Since he became BP chairman four years ago, Carl-Henric Svanberg has seen the company face some of its toughest challenges. But, as he explains to BP Magazine, he is a firm believer in using difficult experiences as a catalyst for change
A generation ago, the task of a non-executive chairman of a great public company was widely seen as important but limited in scope: principally, to preside over the board, run the Annual General Meeting (AGM), appoint directors and – when asked – to offer quiet advice to the chief executive. But times change, and for Carl-Henric Svanberg, chairman of BP since 1 January 2010, the job was different and demanding right from the start. The Macondo accident in the Gulf of Mexico occurred less than a week after his first AGM in April 2010. Svanberg and then chief executive Tony Hayward were thrust into the global media spotlight, and the company was in crisis for several months. Now, looking back after four years, what lessons does Svanberg draw for the future of BP, the role of its board, and his as chairman? “The accident in the Gulf of Mexico was tragic; we must never forget the 11 people who lost their lives. It should never have happened. However, when a company goes through such a defining event, the experience often becomes a catalyst for change on many different levels. I believe we rose to that challenge: management and the board came together as a team to steer the company through this extremely difficult time. It made us turn over every stone and think about what we wanted BP to be. Because of that process, the board’s role has also changed and grown. “Bob Dudley as CEO and his executive team are fully responsible for running the company – Bob and I have a great working relationship. But, what has evolved is the board’s closer involvement in debating issues with him and his team. Remember that eight of our 11 non-executive members are effectively new since the Deepwater Horizon accident – that includes three of us who joined very shortly before the accident. Our board today has more experience in oil and gas and other major industries than most of its predecessors. I believe that we’re now even better equipped to support and to challenge the executive team.”
"Other chairmen may have different views, but I think it’s vital to have several board members who are former CEOs or senior executives mixed with experts from different fields."Carl-Henric Svanberg
As well as working with the board, Svanberg has also supported Dudley in changing the way in which the entire group works. “BP had been an asset-based organisation since its beginnings,” he observes. “The North Sea, Azerbaijan, Angola – each region ran its own business, which could lead to local differences. Now, we have global structures; one organisation for exploration, one for drilling, one for production, and so on. That means we have taken an important further step in the standardisation of our work processes and procedures, with the aim and advantage of being more systematic in how we exchange expertise and lessons learned between sites. “Bob’s strategy has been to address safety, to rebuild trust in the company, and to focus on creating value. Those are the big objectives. As for the aftermath of the accident and the ongoing litigation – as I travel around the world, what has struck me is how many people are impressed by the way we stood up as a company and said, ‘We’re going to clean this up and we’re going to pay those who have a legitimate claim. However, we’re not going to accept being taken advantage of. We are committed to doing what’s right and to be an example.’
“However, to successfully drive change throughout a company takes time. You not only have to preach it, but you have to live it and really make sure that the desired behaviours get into the bloodstream of the company. I’ve visited BP sites in Azerbaijan, Angola, China, Australia, the North Sea, Alaska, and several times in the Gulf of Mexico, as well as our refinery in Whiting. Those trips are some of the best parts of my work and I look forward to more of them in the near future. Wherever I go, I have been asked to hold townhall meetings with our employees to discuss what the board does, and how we want the company to move forward, and it gives me valuable opportunities to meet so many of our great people. It’s also on these trips that I can see whether these changes are really taking root. A visit provides invaluable insights, and I am pleased that other board members have also made visits to different sites.” Being a former chief executive – for seven years at the telecoms group Ericsson in his native Sweden, and before that for eight years at Assa Abloy, the world’s biggest lock maker – clearly shapes Svanberg’s style of chairmanship. “It would have been more difficult to do my job here if I hadn’t been a CEO,” he says. As for the make-up of the board, “You have to create a group that’s dynamic and experienced. Other chairmen may have different views, but I think it’s vital to have several board members who are former CEOs or senior executives, mixed with experts from different fields.
"Twenty years ago, you could find people who sat on five or six boards – but not anymore, because each one is so much more demanding, and I want to be able to really focus on what I have been asked to do."Carl-Henric Svanberg
“In today’s online and immediate world, CEOs, in some ways, become a public commodity. You’re exposed to the media and shareholders, some of whom may be active or even activist. You may face hostile takeovers. And you have to learn how long it takes to bring change to a big organisation. The board has to understand all of this, too, and that’s why I think having a majority of people who have run other businesses is critical. We’re lucky to have great people from several companies, such as BHP Billiton, United Technologies, Unilever, and McKinsey, as well as an admiral from the US nuclear navy and the head of University of Cambridge’s engineering department. “Everyone on our board brings real experience. They can say, ‘I’ve seen this happening elsewhere; these are early indicators that we should watch for,’ or ‘This is a new technology we should really look at.’ That really adds value in the boardroom. But, we are non-executive directors and must always remember our role in supporting and challenging the management team.” Since 2012, Svanberg has also had a second job as chairman of AB Volvo, the leading global truck maker, based in Sweden. How does he manage to juggle two chairmanships, in different countries? “I would turn that question around,” he responds easily. “Not many chairmen have as few business positions as I do: BP and Volvo. Twenty years ago, you could find people who sat on five or six boards – but not anymore, because each one is so much more demanding, and I want to be able to really focus on what I have been asked to do. I’m expected to spend around two to three days a week with BP. I’m doing that and probably more. In Scandinavia, the board is not quite as involved, so I usually spend half as much time with Volvo. That means some 150 working days, which gives me room to be available for all of the unexpected challenges that can and do arise.”
Carl-Henric Svanberg spent his early career at Asea Brown Boveri and the Securitas Group, before moving to the Assa Abloy Group as president and chief executive officer. From 2003 until 31 December 2009, when he left to join BP, he was president and chief executive officer of Ericsson, also serving as the chairman of Sony Ericsson Mobile Communications AB. He was a non-executive director of Ericsson between 2009 and 2012.
After a Master’s degree in applied physics, Svanberg built his career with the Swedish-Swiss engineering group ABB, before moving to run Stockholm-based Assa Abloy, and then Ericsson. Does that history, plus the Volvo connection, mean he brings something distinctively Swedish to BP? “I think you’ll find Swedish executives typically like getting out into the field, meeting people and seeing the realities. That’s part of the way we are. But more importantly, Sweden has a disproportionate number of global companies for the size of the country, be it Ericsson, Electrolux, Volvo, or SKF – and, typically, those companies only have 3-4% of their sales in their Swedish home market. But it’s not our role to teach the rest of the world the Swedish way. On the contrary, I believe we come to other countries with openness to learn about their history, culture and ways of thinking.”
As for BP’s balancing act in London – a global business run by an American, chaired by a Swede, but still largely regarded by investors as a British ‘blue-chip’ – Svanberg sees this as inspiring and positive for the company. “We have every reason to be proud of our British heritage. The British have never been nervous about exploring and doing business around the world. This is a clear strength for BP. Though Britain may have lost some of its industrial footprint, it has become the centre for many international chairmen and directors today. But I also believe that London is a great place to be and to work from. “Of course, there are differences I’ve had to learn about. In most European countries there’s more protection for companies through shareholding structures that encourage stable, long-term ownership, by different voting rights and other ways. Britain no longer has that, which means companies here are more directly exposed to investors. If they’re British pension funds and don’t like what they see us doing, they will be quite vocal about it because BP is such an important component of the index.
"Our task is not to take positions on climate change. We leave this to our political leaders and scientists."Carl-Henric Svanberg
“There are differences in the way our shareholders view ownership of the company. American investors are more likely to leave if they do not like what they see. In the UK, we get a more intense debate – but it keeps us on our toes. Yes, there’s always a tension between any company’s long-term strategy and shareholders who might seek quicker results. We need to listen to them very carefully. Shareholder pressure may not always feel positive, especially if it doesn’t feel warranted, but in the long run, it is a helpful challenge. “Also, the press here is probably more influential, but we have to remember that they’re neither friend nor enemy. They just have a job to do. You may read an article one day that you’re upset about, but you just have to develop a thicker skin. And, I do believe that, over time, the real story always gets through.” Svanberg himself has attracted media attention for his interest in environmental issues – he’s a member of the advisory board of the Earth Institute at Columbia University in New York. Since his Ericsson days, he has had an enthusiasm for using technology as a way to build a more intelligent society to reduce energy consumption. Its sounds like it could be a potentially uncomfortable debate for an oil company chairman, but he sees no conflict in this. The world’s GDP is likely to triple until 2050 and energy demand could almost double. In this world, all forms of energy are needed, as well as a strong focus on energy efficiency.
It’s quite clear to Svanberg what BP’s role in it should be: “Our task is not to take positions on climate change. We leave this to our political leaders and scientists. What we can bring to the discussion is knowledge about what we see happening in the energy market and how the consumption of different forms of energy is likely to develop over time. As a global energy company, this is an area where we can add value. It’s important to get the facts right.” Finally, conversation turns to another aspect of societal interaction – BP’s role in London as a major sponsor of exhibitions, notably in a long-running partnership with the British Museum. When he first arrived at BP headquarters, Svanberg was surprised to find a global energy business so engaged with the arts, “but I’ve come to appreciate how important this is, particularly for London and the UK. I also believe that every large company needs to play its part as a good corporate citizen. Our sponsorship programme plays a big part in our profile in London, and we’ve helped showcase some wonderful things. The Shakespeare: staging the world show was fantastic; I learned so much from it. And we have an exhibition about the Vikings coming up this year.” (see page 46 for more on the Vikings: life and legend exhibition). This is especially exciting for Svanberg. “All those Viking voyages, rowing across the oceans and down rivers really took a lot of courage. I told a story at the museum last year, when we announced the exhibition: that the Norwegian Vikings went to Iceland and America, the Danish Vikings were the ones who came to Britain – and they were all great fighters. But, the Swedish Vikings went up the rivers into Russia and down the rivers to Constantinople, as it was then, now Istanbul. And, when you go by river, you know you have to come back the same way: if you make trouble on the way down, you should expect trouble on the way back. So, they had to build good relationships wherever they went. I hope that tells you something about Swedes and how we’ve come to see the world and our place in it.”