Bob Dudley faces hit to pay package as BP bids to avoid fresh investor revolt
BP boss Bob Dudley has seen his pay package slashed by 40% for 2016 and his maximum earnings cut by 3.7 million US dollars (£3 million) over the next three years to see off a fresh shareholder rebellion.
The oil giant confirmed the new proposed pay deal will be "simpler and more transparent" and lead to "lower levels of reward" as it looks to avoid a repeat of last year's investor revolt.
Almost 60% of BP shareholders voted against a 20% hike in Mr Dudley's pay to nearly 20 million US dollars (£16 million) for 2015 despite the group posting its largest annual loss for at least 20 years and axing thousands of jobs worldwide.
The group's latest annual report revealed that Mr Dudley's pay package was cut to 11.6 million US dollars (£9.3 million) last year.
Under the new pay proposals, his total potential annual earnings for the next three years, excluding pension payments, have been cut from 19 million US dollars (£15.2 million) to 15.3 million US dollars (£12.3 million).
This is largely after BP reduced his maximum payouts under the long-term incentive plan from a staggering seven times basic salary to five times, while targets for the annual bonus have also been made more stretching.
But the pay plans will have to be passed by shareholders at the group's annual general meeting, set to be held on May 17.
Professor Dame Ann Dowling, chairwoman of BP's remuneration committee, said: "After a thorough review and extensive shareholder engagement, we believe the new policy is simpler, more transparent and has strategic focus."
BP also confirmed that Mr Dudley's annual salary will remain unchanged at 1.9 million US dollars (£1.5 million) in 2017 and said he has not received a salary rise since July 2014.
But chief financial officer Dr Brian Gilvary's salary will rise by 3.8% to £759,000 after he took on wider responsibilities last year.
The group said employees at a management level in the group - representing around 22% of its workforce - saw their pay rise by 3.5% on average last year, while bonuses fell 7.6%.
Mr Dudley's pay cut comes after BP became one of the victims of a wave of shareholder protests over executive rewards last year, when pay plans were voted down at seven US companies and three of the UK's largest groups.
While the votes were only advisory, government changes mean a raft of FTSE firms will be subject to binding votes on play plans at this year's round of annual general meetings.
BP's climbdown on pay also comes after it remained in the red for a second year in a row in 2016, posting replacement cost losses of 999 million US dollars (£802 million) for 2016 as oil prices languished at a 12-year low of 44 US dollars a barrel.
But it said on reporting figures in February that a recent rebound in oil prices should help it stage a turnaround in 2017.
BP said in its annual report the remuneration committee used its "discretion" to cut Mr Dudley's cash-and-shares bonus last year by 40% to 2.5 million US dollars (£2 million).
His package also included 3.7 million US dollars (£3 million) of potential long-term performance shares, down from 6.9 million US dollars (£5.5 million) in 2015.
One of BP's major shareholders, Royal London Asset Management, hailed the group's pay policy overhaul as a "milestone" decision that should set an example for other companies.
Ashley Hamilton Claxton, corporate governance manager at RLAM, said: "We applaud the BP remuneration committee for being proactive in responding to the shareholder revolt last year and see this as a milestone in the engagement between companies and shareholders.
"In particular, the committee applied discretion to override the formulaic outcome of the pay policy, which is a welcome step in the right direction."