Why Big Oil needs to consider diversity when choosing leaders

Company chiefs rarely pay the price for business failures, but as energy transition contradictions become insurmountable, they could be held accountable

BP is facing a leadership change after its chief executive resigned last week. Reuters

The original Sun King, Louis XIV, ruled over France for 72 years and 110 days, and his two long-lived successors led France to stagnation, bankruptcy and revolution.

John Browne, nicknamed the Sun King, led BP for 12 years, but his latest successor, Bernard Looney, has just been forced to resign. Big Oil company chiefs rarely pay the price for business failures – but will they now, as energy transition contradictions become insurmountable?

BP’s recent leadership history is volatile.

The late Sir Robert Horton, who took on the role of BP's chief executive in 1990, said in 1992: “Because I am blessed by my good brain, I tend to get the answer rather quicker and more often than most people."

However, investing even as the oil price fell was the wrong answer, and the loss-making company forced him out in June 1992.

After Sir David Simon’s successful restructuring of BP, Mr Browne, now Lord Browne of Madingley, took over in 1995. He masterminded BP's mega-mergers, including the acquisition of Amoco in 1998 and Arco in 1999, and kicked off the creation of the “supermajor” in the late 1990s – followed by Exxon buying Mobil, Chevron acquiring Texaco, Total taking over Fina and Elf, and Conoco swallowing Phillips.

He also led the charge into the former Soviet Union, picking up what became core BP assets in Azerbaijan and Russia.

He correctly perceived the need for scale to reduce costs, after a decade and a half of low oil prices. He also tried to steer the company into new energies, with investments in solar power and the rebranding as Beyond Petroleum, but he was ahead of his time – and what the market and shareholders wanted.

Personal problems, rather than business failings, forced him to resign in May 2007.

His hand-picked successor, Tony Hayward, became the fall guy in October 2010 for the disastrous Deepwater Horizon oil spill in the Gulf of Mexico, and its poor PR handling. Many felt he was unlucky to have inherited a culture of excessive cost cutting and inattention to safety.

Replacement Bob Dudley brought recovery until the rare luxury of retirement on his own terms in February 2020.

This brings us to Mr Looney. An Irish citizen, he joined the company at the age of 21 in 1991. On business grounds, his performance had been reasonable; since the coronavirus pandemic, BP shares have matched Shell, and beaten Chevron and TotalEnergies.

Yet, last Wednesday, he resigned, after misleading BP’s board over the lack of disclosure of relationships with colleagues.

Other oil companies have had a less colourful ride. But in 2004, Shell group chairman Phil Watts and his lieutenant, Walter van der Vijver, were ousted after concealing that they had overstated the company’s oil and gas reserves.

Olav Fjell, chief executive of Norway’s state giant Statoil (now Equinor) had to resign in 2003 amid a bribery scandal to win business in Iran.

Christophe de Margerie, Total’s charismatic head, died in a Moscow plane accident in 2014. This was reminiscent of the death of the founder of Italy’s Eni, Enrico Mattei, in a crash en route to Milan in 1962.

American oil bosses have been luckier, although in 1996 Texaco ousted several top executives caught on tape speaking about African-Americans in grossly racist terms, following a long-running lawsuit over a failure to promote black employees.

All this history reveals three notable features about the oil industry.

First is that these leaders were nearly all company lifers – spending at most a few years elsewhere. The industry promotes from within.

Second is the lack of diversity of gender and national and ethnic background – virtually all white men from the US or northern Europe, a pattern even more pronounced for the US companies.

Wael Sawan, the new Shell chief executive, is a welcome change, a Lebanese Canadian who grew up in Dubai – although still a lifetime company man.

Third is that, since Mr Horton, none of these bosses were sacked over failures in the normal run of business. That is remarkable, coming after a long period in which the industry’s returns to investors were very poor.

Strategy has reversed dizzyingly. Oil bosses followed the herd even as it stampeded towards obvious cliffs.

The major oil companies were slow to get into shale, then paid heavily at the top of the market, then struggled to operate cost-effectively and most of them sold out again.

Under Rex Tillerson, later the US secretary of state for former president Donald Trump, ExxonMobil paid $41 billion for shale gas producer XTO just as prices crashed.

No one since BP's Mr Browne has created a convincing vision for an international oil company in a future of climate change. His contemporary, ExxonMobil’s Lee Raymond, built a formidable machine, but was renowned for his dismissal of climate science, saying: “First, the world isn’t warming. Second, even if it were, oil and gas wouldn’t be the cause. Third, no one can predict the likely future temperature rise.”

No oil leader can take such a position today, but none has resolved the contradiction either.

Mr Looney pledged the industry’s most aggressive falls in hydrocarbon output, then partly reversed them, while Mr Sawan has cooled Shell’s energy transition plans and demanded higher returns from new energy businesses.

ExxonMobil and Chevron apparently are content to bolt on some carbon capture and hydrogen activities to their oily core.

Only one oil chief has proposed something different – Vicki Hollub of Occidental, almost unique as a woman at the top of the petroleum industry, who sees the company’s future as a carbon management business. She had to survive the “dumbest deal in history”, buying Anadarko in 2019, just before the pandemic, and was lucky to attract support from investor Warren Buffett, who was willing to back her for the long term.

If the international oil business is to find a long-term sustainable and profitable business model, it needs to be wiser, bolder and more open-minded in how and where it finds its leaders.

Maybe not a Robespierre, but it will take a Napoleon or a Josephine to reign over future energy.

Robin M. Mills is chief executive of Qamar Energy and author of The Myth of the Oil Crisis