John Browne turned BP into the oil industry's leanest machine, but his cost-cutting now looks like a liabilityby Derek Brower / June 30, 2007 / Leave a comment
Published in June 2007 issue of Prospect Magazine
There were many contradictions in the life and career of Lord Browne of Madingley. He was a small man in a business that prizes scale above all else; an aesthete whose peers seemed happier in the strip clubs of Houston; and a homosexual in an industry of macho frontiersmen. But the oddest thing of all is that despite two years of mismanagement at his company, John Browne resigned as chief executive of BP in May surrounded by scandal but with a chorus of praise in his ear.
“Business genius,” proclaimed the Economist. “The greatest businessman of his generation,” said Peter Sutherland, Browne’s chairman at BP. Other commentators rushed to condemn the allegedly homophobic culture of the City.
Some of this praise was deserved. Browne was undoubtedly brilliant—often as a businessman, sometimes simply as a showman. His command of his brief rarely slipped. And he could entertain a crowd. I remember watching him at the World Petroleum Congress in Calgary in 2000, one of the oil industry’s biggest events, when a pair of protesters interrupted his keynote speech. The protestors’ cause—BP’s involvement in Tibet—was probably just. But Browne’s response humiliated the pair in front of an audience of thousands. Those who know Browne well say that this public persona may merely have been the creation of his “executive coach,” but Browne had the chutzpah to pull it off when it mattered.
The same can be said for his successes at BP. It would be hard to compare the company of which Browne became a managing director in 1991 with the one he left in May. In the early 1990s, BP was still emerging from its 1987 privatisation. It was a swollen, floundering beast of a company, with real assets only in the North sea and Alaska—a civil service launched on to the world’s financial markets with little understanding of how to create value. Its turnover was less than a quarter of Exxon’s.
Under Browne, the change was dramatic. By 2005, BP’s turnover was over $262bn—greater than any other oil company and second only to Wal-Mart. It had become the fifth largest company in the world by market capitalisation. And it had dumped the moribund North sea, shifting focus to Angola, the Caspian, Algeria, the Gulf of Mexico, Asia-Pacific and Russia.