Corporate Governance class 3

1. OECD Principles of Corporate
Governance

2. Stakeholders in Corporate Governance
Stakeholders
of the Firm
Primary
Stakeholders
Other
Stakeholders
Corporate Governance 2
•Shareholders
•Board
•Executive Management
•Managers
•Employees
•Customers
•Suppliers
•Community at large
•Government
•Financial Markets
•Environmentalists

3. • I) Ensuring the basis for an effective corporate governance
framework;
The chapter emphasizes the role of corporate governance framework
in promoting transparent and fair markets, and the efficient allocation
of resources. It focuses on the quality and consistency the different
elements of regulations that influence corporate governance practices
and the division of responsibilities between authorities. In particular,
new emphasis is placed on the quality of supervision and
enforcement. The chapter also includes a new principle on the role of
stock markets in supporting good corporate governance.

4. • II) The rights and equitable treatment of shareholders
and key
ownership functions;
The chapter identifies basic shareholder rights, including the right to
information and participation through the
shareholder meeting in key company decisions. The chapter also
deals with disclosure of control structures, such as different voting
rights. New issues in this chapter include the use of information
technology at shareholder meetings, the procedures for approval of
related party transactions and shareholder participation in decisions
on executive remuneration.

5. • III) Institutional investors, stock markets and other intermediaries;
This
is a new chapter which addresses the need for sound economic
incentives throughout the investment chain, with a particular focus on
institutional investors acting in a fiduciary capacity. It also highlights
the need to disclose and minimize conflicts of interest that may
compromise the integrity of proxy advisors, analysts, brokers, rating
agencies and others that provide analysis and advice that is relevant
to investors. It also contains new principles with respect to cross
border listings and the importance of fair and effective price
discovery in stock markets.

6. • IV) The role of stakeholders in corporate
governance; The Principles
encourage active co-operation between
corporations and stakeholders and underline the
importance of recognising the rights of stakeholders
established by law or through mutual agreements.
The chapter also supports stakeholders’ access to
information on a timely and regular basis and their
rights to obtain redress for violations of
their rights.

7. • V) Disclosure and transparency; The chapter
identifies key areas of disclosure, such as the
financial and operating results, company
objectives, major share ownership,
remuneration, related party transactions, risk
factors, board members, etc. chapter include the
recognition of recent trends with respect to items
of non-financial information that companies on a
voluntary basis may include, for example in their
management reports.

8. • VI) The responsibilities of the board; The chapter provides guidance
with
respect to key functions of the board of directors, including the
review of corporate strategy, selecting and compensating
management, overseeing major corporate acquisitions and
divestitures, and ensuring the integrity of the corporation’s
accounting and financial reporting systems. New issues in this
chapter include the role of the board of directors in risk management,
tax planning and internal audit. There is also a new principle
recommending board training and evaluation and a recommendation
on considering the establishment of specialized board committees in
areas such as remuneration, audit and risk management.

9. Bp & Overview of Oil Spill in Mexican
Gulf..

10. • British Petroleum is the third largest energy company &
the fourth largest company in the world, and one of the
six gas super major measured by 2011 measured
revenue.
• Operates over in over 80 countries and has 21,800
service stations worldwide.
• Production is about 3.4 million barrels/day.
• Works in the field of exploration , production, refining,
distribution, marketing petrochemical, power generation
and trading.
• BP owns 19.7% stake in Russian oil major Rosneft
(World’s largest publicly traded oil & gas company by
hydrocarbon reserves and production.

11. 1921
2000-2013
Brand Evolution of BP
1979-1999

12. BP’s oil production & oil trade
FY-10-11

15. • Fifth generation ultra-deepwater,
dynamically positioned, semi-
submersible mobile offshore
oil drilling unit.
• Built by Hyundai heavy industries
in 2001.
• BP took it on lease from 2001.
• In 2009, the rig drilled the
deepest oil well in history at a
vertical depth of 35050 feet in
Tiber oil field.
• In 2010, it is commissioned in
Mexican gulf.

16. Date: 20th April 2010
Explosion in BP operated Deep water horizon .
Explosion caused fire on the deck.
After 36 hours, it sank leaving the well unprotected.
It caused largest accidental marine oil spill of history.
Casualties: 11
Injured: 26
Accident on Deep water horizon

17. • The accident at Deep water horizon is not an
accident not only due to time-action gapping,
but also some sequential events related to
proactive maintenance.
• At first it was `blow out preventer’ (which was
designed to shut down the well) failed to shut
down the well.
• Secondly. There was a technical fault in design
of the gas venting system which allows a cloud
of explosive gas to envelop the rig.
• At last the additional valves deep inside the well
failed to prevent oil and gas from flowing up the
steel pipe (casing).

18. Area covered by the oil spill
NASA image taken – Spill estimated to cover an area
in excess of 4000 square miles
Spill Characteristics
• Location: Gulf of Mexico near
Mississippi river delta, United States .
• Area Covered: Area affected by this
devastating oil spill is about 4000
square miles.
• Volume: Near about 798000
gallons/day crude oil mixed in the
ocean.
• Per day loss: $430000 per day floated
in ocean ($86/Barrel)

19. After the accident on Deep water
horizon, some ethical issues raised
against BP. It was like in a way that
If BP did not ignore some red
signals, the accident might not
happen.
• Knowing that the Deepwater
Horizon had problems, BP did not
take any action towards proactive
maintenance.
• The rig continued to run under risk.
Putting profit over the safety of
workers.
• The management of BP ignored the
“Red Flags” from their procedural
tests.
Ethical Issues

20. •The area of the oil spill includes 8,332 species.
•More than 400 species that live in the Gulf islands and marshlands are still at risk.
•As of November 2, 2010, 6,814 dead animals had been collected.
•Miles-long strings of weathered oil had been sighted moving toward marshes on
the Mississippi River delta. Hundreds of thousands of migrating ducks and geese
spend the winter in this delta.

22. Based on these estimates, up to 75% of the oil from Gulf oil
disaster still remains in the Gulf environment.
Burning the oil
Approximately 9,300,000 to 13,100,000 US
gallons of oil was burned on the ocean
surface.
Collecting for later processing
The Coast Guard said 33,000,000 US gallons
of tainted water had been recovered, with
5,000,000 US gallons of that consisting of
oil.
Filtering offshore
By June 28, British Petroleum had
successfully filtered 890,000 barrels of oily
liquid.
Removal of oil from gulf
environment

23. Use of non invasive oil eating microbes
• Use of Pseudomonas putida could be very effective as it is non invasive
and has no side affect. It eats oil, as it produces energy for it’s survival.
• In the Labs (US) it shows almost desired results which is safe to use in
mass.
• It can be generated without complex genetically transformation.
• It can grow in very fast rate, so it could cover more area in very short span
of time.

24. How the microbes works
• The oil eating microbes simply oxidize the hydro-carbon, thus carbon
dioxide and water released.
• Oil floats on water as it is lighter than water. Oxygen is available on
the gulf surface . So it can break apart the hydrocarbons easily.
• After eating up the surface oil layer, microbes will die due to
deficiency of oil on the gulf surface.
• In this process the microbes can make the gulf environment oil free
with out leaving any side affect.

25. • $13.6 billion has been spent to clean
up the beaches.
• 95000 tones of crude oil collected
from the shoreline.
• Restoring tourism and seafood
industries by paying all legitimate
claims for damages resulting from the
accident.
• Estimated $.06 billon has been spent
for tree plantation to restoring natural
resources injured as a result of the
accident.
• Estimated $2 billion has been spent
for restoring wild life habitat in the
gulf region.

26. How BP is Reversing Damage Done to the Tourism Industry
• BP has committed a total of $92 million over a 3-year period for Alabama,
Florida, Mississippi and Louisiana.
• In which each state is using tourism funds to sponsor a variety of special
events, including music festivals, classic car rallies, and fishing competitions,
that attracts thousands of visitors

27. BP’s Gen-Next Step towards fuel security:
Cellulosic Bio fuels
• BP is investing in overseas bio-to-diesel technology in Brazil
• There are 3 sugarcane ethanol mills that have been opened
• BP is pairing up with Companhia Nacional de Cucar e Alcoo (CNAA), the leading
biofuel producer in Brazil
• Goal: “Harvest sugar and create ethanol with the least negative effect possible on
the environment, preserving staff and respecting the neighboring communities
and all partners”

28. • Though the well was finally killed and many measures have been
taken for restoring the environment and the business of the Mexican
Gulf which were badly affected by the oil spill.
• But this is not enough, because about 70% of leaked crude oil is in
gulf environment till today. It may push us in danger in near future. So
in order to protect marine spices we have to take necessary steps to
eliminate the danger.
• BP has taken new agenda under a banner of `Beyond Petroleum’ to
produce bio fuels for cutting the dependency on crude oil.
This things led US to work on new sensible energy policy.