Monday, 26 March 2007

BP faces investor pressure over pay and safety

There is plenty of coverage today of the looming investor revolt at BP over executive remuneration arrangements. For example see the Grauniad, Indie and Telegraph.

There are two elements to investors' criticisms of BP - the structure of remuneration and the link to safety performance. On the first point, one of the key questions is why Lord Browne is being allowed to participate in the Executive Directors' Incentive Plan (EDIP), a long-term incentive scheme, when he will have left the company in a few months. In addition the potential rewards he gets when he leaves could be sizeable.

On the safety question, the Local Authority Pension Fund Forum (LAPFF) has argued that there is insufficient linkage between executive pay and management of safety issues. BP has said that in future safety factors will be taken into account when deciding annual bonuses. However bear in mind that, as I posted previously, the directors managed to take home 50% of their maximum annual bonus even in the wake of serious criticism from the Baker and CSB reports. LAPFF goes further and makes the point that if BP is serious that safety is a central and long-term issue for the business then why isn't it a factor in determining the directors' long-term incentives?

What can we expect at the AGM? Who knows. LAPFF only represents just over 1% of BP's shares, and the ABI and RREV have given the company's remuneration report the all-clear. However there are rumblings amongst other shareholders, including some from overseas. In addition one report suggested that the ECCR - a religious group active on CSR issues - may also got into bat on this one.

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