BP calls an end to all political donations

In a decision with wide ramifications for big business and governments, the energy giant British Petroleum will no longer use corporate funds to make political contributions anywhere in the world.

The new policy, which takes effect from 1 April, means that BP will halt "soft-money" contributions to political parties in the United States, which cost it "somewhere short of $1m (£700,000)" last year. BP has not contributed to political parties in Britain. The decision was disclosed by BP's group chief executive, Lord Browne of Madingley, who was giving the John C Whitehead lecture on Anglo-American relations at the Royal Institute of International Affairs in London last night.

Lord Browne said that, while companies might not be "as powerful as some people think or fear", they still had the ability to "make choices, apply resources ... to make things happen". Because of that, they had to make sure their power was used with the greatest care. "We have to remember that however large our turnover might be, we still have no democratic legitimacy to determine how society will develop."

For that reason, he said, "we've decided, as a global policy, that from now on we will make no political contributions from corporate funds anywhere in the world. We will engage in the policy debate, stating our views and encouraging the development of ideas – but we won't fund any political activity or any political party."

Lord Browne referred to the Enron affair in the United States – the scandal-ridden bankruptcy last year of the fifth-largest US company – and the Mittal affair in Britain, where an Indian businessman resident in Britain obtained the backing of the Prime Minister, Tony Blair, to purchase Romania's biggest steel plant.

Both demonstrated the mutual backslapping between government and big business, and the damaging fallout that can result when things go wrong.

Industry and political analysts said BP's decision was a very shrewd move. Not only had the company saved itself money, it had set a clear policy worldwide in the interests of consistency and transparency.

It was also in tune with public suspicion, post-Enron, of the influence that big business can exert on elected governments. The mood in the US was exemplified earlier this month when the House of Representatives passed long-stalled legislation that would ban corporate "soft-money" contributions to political parties.

A final text of the law must now be agreed between the House and the Senate. But BP can expect to win credit for anticipating that change. Other big companies, especially in the energy sector, can be expected to follow.

Alluding to the risk that BP could lose influence in the US, Lord Browne said that contributions "could create a moment when some advantage may be obtained", but that in the longer term, contributions achieved nothing.