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This was the logical thing to do to avoid more bad press. But greed often trumps logic. I'm surprised they did this.

by rradu 16y ago

carbocation 16y ago
From my read of Obama's address last night -- and the Congressional discussion of precisely $20 billion over the last couple of days -- this was not really optional for BP. They seem to have been given the option to do this willingly, or to do so unwillingly. The choice between those two is clear. Forgoing payment of dividends, given this large outlay, seems to be a logical way to keep a cash buffer.
- ZachPruckowski 16y ago
  Yeah, I mean, they could wait until the federal government slaps them with the fines ($4k or so per barrel) and then try to fight those fines in court, but there's not a jury in the USA who's going to believe BP's numbers over whichever experts the government picks, and it's not like BP can claim there's no oil spill. On the civil front, any negligence or shenanigans at that well before April 20th blows straight through the liability cap. There are a number of stories just below the mainstream media radar that I've see talked about on TheOilDrum and other places that, if there's any truth at all to them would obliterate the liability cap. If they think they can't win that point at trial, then they're best off just paying upfront instead of fighting. Again, good luck finding a jury who won't use the flimsiest excuse to crush that liability cap.
  - anamax 16y ago
    The jury isn't the last word. How much of the Exxon Valdez judgement survived appeals?
timwiseman 16y ago
It is hardly greedy for a company to pay dividends. Remember that many retirement funds and some individual investors depend on dividends like this and that certain types of funds will be required by their charters to sell a stock that ceases to pay dividends.
- bhiggins 16y ago
  Remember some people relied on the gulf for their livelihoods.
  - timwiseman 16y ago
    Very true, and what has happened to the Gulf and those people around it is absolutely tragic. The environmental damage is astronomical in addition to the economic damage. Further, I agree that BP should pay for it fully, and that doing so will (and should) affect those who invested in it. With that said, paying dividends is simply not greedy. It is rewarding and supporting those who invested in them, including retirement funds and individuals, many of whom rely on those dividends that have been quite stable for some time now. Treating your shareholders well is simply not greedy.
    - tptacek 16y ago
      People who invest in companies aren't entitled to a reliable return. They earn returns by accepting risk. When you invest in a company that funds and coordinates offshore oil drilling the in Gulf of Mexico, you accept the risk that failure to comply with safety standards will cost you all of your returns.
- DarthMark 16y ago
  It's sad that some investors & retirement plans will get hit... On the other hand, when you invest in a company, you're not just getting a share of the profits, but you also get a share of the liability as well.
ErrantX 16y ago
This was the logical thing to do to avoid more bad press in the USA. It's not going to go down too great here in the UK (either for Obama or BP) EDIT: I should point out, for those that don't know, BP dividends are pretty important to a big portion of UK pension funds. I'm not 100% certain how exactly this affects them, but it is not good (they have been teetering for a while due to the financial crisia as well). BTW, yes, I agree it is silly we rely on them so much. The Times reported the other day that this could wipe out up to 1/3 of UK pension funds, and Robert Peston is was waffling about the fact it could be enough to collapse parts of the economy - I don't actually subscribe to that (I ran some of their numbers and it's nowhere near that bad IMO) but if you get Brits glowering at you for a few weeks it might be because they believed it :)
- skushch 16y ago
  There are quite a few public pension funds in US with the same issue: http://www.marketwatch.com/story/obama-aims-at-bp-hits-state-pensions-2010-06-09 http://www.marketwatch.com/story/obama-aims-at-bp-hits-state...
- jonknee 16y ago
  It's not a good situation either way, but it's not real fair of the retirees to take dividends from a company that just destroyed the livelihoods of tens of thousands of people. BP is obligated to take care of its mess and that should come before paying shareholders. It sucks, but that's business. Stocks aren't risk free, even big dividend paying ones.
  - ErrantX 16y ago
    Yeh I know. Tbh I think they could easily pay the diidend and the clean up bill. They aren't going to need $20bn tomorrow. Also; collapsing pension funds affects the unretired too. Potentially it could leave millions in the cold - so that complicates it more. And I would point out it has not been established who was at fault (though clearly BP must pay)

This was the logical thing to do to avoid more bad press. But greed often trumps logic. I'm surprised they did this.

by rradu 16y ago

This was the logical thing to do to avoid more bad press. But greed often trumps logic. I'm surprised they did this.

From my read of Obama's address last night -- and the Congressional discussion of precisely $20 billion over the last couple of days -- this was not really optional for BP. They seem to have been given the option to do this willingly, or to do so unwillingly. The choice between those two is clear. Forgoing payment of dividends, given this large outlay, seems to be a logical way to keep a cash buffer.

ZachPruckowski 16y ago
Yeah, I mean, they could wait until the federal government slaps them with the fines ($4k or so per barrel) and then try to fight those fines in court, but there's not a jury in the USA who's going to believe BP's numbers over whichever experts the government picks, and it's not like BP can claim there's no oil spill. On the civil front, any negligence or shenanigans at that well before April 20th blows straight through the liability cap. There are a number of stories just below the mainstream media radar that I've see talked about on TheOilDrum and other places that, if there's any truth at all to them would obliterate the liability cap. If they think they can't win that point at trial, then they're best off just paying upfront instead of fighting. Again, good luck finding a jury who won't use the flimsiest excuse to crush that liability cap.
- anamax 16y ago
  The jury isn't the last word. How much of the Exxon Valdez judgement survived appeals?

timwiseman 16y ago

It is hardly greedy for a company to pay dividends. Remember that many retirement funds and some individual investors depend on dividends like this and that certain types of funds will be required by their charters to sell a stock that ceases to pay dividends.

bhiggins 16y ago
Remember some people relied on the gulf for their livelihoods.
- timwiseman 16y ago
  Very true, and what has happened to the Gulf and those people around it is absolutely tragic. The environmental damage is astronomical in addition to the economic damage. Further, I agree that BP should pay for it fully, and that doing so will (and should) affect those who invested in it. With that said, paying dividends is simply not greedy. It is rewarding and supporting those who invested in them, including retirement funds and individuals, many of whom rely on those dividends that have been quite stable for some time now. Treating your shareholders well is simply not greedy.
  - tptacek 16y ago
    People who invest in companies aren't entitled to a reliable return. They earn returns by accepting risk. When you invest in a company that funds and coordinates offshore oil drilling the in Gulf of Mexico, you accept the risk that failure to comply with safety standards will cost you all of your returns.
DarthMark 16y ago
It's sad that some investors & retirement plans will get hit... On the other hand, when you invest in a company, you're not just getting a share of the profits, but you also get a share of the liability as well.

ErrantX 16y ago

This was the logical thing to do to avoid more bad press in the USA. It's not going to go down too great here in the UK (either for Obama or BP) EDIT: I should point out, for those that don't know, BP dividends are pretty important to a big portion of UK pension funds. I'm not 100% certain how exactly this affects them, but it is not good (they have been teetering for a while due to the financial crisia as well). BTW, yes, I agree it is silly we rely on them so much. The Times reported the other day that this could wipe out up to 1/3 of UK pension funds, and Robert Peston is was waffling about the fact it could be enough to collapse parts of the economy - I don't actually subscribe to that (I ran some of their numbers and it's nowhere near that bad IMO) but if you get Brits glowering at you for a few weeks it might be because they believed it :)

skushch 16y ago
There are quite a few public pension funds in US with the same issue: http://www.marketwatch.com/story/obama-aims-at-bp-hits-state-pensions-2010-06-09 http://www.marketwatch.com/story/obama-aims-at-bp-hits-state...
jonknee 16y ago
It's not a good situation either way, but it's not real fair of the retirees to take dividends from a company that just destroyed the livelihoods of tens of thousands of people. BP is obligated to take care of its mess and that should come before paying shareholders. It sucks, but that's business. Stocks aren't risk free, even big dividend paying ones.
- ErrantX 16y ago
  Yeh I know. Tbh I think they could easily pay the diidend and the clean up bill. They aren't going to need $20bn tomorrow. Also; collapsing pension funds affects the unretired too. Potentially it could leave millions in the cold - so that complicates it more. And I would point out it has not been established who was at fault (though clearly BP must pay)