BP Investors Reject Boss's £13.8m Pay Packet

A majority of BP shareholders have rejected the company's pay report amid fury over a 20% rise in awards for chief executive Bob Dudley.

The result of the vote - at the company's AGM in London - was unexpected and represented one of the biggest investor backlashes since the so-called 'shareholder spring' of 2012 that hit several FTSE 100 firms and claimed the job of-then Aviva (Other OTC: AIVAF - news) boss Andrew Moss.

The focus of the anger, in BP's case, was on Mr Dudley's $19.6m (£13.8m) package for 2015 - a year that saw the oil firm record its biggest ever financial loss, axe thousands of jobs and endure further pressure on its share price.

The result of the vote is non-binding, meaning BP does not have to cut the award back and Mr Dudley is not obliged to repay anything but it sets the stage for showdown talks - promised by the company today.

It (Other OTC: ITGL - news) acknowledged shareholder anger when chairman Carl-Henric Svanberg told investors: "We hear you loud and clear".

He said the talks would develop a way forward but BP, which has previously defended the increase as being in line with pay policies agreed by investors in 2014, continued to argue that the award was justified following an "excellent" operating performance.

The vote resulted in a split of almost 60% rejecting the remuneration report.

Sky (LSE: BSY.L - news) 's City Editor Mark Kleinman said it was "extraordinary" and a "very chastening moment for the company in a year when it lost a lot of money".

Mr Dudley, who has led BP since the aftermath of the Gulf of Mexico oil spill in 2010, was awarded a $1.4m (£990,000) bonus for 2015, while the value of his pension pot increased by $6.5m (£4.6m).

The American's enhanced pay package came in the same year that BP cut about 5,000 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.

It blamed the collapse in world oil prices. BP's shares fell 13% in 2015 - a performance that damaged not only shareholder value but also hurt those of pension funds.

Shareholder group Sharesoc had branded Mr Dudley's pay deal as "simply too high" while other critics included Royal London Asset Management, Glass Lewis, Institutional Shareholder Services and the Institute of Directors.

Its director general, Simon Walker, said: "How the board of BP reacts to this rebellion will determine the future of corporate governance in the UK.

"The shareholders have spoken, and BP cannot shrug of this significant expression of disapproval with the CEO’s pay package.

"British boards are now in the last chance saloon, if the will of shareholders in cases like this is ignored, it will only be a matter of time before the Government introduces tougher regulations on executive pay."

BP's share price closed the day almost 2% lower on the FTSE 100.