First Things First (Opinion)

We confess to having been surprised to learn just how dependent upon BP PLC Britain’s retirees are. Its dividend represents $1 of every $8 in dividends paid by the FTSE exchange’s 100 largest companies. (About $4 billion is paid to American shareholders.)

But size and dependence do not change this fact: BP is responsible for the worst environmental disaster in our country’s history. Even BP admits its culpability. Why any British citizens should feel personally offended by criticism of BP by our president or our Congress or our newspapers or by rank-and-file Americans is hard to understand. And the fact that some of them may have referred to the company by its former name, British Petroleum, is no more surprising or calculated than when some of us call KFC Kentucky Fried Chicken. Rebranding of a household name can take generations; just ask the guys at Datsun.

Of course, BP shortened its name more than a decade ago, when it bought Amoco – which took its name from a predecessor, American Oil Co. And The Wall Street Journal noted that, before it was British Petroleum, the company now known as BP was Anglo-Iranian Oil Co. This company would be the object of derision in the United States right now even it if were called Star-Spangled American Patriotic Oil Co. and headquartered in Little Rock.

And those dividends? Of course BP has to suspend them. What else could it do? Simple math will eventually determine whether BP can afford to pay for the damage it has wrought upon the Gulf of Mexico, its residents and their livelihoods and still pay its shareholders their usual profits. In the meantime, a prudent corporation, which clearly does not describe the drilling side of BP, has to start shoveling cash into an escrow account until the full scope and cost of the disaster are better understood. The $20 billion set aside recently is a good start, but is it enough? BP first said the Deepwater Horizon was leaking 1,000 barrels a day, a number that is now believed to have been understated by a factor of 60; how can it possibly know how much the recovery will cost when it doesn’t even know how much oil has leaked, or will leak, or where the oil will wind up?

BP shareholders are no more sacred than the shareholders in any other company. If one invests in a corporation that is mismanaged, one cannot expect as much return as from a well-managed corporation. BP’s profitability may have made it appear to be well-managed, but we now know that its profits were boosted by a willingness to cut corners and take enormous risks. Profit is what is left over after a company pays its obligations, and BP has taken on an enormous new and far-reaching obligation. If BP is a bad word in America now, just imagine the blowback if it made its shareholders whole and then discovered it couldn’t afford to compensate those people whose livelihoods and lifestyles it ruined.