January 25, 2009



            This study seeks to analyze the relationship of corporate governance to the British Petroleum (BP). British Petroleum is recorded as the third biggest global energy company. It is listed under privately-owned companies, which is held by the British Energy Company. Bp is located in London, England, UK. This company is one of the largest private sector energy corporations in the world. (BP, 2008)

            The BP's Board is headed by Peter Sutherland, Chairman of the Board. The board takes the responsibility of taking the direction and supervision, on behalf of the stockholders. The board holds accountable in any aspect of the business to all the stockholders, as owners of the company. (About BP, 2008)

            The Board believes that good governance consists of precision of duties and responsibilities, together with appropriate usage of skills and rights. Thus, the board's center of attention is the activities that will encourage the interests of the shareholder's interests to the business. Those activities are "active consideration of strategy, monitoring of executive action, and on going board and executive management succession. (About BO, 2008)

            These activities supported with approved company policies, which were designed primarily for it, to be achieve desired results from the activities. (About, BP)

            BP has been on the market for a number of years. In December 1998 until 2000, BP merged with Amoco, gaining a new name BPAmoco. Bp was given a new tagline as well which was 'Beyond Petroleum' and that still remains of use today. (BP, 2008)

            In April 2004, BP transferred majority of its petrochemical businesses into a different company called Innovene with in the BP group. However, on October 7, 2005, BP sold Innovene to INEOS, a chemical company that is privately owned by UK chemical company.  Innovene was sold for 9 Billion US Dollars.

            In 2005, BP decided to leave Colorado market. "According to some private BP-branded gasoline center operators in the Metro Atlanta area, BP plans to leave the Southern market in the next few years." All BP stations owned privately, which is typically known as "BP connect" will also be sold to local businessmen. (BP, 2008)

            The following year, BP's pipeline in the North Slope of Alaska had a leakage, causing an oil spill into the tundra. This has caused BP to change more than 16 miles of federally regulated oil transit lines. At the end of 2007, half of the pipeline was done and the 16-mile pipeline is regularly checked. (BP, 2008)

            The same year, BP decided to close 12 out of 57 oil wells in Alaska, generally in Prudhoe Bay, that are still dripping. (BP, 2008)

            The rationale of this study is basically to dig deeper into the relationship of corporate governance of the company. This study will be useful to companies producing similar products, who are looking for good strategy and management style in business.




            This study will answer the following questions.

1.       What are the government's policies regarding privately owned businesses?

2.       What are the rights of a shareholder?

3.       What are the regulations that bound a shareholder?

4.       What are the obligations that a shareholder has?


1.      To determine the government's policies regarding privately owned business.

2.      To determine the rights of a shareholder.

3.      To determine the regulations of a shareholder.

4.      To identify the obligations of a shareholder.



            A study made by Shann Turnbull, titled Corporate Governance: Its scope, concerns & theories identified four models of corporate control. Those models were formulated by Hawley and Williams in 1996. The four models are : 1. The Simple Finance Model; 2. The Stewardship Model; 3. The Stakeholder Model; and 4. The Political Model. (Turnbull, 1997)

In the The simple finance view, the government's role is to "construct rules and incentives to effectively align the behaviour of managers (agents) with the desires of principals." (Hawley & Williams, 1996:21)

In the stewardship model, 'managers are supposed to be good stewards of the corporations and diligently work to attain high levels of corporate profit and shareholders returns' (Donaldson & Davis 1994).

In the stakeholder model, "The firm" is an organization of stake holders working within a larger institution of the host society, which gives the essential legal and market infrastructure for its activities. (Blair, 1995-322)

The political model is awareness that the allocation of corporate power, rights, profits among stockholders, managers and other stakeholders is decided by the government. (Turnball, 1997)


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