ExxonMobil:Private Empire

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jareds
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Re: ExxonMobil:Private Empire

Postby jareds » Mon May 07, 2012 1:30 am UTC

Enokh wrote:
jareds wrote:No, we're disagreeing. Under our current system, there are many, many things which megacorporations are successfully dissuaded from doing. If someone operates an oil refinery, and faces no risk whatsoever if they discharge all their waste directly into the Mississippi river, why isn't the river being polluted wily-nilly? It's because you're fundamentally wrong: megacorporations are dissuaded by fines in reality, including many, many fines that are currently in place. Even when not dissuaded, they face risks. Otherwise, what the hell happened to BP?


You mean other than the mountains of bad press? Or how their stock value plummeted? Unless you've got something on how much BP has actually paid in fines/settlements -- and it's WAY bigger than I think it is -- I'm not inclined to believe that was BP's biggest punishment.

They apparently recently settled some litigation for $7.8 billion, which does not include any government fines (which will presumably be billions more). The fines and settlements don't have to be their biggest punishment: $7.8 billion is still plenty to state that it is false that they faced "no risk whatsoever" for their unsafe actions. BP was a counterexample to:
iamspen wrote:Under our current system, these companies face no risk whatsoever when they decide to act in ways that are illegal or unethical.

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Re: ExxonMobil:Private Empire

Postby iamspen » Mon May 07, 2012 12:55 pm UTC

I think the Deep Water Horizon fiasco, in which BP basically said, "fuck it, 'cause bottom line," and failed to provide the necessary failsafes, polluting the Gulf willy-nilly, supports my position much, much more than yours. The risk of a blowout was infinitesimally small, and so BP and its contractors decided the reward for not implementing the proper failsafe was greater than the risk. The lack of major restructuring by BP, and the fact that they're still a hugely profitable company, legitimizes that crookedness, because, aside from using a tiny fraction of their profits to pay some fishermen and produce some mind-numbing corporate propaganda commercials, they really haven't been impacted by the spill in any sort of meaningful way.

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Re: ExxonMobil:Private Empire

Postby Dauric » Mon May 07, 2012 1:42 pm UTC

iamspen wrote:I think the Deep Water Horizon fiasco, in which BP basically said, "fuck it, 'cause bottom line," and failed to provide the necessary failsafes, polluting the Gulf willy-nilly, supports my position much, much more than yours. The risk of a blowout was infinitesimally small, and so BP and its contractors decided the reward for not implementing the proper failsafe was greater than the risk. The lack of major restructuring by BP, and the fact that they're still a hugely profitable company, legitimizes that crookedness, because, aside from using a tiny fraction of their profits to pay some fishermen and produce some mind-numbing corporate propaganda commercials, they really haven't been impacted by the spill in any sort of meaningful way.


Since the discussion has expanded to include BP I'll link this here:

Frontline: The Spill

The Deepwater Horizon incident was only one of many such incidents involving BP in the U.S. alone. They've absorbed millions in penalties and fees in the last few decades and still refuse to clean up their act.
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Re: ExxonMobil:Private Empire

Postby Zamfir » Mon May 07, 2012 1:49 pm UTC

On the other hand you have this:

http://www.guardian.co.uk/business/2012/may/01/bp-profits-fall-further-expected wrote:Profits at BP have fallen further than expected after the company was forced to sell some of its oil fields to pay for the Gulf of Mexico disaster fund.

Replacement cost profits – which exclude the effect of oil and other price movements – were down $680m, or 14%, to $4.8bn compared with $5.48bn in the same period last year, with bosses admitting profits will continue to fall in the next quarter.

BP blamed tough conditions in its refining business and chief executive Bob Dudley's "shrink to grow" policy of investing in new projects rather than focusing on more mature areas.

Shares in BP dipped in early trading by 3.38%, down 15p to 430p, but later recovered to 434.7p.

The drop in profits was greater than analysts' expectations of $5.1bn.

Chief executive Bob Dudley said the results were encouraging: "We have made a good start against our strategic priorities for 2012."

The price of oil is 12.5% higher than a year ago, at $118.60 a barrel, compared with $105.42 a year earlier.

But like some of its rivals, BP was unable to capitalise on the higher price, with oil and gas production down 6%, excluding its Russian venture TNK-BP, to 2.45m barrels a day.

Keith Bowman at Hargreaves Lansdown said the results were mixed.

He added: "Like rivals Exxon and Chevron, BP has failed to take advantage of the higher oil price. For BP, the Gulf of Mexico accident continues to overhang, with asset sales impacting production.

"On the upside, planned asset sales are 60% complete, new exploration projects continue to be pursued, while the costs, at least for now, for the Macondo accident are reducing."

BP also revealed it has paid $8.3bn to individuals and businesses in relation to the 2010 Deepwater Horizon disaster which left 11 dead, and its divestment programme to cover its costs from explosion and oil spill now stands at $23bn.

It has so far paid $16.6bn into a trust fund and expects to meet its target of $20bn a year earlier than planned.

A spokesman denied the company was making a more general pullback from the region, saying the disposals reflected a new strategy of churning assets more quickly and focusing on larger, younger projects.

However, it has been suggested that the company is not re-investing quickly enough and may see profits falling further.

The US department of justice is also investigating possible criminal and civil charges against BP that could lead to fines of more than $20bn, although the company expects fines of only around $3.5bn.

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Re: ExxonMobil:Private Empire

Postby iamspen » Mon May 07, 2012 1:55 pm UTC

Dauric wrote:Since the discussion has expanded to include BP I'll link this here:


Not that Coll specifically stated at the beginning of the interview that his work was originally supposed to be about the oil industry and/or the megacorporate world as a whole (one or the other, my memory has faded a bit), but he decided to pick a single company that best represented the issues he was writing about. So the discussion has really always included BP and other giant oil companies, it's just that, somehow, BP isn't the most egregious offender.

Edit: Re: Zamfir: You'll forgive me for not thinking slightly lower profits for a couple years and a token selling of a few assets is a significant blow to a well-oiled corporate machine.

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Re: ExxonMobil:Private Empire

Postby Zamfir » Mon May 07, 2012 2:17 pm UTC

If such amounts are just "a few assets", is there any amount that would have convinced you?

Also, imagine for a moment that there were no large oil companies, and the Deepwater Horizon had been a single enterprise on its own. That enterprise would have gone bankrupt, but it wouldn't have coughed up billions. Is that a better outcome? From a calculated risk POV that makes it even more attractive to gamble, because bankruptcy provides an upper bound on the downside.

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Re: ExxonMobil:Private Empire

Postby Dauric » Mon May 07, 2012 2:30 pm UTC

Part of the problem (I'm re-watching the Frontline episode right now) is that the corporate heads of BP are beholden to the stock exchanges, to provide dividends to their shareholders to the exclusion of all else.

When Tony Hayward was attempting to address safety issues just after his installation as CEO the stock prices of BP were slumping, and he was being pressured by the shareholders, their accountants and bankers, and by the stock trading industry to cut more costs, precisely when BP -needed- to be investing profits in to safety and inspections.

You can have a CEO with the best intentions in the world, but if the people with the voting stocks get pissy about their dividends they'll vote in a new CEO who will work to increase those investment returns.
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Re: ExxonMobil:Private Empire

Postby Ghostbear » Mon May 07, 2012 2:31 pm UTC

Zamfir wrote:If such amounts are just "a few assets", is there any amount that would have convinced you?

Also, imagine for a moment that there were no large oil companies, and the Deepwater Horizon had been a single enterprise on its own. That enterprise would have gone bankrupt, but it wouldn't have coughed up billions. Is that a better outcome? From a calculated risk POV that makes it even more attractive to gamble, because bankruptcy provides an upper bound on the downside.

While I do agree that BP has received rather non-trivial losses associated with the Deepwater Horizon oil spill, isn't the issue the fact that the probability of those losses wasn't enough to encourage them to be safer in the first place, combined with the fact that the fines (and probability thereof) weren't enough to push them over the edge for it? As Dauric pointed out, BP has had a history of unsafe operating practices and has been routinely fined for them with no change in behavior. That shows that the fines aren't working as a discouragement. If all that was desired out of fines was a revenue source or a means to compensate for wrong practices, then that's fine. If we want fines to act as a method to discourage the behavior that causes those accidents in the first place, then that's not fine.

Edited so it's known who I'm addressing.

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Re: ExxonMobil:Private Empire

Postby iamspen » Mon May 07, 2012 2:38 pm UTC

Zamfir wrote:If such amounts are just "a few assets", is there any amount that would have convinced you?


Yep. Complete destruction of the corporation.

But that's not what I want. What I want is for large megacorporations to use ethics. I want them to stop running the government, to stop paying huge wads of cash to pass or repeal laws that benefit them, to stop being basically the entities that run our so-called democracy. And really, these instances are merely symptoms of the greater problem. The real point of my argument isn't that corporations aren't adequately punished (they aren't), but that they behave unethically in the first place. I don't want BP to be ripped apart, I would have preferred that the Deep Water Horizon incedent never happened. I don't want ExxonMobile to stop existing entirely, I want them to stop buying the people for whom I vote away from me.

Barring that, I'd like to get out of the following cycle: Ethical fuckup / media outrage / gov't: "We're gonna get you! Psst, jaykay, just wait a couple years." / media diedown / public ADD / negligible real consequences

Because BP fucked up the already-fucked economy of an entire region of the US, not to mention caused irreparable damage to a fragile ecosystem, and has gotten off relatively scott-free, as evidenced by a BP franchise still existing every couple of blocks. Whatever punishments they may receive, hell no, they're not equivilant to the crime.

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Re: ExxonMobil:Private Empire

Postby Zamfir » Mon May 07, 2012 3:35 pm UTC

Destroying BP over this sounds like genuine over-punishment, where the punishment does so much social damage in itself that its beneficial effects come nowhere close.

For example, BP isn't owned by grinning billionaires, it's a typical object for institutional investors. Pension funds, insurance companies, investment funds. If BP is gone, the loss will mostly be divided over lots of fairly ordinary people. Then there's the employees of BP and employees for subcontractors of BP, together totalling hundreds of thousands of people who would face large financial uncertainty if BP goes bankrupt.

It's OK to make those people pay an appropriate cost. After all, they also benefit from the risks BP takes. But if you decide to raise the financial punishment without limit, you're not just hurting a faceless corporation, it will be paid by normal people. The cost to them should not be excessive.


And at the same time, the extra effect on ethical behaviour of companies would be limited. The offshore industry is already scared stiff by this spill, they mostly didn't think it would happen, that the costs would this high, or that the cost could be pinned on them so easily. The more ethically-operating firms are already taking a good look at their operating procedures.

Of course, the less-ethical firms are investigating how they can outsource deepwater drills to unconnected firms, so that the liability will stay at easily-bankruptable entities. And the higher the damages, the more attractive this gets.

If you really want more ethical firms, fines and damages are just one cog in the system. You do not just want to punish badly-operating firms, you also want to encourage well-run firms. And strangely enough, that can mean lowering responsiblity of firms for the damages.

You build a comprehensive system of regulations, regulators, procedures etc, a standard that should lower risks to acceeptable levels. And you tell firms that if they stick to that standard, you will limit their damages if something goes wrong anyway. That way, you encourage well-run firms to take a shot at activities with inherent risks. If you rely to much on fines and damages alone, you encourage the gambling firms, and the firms that miscalculate the risks involved.

Of course, such a system is hard to build, and never perfect. Raising fines is easy, and feels more righteous. But if you really care about improving the system, and not just at punishing the bad guys, you have to look beyond the easy answers.

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Re: ExxonMobil:Private Empire

Postby jareds » Mon May 07, 2012 3:57 pm UTC

iamspen wrote:Yep. Complete destruction of the corporation.
...
Because BP fucked up the already-fucked economy of an entire region of the US, not to mention caused irreparable damage to a fragile ecosystem, and has gotten off relatively scott-free, as evidenced by a BP franchise still existing every couple of blocks. Whatever punishments they may receive, hell no, they're not equivilant to the crime.

Let's apply this to humans. Is a person getting off relatively scott-free for drunk driving as long as he's not executed (or maybe bankrupted by fines)? He'll still be alive and kicking (and free of jail) in a few years, after all. Now, in the case of the BP oil spill, I'm certainly not saying it would have been bad if the liabilities had bankrupted them, but I definitely can't agree that they faced no risk or got off relatively scott-free.

BTW, many of those gas stations are independently owned, and their existence has very little relationship to how well BP is doing--they are, as you said, franchisees.

Finally, I would argue that the sensible way to reduce the chances of things like this is stricter penalties when nothing goes wrong, not stricter penalties when something goes horribly wrong. Obviously, these things happen because some people are completely discounting the possibility of something going horribly wrong, so changing the consequences thereof will have very little effect. You want to instead change the consequence of the safety violation even if nothing goes wrong.

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Re: ExxonMobil:Private Empire

Postby iamspen » Mon May 07, 2012 4:00 pm UTC

Zamfir wrote:Destroying BP over this sounds like genuine over-punishment, where the punishment does so much social damage in itself that its beneficial effects come nowhere close.


For example, BP isn't owned by grinning billionaires, it's a typical object for institutional investors. Pension funds, insurance companies, investment funds. If BP is gone, the loss will mostly be divided over lots of fairly ordinary people. Then there's the employees of BP and employees for subcontractors of BP, together totalling hundreds of thousands of people who would face large financial uncertainty if BP goes bankrupt.[/quote]

Perhaps I wasn't as clear as I should have been, and I apologize. I don't advocate the destruction of BP, because I understand the consequences of that. But I also acknowledge that that really is the only punishment that fits their crimes.

Zamfir wrote:Etc...


You know, I was actually thinking along those lines a little bit earlier. If BP had played by the rules, if their safety equipment met ethical and legal standards, and the Deep Water Horizon incident had still taken place, it really wouldn't make sense to hold them completely liable. After all, they had played by the rules, and so cleanup and subsequent research into preventative technology would and should have been a shared venture between the corporation in question and the public sphere. So, yes, I agree with you, lowering negative consequences when companies follow the rules is a very, very good method of incentivizing good behavior.

But, as it stands, BP really ought to be wholly liable. Methinks that won't be the case, but we shall see.

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Re: ExxonMobil:Private Empire

Postby Zamfir » Mon May 07, 2012 4:18 pm UTC


Perhaps I wasn't as clear as I should have been, and I apologize. I don't advocate the destruction of BP, because I understand the consequences of that. But I also acknowledge that that really is the only punishment that fits their crimes

could you expand on this a little more? as i see it, BP is the investors and employees and suppliers and customers, and everybody else who works together to make BP work. Those are the people who benefit when BP does well, and should pay when BP screws up. If you think 'they' should be punished for their crimes, then you are OK with the consequences.

Anthropomorphication is a real danger here. We have to do it, it's the only way we puny humans can get a grip on such large entities. But in the end, organizations of the size of BP or Exxon aren't controlled by anybody, they are a convenient structure in which enormous numbers of people coordinate their actions. It's similar to blaming 'the government'.

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Re: ExxonMobil:Private Empire

Postby iamspen » Mon May 07, 2012 4:40 pm UTC

Zamfir wrote:could you expand on this a little more?


Sure. Dissolution of the corporate entity that is BP, or otherwise a vast restructuring of its organization, is really the only suitable punishment for the crime. Since shareholders aren't directly responsible for the negative actions of the corporation, and ultimately those who would be hurt are the shareholders and the consumers, I don't think that's a viable option, even if it is entirely justifiable. That being said, since shareholders are, in fact, the owners of the company, they are certainly not absolbved of all responsibility, and if BP continues to be a corporate douchenozzle, it's reasonable that those who continue to bank off their continued douchenozzlery suffer the consequences of those actions.

We're not at the, "fault the little people," stage quite yet, but I don't think we're very far off, either. But the brilliant thing about publicly traded corporations is, even if we do reach that point, a shareholder's level of financial involvement is directly proportional to their decision-making power, and is thus directly proportional to their level of responsibility for the company's fate, and is thus directly proportional to the level of culpability they must bear should the powers that be impact the price of shares. So if you're some retiree in Indiana who has maybe twenty shares of BP in his portfolio, the damages to you can be shrugged off, even recouped if you skip that morning sausage McMuffin for a couple weeks. But if you're a suit who regularly visits the top few floors of corporate headquarters, your portfolio is going to look pretty bad if the law unleashes its full wrath.

But again, we're not to the point where we should think about severely impacting the world oil market to make a point. But that has to be presented as an option, because it's really the only thing that can keep these behemoths relatively honest.


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