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BP : risks fresh pay row in 2017 over boss Dudley's share award

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01/18/2017 | 07:41pm CET

BP is facing a renewed showdown with shareholders over its chief executive's multi-million pound pay package, 12 months after an investor revolt at the company triggered a move by the Government to curb excessive boardroom remuneration.

Sky News has learnt that a number of big City shareholders in BP have expressed opposition to proposals by the oil giant's board to trim the maximum sum payable to Bob Dudley under a long-term incentive plan.

Sources said on Wednesday that BP was proposing to cut Mr Dudley's maximum LTIP award from 700% of his base salary to 550%.

The LTIP award would be related to the performance of both BP and its chief executive, and would be in addition to a base salary of $1.85m and an annual bonus of up to $4.1m, as well as a substantial pension contribution.

The proposed reduction in the LTIP would, under BP's current plan, see the maximum award fall from $13m to about $10m.

One insider said that consultations between BP and leading shareholders in recent months had already led to one proposal - to reduce the long-term share award to six times Mr Dudley's salary - being scrapped.

"There is a sense that they need to go quite a bit further to recover widespread support," said a City source.

In a statement issued to Sky News, a BP spokesman said: "As the board committed to last year, we have been consulting with BP's major shareholders as we develop the new remuneration policy that will be presented to the 2017 AGM.

"We have been consulting shareholders on proposals for the policy - including its components, bonus levels, and performance measures and criteria.

"This process is not yet complete and the engagement is continuing."

Sources said it was likely that BP would ultimately present a further revision to the LTIP award to shareholders, ahead of April's annual meeting.

Last year's revolt saw nearly 60% of investors voting against BP's remuneration report after Mr Dudley was paid almost £14m - a stunning result at such a prestigious British company.

That vote, however, was advisory rather than binding, whereas this year BP will be bound by the result of a vote on its pay policy.

The row came after BP cut about 5000 jobs, including hundreds at its North Sea operations, and reported its biggest-ever annual loss - $5.2bn (£3.7bn) on a replacement cost basis, a measure used widely across the oil industry.

In the wake of further revolts at other large companies, including Anglo American and Shire, Theresa May pledged a crackdown on corporate excess, while MPs on the Business, Energy and Industrial Strategy select committee are preparing to publish a report containing wide-ranging reforms to executive pay.

Earlier this week, Paul Drechsler, the CBI president, told Sky News that the forthcoming pay season would be critical if businesses wanted to avert more intrusive regulation.

Fund managers such as Blackrock and Hermes Investment Management have also become more vocal opponents of lavish pay deals.

BP last year ditched its long-standing adviser on executive pay, appointing consultants at Deloitte in his place.

However, the chairman of its remuneration committee, Dame Professor Ann Dowling, has remained in place - and was re-elected with overwhelming support at last year's annual meeting.

People close to BP pointed out that a number of shareholders had welcomed its revised pay proposals, and said Mr Dudley's award was based overwhelmingly on performance-based measures.

They added that Mr Dudley's pay package remained modest compared to many of its US-based peers.

Last year was notable for BP drawing a line under most of its remaining liabilities from the fatal Gulf of Mexico oil spill in 2010 - an accident which cost the company well over $60bn.

BP said at the time of the AGM revolt that its top team had "performed strongly in a difficult environment in 2015, managing the things they could control and for which they were accountable".‎

(c) Sky News 2017: <a href="http://news.sky.com/story/bp-risks-fresh-pay-row-in-2017-over-boss-dudleys-share-award-10733731">BP risks fresh pay row in 2017 over boss Dudley's share award</a>, source Sky News

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Financials ($)
Sales 2016 186 008 M
EBIT 2016 5 430 M
Net income 2016 2 552 M
Debt 2016 34 439 M
Yield 2016 6,34%
P/E ratio 2016 52,64
P/E ratio 2017 15,32
EV / Sales 2016 0,84x
EV / Sales 2017 0,68x
Capitalization 122 093 M
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Mean consensus OUTPERFORM
Number of Analysts 25
Average target price 6,50 $
Spread / Average Target 5,0%
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Robert W. Dudley Group Chief Executive Officer & Executive Director
Carl-Henric Svanberg Chairman
Brian Gilvary Group Chief Financial Officer & Executive Director
Cynthia Blum Carroll Independent Non-Executive Director
Paul Milton Anderson Independent Non-Executive Director
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