Globe Editorial

BP’s feckless dividend payment

June 15, 2010

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UNTIL BP plugs the oil gusher on the floor of the Gulf of Mexico, there’s no way to know how high the cleanup costs might go. And there’s no way to justify a multibillion-dollar scheduled dividend payment to BP’s shareholders.

With good reason, the Obama administration is pressuring BP to put money in escrow, in anticipation of claims related to the explosion of the Deepwater Horizon oil rig in April and the vast hemorrhage of oil into the Gulf in subsequent weeks. Whether the US government can prohibit BP from making the dividend payment remains to be tested. Regardless, for BP to distribute billions of dollars to shareholders now — likely putting the money beyond the reach of potential claimants — would be a clear gesture of bad faith.

BP has promised to do everything necessary to clean up the spill, and the company should be held to its commitments. While President Obama’s critics accuse him of beating up on BP for political reasons, a number of government agencies have erred in the opposite direction. The Coast Guard, Federal Aviation Administration, and law enforcement officials have all put up obstacles to news crews and others seeking a first-hand view of the damage and of the cleanup by BP and its contractors.

In fact, more outside scrutiny of BP’s efforts is vital, especially because the environmental catastrophe could worsen. While some oil has been recaptured, and some has already washed up on the shore, most is still sloshing around in the water — where it may yet be taken up by currents that spread it far and wide. Should more oil come ashore along the Florida coast or up the Eastern Seaboard, BP’s liabilities will rise significantly.

Some analysts say a failure by BP to pay the scheduled dividend would be interpreted as a breach of faith with its shareholders. But shareholders’ proper role in a firm isn’t just to cash dividend checks. BP management placed a fateful bet that a disaster like the Deepwater Horizon leak wouldn’t happen. If a missed dividend prompts shareholders to demand more caution among oil companies that drill deep offshore, then so much the better.

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