Controversy over BP CEO Bob Dudley’s pay package amid falling profits and job losses at the oil major saw a barrage of complaints from its shareholders on Thursday.
Its worst ever results reported in 20 years, the London-listed company reported a loss of $6.5 billion for 2015. But despite this loss, the company enhanced the pay package of Dudley’s by 20 percent to $19.6 million from $16.4 million a year before.
Chairman Carl-Henric Svanberg said the company had always judged executive performance “not on the price of oil or bottom line profit but on measures that are clearly within management’s control” while reacting to angry investors, who voted against the pay rise at the annual general meeting taking place in London.
“But let me be clear. We hear you,” he said, according to a transcript of his speech on the company website.
“On remuneration, the shareholders’ reactions are very strong. They are seeking change in the way we should approach this in the future … 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.
While 59.11 percent of the members present at the AGM voted against the remuneration report presented to shareholders, the vote on the policy was only advisory. The next time shareholders can change the CEO’s pay rise is in 2017 and the pay rise was actually voted for at the AGM 2014. Nonetheless, any dissent or revolt could put pressure on Dudley and the company.
In the days leading up to the meeting, a slew of shareholders vented their anger. It considered the pay of the CEO to be “simply too high”, ShareSoc, an organization that promotes the interests of private investors, said in a press release this week.
The increase was termed as “unreasonable and insensitive” by Royal London Asset Management, which holds a £443 million ($626 million) stake in BP.
“While we acknowledge BP has had to weather a turbulent period for oil markets, we strongly believe that executive remuneration should remain tied to performance,” Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, told CNBC via an emailed statement.
As plunging oil prices continue to weigh on the firm, BP has taken restructuring charges. Brent crude prices have tumbled around 65 percent since June 2014 to trade around $44 a barrel this week. There has been a fall of 30 percent in the share prices of BP in the same time period.
However for his response to the Gulf of Mexico oil spill in 2010 and the lawsuits that followed, Dudley has also received praise in the five years that he has been CEO. Dudley was praised by BP for the way he has “transformed BP into a safer, stronger and simpler business” and the way he has “guided BP’s recovery to a position of greater resilience” in the invite to the AGM.
Shareholders have been urged to scrutinize the pay deal for Bob Dudley by the U.K.’s Institute of Directors (IoD).
“We are concerned … that Dudley’s £14 million pay package will seem unjustified to many shareholders, considering the performance of the company over the last 12 months,” Simon Walker, director general of the IoD said in a statement.
(Adapted from cnbc.com)