BP Cuts CEO’s Maximum Pay by $3.7 Million to Appease Investors

(Bloomberg) -- BP Plc plans to cut Chief Executive Officer Bob Dudley's maximum pay by as much as $3.7 million over the next three years as the oil producer tries to avoid a repeat of last year's shareholder revolt.

Dudley will earn a maximum of five times his basic salary as part of the long-term incentive plan compared with seven times under the previous remuneration policy, London-based BP said Thursday. This would cut his maximum pay, excluding pensions, to $15.3 million from $19 million. His total pay in 2016 dropped 40 percent compared with the previous year, according to BP's annual report.

A majority of BP shareholders last year voted against Dudley's 20 percent pay increase after the company reported a record net loss in 2015 and announced thousands of job cuts following the slump in oil prices. The revolt sparked investor discontent about compensation at other European companies. BP, which had pledged to change the way it pays executives, will ask investors to approve the new policy next month.

“Last year's AGM remuneration vote was a clear message about how we manage executive pay,” Ann Dowling, chairman of BP's remuneration committee, said in the annual report. “It is clear that shareholders and other stakeholders would like our remuneration policy to be simpler, more transparent, and to lead to reduced levels of reward.”

Dudley's total compensation, including salary, bonus, shares and pension, decreased 40 percent to $11.6 million last year, according to BP's annual report published Thursday. His salary remained unchanged at $1.85 million, the annual bonus dropped 39 percent to $2.55 million and the contribution to pension and retirement benefits fell 66 percent to $2.2 million.

Royal Dutch Shell Plc boss Ben Van Beurden's total pay last year rose 54 percent to 8.59 million euros ($9.2 million), including a 1.46 million-euro salary, 2.4 million euros in bonus and 4.38 million euros in stock awards, according to the company's annual report.

Europe's biggest oil company amended its pay policy to better reward efforts to control emissions. Progress in cutting greenhouse gases from its refineries, chemical plants and the burning of natural gas at its fields will determine 10 percent of executives' bonuses. This portion of the payout was previously based on a range of environmental measures including controlling oil spills and water use.

BP and Shell's shareholders approve the remuneration policies every three years. BP's annual shareholder meeting is scheduled for May 17, with Shell's on May 23.

BP's remuneration committee used its discretion under the new policy to reduce Dudley's total pay, Dowling said in the annual report. He will receive 61 percent of the total maximum annual bonus, compared with 100 percent the previous year. The payout linked to performance will also be 40 percent of the maximum for 2016 compared with about 74 percent in the previous year.

To contact the reporter on this story: Rakteem Katakey in London at rkatakey@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Dylan Griffiths, Alex Devine