Anger toward companies is nothing new, especially following a major accident like the slow-motion nightmare currently unfolding in the Gulf of Mexico. Often the outrage and demands for action fade away as the public and media move on to other news. But sometimes an event has such a profound impact on society that it can lead to landmark changes in the ways governments and corporations act.

A very pertinent example of such a disaster: the 1969 oil rig accident off Santa Barbara, Calif., which the current BP (BP) oil spill echoes. The Santa Barbara rig was operated by Union Oil -- now part of Chevron (CVX) -- in several hundred feet of water. In January of that year, a pipe blowout poured several million gallons of oil into the Pacific. It took 11 days to stop the spill, by which time oil was embedded along dozens of miles of Southern California coastline. Thousands of animals died, and the accident quickly became a national event.

Earth Day and Three-Mile Island

As with the current oil spill, company executives first tried to downplay the damage. "I don't like to call it a disaster, because there has been no loss of human life," said Union Oil President Fred Hartley. "I am amazed at the publicity for the loss of a few birds."

That 1969 oil spill brought a wide spectrum of people, from all parts of the U.S. cultural and political landscape, into a national debate about conservation and the environment. "The Santa Barbara incident has frankly touched the conscience of the American people," President Nixon said at the time. It soon led to the first Earth Day celebration -- as well as the birth of the U.S. Environmental Protection Agency and the Clean Air Act of 1970.

A decade later, in 1979, a partial core meltdown at Pennsylvania's Three Mile Island nuclear power plant shocked both the public and the government. Reaction to the accident was probably not helped by a popular film that had came out two weeks earlier, The China Syndrome -- the plot of which dealt with a near-disaster at a fictitious nuclear power plant. Like China Syndrome, "Three Mile Island" ended up becoming shorthand for the public's growing concerns about nuclear energy. A series of all-star, "No Nukes" concerts later that year added fuel to a still-lingering distrust in the U.S. of the nuclear power industry

BP's Board Was Asleep at the Wheel

The BP oil spill, observers say, is another landmark corporate disaster. It also raises some troubling and complex questions about responsibility, crisis management and public relations.

"We know big oil is a villain. In the eyes of the public, it's always a villain. It's probably a bigger villain than big government," says John Holcomb, professor of business ethics and legal studies at the University of Denver. "But this is a story of a combination of corporate and regulatory failure."

And did that federal regulatory failure allow BP's board of directors too much leeway?

"The [BP] board should have been monitoring all contingency plans for this kind of disaster," he says. "Enron's board obviously was asleep at the switch on the accounting fraud and insider trading that took place among top management. Likewise, the boards of major financial institutions failed to monitor the risks taken by using [the] arcane financial instruments that created our financial meltdown."

A Resistance to Learning From Mistakes


Compared to other corporate entities faced with disaster, however, Holcomb says BP has acted with relative promptness and transparency. He compares BP to Toyota (TM), and the automaker's reluctance to address potentially deadly acceleration issues with its vehicles.

"The irony is that Toyota had this huge, positive reputation," he says. "They had a lot of what we might call brand equity, which they could rely on. When companies have that, they feel they're on top. Anybody who's on top starts to get complacent."

Holcomb has studied corporate crisis management from the 1980s to the present, and he's noticed a "rather distressing pattern" when it comes to how companies often react to bad situations. Most don't examine the causes of their misfortune, he says, preferring instead to deny their problems and resist complaints. They rarely correct or reverse their initial approach to a crisis, even if that crisis goes on for years. There's also a failure to learn from their own mistakes or the mistakes of others.

Creating Incongruous Coalitions

But this resistant corporate culture is now giving way to laws that stress corporate responsibility. New regulations, says Holcomb, give companies "the incentive to take corrective action and preventive action. . . and I hope that continues."

As the Santa Barbara incident did four decades ago, the BP oil spill is uniting some incongruous groups: conservative Gulf Coast lawmakers, environmentalists and a fishing industry that fears it might disappear if it doesn't get some help. "That's when you have some marvelous things happen, in terms of public policies," says Holcomb, "when you get left/right coalitions getting together."

Increase your money and finance knowledge from home

Forex for Beginners

Learn about trading currencies and foreign exchange transactions

View Course »

Income Investing

Grow your nest-egg.

View Course »

Add a Comment

*0 / 3000 Character Maximum