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April 16, 2009 6:26 pm
Barely half of BP’s shareholders backed the oil major’s 2008 pay packages at yesterday’s annual meeting, in one of the biggest-ever investor rebellions against director remuneration.
According to early polls projected at BP’s annual meeting, only 62 per cent of shareholders who voted approved last year’s remuneration package for executive and non-executive directors. Factoring in those who abstained from voting, support was 56 per cent.
Some observers say the BP vote reflects investor irritation with standards of governance and performance across corporate Britain, and could herald other protest votes during the current season of annual meetings.
”If you mention executive pay, people just say ’no’ at the moment,” said Jonathan Rigby, energy analyst at UBS. ”I don’t think the executives have done very much wrong to attract the ire of shareholders, unless there’s some intricate sense of dissatisfaction around corporate governance.”
Salaries for BP directors this year have been frozen, the group emphasised, at the request of the chairman and chief executive.
Pay last year, it said, was based on last year’s performance, when BP made profits of $25.6bn (£17.2bn) despite a fourth-quarter loss of $3.9bn.
BP’s 2008 remuneration package included a 16 per cent rise in basic salary and bonus for Tony Hayward, chief executive, to £2.5m, and a 16 per cent rise in the basic salary of Peter Sutherland, chairman, to £600,000.
BP’s remuneration committee also voted to give executive directors access to 15 per cent of shares awarded under a three-year ”incentive plan” share scheme. But under the scheme’s guidelines, which compares BP’s total shareholder return over the period to performance of peer companies, no shares should have been allocated.
”The total shareholder return result, by itself, was not a fair reflection of BP’s relative underlying performance over the period,” the committee wrote of its decision to award the shares.
All non-executive directors received pay rises, including Sir Tom McKillop, former chairman of Royal Bank of Scotland, who received £95,000. Sir Tom, who quit the BP board two weeks ago, shortly before he could be considered for re-election this year, has become synonymous with the UK financial crisis. Both Sir Tom and Mr Sutherland, who also sat on the RBS board, were vilified by shareholders on Thursday.
”What is breathtaking,” one shareholder said, ”is that [Sir Tom], with the full support of the board, was actually planning to stand for re-election. This is a damning indictment of corporate governance. There should be no rewards for failure and Sir Tom McKillop led RBS to a catastrophic, disastrous failure.” Applause broke out.
Mr Sutherland repeatedly told investors that he would not be drawn into a debate on a former non-executive director who was exemplary while at BP. ”His performance here was first class,” Mr Sutherland said.
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