Corporate governance is a term that describes the systems, structure and the procedures that are used by a corporation to convey responsibility, authority and accountability among different stakeholders and by which the company is governed. They provide guidelines as to how the company can be controlled or directed such that it can fulfill its goals and objectives in an approach that will add to the value of the company and is beneficial to all the company stakeholders including management, customers, shareholders, employees, directors of the company and even the society. Therefore, the management of the company assumes the trustee role for all the other stakeholders (Thomson, 2011).
The recent oil spill in the Gulf of Mexico was a whole host of corporate scandal that drew a lot of attention to the importance of good governance (Thomson, 2011). The paper will seek to explain possible violations of good governance in corporate practice.
The oil spill on 20 April 2010 resulted into a massive explosion. Eleven workers were killed and two days later the ship sank creating a massive oil spill. The incident tarnished the reputation of BP further prompting questions on the company’s safety and environmental record. The BP board was heavily criticized after awarding the then CEO Tony Hayward of more than £600,000 from his pension that was valued at £11 million. People wondered why Hayward was being awarded for failed leadership during the spill period that put BP in a severe political storm and was responsible for a 40% market capitalization. As a result, the directors commitment in handling the crisis were questioned, lacking an oversight in operations and a slow reaction in resolving the disaster.
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To act on that, it was resolved that no annual cash was to be given to Hayward and the new CEO and Dudley, the new CEO announced that employees’ salaries were to be reviewed. The board also promised to increase the number of effectiveness of its discharge and later increased the number of its work site visits. It also revamped and enhanced safety committee with some new blood, playing a significant role in crisis planning and management. For example more informative reports were needed on the company’s operations to help it oversee any likelihood of future disasters (Teen; 2012, p165-166).