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| BP chairman: 'We hear you' over Bob Dudley's £14m pay row | |
| (35 minutes later) | |
| BP chairman Carl-Henric Svanberg has promised to listen and learn from the stinging criticism of chief executive Bob Dudley's £14m pay package. | |
| Several large shareholders have vowed to vote against BP's remuneration plans at Thursday's annual investor meeting. | |
| They say it is wrong that BP is awarding big boardroom pay rises despite falling profits and job cuts. | |
| But in his opening address to the meeting, Mr Svanberg said: "Let me be clear. We hear you." | |
| He continued: "We will sit down with our largest shareholders to make sure we understand their concerns and return to seek your support for a renewed policy." | |
| Some shareholder votes were cast before the meeting. Mr Svanberg said: "We know already from the proxies received and conversations with our institutional investors that there is real concern over the directors' pay in this challenging year for our shareholders. | |
| "On remuneration, the shareholders' reactions are very strong. They are seeking change in the way we should approach this in the future," he said. | |
| Shareholders who had criticised the pay deals included Aberdeen Asset Management and Royal London Asset Management. | |
| Investor group Sharesoc branded the pay deal "simply too high", while Glass Lewis, ShareSoc, Pirc and Institutional Shareholder Services have also expressed their opposition. | |
| Earlier on Thursday, Ashley Hamilton Claxton, corporate governance manager at Royal London, told the BBC: "The executives received the maximum bonuses possible in a year when [BP] made a record loss, and to us that just does not translate into very good decision-making by the board. | |
| "We think it sends the wrong message. It shows that the board is out of touch." | "We think it sends the wrong message. It shows that the board is out of touch." |
| Change | Change |
| Meanwhile, the Institute of Directors warned on Wednesday that the pay increase risked sending "the wrong message to other companies". | Meanwhile, the Institute of Directors warned on Wednesday that the pay increase risked sending "the wrong message to other companies". |
| IoD director-general Simon Walker said the "pay package will seem unjustified to many shareholders, considering the performance of the company over the past 12 months". Last year, BP made a £3.6bn loss and announced that thousands more jobs would be cut. | IoD director-general Simon Walker said the "pay package will seem unjustified to many shareholders, considering the performance of the company over the past 12 months". Last year, BP made a £3.6bn loss and announced that thousands more jobs would be cut. |
| The full voting details on BP's remuneration report are due later on Thursday. The vote is only "advisory", so even a vote against would not strictly require any change of tack from the company. | |
| However, Ms Hamilton Claxton told the BBC's Today programme that 20%-25% of shareholders might vote down the pay deal, which would force BP to "think long and hard about their decision". | However, Ms Hamilton Claxton told the BBC's Today programme that 20%-25% of shareholders might vote down the pay deal, which would force BP to "think long and hard about their decision". |
| Analysis: Simon Jack, BBC business editor | Analysis: Simon Jack, BBC business editor |
| Giving someone a 20% pay rise for a year's work that saw BP record its biggest ever operating loss seems perverse even by chief executive pay standards. | Giving someone a 20% pay rise for a year's work that saw BP record its biggest ever operating loss seems perverse even by chief executive pay standards. |
| If it's any consolation, (I doubt it will be), bosses at Exxon and Chevron got paid even more than Bob Dudley even though the value of their companies fell by more than BP. That's the bit that sticks in the craw for many. Under what circumstances don't these guys get paid a fortune? It would be fine if some years you win, some years you lose - but they never seem to lose. | If it's any consolation, (I doubt it will be), bosses at Exxon and Chevron got paid even more than Bob Dudley even though the value of their companies fell by more than BP. That's the bit that sticks in the craw for many. Under what circumstances don't these guys get paid a fortune? It would be fine if some years you win, some years you lose - but they never seem to lose. |
| We may get a rebellion of 20-30% of shareholders today but even if it was more than 50%, the board doesn't have to listen. Shareholders do have a binding every vote every three years on the pay policy and formula. No use crying now, the formula that spat out £14m for Bob Dudley was approved in 2014 by 96% of shareholders. | We may get a rebellion of 20-30% of shareholders today but even if it was more than 50%, the board doesn't have to listen. Shareholders do have a binding every vote every three years on the pay policy and formula. No use crying now, the formula that spat out £14m for Bob Dudley was approved in 2014 by 96% of shareholders. |
| Read Simon's full blog here. | Read Simon's full blog here. |
| BP's pay policy is subject to a binding shareholder vote every three years. | BP's pay policy is subject to a binding shareholder vote every three years. |
| It was last set in 2014, meaning new proposals are due to be put forward for shareholder approval again in 2017. | It was last set in 2014, meaning new proposals are due to be put forward for shareholder approval again in 2017. |
| Tim Bush, head of governance at the investors' advisory consultancy Pirc, told the BBC's Today programme on Thursday that the "pay model is broken". | Tim Bush, head of governance at the investors' advisory consultancy Pirc, told the BBC's Today programme on Thursday that the "pay model is broken". |
| Paying chief executives on a formula devised two or three years ago was not sensible. "There is a major problem in the way chief executives are recruited and paid," he said. | Paying chief executives on a formula devised two or three years ago was not sensible. "There is a major problem in the way chief executives are recruited and paid," he said. |
| 'Surpassed expectations' | 'Surpassed expectations' |
| But Mark Freebairn, partner at recruitment firm Odgers Berndtson, told Today: "If Bob Dudley was to leave [BP] it would be for a competitive company and remuneration would be part of the discussion. If you operate in a global market, you have to operate on a global scale." | But Mark Freebairn, partner at recruitment firm Odgers Berndtson, told Today: "If Bob Dudley was to leave [BP] it would be for a competitive company and remuneration would be part of the discussion. If you operate in a global market, you have to operate on a global scale." |
| BP was now in a far better position than when Mr Dudley took the helm, he said. | BP was now in a far better position than when Mr Dudley took the helm, he said. |
| After the Gulf of Mexico oil disaster, BP's share price collapsed and it was forced to sell off assets worth billions of pounds to pay costs, fines and compensation. | After the Gulf of Mexico oil disaster, BP's share price collapsed and it was forced to sell off assets worth billions of pounds to pay costs, fines and compensation. |
| However, the collapse in the oil price over the past 18 months saw BP's profit tumble, and the company is axing another 3,000 jobs worldwide on top of the 4,000 cuts already announced. | However, the collapse in the oil price over the past 18 months saw BP's profit tumble, and the company is axing another 3,000 jobs worldwide on top of the 4,000 cuts already announced. |
| A spokesman for BP said before the meeting, at London's ExCel centre, had begun that shareholders had already previously backed the pay formula. | |
| "Despite the very challenging environment, BP's safety and operating performance was excellent throughout 2015... BP's performance surpassed the board's expectations on almost all of the measures that determine remuneration - and the outcome therefore reflects this. | "Despite the very challenging environment, BP's safety and operating performance was excellent throughout 2015... BP's performance surpassed the board's expectations on almost all of the measures that determine remuneration - and the outcome therefore reflects this. |
| "And these clear measures derive directly from BP's remuneration policy which was approved by shareholders at the 2014 AGM with over 96% of the vote," the spokesman said. | "And these clear measures derive directly from BP's remuneration policy which was approved by shareholders at the 2014 AGM with over 96% of the vote," the spokesman said. |
| Mr Dudley's pay package was less than that earned by some rivals in the oil and gas industry, including at Exxon and Chevron. But it was more than the award for Ben van Beurden, chief executive at Royal Dutch Shell, whose salary package fell from €24.2m (£19m) in 2014 to €5.58m last year. | |
| Experts point out, though, that it can be difficult to compare like-with-like. For instance, Mr van Beurden's 2014 pay involved one-off pension payments and "tax equalisation" measures when he moved to the UK. | |
| And in 2015 Mr Dudley and Mr van Beurden received very different rewards under their long-term incentive plans, LTIPs. Shell gave its chief executive 8% of the LTIP, down from 49% in 2014. Mr Dudley's long-term bonus increased from 63.8% of maximum to 77.6%. |