BP 2010 Annual Report Download - page 116
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Please find page 116 of the 2010 BP annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Directors’remunerationreport
Part2Executivedirectors’
remuneration
2010remuneration
Salary
MrDudley’ssalarywasincreasedto$1,700,000onhispromotionto
groupchiefexecutiveinOctober2010.TheLondonaccommodation
providedtohimceasedattheendof2010.Nootherexecutivedirector
hadasalaryincreasein2010.
Annual bonus
The2010annualbonusresultsweredramaticallyaffectedbytheGulfof
Mexicoaccident.Inthejudgementofthecommitteeandthegroupchief
executivethisoverrodethenormalmetricsforbonusoutcomes.As
indicatedinthetableonpage112,nobonuswaspaidtoMrDudley,
DrHaywardorMrInglisfor2010.MrConnandDrGrotesimilarlyreceived
nobonusfortheirgroupportionandwerelimitedtoan‘on-target’levelfor
theirsegment/functionalportion(accountingfor30%oftheiroverall
bonusopportunity).Bothofthesemetorexceededtargetsandmade
importantcontributionstothestabilizationofthebusinessfollowingthe
accident.
ThetotalbonustoMrConnwas£310,500andtoDrGrote
$621,000.Ofthetotalforeach,one-thirdispaidincash,one-thirdis
deferredonamandatorybasisandone-thirdispaideitherincashor
voluntarilydeferredattheindividual’sdiscretion.Theseamountsare
showninthetableonpage112.
Deferred bonus
One-thirdofthebonusawardedtoDrGroteandMrConnisdeferredinto
sharesonamandatorybasisunderthetermsofthedeferredbonus
element.Theirdeferredsharesarematchedonaone-for-onebasisandwill
vestinthreeyearscontingentonanassessmentofsafetyand
environmentalsustainabilityoverthethree-yeardeferralperiod.
Bothindividualsmayelecttodeferanadditionalthirdintoshares
onthesamebasisasthemandatorydeferral.
Alldeferredbonusesareconvertedtosharesbasedonanaverage
priceofBPsharesoverthethreedaysfollowingthecompany’s
announcementof2010results(£4.84/share,$46.68/ADS).
2008-2010 share element
Resultsforthe2008-2010shareelementwerealsostronglyaffectedby
theGulfofMexicoaccident.BP‘sTotalShareholderReturn(TSR)forthe
three-yearperiodwaslowestamongthepeergroupofoilmajors.The
company‘sunderlyingperformancerelativetothepeergroupactually
remainedquitestrongonthemetricshistoricallyusedtotestthefairness
oftheTSRresult.Thecommitteefelt,however,thatbecauseofthe
seriousnessoftheGulfofMexicoaccident,theTSRrankingwasan
appropriateresult.Noshares,therefore,vestedundertheplanforany
executivedirector.
2011remunerationpolicy
Thebasicprinciplesthatguideremunerationpolicyforexecutive
directorsinBPinclude:
• Asubstantialportionofexecutiveremunerationshouldbelinkedto
successinimplementingthecompany’sbusinessstrategyto
maximizelong-termshareholdervalue.
• Thestructureofpayshouldreectthelong-termnatureofBP’s
businessandthesignicanceofsafetyandenvironmentalrisks.
• Performanceconditionsforvariablepayshouldbesetindependently
bythecommitteeattheoutsetofeachyearandassessedbythe
committeebothquantitativelyandqualitativelyattheendofeach
performanceperiod.
• Performanceassessmentshouldtakeintoaccountmaterialchanges
inthemarketenvironment(predominantlyoilprices)andBP’s
competitiveposition(primarilyvis-à-visotheroilmajors).
• Salariesshouldbereviewedannually,inthecontextofthetotal
quantumofpay,andtakingintoaccountbothexternalmarketand
internalcompanyconditions.
• Executivesshoulddevelopandberequiredtoholdasignicant
shareholdingasthisrepresentsthebestwaytoaligntheirinterests
withthoseofshareholders.
• Theremunerationcommitteewillactivelyseektounderstand
shareholderpreferencesandbeastransparentaspossiblein
explainingitsremunerationpolicyandpractices.
Themajorityoftotalremunerationislongtermandvarieswith
performance,withthelargestelementssharebased,furtheraligning
interestswithshareholders.
Thecommitteereviewsthepaypolicyandlevelsforexecutives
belowboard,aswellaspayandconditionsofemployeesthroughoutthe
group.Theseareconsideredwhendeterminingexecutivedirectors’
remuneration.
Salary
Thecommitteenormallyreviewssalariesannually,takingintoaccount
otherlargeEurope-basedglobalcompaniesaswellasrelevantUS
companies.Thesegroupsareeachdenedandanalysedbythe
committee’sindependentremunerationadvisers.
MrDudley’scurrentsalaryof$1,700,000willremainunchanged
in2011.BothMrConnandDrGrote,wholastreceivedsalaryincreases
inJuly2008,willhavetheirsalariesincreasedeffective1April2011.
MrConn’snewsalarywillbe£730,000(from£690,000)andDrGrote’s
willbe$1,442,000(from$1,380,000).
Annual bonus
Bonusmeasuresandlevelsofeligibilityaresetatthestartoftheyear
fortheseniorleadershipincludingexecutivedirectors.Theapproachfor
2011alignscloselywiththegrouptemplateforreinforcingsafetyand
riskmanagement,rebuildingtrustandreinforcingvaluecreation.There
isabalanceoflong-termandnear-termobjectivesweightedtowards
thetopprioritiesofriskidenticationandmanagement,safetyand
compliance,andtalentandcapabilitydevelopment.Groupmeasuresfor
executivedirectorswillfocuson:
• Safetyandoperationalriskmetrics–includingfullimplementationof
theS&ORfunctionalmodel.
• Short-termperformance–includingkeynancialandoperatingmetrics.
• Long-termperformance–includingprogressonkeyprojectsand
reservesreplacement.
• People–includinganewperformanceandrewardframework.
114BPAnnualReportandForm20-F2010