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Monday, August 24, 2009


The beginnings of British Petroleum Plc dates back to 1909 when it was founded by William Knox D’Arcy after fortunately finding oil in Persia. The company was subsequently registered as Anglo-Persian Oil, a sole proprietorship. However, right before the First World War, the need for continuous supply of oil encourage the British government to invest and partially control Anglo-Persian Oil. Increased demand for the supply of oil resulted to the expansion of the company to foreign lands like Canada, South America, Africa, Papua, and some countries in Europe. Consequently, the name of the company Anglo-Persian Oil was changed to Anglo-Iranian Oil Company. Unfortunately, in 1951, the Persian associate resigned its share of the company assets to the Persian national government. This drove the United Kingdom government to increase and expand its sources for additional supply from Kuwait, Libya, and Iraq, and subsequently to the United States of America, and the British North Sea under the name British Petroleum Company. The change in company name was simply the outcome of the United Kingdom government having turned to have more sources and more supply of oil from about 70 different countries. This apparently made British Petroleum Company the vast controlling counterpart of the company assets (Corporate Watch, 2009).

Subsequently, in 1973 and 1979, the surge of supply in the market resulted to the decrease in prices (Corporate Watch, 2009). The reduced oil prices failed to produce the revenue necessary to sustain the operations of British Petroleum Company. So, the government has no other option, but, to privatize British Petroleum Company in the 1980’s during the time of Prime Minister Margaret Thatcher (Vickers and Wright, 1989).

To some, this was the result of some Keynesian principle’s influence and political uncertainties
over intensified governmental indebtedness, need for interventions, escalating taxations, inflation, and differences over allotments on alliances. Additionally, privatization was facilitated as limiting guidelines were legitimated to reign on governmental disbursements and most importantly to render the labour market more flexible and elastic with the escalating economic crisis at the helm which was seemingly beyond governmental strategic reparatory measures of the decade (Vickers and Wright, 1989).

Moreover, the monopolistic underpinnings of British Petroleum Company being government owned, poised only risk to the company in terms of inability to cope with technological upgrading considering that inputs come from taxes which may never bring-in return in revenues, plus the cost which was predictably draining, lesser corporate business strategies on business operations, and the lack of feasible and viable structural organization to fit into the globalization trend. Consequently, prior to becoming a lavish political loss in terms of trust from the people and extreme company losses due to indebtedness, and for the company to achieve economics of scale, the company was marketed as a resolute scheme of the British government (Vickers and Wright, 1989).

In 1989, Heald supposed that the privatization of British Petroleum Company was within the concept of making public enterprises private, loosening state control over marketplace access in anticipation to the development of competitive edge driving efficiency and greater market share with corresponding trades, open investment opportunities, and increase the probabilities of employment with heightened, modernized, and restructured organization (Heald, 1989).

In 1992 the company failed again to produce the revenue necessary to sustain operations, which resulted to rationalizations. Subsequently, the British Petroleum Company chief executive manager in collaboration with the managers of the other company departments under the leadership of Lord Simon of Highbury, Peter Sutherland, and John Brown created a marketing strategy which brought back peak level earnings in 1996. This again prompted the company to go into expansions through mergers with the United States of America Oil Company. The resulting company named Amoco was realized in 1998 with 55% percent ownership by the British Petroleum Company. In the succeeding period that was in 1999 the British Petroleum Company purchased the 50% ownership rights of Enron over Solarex. This resulted to the emergence of British Petroleum Solarex, providing solar energy. As well, the company manufactures its own solar cells and markets the same worldwide, with the United States of America, Spain, Australia and India as its production venues for solar cells. Considering the large scale production from the 5 subsidiaries, the company British Petroleum Solarex captured 20% share of the global market.

Finally, in the recent past, apparently under the leadership of the chief executive officer John Brown, the British Petroleum which turned into British Petroleum plc continued to make joint ventures on of which is with Burmah-Castrol, producing and marketing lubricants, and ARCO producing and marketing petrol in the United States of America Corporate Watch, 2009).

The British Petroleum Plc corporate structure as a private company of the 21st century is akin to contemporary commercial organizations with some modifications primarily in terms of having managers and chief executive officers that are not completely under the influence of the stakeholders or owners when it comes to managerial decisions. Second, under the private company category of common practices, the stakeholders’ or owners’ liabilities are restricted. For example, in the event that the corporation runs across a period of losses in revenues such that it can not allocate anything for liabilities, the stakeholders’ or owners’ of British Petroleum Plc does not have to pick into their personal purse to get some amount they could chip-in to augment the need. The stakeholders’ or owners’ to a certain extent are protected. However, losses may be in terms of a portion of the worth of their company share as part owners. Clearly, this strategy minimizes the risk on stakeholders’ or owners’ company share, minimizes the risk of stakeholders’ or owners’ interest on other companies, minimizes the risk of stakeholders’ or owners’ personal assets which are not invested, and subsequently opens more avenues for investments considering the orderly manner of revenue driven blueprint (Taylor, 1995).
However, the British Petroleum Plc as a corporate entity regularly shells out corporate tax based on the profit earnings and based on the predetermined equitable taxation margin (Taylor, 1995) imposed by the British government per £. So, profits before dividends are tax. The corporate entity distributes dividends to stakeholders’ or owners’ based on the number of shares held and based on the profits earned (Taylor, 1995). But, at some points, parts of the profits are retained (Taylor, 1995) by the company like British Petroleum Plc, as an organization to cover developmental projects, to add to the company capitalization, or to be used for acquisitions of companies which can be turned into productive subsidiaries (Taylor, 1995).

In cases where the stakeholders’ or owners’ pay also their personal income taxes, this would be based on their corporate share earnings (Taylor, 1995). The tax would be as predetermined equitable taxation margin (Taylor, 1995) imposed by the British government per £. This means that profits of the British Petroleum Plc as a corporation are tax twice. First when the corporation paid income taxes, and second when the stakeholders paid income taxes. In other words, without having to input any contributions for capitalization, the government benefits more from British Petroleum Plc in addition to avoidance of labour related complications.

Corporate ownership of British Petroleum Plc lies on the hands of stakeholders. These are the people who bought stocks as shareholdings to the company. The stocks as shareholdings are legitimate certificate of part possession. Consequentially, legitimate shareholders choose by ballot the set of the members of the board of directors. These are their trusted personalities whose primary role is to see to the appropriate management of their investments in the corporation such that it will bring them back commendable revenues. There may be instances when the shareholders would opt to sell their shares of stock in the exchange market when the board deems the investment to be profitable.

Nonetheless, despite passing away of the original shareholders of British Petroleum Plc or their subsequent successors, British Petroleum Plc as a corporation would continue to exist. This is because many of the daily decisions such as hiring, firing of employees and purchase of new equipment are made by the chief executive officer in collaboration with the different managers of the different corporate departments (Taylor, 1995). So, the British Petroleum Plc may exist on as long as it makes profit, as the organization is revenue driven. As a result the British government can continuously collect taxes from the company as well as the stakeholders.

Conversely, British Petroleum Plc corporate governance which is decisions relative to mergers, alliances, acquisitions, pursues the usual practice of collaborative efforts of managers and stakeholders. This is because these are relatively enormous decisions that are quite complicated in nature considering configurations of probable risk and revenues plus capitalizations. Meanwhile, the members of the board of directors approve and endorse or disapprove and reject plans of chief executive officers and managers for growth and development or scale down for rationalization (Taylor, 1995). Nonetheless, Levine in 2002 indicated that in the United Kingdom, “governance begins and ends with the board of directors”. In as much as the British Petroleum Plc is based in the United Kingdom, then the probability that the principle is adopted by the corporation is favourably high. Besides, the United Kingdom Institute of Chartered Accountants in England and Wales were the ones who created the parameter (Levine, 2002).

However, the foundations of a corporation or how it originated grounds more its corporate governance style. In addition, the continued business operations of a company marked the control design which could clearly manifest interfering policies which may be those of the state, apparently ensuring satisfactory performance of corporate issues as per statutory standards. Nonetheless, experts in the field see three different theories under which a corporation exist underpinning exercise of a particular governance strategy. These are the contractual theory, communitaire theory, and the concession theory (Dine, 2000). A deeper analysis of the concession theory most likely reveals the practice of British Petroleum Plc governance strategy.

In concession theory, the associates consider the company acquired as a new organization which is totally different from when it was first organized. And so, the associates manifest that their linkage plus the handiness of corporate concepts brought about an entirely novel company with the current owners field of concentration. The concept embraces the culture of separation of ideas between the old organization and the new corporation. The old organization is thus gone, and the new corporation is that which is in existence (Dine, 2000).

However, in reality, the new corporation is in some way controlled by the original owners. Although, the original owners does not have any direct hand over elections of the members of the board of directors, nor of the appointments of chief executive officer and the managers, not even on the hiring, firing of employees, or expansions and purchase of corporate equipments. Clearly, the previous owners upon sale gave up also its rights to influence the new corporate structure (Dine, 2000). Hence, the British Petroleum Plc’s corporate fate went through the same route to achieve what it is today.

Before privatization, British Petroleum Plc was chiefly owned by the government of the United Kingdom. In the 80’s it was privatized under the influence of the then Prime Minister Margaret Thatcher (Vickers and Wright, 1989). But, because it was originally founded and grounded on British culture, and persist major existence within the same region, then, the corporation is still subject to the British by-laws. For example, British Petroleum Plc pays corporate income tax to the United Kingdom government. The private shareholders or owners who live in the United Kingdom also pay their income taxes from dividends to the United Kingdom government. All its corporate employees that derive income from the company and dwells in the country do the same. Besides the taxes that the corporation contributes to the British coffers, the labour market that the corporation created with its continued existence ensures employment of manpower for its business operations.

In addition, the corporation also transacts business with fellow countrymen as creditors of banking institutions who are capable of financial lending for funding projects, or for capitalization, saving corporate income in banks, conveyance of finances to companies where the British Petroleum Plc have obligations to pay through banks, conveyance of dividends to shareholders through banks, and income tax payments through banks (Dine, 2000). As a supplier company, the British Petroleum Plc has evolved a line of products not only for its British consumers, but, also for international markets. Certainly the corporation now does not only serve its end, but it likewise makes available many different opportunities to the society at large, and to the global consumer community.

Online, BP plc listed the industrial products the company regularly supply to its patron all around the world. These are petroleum products, chemicals for processing of crude oil into refined forms, gas, and solar cells. Conversely, the company is involved in oil and gas exploration and subsequent production, refining, marketing, manufacturing of chemicals for refining petroleum products, gas and power generation, and manufacture of solar cells (BP plc, 2009).

Looking back, in 1990, the chief executive officer of the British Petroleum Plc Robert Horton initiated a company organizational transformation plan which was eventually implemented through workshops with the objective of changing the manpower culture, vision, values, and behaviours in the midst of a transitioning organization after privatization. This was primarily to enhance exceptional human resources assets, to learn from the old firm and to welcome the new organization with enthusiasm to be productive (White, 1992).

Among the behavioural traits that were the centre of development were those of commitment and transparency. To facilitate the realization and achievement of the program’s goals, experts in the area were employed. This activity was indicative of the new company’s dedication to uplift the old company’s service group led by the president of the Human Resource department, the vice-president of the Human Resource department, assisted by experts in the art of helping people developed the attitude of ease in fitting into the new and modified structure of the company. Additionally, the transformational program headed by the Human Resource Department was in close collaboration with the Corporate Strategy Team. This was to make certain that the participants will be aware and absorb the ideas that the new organization will be directed and focused (White, 1992).

After the training program exceptional candidates for higher corporate positions were further trained to enhance capabilities of handling sensitive corporate task. From another perspective, the program was deemed necessary by the senior management group of the new company to tap human resources from within the corporate organization to man future positions that need to be filled up in case of expansions.

Taken as a whole, the1990 chief executive officer of the British Petroleum Plc Robert Horton supposed “that the key factor in sustaining competitive advantage in the future will be the ability of BP to release the talents of all our employees” (White, 1992). Furthermore, this underpins company movement towards the realization of its vision which is to be the “Most Successful Oil Company in the World” (White, 1992).

The current chief executive officer of British Petroleum Plc – AMOCO, Sir John Browne clearly said that the company strategy is actually their organizational structure, where, “Strategy = Structure = Implementation” (Organizing for Growth, 2001). This fashioned company equation formula obviously manifests the humble acknowledgement that no one can accurately forecast, not even the top-notch corporations in the world, or the most experienced expert in the field. But, as the current practices details, outputs from multifaceted linkages of institutional leaders, supporters, and the business environment, practically create what is in store for the future (Organizing for Growth, 2001).

Sir John Browne clarified that the old maxim where a business institution should work along a corporate strategic plan is no longer applicable in the 21st century. What is apt today is for a corporate entity to have a leader within the principle and structure of teamwork, where manpower is aptly tasked in accordance with the mental, physical, and attitudinal capabilities. The impact of an organization’s structure is relative to the diversified approach driving the market these days. This innovative approach effectively and efficiently links big corporations to small enterprises, making capital available and ensuring availability of diversified supply to meet diversified market and consumer demands (Organizing for Growth, 2001).

Seemingly, the global economy requires the dual functioning of the big and the small businesses. For example, the business of Nokia is on production and marketing of cell phones and accessories. Nokia have established a market name and have captured a market share. But, the company is now bordered by small entrepreneurs in the same business actually influencing production and marketing forms and styles, and even competitive prices. Sometimes, the small entrepreneurs come out with more innovative designs. Nonetheless, Nokia persisted to exist in such a business milieu, broadly accepting competitions as natural events, and taking the same as a challenge to come up with more competitive products. Conversely, the small-time business entrepreneurs saw opportunities in the same market. These were their motivating issues to further expand and find access to entry in the international market. These too indicate the significance of diversity in the 21st century business markets (Organizing for Growth, 2001).

Likewise, to the same degree of significance are the current trends of networks, joint ventures, alliances, mergers, and acquisitions. But, the most prominent, progressive and successful features of contemporary business organizations are the abilities to integrate the many and varied small business enterprises into a corporate business creating the assortment of goods and services aimed at supplying even the most trivial demands, making business marketing efficient (Organizing for Growth, 2001).

The organizational constitution of British Petroleum Plc is its current corporate governance structure headed by an open minded leader who team works with highly trained and apt management and staffs, and does not stop at monopolistic activities, but encourages joint ventures among the big and small enterprises, thus coming out with assortment of supplies to ensure an efficient global market.

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Alexanders’ Gas & Oil Connections. BP – AMOCOMerger rets: 4/23/09.
British Petroleum plc. rets: 4/16/09
Corporate Watch. rets: 4/16/09


  1. Thanks for the posting it's been nice to know the history of British Petroleum plc's corporation.


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