BP shareholders vote against £13.8m pay deal for chief Bob Dudley
Shareholders in oil giant BP gave the company's board a symbolic slap in the face when they voted to reject its remuneration report for the last year, which included a pay deal of 19.6 million dollars (£13.8 million) for chief executive Bob Dudley.
Almost 60% of shareholders rejected the report, which allowed Mr Dudley's pay package to rise by 20% on the previous year, despite the group posting its largest annual loss for 20 years and axing thousands of jobs worldwide.
The vote against the pay deal is only advisory as shareholders have no power to veto it and Mr Dudley has already been paid.
But the large percentage of those voting against it showed the depth of shareholder displeasure.
Just 40.71% of BP shareholders voted to approve the package, while 59.29% voted against it.
Chairman Carl-Henric Svanberg told the company's annual general meeting in London that Mr Dudley and his team had put in a "seriously impressive performance", particularly against a backdrop of falling oil prices in a volatile and fragile market.
But he faced difficult questions from shareholders, including one from a representative of the Church of England about the morality of rising pay, and from others about whether they were suitable in times of austerity.
BP has promised to review its remuneration policy ahead of next year's meeting, with new proposals due to be put forward for shareholder approval in 2017.
Professor Dame Ann Dowling, a non-executive director of BP, said she would personally engage with some of the major shareholders when carrying out the review.
She said: "We are going to review the remuneration policy to see how we can simplify it while retaining a strong link to long-term performance.
"We will certainly review the measures and criteria that we use to judge performance, including how in the future we deal with changes in oil price and also the link to shareholder value."
One shareholder, Bill Parker, questioned why Mr Dudley was paid a bonus for safety when it should be "inculcated in his job".
Dame Ann defended safety being part of the company's pay scheme, saying it is BP's "number one" element of strategy and that it "concentrates everybody's minds on just how important it is".
She added: "At this particular time where the company is restructuring and there is a lot of change going on, it would send a terrible message to say 'we've finished with safety, now the only thing we're worrying about is costs'."
Dame Ann also suggested that BP would "certainly consider" whether it could include an environmental measure within pay packages at group level.
Among the questioners was Adam Matthews, representing the Church of England's pensions board.
He said: "Given the context of headline performance from BP ... the question I ask is whether this level (of remuneration) is morally right and how much one person needs to be paid to be incentivised?"
Dame Ann said the company works in an "international market" and that pay levels have to "attract talented people to the company at all levels".
She said: "We don't aim to be the market leader and pay the most, but we have to be somewhere in the middle...
"We need to reward people appropriately to make sure that at all levels within the company we can attract the talented employees that are important to the future health of the company."
But shareholder Captain David Hawker called the AGM a "PR disaster" and said huge pay rises for bosses were wrong when normal people still faced tough times.
He said: "The situation today in this country and in much of Europe is austerity, and while so much of our population much accept austerity, it is not the time to increase directors' remuneration."
The pay hike for Mr Dudley came in a year when BP slumped into the red by 5.2 billion US dollars (£3.6 billion) following a collapse in oil prices.
But earlier in the AGM Mr Svanberg defended his chief executive, saying he had been judged not on oil prices or bottom line profit but rather on "measures that are clearly within management's control".
He said: "From that perspective, the board has concluded that it has been an outstanding year. The pay reflects this and it is consistent with our policy."
Mr Svanberg later refused to say whether the shareholders' rejection of the remuneration report was a slap in the face for the company, but said BP had taken on board their concerns.
He said: "There are concerns about how the pay policy works and we will bring back a renewed pay policy next year - that's in the making anyway.
"But because of this reaction we will of course sit down and make sure that we come up something that gets everybody's support."
Simon Walker, director general of the Institute of Directors, said BP cannot simply shrug off the shareholder disapproval at Mr Dudley's pay package.
He said: "How the board of BP reacts to this rebellion will determine the future of corporate governance in the UK."
He added: " 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."
Labour's shadow chancellor, John McDonnell, welcomed the move.
"The rejection by BP shareholders today of the director's eye-watering remuneration package is a welcome sign of ethical shareholder action, given the company is making large job cuts in other parts of the business.
"It further shows a sign of a growing revolt against the 'rewards for failure culture' that we have got so used to seeing at a boardroom level for far too long. Labour wants to encourage more shareholder activism, linking to trade union pressure, in order to secure increased accountability in our corporations," Mr McDonnell said.