Ask Tony Hayward what his legacy as BP’s chief executive will be and he’ll tell you it is to leave behind a company that will not fall repeatedly into the man-made disasters that have periodically destroyed all the good work achieved at the £107 billion oil giant.

For all the successes of his predecessor, Lord Browne, his tenure was equally marked by successive disasters. This point was made abundantly clear last week, when, just a day after Hayward announced blockbuster quarterly figures that smashed consensus forecasts, BP was hit with a record $87m (£53m) fine for failing to fix safety violations at the Texas City refinery, four years after an explosion at the plant killed 15 people.

It is now two-and-a-half years since Hayward took the helm. In that time he has led a cultural revolution at the group, but the City still has reservations about whether he can change the direction of the corporate supertanker — and not without justification. BP has been a perennial disappointment. A quick look at the accompanying share price graph will remind you that over 10 years it has gone nowhere. And when it does get a boost it is quickly knocked back.

With its shares closing at 572p its dividend yield is a smidgen under 6%, making it one of highest in the FTSE 100. With interest rates so low, it is odd that a blue-chip stock should be yielding so much. It is even more illogical when Hayward has pinned his reputation on both preserving and possibly growing this dividend. He knows he will be punished hard if he disappoints.

After successive quarterly profit growth, the City should start to have more confidence. Hayward has applied a very simple formula at BP. Unlike Browne, it is not wrapped in fancy language, it is simply about operational efficiency. Less is more. It is a mantra liked by his employers. As he told me and my colleague Danny Fortson in an interview on Friday: “We make our money by someone somewhere everyday getting up and putting on coveralls, boots and hard hats and glasses and turning valves. We had lost a bit of that.”

He believes operational excellence, matched with a proven ability to source new oil reserves, will lead to profit growth. That should translate to a higher share price and a dividend yield that does not value BP as a utility.

Hayward is adamant he can do this without corporate deals. He does not believe big acquisitions add value. His preference is to negotiate long-term partnerships with governments and oil-rich countries. BP produces 4m barrels of oil a day and supplies some 5% of the world’s needs. To sustain growth it has to replace those reserves and add more. It is a big challenge, but one that Hayward insists is achievable — and partnership deals are the way to do it.

The ultimate measure of his tenure will be a revaluation of the company. He believes the group’s assets are as good as Exxon, but it needs to make even more strides to equal its operational quality.

As we write on page nine, the City is starting to understand the changes being made, but Hayward has to demonstrate he can repeatedly deliver. If he does, it will define his time at BP.

Turbulence ahead

British Airways has been one of the quiet star performers of the FTSE 100 in the past year, the shares more than doubling from a low of 116p to a high of 240p in the middle of September. Last week, however, they came down with a bump, losing 13% of their value and closing at 181Çp.

The slide was caused by the threat of a cabin crew strike at Christmas. Industrial action over the festive period would be damaging for BA, but I’m afraid to say it’s only one of the clouds massing on the horizon. Willie Walsh, the chief executive, has one of the longest to-do lists of any FTSE 100 boss.

First, the strike: Walsh is on a collision course with the cabin crew, and, I’m told, is determined to tough it out. It’s the right course of action, given the airline’s losses and the expectation that the good times for business travel are never coming back in the way that buoyed BA to record profits only 18 months ago. But it is risky. BA has decent cash reserves, but they could be drained away quickly if the planes are grounded for any length of time. And Walsh could win the war but lose the peace: BA is a service company, and disaffected cabin crew won’t provide good service.

Second, the gorilla in the room — BA’s crippling pension deficit. The triennial valuation has been completed and is now with the trustees. Some estimates think it could have gone as high as £3.9 billion, nearly double the company’s stock market value. The company may have to convince staff to work longer and accept reduced benefits, a tricky set of negotiations when you have just battled cabin crew to a standstill.

Third, the stalemate on mergers. BA has been in talks with Iberia for more than a year without a deal emerging. Its talks with American Airlines on a virtual merger of Atlantic operations have been dragging on for more than a decade. American will probably happen, but if Iberia drags on much longer BA will be left looking isolated in Europe.

There is a lot on Walsh’s plate. His predecessor, Rod Eddington, did the job for five years, saying that was long enough for such a pressurised role. Walsh’s five years are up in May next year.

Called to account

Happy belated birthday to the probe into accounting irregularities at iSoft — three years old last week. Of course the Financial Reporting Council must do a thorough job to find out what went wrong at the NHS software provider and whether directors or RSM Robson Rhodes, the auditor, acted improperly.

But such lengthy investigations hardly inspire number-crunchers to get it right first time. And they have limited impact when they eventually do come to a conclusion. As the latest black hole opens up at Aero Inventory (see page 8) perhaps the FRC — which also has Langbar, Farepak and Worthington Nicholls in its in tray — needs greater resources to tackle these matters more quickly.

An M&S recession

Funny thing this recession, widely tagged as the worst in living memory. Analysts had thought Marks & Spencer’s year-end profit would plunge from £600m to £460m. Now they are revising estimates to about £560m. It just goes to show that if you own your assets, are not leveraged to the eyeballs, and focus on cash flow and good management, a downturn needn’t mean Armaggedon.

john.waples@sunday-times.co.uk

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