BP 2012 Annual Report Download - page 138

Corporate governance
BP Annual Report and Form 20-F 2012
136
2013 remuneration policy
Overview
Remuneration policy summary
Component Policy and opportunity 2013 operation and performance metrics
Salary Base salaries should be competitive relative to relevant
market peer groups and are normally reviewed annually.
Salaries as at 1 January 2013 are: Bob Dudley $1,751,000,
Iain Conn £752,000, Dr Brian Gilvary £690,000 and Dr Byron
Grote $1,485,000.
Annual bonus Annual bonus should be based on performance relative
to measures and targets reflecting the annual plan, which
in turn reflects the strategic priorities of the company.
Achieving plan results should equate to on-target bonus.
On-target bonus is set at 150% of salary for executive
directors with a maximum of 225% of salary.
Bonus measures for 2013 are:
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– Loss of primary containment.
– Process safety tier 1 events.
– Recordable injury frequency.
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– Operating cash flow.
– Underlying replacement cost profit.
– Total cash costs.
– Upstream unplanned deferrals.
– Upstream major project delivery.
– Downstream net income per barrel.
No change from last year on safety and operational risk
management. Weight on value creation increased from 50%
last year by eliminating rebuilding trust as a measure.
Deferred bonus A portion of annual bonus should be paid in shares and
deferred to add long-term sustainability and shareholder
alignment to short-term performance achievement.
One-third of annual bonus is deferred on a mandatory basis
and a further one-third can be deferred on a voluntary basis.
All deferred shares are matched on a one-for-one basis.
All deferred and matched shares vest after three years
contingent on an assessment of safety and environmental
sustainability over the three-year deferral period.
No change from last year.
Performance shares A large portion of total remuneration for executive directors
should be tied to the long-term performance of the company.
Shares to a value of 5.5 times salary for the group chief
executive and 4 times salary for the other executive directors
are normally awarded annually.
Vesting of the shares after three years is dependent on
performance relative to measures reflecting the strategic
priorities of the company.
Those shares that vest are held for an additional three-year
retention period, after payment of tax on vesting.
The 2013-2015 share element will vest based equally on the
following three performance metrics:
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– Reserves replacement versus oil majors.
– Process safety.
– Major project delivery.
Executive directors are expected to develop a personal
shareholding of five times salary before shares are released.
No change from last year with the exception of major project
delivery replacing rebuilding trust as one of the strategic
imperatives, to align with strategy.
Pension and other
benefits
Executive directors should participate in the normal company
pension and benefit schemes applying in their home
countries.
Both UK and US executive directors remain on defined benefit
pension plans. UK directors, as for all UK employees who
exceed the annual allowance set by legislation, may receive a
cash supplement in lieu of future service pension accrual.
See pages 28-29 for how our bonus measures for 2012
and 2013 are directly linked to business KPIs.