BP Courts Investors Over Pay Reforms After Humiliating Revolt

BP is sounding out top investors on a new boardroom pay policy after a humiliating revolt this year saw a majority of shareholders vote against a £14m package for its chief executive.

Sky News has learnt that the FTSE-100 oil company has begun meeting investors in recent days to discuss proposals that will be put to a binding vote at next year's annual general meeting.

Precise details of the plans were unclear on Thursday, although City sources said BP's remuneration committee chairman, Dame Professor Ann Dowling, had expressed a wish to avert a repeat of the row which thrust Bob Dudley's pay deal into the headlines in April.

One insider suggested, however, that Dame Ann had raised eyebrows by hinting at the need for a new incentive scheme for BP managers in the US, many of whom have seen little or no return from previous schemes as the company battled to repair its finances in the aftermath of the Gulf of Mexico oil spill in 2010.

Last month, BP took a $5.2bn charge related to the Deepwater Horizon accident, in which 11 people were killed, and said its final bill for the disaster would be $61.6bn.

Mr Dudley was paid almost £14m last year despite the fact that BP cut about 5000 jobs, including hundreds at its North Sea operations, and reported its biggest-ever annual loss - $5.2bn (£3.7bn) on a replacement cost basis, a measure used widely across the oil industry.

At its AGM in April, nearly 60% of investors opposed BP's remuneration report - a vote which was advisory rather than binding and had no bearing on the ultimate payout to Mr Dudley.

The revolt triggered criticism of BP by the Institute of Directors, which warned that companies were in the "last-chance saloon" to avert a more draconian crackdown on executive pay.

Just days before she became Prime Minister, Theresa May signalled that she wanted to tackle executive pay by giving shareholders more powerful binding votes, although the details of her plans have yet to emerge.

Investors currently get a binding vote on forward-looking pay policy every three years under reforms introduced by Sir Vince Cable, the former Business Secretary.

BP said at the time of the AGM revolt that its top team had "performed strongly in a difficult environment in 2015, managing the things they could control and for which they were accountable".

The company added:

"Their remuneration is primarily based on true underlying performance, not factors over which the executives have no control.

"The annual cash bonus is based on measures directly linked to BP's strategy, and results were strong across all measures.

"Safety and operational risk performance was excellent and BP responded quickly and decisively to the drop in the oil price."

Shareholders were nevertheless angered that Mr Dudley's total pay had risen by 20% during the year, prompting independent voting advisors to recommend that investors opposed the package.

Sources said that the meetings on a new executive pay policy were being led by Dame Ann, suggesting that she will remain in her role as the remuneration committee chair, against the wishes of some shareholders.

BP is also continuing to use Gerrit Aronson, a long-standing remuneration adviser to the company's chairman, Carl-Henric Svanberg, to help devise the new proposals, the sources added.

Dame Ann was re-elected to the board this year with more than 98% of voting investors doing so in favour.

In a statement to Sky News, a BP spokesman said:

"We said at the AGM that we would engage with our major shareholders over the coming months.

"That process is underway."