How can this be justified?

[davieG]

BP boss Dudley faces shareholder action over £14m pay

• 1 hour ago
•  
• From the sectionBusiness

Image copyrightPA

BP holds its annual shareholders' meeting on Thursday with some investors planning to vote against chief executive Bob Dudley's 20% pay rise.

Shareholders in the oil giant are concerned that rises for Mr Dudley and other executives come despite job cuts and falling profits.

Those who have spoken out include Aberdeen Asset Management and Royal London Asset Management.

But BP said the firm's performance beat most measures that determine pay.

The pay rise for Mr Dudley takes his salary package to £14m.

Shareholder group Sharesoc branded the pay deal "simply too high", while Glass Lewis, ShareSoc, Pirc and Institutional Shareholder Services have also expressed their opposition.

Ashley Hamilton Claxton, corporate governance manager at Royal London, told the BBC: "The executives received the maximum bonuses possible in a year when [bP] made a record loss, and to us that just does not translate into very good decision-making by the board.

"We think it sends the wrong message. It shows that the board is out of touch."

Change

Meanwhile, the Institute of Directors warned on Wednesday that the pay increase risked sending "the wrong message to other companies".

IoD director-general Simon Walker said the "pay package will seem unjustified to many shareholders, considering the performance of the company over the past 12 months". Last year, BP made a £3.6bn loss and announced that thousands more jobs would be cut.

The vote on BP's remuneration report is "advisory", so even a vote against would not strictly require any change of tack from the company.

However, Ms Hamilton Claxton told the BBC's Today programme that 20%-25% of shareholders might vote down the pay deal, which would force BP to "think long and hard about their decision".

BP's pay policy is subject to a binding shareholder vote every three years.

Image copyrightGetty ImagesImage captionMr Dudley took over at BP in the aftermath of the fatal Gulf of Mexico oil rig disaster Analysis: Simon Jack, BBC business editor

Giving someone a 20% pay rise for a year's work that saw BP record its biggest ever operating loss seems perverse even by chief executive pay standards.

If it's any consolation, (I doubt it will be), bosses at Exxon and Chevron got paid even more than Bob Dudley even though the value of their companies fell by more than BP. That's the bit that sticks in the craw for many. Under what circumstances don't these guys get paid a fortune? It would be fine if some years you win, some years you lose - but they never seem to lose.

We may get a rebellion of 20-30% of shareholders today but even if it was more than 50%, the board doesn't have to listen. Shareholders do have a binding every vote every three years on the pay policy and formula. No use crying now, the formula that spat out £14m for Bob Dudley was approved in 2014 by 96% of shareholders.

Read Simon's full blog here.

It was last set in 2014, meaning new proposals are due to be put forward for shareholder approval again in 2017.

Tim Bush, head of governance at the investors' advisory consultancy Pirc, told the BBC's Today programme on Thursday that the "pay model is broken".

Paying chief executives on a formula devised two or three years ago was not sensible. "There is a major problem in the way chief executives are recruited and paid," he said.

'Surpassed expectations'

But Mark Freebairn, partner at recruitment firm Odgers Berndtson, told Today: "If Bob Dudley was to leave [bP] it would be for a competitive company and remuneration would be part of the discussion. If you operate in a global market, you have to operate on a global scale."

BP was now in a far better position than when Mr Dudley took the helm, he said.

After the Gulf of Mexico oil disaster, BP's share price collapsed and it was forced to sell off assets worth billions of pounds to pay costs, fines and compensation.

However, the collapse in the oil price over the past 18 months saw BP's profit tumble, and the company is axing another 3,000 jobs worldwide on top of the 4,000 cuts already announced.

A spokesman for BP said shareholders themselves had backed the pay formula.

"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.

"And these clear measures derive directly from BP's remuneration policy which was approved by shareholders at the 2014 AGM with over 96% of the vote," the spokesman said.

 

[DJ Barry Hammond]

I think the problem can be traced to the fact that the majority of share ownership these days tends to be through third party collectives for individuals meaning these votes don't undergo any real scrutiny until something gastly horrible like this happens.

As wrong as this is, it's very difficult to legislate against this happening without being seen as an interfering and regressive government, but clearly the main area of checks and balances (share holder voting) is largely broken.

[Captain...]

What on earth can this guy bring to BP that  makes his salary worth £14m?

 

I'm sure he could live very well on £1m a year, even that is a ridiculous amount and the other £13m filters down to the rest of the work force.

 

I really would love to see a pay structure where the highest earners pay is capped in relation to the lowest earners, 10 x would be fair, lowest earners earn 12k pa, top level directors can earn a maximum of £120k. Record losses and job cuts and this guy is looking to get £14m, after already being paid a ridiculous amount for years, £14m is 1000 jobs at £14k a year (more than minimum wage).

[Rincewind]

Someone will justify it.

[leicsmac]

As Barry said, this was entirely approved through the shareholder voting system and as a privately traded company such payment is the business of only the shareholders and no one else. This might suggest that there might be something wrong with such systems in the big multinationals.

 

If BP was experiencing profit (or even marginal loss) and more importantly hadn't laid off thousands of jobs already with thousands more in the pipeline (no pun intended) then such remuneration might be considered sound; as it is, it looks pretty damn gross when thousands of everyday workers within BP are getting their P45's and the top dog is getting 14 mill.

 

As an aside, I wonder how much of that 14 mill is going to end up in the Caymans or the BVI and how much will actually show up on a tax return?

[DJ Barry Hammond]

http://www.theguardian.com/business/2016/apr/14/bp-pledge-shareholder-anger-ceo-bob-dudleypay-deal

So the pay deal was voted down... Will be interesting to see what happens next. I wonder what constitutes or triggers a vote of no confidence in the board?

[Bellend Sebastian]

Someone will justify it.

 

I've heard that he works really hard - sometimes even working through part of his lunch break, and when he forgot to bring his sandwiches in, he was too busy to pop out to the shop himself and got someone else who was going to the little Tesco's anyway to get him a wrap and a little tube of Pringles.

 

When it's home time, he doesn't have his coat on ready to leave on the dot like everyone else, but doesn't even turn his computer off until it's actually time to go, meaning he often leaves the office as much as 3 minutes after everybody else, so he sometimes has to turn the alarm on when leaving the building.

 

And some of you will begrudge him being paid an hourly rate of over £7,000.  I hope you're proud of yourselves

[MPH]

I've heard that he works really hard - sometimes even working through part of his lunch break, and when he forgot to bring his sandwiches in, he was too busy to pop out to the shop himself and got someone else who was going to the little Tesco's anyway to get him a wrap and a little tube of Pringles.

 

When it's home time, he doesn't have his coat on ready to leave on the dot like everyone else, but doesn't even turn his computer off until it's actually time to go, meaning he often leaves the office as much as 3 minutes after everybody else, so he sometimes has to turn the alarm on when leaving the building.

 

And some of you will begrudge him being paid an hourly rate of over £7,000.  I hope you're proud of yourselves

 

 

You forgot that he also has to have Tinder blocked on his work computer. Disgraceful! Surely thats worth a bob or two?

[Bellend Sebastian]

You forgot that he also has to have Tinder blocked on his work computer. Disgraceful! Surely thats worth a bob or two?

 

He doesn't have it blocked, he just chooses not to go on it that much

[Jon the Hat]

Two separate points, is the salary level excessive - and you look at that in the context of what he brings to the job.  On the face of it no one is worth that much, but having worked for a number of people in the £1-£5m pay bracket, there are in my experience a select group of people who can handle the level of pressure and expectation that it takes to functions and remain focuses on what you are trying to achieve at that level.  You can take the piss, but it is very very difficult to be successful running a company that size.  If people you trust with your company are few and far between then you would and do pay a lot of money to get the guy you want.  They know that, and of course are also very capable of negotiating an astounding salary package.

 

Second point is whether Bod Dudley did a good job and hence earned his pay rise.  You can of course point to the bottom line and note the loss BP suffered this year, however you also need to consider what his objectives where and whether he delivered on them.  He was tasked to reduce the operations of the business, and to cut costs among other things, which it seems he has done.  Also if he hit safety targets that is very important - the tone from the top is the key driver of delivering safe working environments.

 

So overall I would say looks nuts, but he is far from the highest paid out there, have done a good job in many respects bring BP back from the bring of failure after Deepwater horizon, and that have benefitted frankly anyone with a UK pension of savings fund.

 

There you go Ken, not that hard actually.

[Trav Le Bleu]

Classic Bellend!

 

 

 

 

Which works on two levels! ​

[DJ Barry Hammond]

But Jon - wouldn't you say his true success would only be seen over a longer term and so it should only be right any bonus / pay award be deferred to reflect that?

[Jon the Hat]

But Jon - wouldn't you say his true success would only be seen over a longer term and so it should only be right any bonus / pay award be deferred to reflect that?

 

Yes of course, but we don't have the details do we?  We have journalist adding up everything they can to make the largest number possible.  This could well be a combination of salary, short term incentives on in year delivery of safety, project and financial targets, plus the vesting of long term incentives from past years, share plans to align his personal finances with share value, and pension contributions.  I doubt very much the guy gets £14M in 12 monthly instalments in his bank account.

[Webbo]

Why do people care what other people earn? If this bloke was paid half that amount nobody on here would be a penny better off. I wish I was earning that.

[Guest MattP]

Presume those who find these wages absurd will be demanding we boot out Kante, Vardy and Mahrez etc next season?

They'll be waiting a multi million pound wage a year. Can't justify that.

[DJ Barry Hammond]

Yes of course, but we don't have the details do we? We have journalist adding up everything they can to make the largest number possible. This could well be a combination of salary, short term incentives on in year delivery of safety, project and financial targets, plus the vesting of long term incentives from past years, share plans to align his personal finances with share value, and pension contributions. I doubt very much the guy gets £14M in 12 monthly instalments in his bank account.

Well we do if we can be bothered to look as its a Public Company.

http://www.bp.com/en/global/corporate/investors/annual-general-meeting.html

Having looked through the prospectus, my reading of things suggests Dudley was paid significantly more than the guy he followed when he starred in 2010 and that his renumeration has consistently increased year or year. He's also received a high percentage of the maximum available bonus year on year, but 2015 was the first time he was awarded 100%.

[DJ Barry Hammond]

Ahhhhh - i see why the pay award was granted... because all of the areas the business failed on (like making a profit) weren't on the scorecard.

[Dodgy Bob]

Major company CEO's do seem like a bit of an old boys network. The chief exec at my current workplace (which employs several thousand people) was made into the CEO of a large company at the age of 24, which he spent ten years destroying. He then took on a few CEO positions at not for profits, appeared to doss around for several more years before joining my company as chief exec. He hasn't really done anything successfully in his career to date, but there he is turning up every few months in some chauffeur driven Bentley and taking his seven figure salary. How did he do it? By being educated at Eton and then Cambridge and knowing all the right people. And I suspect that's quite a common story.

This BP boss does look to have worked his way up a bit though, so he does have that in his favour. But I'd bet he's no more talented, intelligent or capable than hundreds of his employees who earn a fraction of what he does. It's all about opportunities in this world, and the world of opportunity is nowhere near meritocratic.

[Jon the Hat]

Ahhhhh - i see why the pay award was granted... because all of the areas the business failed on (like making a profit) weren't on the scorecard.

 

I am sure it was part of it, but there are a lot of reasons why companies make a loss, and who knows if in this case the loss might have been double or triple what it was without his leadership?  I would suggest the board are in a good position to assess that.  Have no doubt, if he was failing it would make them look bad and he would be gone overnight, albeit with a fat cheque.

[Jon the Hat]

To be fair to most of the senior guys I have worked with, they have a track record of success.   Of course some people get over promoted, but they don't last long. 

[davieG]

The company  for whom i worked for a number of years had several CEOs during a ten year period, none of them had any experience of the product or market we were in, they all came in full of 'big ideas' and promptly set about a programme of improvements/efficiencies. None of them stayed to see these changes to fruition and most of them did nothing to improve the business. 

 

Costs were cut by redundancies which were eventually replaced by new people who had to 'learn' the business.

 

We even got to a stage where some of the ideas were going back to how we used to work before.

 

Around the time I left one of the efficiencies was to make the H&S manager redundant, within 3 months they had to re-employ him because no one had the legally required qualifications to do his job.

 

During this time the workforce became more and more disillusioned and demotivated at the constant changes I really don't see how any of them justified their salaries.