BP's Browne Bows Out Early
On May 1 BP (BP) announced that John Browne, its chief executive officer since 1995, was resigning effective immediately because of newspaper stories about his relationship with Jeff Chevalier, a Canadian national. Browne, 58, issued a statement saying in part, "This is a voluntary step which I am making to avoid unnecessary embarrassment and distraction to the company at this important time."
Browne also admitted to lying in his initial witness statements about the circumstances in which he had met Chevalier, and apologized for doing so.
In fact, beyond the unwelcome attention, Browne's resignation is unlikely to do any significant damage to the company. Insiders say that the CEO-designate, Tony Hayward, has in effect already taken the reins from Browne. If anything, it is probably a relief to have Browne, who was to depart in July, out of the way (see BW Online, 1/22/07, "BP Feels the Heat"). Much as Jeroen van der Veer has done at Royal Dutch Shell (RDSB), Hayward is running a back-to-basics, low-profile operation that offers a huge contrast to Browne's style.
The shock ending will inevitably obscure the considerable achievements that Browne rang up at BP. He and his predecessor David Simon rescued the company when it was struggling in the early 1990s. Browne transformed BP into one of the biggest players in the oil industry through a series of deals, notably the $62 billion acquisition of Amoco in 1998.
Browne's 2002 $8 billion 50/50 joint venture with Russia's TNK was also a visionary move that no other company has been able to replicate. Of course the Russian bear may claw back what it has given, but it hasn't yet. (see BW Online, 4/30/07, "The Kremlin's Big Squeeze").
The BP CEO drew global notice. He was appointed to the boards of Goldman Sachs (GS) and Intel (INTC), two of the most prestigious companies in the U.S.
A Series of Missteps
But Browne, who once contemplated an academic career in physics, had his flaws. He probably focused too much on financial targets and paid too little attention to operations. In hindsight, he also probably erred in adopting the Beyond Petroleum logo and its flower power trappings. An oil company taking what seemed to be a holier-than-thou stance about the environment annoyed industry rivals and set Browne up for a pasting when BP was revealed to be guilty of slovenly practices at its refineries and in Alaska. The disastrous explosion that killed 15 people at a refinery in Texas City, Tex. in 2005 eventually brought Browne down.
Finally, Browne did too little to develop a successor. The executives around him were mostly in awe of the chief and wary of disagreeing with him. He showed what seemed to be incredibly poor judgment last summer when either he or his minions launched a campaign to extend his retirement date beyond his 60th birthday in 2008. In the end Chairman Peter Sutherland, who had mostly watched Browne chalk up success after success, had to force him to agree to set a date—the end of 2008. Then last winter, under a barrage of criticism from plaintiffs' lawyers and pressure due to various Texas City investigations, Browne agreed to depart this summer. Now he is gone prematurely.
Browne is taking a big financial hit. Because he is resigning, BP says, he will lose a severance package of up to $7 million (see BusinessWeek.com, 3/22/07, "Golden Parachutes: Cut the Cords"). He will also forgo inclusion in a long-term performance plan that could have had a maximum value of $24 million. Some investors had complained that the CEO was departing on terms that were far too rich.
Punch-Up With Tabloid
Browne's resignation follows a simmering battle with the Mail on Sunday, a London tabloid. Browne had obtained an injunction blocking the newspaper from publishing Chevalier's story, for which the former boyfriend was apparently paid, but the injunction was lifted on May 1. In his resignation statement Browne acknowledges a four-year relationship with Chevalier.
The Daily Mail reports that in his court witness statement, Chevalier made various allegations including that "BP's resources were diverted for Mr. Chevalier's use." Some of the allegations border on the comic, such as: "Browne discussed EU policy and Chinese textile quotas with Peter Mandelson, the EU Trade Commissioner, and Mandelson's Brazilian boyfriend, Reinaldo."
In BP's statement, the company chairman Peter Sutherland said that a review of the evidence "concluded that the allegations of misuse of company assets and resources were unfounded or insubstantive." A company spokesman said that Browne's secretary had assisted Chevalier, but said that is nothing out of the ordinary for the partner of a CEO.