BP Pressure: Shareholders v Stakeholders or Shareholders one of the Stakeholders?

Shareholders are the only concern of the business. They are the only stakeholders that a Corporation is accountable to. Or perhaps Shareholders are the only stakeholders. That was way back in early 1950’s when Milton Friedman’s philosophy ruled the hearts in Corporate Boardrooms. With awakened social movements, stronger omnipresent Transnational and globally NGOs asking Governments to call for increased transnational participation in good governance the call for caring for other stakeholders emerged. But who are these other Stakeholders. An interesting open-ended question that continues to get debated in the academic and business circles. Some of the stakeholders that unanimously are considered to be the stakeholders are the shareholders for sure, and then come the consumers, the society, the employees et al. It is now unquestioningly universally acknowledged that shareholders are but one of the many stakeholders. But the question is far from settled. There is more to this stakeholder debate. The voice gets only louder and brawnier in crisis times. An important question that deserves answer is who are the most important stakeholders? The shareholders who provide the initial impetus to kick start the company or occasionally fill its coffers during IPO’s or in a crisis like the one that has hit the Gulf of Mexico recently, the society that has been adversely effected by the negative fallouts of company’s reckless pursuit for riches. BP one of the world’s richest oil companies sitting on neatly piled up US$ 7 Billion worth of cash with a capacity to borrow another 15 billion and an estimated revenue of $34 Billion for the current financial year is a forefront partaker to this debate. What should be BP’s primary concern- offering dividends to its shareholders for the huge profits that came in the financial year or the forlorn fisherman, residents living on the effected Gulf cost who lost their source of earning, the pristine unsullied environs they would wake up to every morning or the tour agencies who filled the dreamy-eyed tourists with a dream holiday on the eloquent environs of the Gulf of Mexico or the inconsolable tourists who long premeditated to holiday on the picturesque beaches.


Are there any legal remedies in a scenario like this in case a moral obligation with increasing stakeholder pressure is cast on the Government to prevent the Corporation from paying dividend to its shareholders. A legislation can be passed by the Government to this effect thwarting BPs attempts to pay dividends and ordering it prioritize payment of compensation to the aggrieved. In the present circumstances what seems like a more plausible scenario is resorting to a Court of Law. Courts have the power to issue Injuctions. Injunction is the power to stop the part from doing a certain act, in the present it being the payment of Dividends and instead asking for paying compensation. Broadly there are four important factors to be taken into consideration while ordering interim injunction. First balance of convenience is in the favour of the aggrieved party; Second the likely outcome would be in the favour of the aggrieved on the basis of prima facie; and in case of failure to issue interim injunction, an irretrievable damage would be caused to the aggrieved which can not be made good by monetary compensation later. A permanent injunction is issued on appreciation of the fact and law which requires a complete trial. The onus probandi that is burden of proof is on the claimant seeking relief. In the present case to elaborate one of the claims of the Department can be that payment of Dividend in the present scenario would be tantamount to a “fraudulent conveyance” to prevent money from rightfully flowing to the claimants.

The BP debate builds up pressure to this Shareholder-Stakeholder debate and the outcome would set a new benchmark for the evolving CSR debate.