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BP CEO's 20% jump in pay seen sending 'wrong message' before AGM
[LONDON] BP Plc's award of a 20 per cent pay increase to Chief Executive Officer Bob Dudley might send the "wrong message" to investors and other companies after the UK explorer reported a net loss last year, according to the Institute of Directors.
The London-based institute, which represents businesses and their leaders, urged shareholders to "scrutinize" the award when it's put to a vote at BP's annual general meeting Thursday, according to a statement on the group's website.
"If his pay deal is approved, but with a significant minority voting against, the BP board must explain how it will engage with this group of shareholders -- they cannot and should not be ignored," the IoD said.
Shareholder Royal London Asset Management Ltd said last week it would vote against the package, calling it "unreasonable and insensitive" at a time when oil's crash has driven down earnings. BP plans to cut 4,000 jobs in oil and gas exploration and production this year, and 3,000 in downstream businesses by 2017. The company said last year it would freeze employee salaries amid a "harsh trading environment." Shareholder advisory firms including Glass Lewis & Co and Pensions & Investment Research Consultants Ltd also have recommended that investors oppose Mr Dudley's pay deal.
Mr Dudley's total compensation, including salary, bonus, shares and pension, increased to US$19.6 million in 2015, 20 per cent higher than the previous year, according to BP's annual report. While his salary rose just 1.5 per cent to US$1.85 million, the bonus jumped 38 per cent to US$1.39 million and the contribution to pension and retirement benefits more than doubled to US$6.52 million, the report showed.
The company plans no salary increases for senior leadership in 2016, it said in the report.
BP posted a record net loss of US$6.5 billion last year, reflecting oil's biggest slump in a generation as well as a US$10 billion provision for the legal settlement relating to the Gulf of Mexico oil spill. Adjusted for one-time items, profit dropped 51 per cent to US$5.9 billion.
The London-based company has said the measures that determine CEO pay were backed by 96 per cent of shareholders when they approved the remuneration policy in 2014.
"BP's performance surpassed the board's expectations on almost all of the measures that determine remuneration - and the outcome reflects this," the company said in a statement April 8. Investors are next scheduled to vote on remuneration policy in 2017.
Exxon Mobil Corp, world's largest crude producer by market value, said Wednesday that CEO Rex Tillerson's pay slid 18 per cent last year to US$27.3 million as the company's shares tumbled. His annual stock award fell by more than 14 per cent to US$18.3 million after the board awarded him the same number of shares as in prior years and the bonus dropped by about 35 per cent to US$2.39 million.