British oil major BP brushes aside investor discontent to award executives bonuses
18 Apr 2009
Oil major BP has ignored a potential shareholder rebellion and agreed to award bonuses to executives following its annual general meeting.
Nearly four in 10 shareholders voted against the group's remuneration package, which will see four current and one former executive director receive a bonus worth 15 per cent of their salary. BP said 37.6 per cent of investors who voted ahead of the company's Annual General Meeting - the vast majority of shareholders who express a preference - opposed its remuneration report. Last year, about 12 per cent voted against the report.
Some observers say the BP vote reflects investor irritation with standards of governance and performance across corporate Britain, and could herald other protest votes during the current season of annual meetings.
Some small investors criticised the reappointment of chairman Peter Sutherland and a proposal - recently dropped - to reappoint Tom McKillop as a non-executive director, based on their links to RBS. Sutherland was a non-executive director at RBS from 2001 until it was rescued from collapse by a government bail out. McKillop was chairman, a role for which he has been pilloried by British politicians and media.
Salaries for BP directors this year have been frozen, the group emphasised, at the request of the chairman and CEO. Pay last year, it said, was based on last year's performance, when BP made profits of $25.6 billion (£17.2 billion) despite a fourth-quarter loss of $3.9 billion. BP's 2008 remuneration package included a 16 per cent rise in basic salary and bonus for Tony Hayward, CEO, to £2.5 million, and a 16 per cent rise in the basic salary of Sutherland, chairman, to £600,000.
BP's remuneration committee also voted to give executive directors access to 15 per cent of shares awarded under a three-year "incentive plan" share scheme. But under the scheme's guidelines, which compare BP's total shareholder return over the period to performance of peer companies, no shares should have been allocated.
"The total shareholder return result, by itself, was not a fair reflection of BP's relative underlying performance over the period," the committee wrote of its decision to award the shares.
There is no prospect of Europe's second-largest publicly traded oil company by market value merging with Exxon Mobil Corp), the world's most valuable listed oil company, despite occasional speculation, Sutherland said .He also said he does not foresee any change in BP's credit rating, despite a big fall in revenues on the back of an almost $100 per barrel drop in oil prices since July.
