The controversy over the $20m (£14m) pay for BP’s chief executive has intensified after a group representing individual shareholders urged members to vote against the measure at this week’s annual general meeting (AGM).
ShareSoc said Bob Dudley’s pay was too high for a company that suffered a record loss last year and has underperformed rivals for a long time. It also reflects a convoluted incentive scheme that should be simplified, it said.
Dudley’s pay rose 20% last year to $19.6m as the oil company racked up a record $6.5bn loss caused by the tumbling oil price and cut thousands of jobs. His pay was increased by a more than doubling of pension payments to $6.5m from $3m that has displeased investors.
Royal London Asset Management, which owns 0.7% of BP, said last week Dudley’s pay was unreasonable and insensitive and that it would vote against at Thursday’s AGM. Two shareholder advisers – ISS and Pirc – have recommended investors vote against BP’s remuneration report and Glass Lewis, another adviser, has reportedly done the same.
ShareSoc said: “We consider the pay of the CEO to be simply too high, and particularly so in a year when the company suffered a record loss in 2015. Even so his pay went up by 20%. Part of the reason for the high pay was the excessively complex remuneration scheme.”
BP has a large cohort of small investors and ShareSoc’s move makes it more likely Dudley and his fellow board members will face a rough ride at the AGM in London. Individual shareholders are more likely to ask hostile questions from the floor at AGMs than big individual investors, who prefer to make their complaints in private.
ShareSoc criticised BP for claiming its pay structure was relatively simple when Dudley’s cash bonus has six performance measures and the long-term incentive plan has five, only one of which is transparent to shareholders. Making Dudley’s bonus pensionable creates incentives to boost short-term performance and goes against best practice, ShareSoc said.
Pay will be back in the spotlight during this year’s AGM season, which gets going this week as BP, miner Rio Tinto and housebuilder Persimmon face shareholders. Investors are on alert for attempts to increase salaries and overly generous pension arrangements as well as inadequate governance.
BP said last week Dudley’s pay was based on the policy shareholders approved two years ago and that BP’s performance last year surpassed the board’s expectations in the context of plunging oil prices.
