BP 2015 Annual Report Download - page 82

Total remuneration in more depth
The committee, in seeking a fair outcome for pay, has for many years
sought to ensure that variable pay is based primarily on true underlying
performance and is not driven by factors over which the directors have no
control. Accordingly, the committee normalizes for changes in oil and gas
price and refining margins. Other factors such as major divestments and
contributions to the Gulf of Mexico restoration made in the year are also
taken into consideration. In the light of the substantial drop in the price of
oil during the three-year plan, the committee has been focused on
ensuring that its approach to normalization has been consistent with our
previous approach.
Salary and benefits
Base salary
No increases were granted to executive directors for 2015, in line with
the group-wide salary freeze, therefore the 2015 salaries remained
unchanged from 1 July 2014: $1,854,000 for Bob Dudley and £731,500
for Dr Brian Gilvary.
2016 implementation
The committee reviewed executive directors’ salaries in January 2016.
Given the continuing low oil price environment, no increases will be applied
to executive directors’ salaries for 2016.
Benefits
Executive directors received car-related benefits, security assistance,
insurance and medical benefits.
Annual bonus
Framework
The committee determined performance measures and their weightings
for the 2015 annual bonus at the beginning of the performance year. The
2015 bonus plan was set in the context of the group’s strategy and
short-term imperatives. It focused on two key priorities: safety and value.
Targets for each measure were challenging but realistic and were set in the
context of the current price and industry environment. Targets for the value
measures were based upon the annual plan. Threshold and maximum
were set on a linear scale around the target.
Continued improvement in safety performance remains a key focus area
and a group priority, particularly given the need to simplify the business.
Safety made up 30% of total bonus. Safety measures included loss of
primary containment, tier 1 process safety events★ and recordable injury
frequency. Challenging targets were set, both to build on the improving
trend of the last three years and to continue to reduce the number of
safety events.
2015 annual cash bonus
Measures
Safety Value
Loss of
primary
containmenta
Tier 1
process
safety events
Recordable
injury
frequencyb
Operating
cash flow
Underlying
replacement
cost profit
Net
investment
(organic)
Corporate
and functional
costs
Major
project
delivery
Total
bonus score
Weight
On target
Maximum
10%
20% 10% 20% 10% 20% 20% 40% 20% 40% 15% 30% 10% 20% 5% 10% 100% 200%
Weighted
outcome % 20 20 20 36 40 30 20 5
191% =
score
1.91
Target
Met
Not met
Group key
performance
indicator
Final score
based on
committee
judgement
1.70
Maximum 215
events
20
events
0.235/
200k hours $19.7bn $5.0bn -24% 11.8% improvement 6 projects
Plan/target 253
events
29
events
0.261/
200k hours $17.2bn $4.2bn -18% 5.9% improvement 4 projects
Threshold 291
events
38
events
0.287/
200k hours $14.7bn $3.4bn -7% No improvement 2 projects
Outcome 208
events
20
events
0.223/
200k hours $19.1bn $5.9bn -27% 17.6% improvement 4 projects
a Adjusted in accordance with the treatment of the LOPC KPI on page 20. Full LOPC is 235.
b Recordable injury frequency excludes biofuels.
5%
40%
36%
30%
20%
20% 20% 20%
BP Annual Report and Form 20-F 201578