating the environment and crippling the local economy.

So it was with heightened interest that many sustainable investors and others followed this year's Annual General Meeting (AGM) of BP, which occurred in London last week. A coalition of investors, led by Christian Brothers Investment Services (CBIS), had announced beforehand that its members would either vote against or abstain from voting for the company's annual report.

Julie Tanner, Assistant Director of socially responsible investing (SRI) at CBIS, pointed out some of the shortcomings of BP's annual report, telling, "Very few goals and very few measurements are included, so how am I as an investor supposed to hold the company accountable when I don't have any benchmarks, indicators, or goals? Time and time again, we're left with more questions."

Mark Regier, director of stewardship investing at
Everence, a member of the coalition, added, "As an investor and a social advocate, you're not sure of what the information means. It lends itself to misinterpretation."

Tanner traveled to London to attend BP's AGM, and in fact took to the podium to present the concerns of the investor coalition.

"I mentioned that the group I was representing was either abstaining or voting against the annual report," Tanner said. "Between all of us we held 35 million shares. There were a couple of times during the meeting when the CEO or the Chair admitted the report was light on detail."

A total of 15% of shareholder votes either abstained or voted against the company's accounts and reports.

Regier observed, "We were surprised that votes abstaining or against the annual report weren't a little higher," especially considering that proxy advisory services Glass Lewis and PIRC advised against voting for the annual report.

Also, the
California Public Employees' Retirement System (CalPERS), the largest public pension fund US in the US, voted against the annual report, stating its concern "with the absence of information related to key performance indicators and re-evaluation of the board's role in oversight of risk management."

Regier said, "But still, in a country where such votes generally run 99% in favor, the vote indicates that this is an issue for the entire ownership base. The concerns over reporting, and safety and risk management, came out in different ways. The vote against Sir William Castell indicates a concern over a string of disasters going back five or six years."

Forty-three percent of shareowner votes either abstained or voted against the reelection of Castell as Chair of the company's Safety, Ethics and Environment Assurance Committee (SEEAC). Twenty-five percent abstained or voted against the company's remuneration proposal, and 15% abstained or voted against the reelection of Carl-Henric Svanberg as the Chair of the Board of Directors.

Tanner said, "At the meeting, I raised the issue of an independent external expert for the Gulf, since the same thing was done for Texas City. Some of the expectations for thinking about an independent expert now result from the string of accidents since 2007. At that time we didn't have the issue with the Gulf, we didn't have the issue with Alaska, and we didn't have what has come out about Azerbaijan."

The 2005 explosion at BP's Texas City Refinery killed 15 workers and injured more than 170. In 2006, 200,000 gallons of oil spilled in Great Prudhoe Bay in Alaska, and WikiLeaks reported that a gas leak at a platform in Azerbaijan led to "the largest such emergency evacuation in BP's history."

"At the meeting, (CEO) Bob Dudley addressed the question (of an independent expert) and said that has been something they're looking at," Tanner said. "Carl-Henric Svanberg talked about the difficulty of finding an expert with the qualifications, considering the scope of the Gulf disaster. But they did say it was something that was under consideration."

Among the more extensively covered events of BP's AGM were the protests staged by residents of the Gulf Coast working in fishing industries. The protestors were denied entrance to the meeting, and at least one was reportedly arrested.

Antonia Juhasz, a Gulf Coast author, did attend the meeting, and read a statement from the father of one of the rig workers killed in the Deepwater Horizon explosion.

Tanner said, "I actually heard them speak the night before and they were quite eloquent in terms of the difficulties they've been having in trying to get payouts. It's a shame they weren't able to share their views at the meeting."

"When he was asked from the podium why these people were not being let in, Svanberg essentially said he had no control over security," Tanner continued. "Someone on their behalf did extend an invitation to Chair to go to Louisiana to share some gumbo."

During the meeting, Dudley said he would meet with the investor coalition, although a date has not yet been set. In addition, sustainable investors are scheduled to meet with Mark Bly, Executive Vice President of Safety and Operational Risk at BP, in May.

"We're anticipating the meeting in May with several senior executives," Regier said. "We're excited about how the engagement has progressed, but we're disappointed in what we saw in the annual report, and to some extent what we saw in the sustainability report as well."

Tanner said, "Having that external voice on the Gulf will be critical for communities and shareholders and our understanding how these 26 recommendations from the Bly report are going to be implemented, knowing that the annual report lacked details."

In March, BP published a
Responsible Investor Briefing, which promised to provide details on its implementation of the recommendations by Bly. Although the briefing references a "7 point strategic agenda" as well as a Project Execution Plan, it does not provide specifics on implementation.

"We're trying to meet with a board member as well, because why hasn't the board exercised oversight and called for an independent expert itself?" Tanner said. "The proof is going to be what happens in the next six months."


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