BP shareholders have voted down a proposed 20% pay rise for the company’s CEO Bob Dudley, at the supermajor’s Annual General Meeting in London today.
The new pay deal would have seen Mr Dudley’s annual pay package reach £14 million (US$20m), at a time when the company has announced thousands of job cuts across the globe, with its offshore upstream operations some of the hardest hit.
“Let me be clear. We hear you”, said BP’s chairman, Carl-Henric Svanberg, in his opening address to shareholders at the meeting in London today.
BP Shareholders Say No
The vote brought a result of 51.11% of shareholders against the deal, with fierce opposition to the pay deal widely voiced amongst even the biggest investment funds.
Speaking on the BBC’s radio 4 today program, Ashley Hamilton Claxton, corporate governance manager at pension group Royal London, a major shareholder in BP said: “We think it sends the wrong message. It shows that the board is out of touch.”
A 20% BP Pay Rise?
The BP board had argued that although the company had made a significant loss, £3.6 billion (US$5bn) in the last year, the company is actually in remarkable shape.
BP’s board argued that due to the slump in the global oil price, it’s hard to compare the success of a business operating in oil exploration and production, on profits alone. Instead success and prosperity of the company is measured on a wider range of factors including safety, and future potential of investments.
It is part of a formula, that once taken into account, shows that the CEO has performed well and has put BP in a very good position, said BP.
A spokesman for BP pointed out that the current formula for working out the remuneration of the CEO had been agreed by shareholders at a previous meeting.
On the formula the spokesman added: “Despite the very challenging environment, BP’s safety and operating performance was excellent throughout 2015. BP’s performance surpassed the board’s expectations on almost all of the measures that determine remuneration – and the outcome therefore reflects this.”
Pay Rise Or Not To Pay Rise
So what is the next move? We will have to wait and see. Although the vote took place, and produced a definitive no vote, it isn’t binding.
BP Chairman Carl-Henric Svanberg
Continuing his address to shareholders at the AGM, Mr Svanberg added: “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.”
“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.”
“On remuneration, the shareholders’ reactions are very strong. They are seeking change in the way we should approach this in the future.”