June 11, 2010
A newly-minted BP shareholder speaks
Posted by Usha Rodrigues

My husband does the investing in the family, and he likes to take a flier on an individual stock now and then.  He asked me what I thought of BP 2 weeks ago, and then he bought on a dip anyway.  He generally follows the Dilbert Portfolio (worth a read, particularly the part about the chicken droppings). Yes, that's right, shower your opprobrium upon me, I'm a BP shareholder now .  But before you cast the first stone, ask yourself whether you control your spouse's every action. 

So the NYT yesterday surveyed illustrious law and economics type folks on whether the Justice Department can or should take legal action to block BP from paying dividends. Here's a summary of their responses:

Lynn Stout: Hell, yeah the government can!  Who knows how big the liabilities will turn out to be? 

Jeffrey A. Miron: Rule of law, people.  BP played by the existing rules and should be held accountable under them.  If you don't like it, change the rules.

Nils Pratley: It's in BP's long term best interest to keep make the U.S. happy, so it should suspend the dividend.

Stephen Kaplan: This is a rare case where cutting a dividend won't send a negative signal to the market (which knows BP can afford to pay it), and may well result in a good-will dividend for the company.  BTW, the DOJ shouldn't pursue legal action because it makes the U.S. look anti-business.

William K. Black: "The U.S. is BP's biggest creditor--it should act like it" by suing to block the dividend.

J.W. Verret: THe U.S. doesn't have the power to block the BP dividend.  Period. 

Tom Baker: If BP is the Titanic, the shareholders (particularly you, Usha Rodrigues) are in first class.  Wouldn't it be nice, for a change, if everyone else got to the lifeboats first, and you waited at the back of the line? 

I'm in the Pratley/Kaplan camp; it seems like a PR disaster for BP to pay a dividend right now.  But what interests me most about the "yes we can" sue governmental position is how the BP shareholders play the villain in the piece.  They're the fat cat owners, out to take the money and run.  That story doesn't ring true for me--shareholders don't really have the power to change the company, and mostly these days are pensioners or mutual-fund holders that happen to own a slice of BP instead of Exxon.  Sure, paying them likely isn't in the company's best interests long term, but directing moral outrage at them seems misplaced.

(says the fat cat).


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