Mayhall Fondren Blaize

Building culture of compliance can strengthen investor confidence

In the oil and gas industry, there are a variety of laws, rules and regulations that businesses must follow, and ensuring compliance with the law can be costly. Oil and gas business may find it more or less burdensome to factor these costs in to their budget, but it should be kept in mind that building an effective compliance program is smart not only from the perspective of avoiding penalties and other liabilities resulting from noncompliance, but also from the perspective of attracting investors.

Investors are, of course, concerned about profit, but they are also concerned about the integrity of a company’s business operations, including its culture with respect to regulatory compliance. Companies that don’t dedicate adequate time, effort and resources to building a culture of compliance can expect to see the impact among their investors. 

Companies can do a lot to improve investor confidence in the area of regulatory compliance and to boost investor confidence. One important way to do this is to increase disclosure to investors. One example of this is BHP Billiton, which ranked among the lowest in the industry in terms of disclosure back in 2013. Unhappy with its ranking, the company made changes that vastly improved its ranking for 2015.

Among the changes the company made were disclosing the business priorities of the company with respect to the reduction and monitoring of the environmental impact of toxic “fracking” fluid, air emissions, water and waste management, the integrity of wells, and community involvement.  

Ensuring a strong culture of compliance does come with certain costs, but businesses that do it well can also reap rewards, especially when it is done in such a way that it becomes visible to investors. It is not an easy task for large companies, but working with experienced legal counsel can help a company to do this more effectively. 

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