BP Dumps Veteran Pay Adviser After £14m Dudley Row

BP has ditched its long-standing adviser on executive pay in the wake of a stinging shareholder revolt which led to a majority vote against its boss's £14m package earlier this year.

Sky News has learnt that the oil giant has ended its relationship with Gerrit Aronson, who had earned hundreds of thousands of pounds for his work there in the last three years, and appointed consultants at Deloitte in his place.

Towers Watson, which had been helping to advise BP on remuneration benchmarking, has also ceased working with the company.

The decision is understood to have been made in May but will not be publicly disclosed until BP's 2016 annual report is published next year.

BP's move to sever ties with Mr Aronson followed a storm of negative headlines which threatened to engulf Dame Professor Ann Dowling, the non-executive who chairs the company's remuneration committee.

It emerged as BP is holding talks with leading shareholders about a new pay policy, which will be tested by a binding vote at its 2017 AGM.

Mr Aronson had worked with the company for many years, but had courted controversy by declining to sign up to a voluntary code for remuneration consultants.

A spokesman for BP confirmed to Sky News that Deloitte had been hired "to provide the committee with advice, particularly on benchmarking", adding that its board members remained responsible for decisions made on pay policy issues.

"Gerrit Aronson advised the committee for a number of years; BP is grateful for his work and advice," the spokesman added.

The shake-up of advisers comes as boardroom pay comes under greater scrutiny, with Theresa May, the Prime Minister, pledging a crackdown on corporate excess when she entered Downing Street.

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.

Bob Dudley, the company's chief executive, 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.

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".‎

"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 (Shanghai: 603028.SS - news) 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.

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