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Greed-to-Grief, No. 25

Greed-to-Grief, No. 25

The wrong way to manage a crisis

George Pillari
October 30, 2025

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By the time Tony Hayward took over as CEO of oil giant BP in 2007, it was reeling from a string of catastrophic safety failures.

In 2005, BP’s Texas City refinery exploded and resulted in 15 deaths. A year later in Prudhoe Bay, Alaska, a dime-sized hole in a BP pipeline leaked more than 200,000 gallons of oil into the bay before the spill was detected.

Tony Hayward, former BP CEO

As a career company man with 25 years at BP, Hayward was part of the BP cost-cutting culture and when he became CEO, he pressed for even more cost-cutting. In both the Texas City and Prudhoe Bay disasters, there were numerous safety violations that went unheeded.

Preventative maintenance is expensive today but is a cost-saver in the long run. But as a public company, who at BP cared about anything beyond the next quarterly earnings announcement?

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And cost-cutting was immediate gratification since it improved the company’s earnings right away and good earnings puts wind under sails of a rising stock price.

When a public company like BP posts better earnings growth and other metrics when compared with competitors (eg, ExxonMobil), stock investors conclude BP must be better managed and smarter than the competitors and rush in to buy more BP stock, pushing up its stock price.

Senior executives like Heyward usually have more than 75% of their compensation tied to the stock price, so they have every incentive to cut those costs, improve earnings, and reap the benefits of a rising stock price. Greed at work.

BP’s stock appreciated under the company’s cost-cutting culture. It abruptly came to halt with the Deepwater Horizon explosion in April 2010.

For even well-managed companies, all those measurements get thrown out the window when a crisis hits. Companies that manage a crisis well are rewarded by investors over the medium and long term, since, as Mike Tyson famously said, “Everybody has a plan until they’re punched in the mouth.”

How a company responds to a crisis tells you everything you need to know about the quality of the company’s board and management.

For BP, the crisis was the explosion of the offshore drilling platform Deepwater Horizon. The Horizon was drilling three miles below the surface in the Gulf of Mexico.

Horizon was supposed to drill the well, test it, confirm the suspected massive supply of oil, and then temporarily cap the well and move to the next well. BP would then construct a permanent drilling platform and harvest oil from the well for the several decades.

Deepwater Horizon was able to move around the world with its engines and thrusters for navigation. It is classified as a ship.

The well exploded and demolished the Deepwater Horizon. Eleven of the 150 or so crew were never found. After the explosion, the well, at the bottom of the ocean, continued to spout more than a million gallons of oil per day into the once-pristine Gulf waters. The well went uncapped for three months before it was finally sealed shut.

Before long, much of the Gulf coast in Louisiana was covered in oil. Estimates include more than eight billion oysters lost, a half million birds and turtles, and tens of thousands of jobs as the Gulf went from a commercial fishermen’s paradise to a wasteland.

Deepwater Horizon burning before sinking to the bottom of the Gulf

And where was CEO Hayward? The crisis playbook says be visible and transparent about everything and to keep all parties informed on what’s going on. How is the clean-up progressing? What is BP going to do to compensate families who lost loved ones or lost their livelihoods?

About a month after the explosion, Hayward made the cardinal mistake of crisis management: he made it all about himself. When speaking to a reporter, he said “We’re sorry for the massive disruption this has caused. There’s no one who wants this thing over more than I do. I’d like my life back.”

And just like that, Hayward became the most hated guy on the planet.

Making matters worse, a few weeks later he crewed his racing yacht in a well-publicized sailing race. Juxtaposed against the video of the oil pouring into the Gulf, the birds caked in oil, and the losses suffered by the people of the Gulf, the once high-flying CEO sealed his own fate.

BP’s board replaced Hayward as CEO less than six months after the Horizon catastrophe and sent him to manage a division in Siberia. He wound up leaving BP with a $40+ million severance package. Go figure.

Key Takeaways

Hayward enjoyed his orderly existence running one of the largest companies in the world. When a crisis hit, he refused to let go and do the right thing. He badly misread the situation and tried to minimize the Deepwater Horizon incident.
Go visit a hospital emergency room to see real-life management in action. There are protocols and guidelines, but the key is the staff are trained to deal with uncertainty and making decisions with imperfect information.
Every crisis presents an opportunity and Hayward had the opportunity to be the hero by taking responsibility and the leading the charge to make things right. Instead, he put his own comfort ahead of everything else.

Things I think about

More than 1/3 of divorces filed mention “Facebook” in the court papers.