OECD Principles of Corporate Governance

Stakeholders in Corporate Governance

Stakeholders of the Firm

Primary Stakeholder

s

Other Stakeholder

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Corporate Governance 2

•Shareholders•Board•Executive Management

•Managers•Employees•Customers•Suppliers•Community at large•Government•Financial Markets•Environmentalists

• I) Ensuring the basis for an effective corporate governance framework;

The chapter emphasizes the role of corporate governance frameworkin promoting transparent and fair markets, and the efficient allocationof resources. It focuses on the quality and consistency the differentelements of regulations that influence corporate governance practicesand the division of responsibilities between authorities. In particular,new emphasis is placed on the quality of supervision andenforcement. The chapter also includes a new principle on the role ofstock markets in supporting good corporate governance.

• II) The rights and equitable treatment of shareholders and key

ownership functions; The chapter identifies basic shareholder rights, including the right to information and participation through theshareholder meeting in key company decisions. The chapter alsodeals with disclosure of control structures, such as different votingrights. New issues in this chapter include the use of informationtechnology at shareholder meetings, the procedures for approval ofrelated party transactions and shareholder participation in decisionson executive remuneration.

• III) Institutional investors, stock markets and other intermediaries; This

is a new chapter which addresses the need for sound economicincentives throughout the investment chain, with a particular focus oninstitutional investors acting in a fiduciary capacity. It also highlightsthe need to disclose and minimize conflicts of interest that maycompromise the integrity of proxy advisors, analysts, brokers, ratingagencies and others that provide analysis and advice that is relevantto investors. It also contains new principles with respect to crossborder listings and the importance of fair and effective pricediscovery in stock markets.

• IV) The role of stakeholders in corporate governance; The Principles

encourage active co-operation between corporations and stakeholders and underline the importance of recognising the rights of stakeholders established by law or through mutual agreements. The chapter also supports stakeholders’ access to information on a timely and regular basis and their rights to obtain redress for violations oftheir rights.

• V) Disclosure and transparency; The chapter identifies key areas of disclosure, such as the financial and operating results, company objectives, major share ownership, remuneration, related party transactions, risk factors, board members, etc. chapter include the recognition of recent trends with respect to items of non-financial information that companies on a voluntary basis may include, for example in their management reports.

• VI) The responsibilities of the board; The chapter provides guidance with

respect to key functions of the board of directors, including thereview of corporate strategy, selecting and compensatingmanagement, overseeing major corporate acquisitions anddivestitures, and ensuring the integrity of the corporation’saccounting and financial reporting systems. New issues in thischapter include the role of the board of directors in risk management,tax planning and internal audit. There is also a new principlerecommending board training and evaluation and a recommendationon considering the establishment of specialized board committees inareas such as remuneration, audit and risk management.

Bp & Overview of Oil Spill in Mexican Gulf..

• British Petroleum is the third largest energy company & the fourth largest company in the world, and one of the six gas super major measured by 2011 measured revenue.

• Operates over in over 80 countries and has 21,800 service stations worldwide.

• Production is about 3.4 million barrels/day.• Works in the field of exploration , production, refining,

distribution, marketing petrochemical, power generation and trading.

• BP owns 19.7% stake in Russian oil major Rosneft (World’s largest publicly traded oil & gas company by hydrocarbon reserves and production.

19212000-2013

Brand Evolution of BP

1979-1999

BP’s oil production & oil tradeFY-10-11

• Fifth generation ultra-deepwater, dynamically positioned, semi-submersible mobile offshore oil drilling unit.

• Built by Hyundai heavy industries in 2001.

• BP took it on lease from 2001.• In 2009, the rig drilled the

deepest oil well in history at a vertical depth of 35050 feet in Tiber oil field.

• In 2010, it is commissioned in Mexican gulf.

Date: 20th April 2010Explosion in BP operated Deep water horizon .Explosion caused fire on the deck.After 36 hours, it sank leaving the well unprotected.It caused largest accidental marine oil spill of history.

Casualties: 11Injured: 26

Accident on Deep water horizon

• The accident at Deep water horizon is not an accident not only due to time-action gapping, but also some sequential events related to proactive maintenance.

• At first it was `blow out preventer’ (which was designed to shut down the well) failed to shut down the well.

• Secondly. There was a technical fault in design of the gas venting system which allows a cloud of explosive gas to envelop the rig.

• At last the additional valves deep inside the well failed to prevent oil and gas from flowing up the steel pipe (casing).

Area covered by the oil spill

NASA image taken – Spill estimated to cover an area in excess of 4000 square miles

Spill Characteristics• Location: Gulf of Mexico near

Mississippi river delta, United States .• Area Covered: Area affected by this

devastating oil spill is about 4000 square miles.

• Volume: Near about 798000 gallons/day crude oil mixed in the ocean.

• Per day loss: $430000 per day floated in ocean ($86/Barrel)

After the accident on Deep water horizon, some ethical issues raised against BP. It was like in a way that If BP did not ignore some red signals, the accident might not happen.

• Knowing that the Deepwater Horizon had problems, BP did not take any action towards proactive maintenance.

• The rig continued to run under risk. Putting profit over the safety of workers.

• The management of BP ignored the “Red Flags” from their procedural tests.

Ethical Issues

•The area of the oil spill includes 8,332 species.•More than 400 species that live in the Gulf islands and marshlands are still at risk. •As of November 2, 2010, 6,814 dead animals had been collected. •Miles-long strings of weathered oil had been sighted moving toward marshes on the Mississippi River delta. Hundreds of thousands of migrating ducks and geese spend the winter in this delta.

Based on these estimates, up to 75% of the oil from Gulf oil disaster still remains in the Gulf environment.

Burning the oil Approximately 9,300,000 to 13,100,000 US gallons of oil was burned on the ocean surface.

Collecting for later processingThe Coast Guard said 33,000,000 US gallons of tainted water had been recovered, with 5,000,000 US gallons of that consisting of oil.

Filtering offshoreBy June 28, British Petroleum had successfully filtered 890,000 barrels of oily liquid.

Removal of oil from gulf environment

Use of non invasive oil eating microbes

• Use of Pseudomonas putida could be very effective as it is non invasive and has no side affect. It eats oil, as it produces energy for it’s survival.

• In the Labs (US) it shows almost desired results which is safe to use in mass.

• It can be generated without complex genetically transformation. • It can grow in very fast rate, so it could cover more area in very short span

of time.

How the microbes works

• The oil eating microbes simply oxidize the hydro-carbon, thus carbon dioxide and water released.

• Oil floats on water as it is lighter than water. Oxygen is available on the gulf surface . So it can break apart the hydrocarbons easily.

• After eating up the surface oil layer, microbes will die due to deficiency of oil on the gulf surface.

• In this process the microbes can make the gulf environment oil free with out leaving any side affect.

• $13.6 billion has been spent to clean up the beaches.

• 95000 tones of crude oil collected from the shoreline.

• Restoring tourism and seafood industries by paying all legitimate claims for damages resulting from the accident.

• Estimated $.06 billon has been spent for tree plantation to restoring natural resources injured as a result of the accident.

• Estimated $2 billion has been spent for restoring wild life habitat in the gulf region.

How BP is Reversing Damage Done to the Tourism Industry

• BP has committed a total of $92 million over a 3-year period for Alabama, Florida, Mississippi and Louisiana.

• In which each state is using tourism funds to sponsor a variety of special events, including music festivals, classic car rallies, and fishing competitions, that attracts thousands of visitors

BP’s Gen-Next Step towards fuel security: Cellulosic Bio fuels

• BP is investing in overseas bio-to-diesel technology in Brazil• There are 3 sugarcane ethanol mills that have been opened • BP is pairing up with Companhia Nacional de Cucar e Alcoo (CNAA), the leading

biofuel producer in Brazil• Goal: “Harvest sugar and create ethanol with the least negative effect possible on

the environment, preserving staff and respecting the neighboring communities and all partners”

• Though the well was finally killed and many measures have been taken for restoring the environment and the business of the Mexican Gulf which were badly affected by the oil spill.

• But this is not enough, because about 70% of leaked crude oil is in gulf environment till today. It may push us in danger in near future. So in order to protect marine spices we have to take necessary steps to eliminate the danger.

• BP has taken new agenda under a banner of `Beyond Petroleum’ to produce bio fuels for cutting the dependency on crude oil.

This things led US to work on new sensible energy policy.