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LONDON (Alliance News) - The chairman of BP PLC said all of the investors he has spoken to have recognised the major role that Chief Executive Bob Dudley has played in the company's transformation as the oil and gas firm tries to tackle shareholder concerns over the CEO's pay.
Although Chairman Carl-Henric Svanberg noted the concerns from shareholders over the pay packets set to be dished out to Dudley and Chief Financial Officer Brian Gilvary, he said the board members had played a major role in the company's transformation and suggested the company will only consider changing its policy for future payments.
Ahead of BP's annual general meeting later Thursday, the media was rife with stories concerning anger among some of its investors over plans to increase Dudley's pay packet despite one of the worst years for oil and gas firms during 2015.
Dudley is set to receive a higher salary, a higher cash bonus and a higher amount of benefits in 2015 compared to the previous year.
BP is proposing increasing Dudley's salary by 1.6% in 2015 to USD1.85 million from USD1.82 million, upping his annual cash bonus by 29% to USD1.39 million from only USD1.00 million and increasing his benefits by 4.4% to USD119,000 from USD114,000.
That part of his package comes to a grand total of USD3.36 million, 14% higher than the USD2.94 million paid the year before.
However, the bulk of his remuneration package is made up of his pension and share options. Importantly, Dudley's share incentives for 2015 are falling 6.7% to USD9.7 million in 2015 from USD10.4 million in 2015.
That gives Dudley a total remuneration package, including his salary, bonus and share incentives, of USD13.08 million in 2015, which is down 2.1% from the USD13.36 million paid in 2014.
Dudley's pension and retirement savings have more than doubled to USD6.5 million at the end of 2015 from the USD3.0 million at the end of 2014.
To put that into some form of perspective, Chief Financial Officer Brian Gilvary is being paid a total remuneration package of USD4.82 million for 2015, which is a staggering 44% lift from the USD3.35 million paid in 2014.
The reason for the spotlight being placed on Dudley's pay is the time at which it has occurred, as the pay packet is covering the year when BP and its peers were hammered by the fall in oil prices, leading BP to post a USD9.57 billion pretax loss compared to the USD4.95 billion profit the year before.
It also follows on from the 4,000 job cuts in 2014 and the 3,000 further cuts that will be made throughout this year.
London-listed peer Royal Dutch Shell PLC had an equally difficult year in 2015, but Shell's Chief Executive Ben van Beurden saw his total remuneration package fall year-on-year in 2015.
The media has reported on a string of institutional investors of BP that are reportedly unhappy about the Dudley's proposed pay packet, and although BP does not need approval for it to implement the pay packet, the company ideally wants shareholders to support the proposal.
Ahead of the annual general meeting Thursday, BP Chairman Svanberg said 2015 was a year of great contrasts that saw the work carried out by Dudley come together with the rest of the team.
"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," said Svanberg.
"We have always judged executive performance not on the price of oil or bottom line profit but on measures that are clearly within management's control. And from that perspective the board has concluded that it has been an outstanding year. The pay reflects this and it is consistent with our policy," he added.
"All investors we have spoken to, recognise the significant operational achievements and the major role that Bob Dudley and Brian Gilvary have played in achieving BP's transformation," said Svanberg.
Svanberg seemed to imply Thursday that Dudley's and other pay packets proposed for 2015 will not be changed, but looked open to the possibility of changing how the pay packets are derived in the future.
"All investors we have spoken to, recognise the significant operational achievements and the major role that Bob Dudley and Brian Gilvary have played in achieving BP's transformation," said Svanberg.
"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," he added. "Let me now look to the future."
Addressing other issues, Svanberg reiterated the company's commitment to maintaining its dividend in the tough environment.
"BP has had to change and we may be a little smaller company than before. But it is agile and ready for the future. And still a great company," said Svanberg.
BP shares were down 1.2% to 361.20 pence per share on Thursday afternoon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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