BP faces backlash over CEO’s 20 per cent pay rise
Dudley’s £13 million package may prove tipping point in fresh ‘shareholder spring’
Oil and gas giant BP has defended the 20 per cent pay rise handed to chief executive Bob Dudley, ahead of a potentially difficult AGM this week.
BP will ask shareholders in London on 14 April to accept a directors’ remuneration report showing that a $19.6 million (£13.6 million) package, including pension, was paid to Dudley in 2015.
This was up from $16.4 million in the previous year, despite the firm reporting a loss of about $6.5bn in 2015, its worst ever financial performance.
Reports have suggested that some shareholders and fund managers could vote against the report at the AGM. But a BP spokesman said: “Despite the very challenging environment, BP’s safety and operating performance was excellent throughout 2015 and management also responded early and decisively to the steep fall in the oil price.
“BP’s performance surpassed the board’s expectations on almost all of the measures that determine remuneration – and the outcome reflects this.
“These clear measures derive directly from BP’s remuneration policy, which was approved by shareholders at the 2014 AGM with more than 96 per cent of the vote.”
PIRC, the influential body that represents pension funds and other smaller shareholders, has recommended voting against BP’s remuneration report, drawing particular attention to what it said is Dudley’s “highly excessive” variable reward package of almost 600 per cent of salary. “The balance of CEO realised pay with financial performance is not considered acceptable,” it told its clients in an advisory note.
BP’s is the highest profile in a forthcoming tranche of AGMs where significant revolts are expected from shareholders over remuneration reports. This has led experts to speculate that dissent over executive pay is reaching levels not seen since the 2012 ‘shareholder spring’. That cost a number of CEOs their posts and led to changes in the law that have seen shareholders given binding votes on general pay policy, though a vote against a specific annual remuneration report takes place retrospectively and only in an advisory capacity.
Other businesses facing potential ire this year include estate agency Foxtons – where CEO Nick Budden received a 19 per cent pay rise despite a tumbling share price – and housebuilder Persimmon, where 150 directors will reportedly receive £600 million in bonuses over the course of 10 years. Reckitt Benckiser, which has historically been notable for its particularly generous payouts, will hand its CEO, Rakesh Kapoor, around £23 million in salary and long-term incentives.
In December 2015, the CIPD called for a radical rethink of executive remuneration strategies, linking them to lower morale and constrained performance inside organisations. Its report, The view from below: what employees really think about their CEO’s pay packet, found that 71 per cent of employees believe CEO pay is too high and 59 per cent find it directly demotivating.
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