It is striking that Bluebell Capital Partners reaches for the word “irrational” to describe BP’s net zero commitments (Report, January 30). Developing and implementing a long-term investment strategy that seeks to secure victory in the war, while standing firm against the short-term temptation of winning a battle, is the definition of rationality.
Bluebell’s analysis of BP’s approach displays the short-termism and obsession with immediate shareholder value that blights both the international response to climate change and much corporate and political decision-making.
Roger Martin, former dean of the Rotman School at the University of Toronto, argued that “our theories of shareholder value maximisation and stock-based compensation have the ability to destroy our economy” because they create “an incentive [for executives] to make short-term moves that jerk up expectations and . . . cash out”. With this short-term focus, all other stakeholders’ interests are subordinate to those of a few executives and shareholders. Some investors, those with a short-term focus, might retort that this is as it should be. They would be rational by their standards as well. However, among the stakeholders to lose out, in Martin’s analysis, is the company itself in the long term.
Clearly the oil and gas giants have to develop new products to survive in the long term and BP executives (and, it seems, many shareholders) believe their strategy is setting them on the path to future prosperity. On this issue, however, companies also need to factor in the financial hit they will take if climate change does have the devastating impact on humanity — and the operation of markets and society — that most reputable scientists accept it will have. If firms choose to ignore stakeholders’ interests, it is rational for consumers, and the broader society we all live in, to take note of that in the market. Either way, we risk losing Bluebells in the spring.
Professor Anirban Mukhopadhyay
Professor of Marketing
Bayes Business School, London EC1, UK
