BP 2006 Annual Report Download - page 70

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Directors’ remuneration report
This is the board’s report to shareholders on directors’ remuneration.
It covers both executive directors and non-executive directors. The first
and third parts were prepared by the remuneration committee. The
second part was prepared by the company secretary on behalf of the
board. The report has been approved by the board and signed on its
behalf by the company secretary. The report is subject to the approval
of shareholders at the annual general meeting (AGM).
Contents
Part 1 Executive directors’ remuneration 68
Letter to shareholders
2006 remuneration
Remuneration policy
Salary
Annual bonus
Long-term incentives
Pensions
Service contracts
Part 2 Non-executive directors 72
Part 3 Additional statutory and other disclosures 73
Historical TSR performance graph
Pensions table
Share element of EDIP and LTPPs table
Share options table
Part 1 – Executive directors’ remuneration
Dear Shareholder
Executive directors’ remuneration for 2006 reflects a clear set of principles, set out in the pages that follow. At their heart is the importance of matching
reward to performance, in a way that both reflects shareholders’ interests and provides fair and competitive compensation to the executives.
As described elsewhere, 2006 was a year of strong financial performance for the group. A number of strategic and operational milestones were
attained. However, the year also brought serious challenges and in key operational and safety areas company performance fell short of expectations.
The remuneration committee has carefully evaluated performance against the quantitative measures set at the beginning of the year. We also
made a qualitative assessment of the effect on the company and its reputation of adverse events and developments in the year. The executive team
responded to these challenges with determination and a sincere commitment to implement the lessons learned. However, taking a balanced judgement
on the year, the remuneration committee halved the bonuses that would have resulted directly from their quantitative assessment. This, and all other
remuneration received, is shown on the following page.
We have made some changes to the style and format of the remuneration report this year in order to make it easier to read and understand. Our aim
has been to set out clearly the principles and policy on which we base executive directors’ remuneration, as well as the figures for 2006. In addition,
full details of arrangements agreed for Lord Browne’s retirement later in 2007 and information on recent changes in remuneration for Dr Hayward and
Mr Inglis are included in the relevant sections.
Dr D S Julius
Chairman, Remuneration Committee
23 February 2007