Rise and Eclipse of the ‘Sun King’

Rise and Eclipse of the ‘Sun King’

Samuel Barclay, Alex Davidson

1108598, 1108203

Lincoln University

BMGT220

Neil Ritson

iSamuel Barclay Alex Davidson1108598 1108203

Rise and Eclipse of the ‘Sun King’

Lord John Browne was an oil industry leader in a time of

great change. Browne worked for BP as an apprentice in 1966 up

until 2007 when he retired as CEO. He helped to build BP into

Britain’s largest company and catapulted them into “the

superleague” (Alexander & Lorenz, 1998). Browne was considered

by many to be an industry leader and was even labelled “the

greatest British businessman of his generation” by BP Chairman

John Sutherland (Irving, 2010). However, due to his single

minded focus, the man dubbed the “Sun King” by the Financial

Times in 2002, had his legacy eclipsed by poor safety records

and private scandal.

As explained by Browne (2010) and Reguly (2013), Lord

John Browne’s father, also named John Browne, worked in the

British Army as an Officer. John Browne senior fell in love

with Paula Wesz in Germany and went on to marry her after the

Second World War (Browne, 2010; Reguly, 2013). It was later in

February 1948 when their first and only child was born, John

Browne (Browne, 2010).

According to Browne (2010), John Browne was brought up in

Germany and England and then went to live in Singapore when

his father was commissioned to work there. John Browne Seniors1

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commission in the army ended in 1955 and, having had lost his

job in the army, the family returned to the United Kingdom to

live in Cambridge (Browne, 2010). However, he soon found

another job working for the Anglo-Iranian Oil Company (BP’s

predecessor) as a management consultant (Browne, 2010; Rushe,

2006). The oil company transferred him at the beginning of

1957 to Masjid-i-Suleiman (MIS) in Iran where John and Paula

later joined him to live (Browne, 2010).

In 1958, at the age of ten, Browne, who was still living in

Iran, experienced the Ahvaz oil well blowout (Browne, 2010).

The explosions, flares of gas and smell of oil gave Browne “A

taste for the oil industry” (Reguly, 2013). Browne (2010)

explains that his favourite activity in Iran was going with

his father to the oil fields. Browne found it incredible the

way in which a drill could obtain value out of the ground. He

read many books on oil and started to realise that the oil

industry will have a huge role to play in the future (Browne,

2010).

According to Browne (2010), Paula associated well with

the people of Iran. She treated everyone the same regardless

of colour, language or dress. John Browne Senior was much the 2

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Rise and Eclipse of the ‘Sun King’

same in that he respected the Iranians immensely, always being

very polite to his Iranian servants. John Browne’s parents

shaped his respectful attitude and this flowed into his career

when he was able to comprehend the “merits of diversity”

(Browne, 2010).

In 1966, John Browne decided to undertake a tertiary

education without the financial assistance of his parents

(Browne, 2010). He won the Trevelyan Scholarship and a

university apprenticeship from BP that allowed him to study

physics at Cambridge University for free (Bennett, 2010;

Craine, 2013).

In 1969, John Browne graduated and began working full

time for BP as a petroleum engineer (Wall Street Journal,

2014; Beetz, n.d.). He went back to take his MBA at Stanford

Business School not long after this, but when he returned, his

career in the oil industry started to take flight (Craine,

2013).

As a Petroleum Engineer Browne held a variety of

production and exploratory posts in Anchorage, Alaska, New

York, San Francisco, London and Canada (Browne, 2010; Wall

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Rise and Eclipse of the ‘Sun King’

Street Journal, 2014). After spending nearly ten years in

these roles Browne started his ascent through the BP ranks,

becoming a manager in 1983 and after only a year was promoted

to running the Aberdeen Office in 1984 (Beetz, 2014).

Browne’s career truly started to take off in 1984 when he

became Group Treasurer and Chief Executive of BP Finance

International - the first of many executive positions for

Browne within BP (Wall Street Journal, 2014). In 1986, with BP

owning 55% of Sohio (Standard Oil Ohio), Browne then became

the Executive Vice President and Chief Financial Officer of

Sohio (Bloomberg, 2014; Vartan, 1986). In 1987, after BP

merged with Sohio to form BP America, Browne was appointed

Chief Executive Officer of the Standard Oil Production Company

in addition to his roles at BP America (Wall Street Journal,

2014; BP, 2014).

In 1989 Browne’s career continued to soar as he returned

to London as he became Managing Director and Chief Executive

Officer of BP Exploration. As the Managing Director and CEO of

BP exploration, the company expanded its boundaries into new

areas, such as Columbia, where it discovered a vast amount of

oil and gas (Salpukas, 1994).4

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In September 1991 Browne joined the BP Board as a

Managing Director, and strengthened his relationship with the

group directors until it was announced in 1994 that he would

replace David Simon as BP Group Chief Executive on the 1st of

July 1995 (Salpukas, 1994).

When Browne started as BP Group Chief Executive on the 1st

of July 1995 few would have predicted what was to come for BP.

Firstly, as explained by Doh and Holt (2005), Browne changed

the company’s Insignia logo to a sunburst logo to illustrate a

change in perception and attitude for the company. The offices

were then redesigned to adopt the new corporate values of

environmental sensitivity and knowledge sharing to stimulate

employee relationships and information exchange. Browne

decided to then eliminate all political contributions in the

U.S. despite it potentially hurting the companys future

prospects. But Browne thought that the idea of making

donations in the U.S. was unessassary due to the size of BP.

BP was also placed in support of the Kyoto Protocol, which

helped drive their environmentally responsible objectives (Doh

& Holt, 2005).

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After only three years as CEO, Browne orchestrated one of

the largest industrial mergers of all time. The 1998 BP Amoco

merger was worth a total $110 billion USD (BBC, 1998). Browne

himself said that prior to the merger BP “had been top of the

second division” and that his deal would put them into the

“superleague” (Alexander & Lorenz, 1998). Part of the reason

the Amoco merger was so big for BP was that while Amoco didn’t

have a large exploratory base they had plenty of service

stations across the United States of America, with over 9,000

outlets in 32 states (Alexander & Lorenz, 1998). The BP Amoco

merger created the third largest oil company (behind Shell and

Exxon) and the largest British company. Browne identified that

BP needed to merge to remain internationally competitive and

Amoco was considered the best available option (Alexander &

Lorenz, 1998). The creation of BP Amoco was the first of many

mergers or take-overs during Browne’s tenure.

In 2000 BP completed £24.2 billion worth of business in a

single week and Browne had continued his aggressive assault on

the oil industry, continuing BP’s growth into the

“superleague” (Hamilton, 2000). See appendix one for more

detail.

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Browne expanded BP’s horizons again in 1999 with a $45

million (USD) takeover of Solarex (“How green is Browne”,

1999). The purchase of Solarex made BP the World’s biggest

solar energy company (“How green is Browne”, 1999). This

helped to make BP a market leader in sustainable energy,

something Browne had wanted to do for a long time. “Real

sustainability is about simultaneously being profitable and

responding to the reality and the concerns of the world in

which you operate. We're not separate from the world. It's our

world as well” (Browne, 1997).

In 1998 Browne was knighted, and from 1999-2002 he was

voted most admired CEO by Management Today (Wall Street

Journal, 2014).

In 2003 Browne’s aggressive growth strategy quickly

expanded BP’s operations further into Russia after a more than

$7 billion (NZD) purchase of half of TNK (a company which was

worth $18.5 billion (NZD) by 2005) (Box, 2005). The merger

created Russia’s 3rd largest oil and gas producer. Initially

the Russian venture proved very successful for BP with the

Russian company accounting for 20% of BP’s oil production by

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2005 and produced more profits than had been anticipated (Box,

2005).

By 2005, 40% of BP’s operations were in the USA and it

had grown to be America’s largest oil and gas producer (Box,

2005).

As stated by Bower (2010), his obsession for growth

started to overwhelm his decision-making. He became too one-

sided and began to trade off safety and maintenance for cost

cutting. He wanted “more for less” (Bower, 2010) and ended up

replacing hundreds of managers and engineers with

subcontractors. He effectively removed the “in-house expertise

that could second-guess every technical operation” (Bower,

2010). Managers and engineers were protesting for safety and

maintenance requirements to go back to normal, but this never

happened. They were replaced with an accountant who “pruned”

(Bower, 2010) the safety and maintenance costs (Bower, 2010).

These budget cuts were blamed for the 2005 explosion at the

Texas oil refinery that killed 15 employees and injured 170

due to the unsafe designs and maintenance deficiencies that

were tolerated (Bower, 2010; Macalister, 2005). For further

detail refer to appendix two.8

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In 2006 Browne announced his retirement date from BP at

the end of 2008 when he reached BP’s retirement age of 60

(Kenney, 2006). However Lord John Browne didn’t survive till

2008 as his tenure was cut short due to scandal and mistrust.

He then brought his retirement forward to the 1st of July 2007

after a “cascade” of safety issues affected the company

(Cowell, 2007; BBC, 2007). However, Browne stood down as BP

CEO before July 1st because he lost a court battle, which had

proved he lied in court. This allowed tabloids to print

details of his private affair with a Canadian male escort

(BBC, 2007). After the court’s decision, Browne stood down

with “immediate effect” and Tony Hayward became BP’s new CEO

after Browne’s resignation was accepted (BBC, 2007).

Throughout Brownes management roles he has shown the

characteristics of an excellent manager. As a manager, Browne

solved problems such as how to grow BP into the giant oil

company we know of today. He was concerned with doing things

right by transforming the company into an environmentally

consious organisation. He was also willing to break the rules

and step outside boundaries in order to engage employees. This

was evident when he redesigned the offices for better employee

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relationships and replaced the insignia logo with a logo that

told the world BP was going to change. But ultimately, Browne

was a great manager because he was able to grow BP into the

‘superleague’, the third largest oil company and the biggest

company in Britain.

Early on, when Browne started as CEO, he also proved to

be an exceptional leader. As explained by Doh and Holt (2005),

Browne redesigned the offices in London and Los Angeles to

stimulate employee relations and information exchange, he

changed the insignia BP logo to a bright sunburst logo

illustrating a change in perception and attitude, he accepted

responsibility for the Texas oil refinery explosion and he was

able to make deals that allowed BP to merge with multiple

businesses, thus ensuring its exponential growth (Doh & Holt,

2005). These examples, as well as many others, complement

several leadership theories. According to Bartol Gardner’s

leadership traits identify characteristics that should be

shown in leaders. Browne demonstrated a ‘need for

achievement’, ‘action-orientated judgement’, ‘an eagerness to

accept responsibility’, ‘an understanding of followers and

their needs’, ‘intelligence’, ‘task competence’, ‘self-

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confidence’, ‘adaptability’, ‘courage and resolution’ and ‘a

skill in dealing with people’. Based on the leadership grid,

Browne was also illustrating a moderate concern for people and

high concern for production, which suggests the morale of

people is maintained whilst operations are efficient (Ritson,

2014).

Although Browne’s leadership style started off well, it

certainly didn’t finish well. It was cost cutting that threw

this once competent leader backwards. He forgot about the

safety of his employees and single-mindedly focused only on

the expansion of BP. Tony Hayward, the eventual successor of

Browne, described Browne’s leadership style as being “too

directive and doesn’t listen sufficiently well” (Shetty, 2010)

. For example the managers and employees that were protesting

for the safety of their jobs, were never listened to and so

ended up resigning. According to the Iowa studies it is clear

that the unilateral decision making of Browne would suggest an

autocratic style of leadership (Ritson, 2014). The Blake and

Mouton studies would concur that in this case there is very

little concern for people and a great concern for task

(Ritson, 2014). They refer to this situation as Authority

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Compliance. Some of Gardner’s leadership traits that were

followed before are now no longer followed. For example Browne

no longer had an ‘understanding of followers and their needs’

and his ‘intelligence’ was shadowed by a greed and obsession

for growth.

Lord John Browne made a huge contribution towards the

success of BP. Since the age of ten Browne has been had a

passion for the industry that saw him rise to the top of its

ranks. When he got to the top, his aggressive stand on merging

took full flight and within the twelve years that he was

acting CEO, he’d developed a company that was feared by its

competitors. Browne could not have had done this without his

exceptional management skills. His leadership also showed

promise in the beginning, but unfortunantely he followed a

pathway of greed and forgot about the safety of arguably the

most important people in the organisation, the employees.

Therefore, he started off as both a manager and a leader and

near the end of his time as CEO he was reduced to just a

manager. All in all, John Browne, the Sun King, rose to the

top of the industry, changed it, but then had his success

eclipsed due to his obsession with growth and the revelations

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of his personal life. His legacy with the company will be

remembered as one of the greatest.

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Appendix 1:

In 1999, Browne and BP were again on the attack for their

second major deal with a £16.7 billion (British pounds)

takeover of Arco in the pipeline (Jay, 1999). By March 2000,

the deal was finally completed. In order to complete the deal

BP had to sell off its Alaskan oil interests to Philips

petroleum because of a regulatory block caused by the American

anti-monopoly laws. In the same week BP also purchased Burmah

Castrol (Hamilton, 2000). BP completed £24.2 billion worth of

business in a single week (Hamilton, 2000). Browne had

continued his aggressive assault on the oil industry,

continuing BP’s growth into the “superleague”.

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Appendix 2:

However, BP’s handling of the situation brought praise

because they quickly accepted full responsibility for the

disaster, something that is brave to do when vulnerable to

strong law suits (Macalister, 2005). Despite this, Browne

continued to cut costs until the 2006 Alaskan Oil Spill where

corrosion in the pipelines was found to be the cause (Bower,

2010). This finally spurred BP to repair and upgrade

pipelines, enhance corrosion monitoring, and implement new

standards for integrity management and work control (BP,

2014).

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