BP Disaster: Investors Have Indirect Role

The news cycle is filled with details of the environmental disaster in the Gulf of Mexico. Politicians, pundits and the like daily raise a hue and cry against the alleged corporate greed of BP(BP) and the ineptitude of its engineers aboard the Deepwater Horizon oil platform.

BP is no stranger to controversy. In 2005, 15 employees of a BP-owned refinery in Texas City, Texas, were killed and 170 were injured following an explosion. Subsequent reports cited numerous failings in risk management, maintenance and safety assessments.

U.S. government officials and independent investigators have found that another deepwater Gulf rig -- owned by BP -- is operating with insufficient engineering documents. And yet, the rig and its workers soldier on because the market demands they do so.

This is not a pretty picture. On the surface, BP appears to be the evil empire more intent on profits than safety. And while it does deserve a large share of the slings and arrows for its part in this debacle, BP is not alone. We, as investors, must also take a close look in the mirror. Aren't we also culpable?

The investor/vendor relationship is based on a structural agreement. We investors demand a certain return on our investment. Good returns make us happy. Poor returns do not. As a business entity, BP understands this paradigm very well. BP is required legally and ethically to maintain a disaster response protocol. Where and how this fits into its business plan may very well be dictated by ongoing profitability.

Should we as investors therefore require more information about a company's -- not just BP's -- disaster response protocols? Are we willing to share a portion of our return to pay for better disaster protocols or safety protocols or response protocols? Should we ask for a description of the company's safety checks and balances and demand more stringent risk management going forward? These are reasonable questions.

There exists in the relationship between investor and vendor an "agreement in silence." Similar to the "Don't ask, don't tell" policy in the U.S. military, we invest usually because we foresee a short- or long-term payoff. We expect the companies with which we invest to provide the return on investment predicted in their prospectuses. How that return is manifested, within reason, is of little concern to us.

Does the debacle in the Gulf suggest we should demonstrate more concern? After all, BP has delivered on investor expectations. Should we now coerce BP into improving upon its shaky safety record at the expense of profitable returns? Should we, as investors, re-examine future investment strategies based not just on profitability but on corporate responsibility as well?

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