BP slashes CEO pay to appease investors

BP plans to cut CEO Bob Dudley’s maximum pay by as much as $3.7m over the next three years as the oil producer tries to avoid a repeat of 2016’s shareholder revolt.

Dudley will earn a maximum of five times his basic salary as part of the long-term incentive plan compared with seven times under the previous remuneration policy, BP said on Thursday. This would cut his maximum pay, excluding pensions, to $15.3m, from $19m. His total pay in 2016 fell 40% compared with the previous year, according to BP’s annual report.

A majority of BP shareholders in 2016 voted against Dudley’s 20% pay increase after the company reported a record net loss in 2015 and announced thousands of job cuts following the slump in oil prices. The revolt sparked investor discontent about compensation at other European companies.

BP, which had pledged to change the way it pays executives, will ask investors to approve the new policy in May.

“Last year’s remuneration vote was a clear message about how we manage executive pay,” Ann Dowling, chairman of BP’s remuneration committee, said in the report. “It is clear that shareholders and other stakeholders would like our remuneration policy to be simpler, more transparent, and to lead to reduced levels of reward.”

Dudley’s total compensation, including salary, bonus, shares and pension decreased 40% to $11.6m in 2016. His salary remained unchanged at $1.85m, the annual bonus dropped 39% to $2.55m and the contribution to pension and retirement benefits fell 66% to $2.2m.

Royal Dutch Shell boss Ben Van Beurden’s total pay in 2016 rose 54% to €8.59m, including a €1.46m salary, €2.4m in bonus and €4.38m in stock awards, according to the company’s annual report.

Europe’s biggest oil company amended its pay policy to better reward efforts to control emissions. Progress in cutting greenhouse gases from its refineries, and chemical plants and the burning of natural gas at its fields will determine 10% of executives’ bonuses.

This portion of the payout was previously based on a range of environmental measures including controlling oil spills and water use.

BP and Shell’s shareholders approve the remuneration policies every three years. BP’s annual shareholder meeting is scheduled for May 17, with Shell’s on May 23.

BP’s remuneration committee used its discretion under the new policy to reduce Dudley’s total pay, Dowling said in the annual report.

He will receive 61% of the total maximum annual bonus, compared with 100% the previous year. The payout linked to performance will also be 40% of the maximum for 2016 compared with about 74% in the previous year.

LAST YEAR’S REMUNERATION VOTE WAS A CLEAR MESSAGE ABOUT HOW WE MANAGE EXECUTIVE PAY