Times tough at BP, so chief executive gets raise
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.