BP 2010 Annual Report Download - page 117
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Please find page 117 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’ remuneration report
Directors’remunerationreport
MrDudley’sbonusin2011willbebasedentirelyongroupmeasures.
MrConnandDrGrotewillhave70%oftheirbonusbasedongroup
measuresand30%ontheresultsoftheirrespectivesegments.For
MrConnthesewillincludereningavailability,safetyandcostefciency.
ForDrGrotetheywillfocusonfunctionalcostsandsuccession.
Asinpastyears,inadditiontothespecicbonusmetrics,the
committeewillalsoreviewtheunderlyingperformanceofthegroupinlight
oftheoverallbusinessplan,competitors’results,analysts’reportsandthe
viewsofthechairmenoftheothercommittees.
Basedonthisbroaderview,thecommitteecandecidetoreduce
bonuseswherethisiswarrantedand,inexceptionalcircumstances,topay
nobonuses.
Deferred bonus
One-thirdoftheannualbonuswillbedeferredintosharesforthreeyears
andmatchedbythecompanyonaone-for-onebasis.Undertherulesofthe
plan,theaveragesharepriceoverthethreedaysfollowingannouncement
offull-yearresultsisusedtodeterminethenumberofshares.Both
deferredandmatchedshareswillvestcontingentonanassessmentof
safetyandenvironmentalsustainabilityoverthethree-yeardeferralperiod.
Ifthecommitteeassessesthattherehasbeenamaterialdeteriorationin
safetyandenvironmentalmetrics,ortherehavebeenmajorincidents
revealingunderlyingweaknessesinsafetyandenvironmental
management,thenitmayconcludethatsharesshouldvestinpart,ornot
atall.Inreachingitsconclusion,thecommitteewillobtainadvicefromthe
safety,ethicsandenvironmentassurancecommittee(SEEAC).
Executivedirectorsmayvoluntarilydeferafurtherone-thirdoftheir
annualbonusintoshares,whichwillbecapableofvesting,andwillqualify
formatching,onthesamebasisassetoutabove.
Wheresharesvest,theexecutivedirectorwillalsoreceive
additionalsharesrepresentingthevalueofthere-investeddividends.
Thisstructureofdeferredbonuses,paidinshares,placesincreased
focusonlong-termalignmentandreinforcesthecriticalimportanceof
maintaininghighsafetyandenvironmentalstandards.
Performance shares
TheshareelementoftheEDIPhasbeenafeatureoftheplan,withsome
modications,sinceitsinceptionin2000.Themaximumnumberofshares
thatcanbeawardedwillbe5.5timessalaryforthegroupchiefexecutive
andfourtimessalaryfortheotherexecutivedirectors.
Performanceshareswillonlyvesttotheextentthataperformance
conditionismet,asdescribedunderperformanceconditions.Inaddition,
thecommitteewillhaveanoverridingdiscretion,inexceptional
circumstances(relatingtoeitherthecompanyoraparticularparticipant)to
reducethenumberofsharesthatvest(ortoprovidethatnosharesvest).
Thecompulsoryretentionperiodwillalsobedecidedbythe
committeeandwillnotnormallybelessthanthreeyears.Togetherwiththe
performanceperiod,thisgivesexecutivedirectorsasix-yearincentive
structure,whichisdesignedtoensuretheirinterestsarealignedwiththose
ofshareholders.
Wheresharesvest,theexecutivedirectorwillreceiveadditional
sharesrepresentingthevalueofthere-investeddividends.
Thecommittee’spolicy,reectedintheEDIP,continuestobethat
eachexecutivedirectorbuildsasignicantpersonalshareholding,witha
targetofsharesequivalentinvaluetovetimessalary,withinareasonable
timefromappointmentasanexecutivedirector.
Performanceconditions
Performanceconditionsforthe2011-2013shareelementwillbealigned
withthestrategicagendathathasevolvedinresponsetolastyear’s
events.Thisfocusesonvaluecreation,reinforcingsafetyandrisk
management,andrebuildingtrust.
Vestingofshareswillbebased50%onBP’stotalshareholder
return(TSR)comparedtotheotheroilmajors,reectingthecentral
importanceofrestoringthevalueofthecompany.Afurther20%willbe
basedonthereservesreplacementratio,alsorelativetotheotheroil
majors,reectingacentralelementofvaluecreation.Thenal30%willbe
basedonasetofstrategicimperativesforrebuildingtrust;inparticular,
reinforcingsafetyandriskmanagementculture,rebuildingBP’sexternal
reputation,andreinforcingstaffalignmentandmorale.
Fortherelativemeasures,TSRandthereservereplacementratio,
thecomparatorgroupwillconsistofExxonMobil,Shell,Total,
ConocoPhillipsandChevron.Thisgroupcanbealteredifcircumstances
change,forexample,ifthereissignicantconsolidationintheindustry.
Whileanarrowgroup,itcontinuestorepresentthecomparatorsthatboth
shareholdersandmanagementuseinassessingrelativeperformance.
TheTSRwillbecalculatedasthesharepriceperformanceoverthe
three-yearperiod,assumingdividendsarere-invested.Allsharepriceswill
beaveragedoverthethree-monthperiodbeforethebeginningandendof
theperformanceperiod.TheywillbemeasuredinUSdollars.Thereserve
replacementratioisdenedaccordingtoindustrystandardspecications
anditscalculationisaudited.
Asinpreviousyears,themethodologyusedfortherelative
measureswillrankeachofthevecompetitorsoneachmeasure.BP’s
performancewillthenbecomparedtotheotherve.Performanceshares
foreachcomponentwillvestatlevelsof100%,70%and35%
respectively,forperformanceequivalenttorst,secondandthirdrank.No
shareswillvestforfourthorfthplace.Forperformancebetweensecond
andthirdorrstandsecond,thevestingpercentagewillbeinterpolated
basedonBP’sperformancerelativetothecompanyrankeddirectlyabove
andbelowit.
Theremaining30%ofvestingwillbebasedonabalanced
scorecardofstrategicimperatives.Thesewillcomprisesafetyandrisk
managementculture,externalreputation,andinternalstaffalignmentand
morale.Foreachofthese,specicmetricsderivedfromexternally
tabulatedsurveyswillbeusedtotrackprogress.Thisevidencewillbeused
bythecommittee,alongwithinputfromtheotherboardcommittees,to
judgeperformanceoneachmetric.Theresultswillbeexplainedinthe
subsequentdirectors’remunerationreport.
Thecommitteeconsidersthatthiscombinationofquantitativeand
qualitativemeasuresreectsthelong-termvaluecreationprioritiesofthe
companyaswellasthekeyunderpinningsforbusinesssustainability.Asin
previousyears,thecommitteemayexerciseitsdiscretion,inareasonable
andinformedmanner,toadjustvestinglevelsupwardsordownwardsifit
concludesthattheformulaicapproachdoesnotreectthetrueunderlying
healthandperformanceofBP’sbusinessrelativetoitspeers.Itwillexplain
anyadjustmentsinthedirectors’remunerationreportfollowingvesting,in
linewithitscommitmenttotransparency.
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