BP 2005 Annual Report Download - page 174

172 Making energy more
Part 2 – Non-executive directors’ remuneration
POLICY ON NON-EXECUTIVE DIRECTORS’ REMUNERATION
The board sets the level of remuneration for all non-executive
directors within the limit approved from time to time by shareholders.
In line with BP’s governance policies, the remuneration of the
chairman is set by the board rather than the remuneration committee,
since the performance of the chairman is a matter for the board as
a whole rather than any one committee.
The board has adopted the following policies to guide its
current and future decision-making with regard to non-executive
directors’ remuneration:
••• Within the limits set by the shareholders from time to time,
remuneration should be sufficient to attract, motivate and retain
world-class non-executive talent.
••• Remuneration of non-executive directors is set by the board and
should be proportional to their contribution towards the interests
of the company.
••• Remuneration practice should be consistent with recognized
best-practice standards for non-executive directors’ remuneration.
••• Remuneration should be in the form of cash fees, payable monthly.
••• Non-executive directors should not receive share options from
the company.
••• Non-executive directors should be encouraged to establish a
holding in BP shares broadly related to one year’s base fee, to
be held directly or indirectly in a manner compatible with their
personal investment activities, and any applicable legal and
regulatory requirements.
ELEMENTS OF REMUNERATION
Non-executive directors’ pay comprises cash fees, paid monthly,
with increments for positions of additional responsibility, reflecting
additional workload and consequent potential liability. For all
non-executive directors, except the chairman, a fixed sum allowance
is paid for transatlantic travel (or equivalent intercontinental travel)
undertaken for the purpose of attending a board or board committee
meeting. In addition, non-executive directors receive reimbursement
of reasonable travel and related business expenses. No share or share
option awards are made to any non-executive director in respect of
service on the board.
LETTERS OF APPOINTMENT
Non-executive directors have letters of appointment, which recognize
that, subject to the Articles of Association, their service is at the
discretion of the shareholders. All directors stand for re-election at
each annual general meeting.
NON-EXECUTIVE DIRECTORS’ ANNUAL FEE STRUCTURE
The fees paid to non-executive directors are set by the board within the
limit set by shareholders in accordance with the Articles. Shareholders
approved an increase to this limit in 2004. All fees are fixed and paid in
pounds sterling. Fees payable to non-executive directors were reviewed
in 2005 by an ad hoc board committee comprising Mr Bryan (chairman),
Dr Julius and Mr Burgmans. This ad hoc committee recommended
an increase in fees to reflect the increase in director workload as well
as increases in global market rates for independent/non-executive
directors, since these fees were last reviewed in 2002. The board duly
approved the recommended increases with effect from 1 January 2005.
£ thousand
2005 2004
Chairmana500a390
Deputy chairmanb100b85
Board member 75 65
Committee chairmanship fee 20 15
Transatlantic attendance allowancec55
aThe chairman is not eligible for committee chairmanship fees or transatlantic
attendance allowance but has the use of a fully maintained office for company
business and a chauffeured car.
bThe deputy chairman receives a £25,000 (2004 £20,000) increment on top of
the standard board fee. In addition, he is eligible for committee chairmanship
fees and the transatlantic attendance allowance. The deputy chairman is
currently chairman of the audit committee.
cThis allowance is payable to non-executive directors undertaking transatlantic
or equivalent intercontinental travel for the purpose of attending a board
meeting or board committee meeting.
LONG-TERM INCENTIVES (RESIDUAL)
The table on the next page sets out the residual entitlements of
non-executive directors who were formerly non-executive directors
of Amoco Corporation under the Amoco Non-Employee Directors’
Restricted Stock Plan.