Oil giant BP, which last year lost its advisory vote on its remuneration report at its AGM, has reduced the pay of its chief executive, Bob Dudley, and will propose a simpler pay policy to shareholders at this year’s meeting on 17th May.
BP disclosed in its annual report published this week that Dudley’s total remuneration for 2016 was $11.6 million, 40% lower than he received for 2015.
The company stated: “In reaching their final decisions, BP’s remuneration committee considered results from the current remuneration policy alongside outcomes for shareholders, and exercised downward discretion. This use of discretion reduced Bob Dudley’s 2016 remuneration by $2.2 million.”
Last year’s 59% vote against BP’s remuneration report was primarily a reaction to the potentially high pay that Dudley could receive particularly set against recent poor financial performance. After the AGM last year the company said it would engage with shareholders when it designed its new remuneration policy.
Professor Dame Ann Dowling, chair of the remuneration committee, said: “After a thorough review and extensive shareholder engagement, we believe the new policy is simpler, more transparent and has strategic focus.”
BP said that its proposed remuneration policy, which will be subject to a binding vote at this year’s AGM is designed to be simpler and more transparent. The company added that is aims to more clearly link pay to shareholder outcomes and delivery of BP’s strategy, and to lead to lower levels of reward.
The policy includes a lower ‘on-target’ annual bonus, more challenging stretch targets to achieve maximum annual bonus, and material reductions in the maximum longer-term incentives available to executive directors.
As a result of these changes, BP said that the maximum potential opportunity for the chief executive will be reduced by $3.7 million, and achieving this maximum will also be significantly more challenging.
As the Financial Times (FT) reported last week shareholders are expected to be tough on companies this year in their votes on pay with two-thirds of FTSE companies having to put their remuneration policies to the vote as well as their reports. Like BP others companies, the FT reported, have changed their pay for their chief executives. These include Reckitt Benkiser, Thomas Cook and Imperial brands.
Data from Manifest used by the FT showed that last year 3% of FTSE 100 companies suffered shareholder revolts where more than half of shareholders refused to support the remuneration report. This was the highest level in four years.
Last Updated: 6 April 2017