David Prosser: Don't forget the real victims of BP's 'Deepwater' disaster
Outlook: Mr Hayward is entitled to retain his BP pension, which is worth the best part of £600,000 a year, but shouldn't be getting a pay-off
Tuesday 27 July 2010
In the end, he had to go. Forget the gaffes (unhelpful) or the question of whether his chairman should have been more visible in the weeks following the Deepwater Horizon accident (absolutely). Tony Hayward has no choice but to step down from the chief executive's office at BP because he was the man in charge when that accident cost the lives of 11 people.
Even if the spill had not subsequently wiped £48bn off the market value of BP, the oil giant's responsibility for that first incident would have been sufficient to require Mr Hayward to offer his resignation. More so since he took the helm at the company in the wake of the Texas City refinery accident, where 15 people died in 2005 at a BP-owned facility.
This is not to say that Mr Hayward has not done his best to put matters right since the crisis began. He was right not to quit immediately, instead choosing to head up the effort to cap and clean up the oil spill. Though BP's boss has been pilloried for a couple of unfortunate utterances, he has worked tirelessly to get on top of the crisis. Now that the relief well drilling is close to finally capping the spill, however, it is time for Mr Hayward's departure.
Should Carl-Henric Svanberg, BP's chairman, get the bullet too? In a word, yes. As the oil giant's figurehead, Mr Svanberg must accept the "buck stops here" test, just like his chief executive. Moreover, as BP's accident turned into a full-blown disaster, its chairman was nowhere to be seen. He surfaced only after Mr Hayward had been thrown to the wolves.
Mr Svanberg will also have to accept yet more criticism if, as expected, he sanctions a generous severance package for Mr Hayward. This is not a resignation but a sacking – the dismissal of a chief executive on whose watch 11 workers died and 40 per cent of the company's value was wiped out. Given that, no severance payment should be made. Mr Hayward is entitled to retain his BP pension – worth the best part of £600,000 a year – but shouldn't be getting a pay-off, even the 12 months of salary that his contract stipulates.
The good intentions of financial reform
Slowly but surely the curtain is coming down on the era of the Financial Services Authority. Mark Hoban, the City minister, yesterday promised that a shadow version of the new Prudential Regulation Authority (PRA) will be up and running by the autumn – working within the Bank of England, it will eventually take the FSA's responsibilities for banking supervision.
The PRA will often find itself responsible for implementing the decisions of the Bank's Financial Policy Committee (FPC), the new 11-strong body that will control the macro-prudential policy tools everyone hopes will enable it to smooth out the excesses of the financial cycle.
We didn't find out yesterday what these tools will actually be, but think powers such as being able to order banks to increase their capital strength during the cycle's upswing – both to rein in boom-generating activities and to provide a greater cushion for more difficult times.
It is this sort of "counter-cyclical" approach that the Bank has been particularly keen on. In the past, we have only ever talked about financial stability during periods of instability – policy has been reactive, with measures to curtail crises, rather than pre-emptive, aiming to prevent them occurring in the first place.
The test will be whether the FPC finds itself able to make a difference. At times such as now, in the wake of such a disastrous financial crisis, there is widespread acceptance of the need for regulatory reform and closer supervision. Will those that are subject to the FPC's strictures be quite so willing to play ball in five years' time, say, let alone in 20 years' time?
Adding to the challenge is the global nature of financial services. The threat to leave for a more beneficial jurisdiction is one that bankers are becoming adept at using – one can imagine the FPC facing similar cries, with the City simultaneously using its considerable lobbying powers to appeal for ministerial interventions.
One other thought about the package of reforms announced yesterday. The duties of the FSA not being transferred to other bodies will remain with the watchdog, under the new moniker of the Consumer Protection and Markets Agency. In these times of austerity, why bother with an expensive rebranding exercise?
Broadband providers pull a (not so) fast one
How is the telecoms industry continuing to get away with advertising a service that it routinely fails to provide? For this is what Ofcom accuses broadband providers of today. The regulator does not put it quite like this, but its report suggests many broadband companies are conning their customers by advertising internet access at speeds up to a maximum that is rarely or never achieved.
Moreover, the problem is getting worse. When Ofcom last looked at this issue, in April 2009, broadband providers where offering access speeds of an average of up to 7.1 megabits per second, but delivering an average of 4.1, a 42 per cent shortfall. Today, the shortfall is 55 per cent, with up to 11.5 megabits per second promised on average, but only 5.2 delivered.
Those little words "up to" are the broadband providers' failsafes. Since the quality of each customer's connection to the network differs, it is not possible for the broadband companies to deliver the fastest speeds they offer to everyone. Some people get the headline rate, while others are catered to by the "up to" rider.
However, while one might accept that compromise if only a minority of customers were affected, Ofcom's research suggests most people don't get the highest speeds most of the time. For all the watchdog's talk of new codes of practice, and referrals to the Advertising Standards Authority, it is hard to imagine any other industry being allowed to mislead in this way.
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