Famously, Robert Zimmerman became Bob Dylan, David Jones became David Bowie, and Leonard Cohen became…Leonard Cohen. Similarly, in the early noughties the employee-owned international engineering consultancy Ove Arup & Partners became Arup. Just as artists decide to assume a stage name to enhance their popularity and success, some companies make the decision to modify this particular part of their public image for business reasons.
So, what’s in a name?
We should remember that, in company law, it is widely accepted that the corporation is a legal person, and that the veil of incorporation, enshrined in the limitation of liability, is lifted only in the most specific of circumstances. Critics of corporatism see the large, listed entities which figure significantly in our day to day lives as monoliths with massive lobbying power pursuing their own nefarious agendas. I prefer to think of the person embodying the fiction of the company as feeble, anxious and increasingly short lived. One only has to remember the near collapse of BP during the Gulf of Mexico tragedy, the inability of corporations to act with one clear voice on such an important issue as the form Brexit will take after the divorce, and the ever shorter average life span of corporations around the world to see that this is the case.
Nevertheless, Statoil is in my view a remarkable organisation. Still 51% owned by the Norwegian state, it would be easy to simply frame the company as a state owned entity (SOE). Moreover, within the classical categories applied to upstream oil and gas organisations, it might be seen as a national rather than an international oil company (NOC, IOC). But a brief consideration of its history and achievements shows it to be a true disruptor from a range of perspectives.
In terms of oil and gas acreages, Statoil long ago broke free of the Norwegian Continental Shelf. It now operates in 30 countries having oil and gas concessions in North and South America, Africa, Asia, Oceania, as well as Europe and Norway.
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It has longstanding commitments to transparency and disclosure, being one of the first oil majors, for example, to disclose its tax, royalties, licence fees and other payments to governments around the world. Its distinctive remuneration policy to senior executives sets it apart from the majority of other multinational oil and gas corporations in terms of the relative modesty of rewards. Technologically, it is in the forefront of innovation. Its division, “Statoil Innovate”, tangibly supports technical advance along the strands ‘Competitive at all times’, ‘Transforming oil and gas’ and ‘Providing energy for a low carbon future’. Off the north east coast of Scotland it is pioneering the world’s first floating windfarm.
Given all the above reputational strengths achieved over the last 50 years, and as summarised in the preceding paragraph, why go through this name changing process? The Board’s justification does not particularly inspire confidence. Reference is made to the two parts of the new name “Equi” and “nor”. The first is intended to draw us to notions of equity, fairness, equality; the second to Norway. The only specific metric in the press release announcing the change is a commitment to 15%-20% of capital expenditure being allocated to ‘new energy solutions’ by 2030. In simple compounding terms, this is rather a modest target given the tremendous shift needed in investment aligned towards renewable energy generation. Perhaps of more importance is the removal of the term ‘oil’ as a result of the name change. ‘Stat’, arguably, has never been particularly controversial, since the alignment with Norway, possibly one of the most patient investors in the world, and custodian of the world’s second largest sovereign wealth fund, should be the clearest possible deterrent to greedy activist, short-term and private equity forms of investor.
However, the removal of ‘oil’ in my opinion signals the beginning of a delicate transition for Statoil from a time when proven fossil fuel reserves were viewed if not as a tangible asset on the balance sheet, then certainly a key performance indicator, to a future where ‘stranded assets’ – barrels of oil – become too expensive and too environmentally harmful to extract and refine.
Changing the name of a company isn’t a mere exercise of style, as this kind of transition impacts in very different ways for differing stakeholders. For example, for employees and pensioners of the company, serious issues arise as to skill shortages, retraining needs and recruitment challenges. For tax authorities, there are greater uncertainties in revenues from conventional sources, and the opportunities provided by a tax on carbon. For supply chains, radical new technical and logistical requirements will be needed for sustainable renewable energy generation. For customers – householders, businesses – new ways of providing energy and transforming national grids will emerge to compete with existing modes of supply.
In general terms, a company name change is rarely a cosmetic change. Sometimes, as in the above example of Arup, it is a reflection of the reality that a human partnership has been transformed into a global firm of consulting engineers owned by its staff. In the case of Equinor, it appears to be a readiness to embrace a future energy mix very different to the fossil fuel regime we currently live and breathe and occasionally choke on. Sometimes the change is for the better, sometimes not.
In conclusion perhaps Statoil’s name change is less about the style and flair of Jones to Bowie, or Zimmerman to Dylan, and more about the new economy of energy? Whatever the case, it will be an interesting journey for all of us.
About the author
Steve Priddy holds the position of Academic Director at GISMA Business School, as well as Affiliate Professor at Grenoble Ecole de Management. He has nearly 30 years of top level experience in accountancy and is a Fellow of the Association of Chartered Certified Accountants (FCCA).