BP and Dividends

     Some politicians are saying BP should not pay dividends until the oil is cleaned up.  Today, Speaker Pelosi said that BP should use the dividends to fund the cleanup.

     The reasonable suggestion would be to take the dividend payments and put them in escrow.  We do not know today what the total cleanup costs will be.  At such a time as we know, then the money can be released.  This sets up good incentives.  BP will have an incentive to clean up the oil as quickly as they can.  If BP simply didn't pay dividends, they'd just have lots more cash on hand.  If they simply use it for cleanup, it doesn't make much sense because we won't really know it will be spent on the cleanup (BP can claim they are spending as much as they can on cleanup, but have constraints).

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