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LONDON (Alliance News) - BP PLC said shareholders have demonstrated their real concern over the company's remuneration policy for 2015 but suggested it will stick to its proposed payment plan as the company said it will only propose a new policy next year.
"We have already spoken to a number of shareholders and they are seeking changes to our remuneration policy for the future. We will continue this engagement and bring a revised policy to our next AGM," said BP in a statement on Thursday afternoon.
The vote on BP's proposed remuneration policy for Chief Executive Bob Dudley and Chief Financial Officer Brian Gilvary came after shareholders highlighted concerns about their pay packets for 2015 following one of the company's worst financial performances.
Media said shareholders voted against the remuneration report, with Bloomberg and others reporting that over 59% of shareholders voted against the proposal Thursday.
A spokesperson for BP said those figures related to proxy votes, the ones placed by shareholders prior to the AGM, which are then added to the votes cast in the room. The official voting figures from the AGM have not yet been released by BP.
Regardless, the vote was an "advisory" one, meaning BP does not have to take action and can still implement those pay packets.
Importantly, shareholders have voted in favour of the remuneration report over the last three years, with 98.4% of shareholders voting in favour in 2012, 98.8% in favour in 2013 and 83.9% voted in favour of the package at the 2014 AGM.
Although Chairman Carl-Henric Svanberg noted the concerns from shareholders over the pay packets set to be dished out to Dudley and Gilvary at the AGM earlier Thursday, he said the board members had played a major role in the company's transformation.
Dudley will 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. Dudley's share incentives for 2015 are falling 6.7% to USD9.7 million.
That gives Dudley remuneration, 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.
Put together, the total value of the package including the pension increased by almost 20%.
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 44% increase 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.
However, the defence is that Dudley's pay and performance is not judged by the financial performance of the company, as it was impossible for BP and its peers to avoid the severe downturn in oil prices, but is compared to other major corporations.
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.
BP, in terms of its share price, outperformed Shell in 2015. BP shares fell under 14% throughout 2015 whereas Shell 'A' shares declined by more than 29%.
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. "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."
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 1.4% to 360.40 pence per share on Thursday afternoon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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