Times tough at BP, so chief ex­ec­u­tive gets raise

Houston Chronicle - - BUSINESS - Chris.tom­lin­son@chron.com

The CEO of oil gi­ant BP is get­ting a 20 per­cent raise in com­pen­sa­tion for man­ag­ing the com­pany through a dra­matic drop in share price, for lay­ing off thou­sands of em­ploy­ees and en­dan­ger­ing the com­pany’s div­i­dend.

I won­der what they would give him if BP’s per­for­mance ac­tu­ally im­proved?

BP’s board of di­rec­tors, who sup­pos­edly rep­re­sent share­hold­ers, ig­nored a non­bind­ing vote where 59 per­cent of those share­hold­ers said Dud­ley shouldn’t get the raise.

“Let me be clear. We hear you,” board chair­man Carl-Hen­ric Svan­berg said in ex­plain­ing why Dud­ley would get the money any­way.

Ap­par­ently the board can hear but doesn’t care what share­hold­ers think. So who does the board re­ally rep­re­sent?

That’s the real ques­tion that many in Bri­tain are ask­ing to­day, and one that re­mains open in the United States. How in­de­pen­dent are boards? Are they true rep­re­sen­ta­tives of share­hold­ers, or are they the man­age­ment team’s peers who run their own com­pa­nies and want their boards to be def­er­en­tial to them?

As for whether a CEO’s pay should be tied to per­for­mance, this episode at BP proves that’s laugh­able. CEOs get big raises when the oil

price goes up and the com­pany thrives, but they also get big raises when prices go down and thou­sands of peo­ple lose their jobs and share prices plum­met.

Svan­berg’s ex­pla­na­tion is that Dud­ley did a good job un­der tough cir­cum­stances. God for­bid a CEO should share in the pain felt by share­hold­ers and em­ploy­ees.

What makes Dud­ley’s com­pen­sa­tion hike even more out­ra­geous is that his salary was frozen along with other ex­ec­u­tives. To get around that com­pa­ny­wide pol­icy, the board boosted his bonus 40 per­cent over last year’s and dou­bled the pay­ment to his re­tire­ment fund.

Ask BP em­ploy­ees laid off in Hous­ton if they got a big bonus and a dou­bling of re­tire­ment ben­e­fits.

Cor­po­rate boards and ex­ec­u­tives have rigged the game so that they never suf­fer, un­til and un­less the com­pany goes bank­rupt. Even then, some CEOs will hand out bonuses with cred­i­tors bang­ing on the door.

If you still be­lieve that ex­ec­u­tive com­pen­sa­tion pack­ages at pub­licly traded cor­po­ra­tions do not re­quire greater govern­ment over­sight, then you are ei­ther one of those ex­ec­u­tives or you are naive with your money.

Many an­a­lysts be­lieve that BP will have to cut its div­i­dend if oil prices re­main low. Cut­ting costs dur­ing a down­turn is crit­i­cal for keep­ing that div­i­dend stable, and yet the board is giv­ing money away to Dud­ley. That’s money com­ing out of share­hold­ers’ pock­ets.

What hap­pened at BP is an­other case of the priv­i­leged pro­tect­ing them­selves at the ex­pense of the share­holder and the lit­tle guy. If I owned BP stock, which I prob­a­bly do in an in­dex fund some­where, I would feel ripped off.

CHRIS TOM­LIN­SON

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