Tony Hayward's Legacy -- BP Chief Boosted Bottom Line, But Not Safety
LONDON — Two decades ago, Tony Hayward was a "turtle" – one of a handful of young high fliers at BP earmarked for great things, named after the cartoon warriors, the Teenage Mutant Ninja Turtles.
Fast-tracked through BP's heavy bureaucracy by the man he would succeed as CEO, John Browne, Hayward took the top job three years ago, promising to focus "like a laser" on safety and change the company's champagne culture. He was supposed to get BP back to basics, and for most of his tenure shareholders were happy with the results.
Then came the rig explosion that set off the worst offshore oil spill in U.S. history, and several weeks in which Hayward repeatedly put his foot in his mouth while his company appeared incapable of stopping the gusher.
Now the former geologist is vacating the top spot by "mutual agreement." Following weeks of speculation about his future, BP confirmed on Tuesday that the 53-year-old will step down from the company's top job on Oct. 1 and will be replaced by the company's current managing director, American Robert Dudley.
Hayward said Tuesday that BP would emerge from the disaster a changed company and "it is right that it should embark on its next phase under new leadership."
"The Gulf of Mexico explosion was a terrible tragedy for which – as the man in charge of BP when it happened – I will always feel a deep responsibility, regardless of where blame is ultimately found to lie," he said in a statement.
Analysts were divided over whether removing Hayward was justified, but they acknowledged that it was inevitable, despite his success before the Gulf spill in streamlining a bloated company.
"He was always going to be thrown out in the end to appease investors," said David Battersby, investment manager at Redmayne Bentley Stockbrokers.
But BP's decision to nominate Hayward for a board position at TNK-BP, the company's 50-50 joint venture with Russian oligarchs, suggests that the company still holds more faith in its embattled CEO than much of the U.S. public and political establishment.
Hayward also departs with a hefty financial package, including a $1.6 million payout in lieu of notice, an $11 million pound ($17 million) pension pot and his entitlement to shares under a long-term performance program which could eventually be worth several million pounds (dollars), if BP's share price recovers.
Analysts consider TNK-BP one of BP's crown jewels, accounting for a quarter of BP production. But it is problematic, as Dudley well knows.
Dudley was forced to flee Russia in 2008, running the company in absentia until that became untenable, after a row with Russian shareholders. That history means that Hayward, who is still well-regarded in Europe, will be a key negotiator for his new boss.
"It's recognizing that this is a very smart guy and has good contacts," said Stephen Pope, the chief global equity strategist at Cantor Fitzgerald. "He will very good at smoothing the way."
Phil Weiss, an oil analyst with Argus Research in New York, said BP thinks highly of Hayward, "but they have to get him away from this situation."
Hayward's elevation to CEO in 2007 was supposed to herald a new era for the company after a series of accidents – including the 2005 Texas City refinery explosion that killed 15 people.
"The task is to restore confidence," he told the Texas-based Houston Chronicle newspaper shortly after his appointment.
Browne was forced to step down as CEO after admitting to perjury while giving evidence to a court to prevent a newspaper revealing details of his private life. There was little surprise that Hayward was named as his replacement.
It was Browne who, as head of exploration and production in 1991, recognized the young geologist's potential and marked Hayward out for a fast-track program for young executives. That gave Hayward entry to the inner circle.
He moved quickly through the ranks, from geologist to group treasurer to head of exploration and production – a crucial role at any big oil company.
Before becoming CEO, he was instrumental in BP's expansion into the United States, which involved a number of takeovers, including the 1998 merger with Amoco and the subsequent acquisitions of Arco and Castrol.
The eldest of seven children, Hayward had a far less privileged upbringing than his predecessor – Lord Browne of Madingley to his fellows in the House of Lords.
Browne had been known for his celebrity lifestyle as much as his business successes, and Hayward was seen as a leader who could focus BP more on the bottom line.
Not long before he took over, Hayward told a conference that BP needed to change its leadership style because it was "too directive and doesn't listen sufficiently well." He said he was concentrating on "closing the performance gap" with rivals such as Royal Dutch Shell.
Hayward stripped out layers of management and costs across a stumbling and bloated business, improving its refining efficiency and putting the firm on a stronger footing to weather a global downturn.
BP's market position improved and its reputation was rehabilitated. Cost-cutting, which saw around 7,500 positions axed, led to savings of around $4 billion.
Even in the immediate wake of the Deepwater Horizon explosion on April 20 with the loss of 11 workers, Hayward appeared to be able to survive.
Former BP Chairman Peter Sutherland described him as a "superb chief executive by common consent" and British-based investors and analysts were supportive.
But in the U.S., Hayward became the lightning rod for anti-BP feeling and didn't help matters with a series of gaffes. He raised hackles by saying "I'd like my life back," going sailing, and what was viewed as an evasive performance before U.S. congressmen in June.
President Barack Obama said then that Hayward should have been fired – although BP later cooled the political heat by agreeing to set up a $20 billion compensation fund.
Hayward was called back to London a month ago after the bruising encounter with the congressional committee and has since kept a low profile.
Tom Bower, who wrote a book called "The Squeeze: Oil, Money and Greed in the 21st Century," suggested Hayward's response to the Gulf spill was symptomatic of how he "hadn't changed the culture" at BP following the previous accidents in the U.S.
"He knew what had to be done, but he didn't do it properly. He was too slow; he wasn't inspired; he wasn't focused enough," Bower told the BBC.
But David Cumming, head of UK equities at Standard Life Investments, said that Hayward was the scapegoat for BP's "political appeasement" to help rebuild its U.S. reputation.
"I think Hayward has been harshly treated and I think Hayward's departure is premature," he said. "We still don't know the full facts of the spill."
(This version CORRECTS Corrects quote in graf 28. An interactive looking at BP will be updated with the latest news on possible management changes will be available at _national/oil_bp. This story is part of AP's general news and financial services.)