BP 2008 Annual Report Download - page 83

BP Annual Report and Accounts 2008
Directors’ remuneration report
All the above measures will be compared with the five other oil majors to
determine the overall vesting result. The methodology used will rank each
of the five other majors on each of the measures. BP’s performance will
then be compared on an interpolated basis relative to the performance of
the other five. For performance between second and third or first and
second, the result will be interpolated based on BP’s performance
relative to the company ranked directly above and below it. As in previous
years, performance shares will vest at 100%, 70% and 35% for
performance equivalent to first, second and third rank respectively and
none for fourth or fifth place. The three underlying measures will be
averaged to form the balanced scorecard component.
The committee considers that this combination of measures
provides a good balance of external as well as internal metrics reflecting
both shareholder value and operating priorities. As in previous years, the
committee will exercise its discretion, in a reasonable and informed
manner to adjust vesting levels upwards or downwards if it concludes the
above quantitative approach does not reflect the true underlying health
and performance of BP’s business relative to its peers. It will explain any
adjustments in the next directors’ remuneration report following the
vesting, in line with its commitment to transparency.
Pensions
Executive directors are eligible to participate in the appropriate pension
schemes applying in their home countries. Additional details are given
in the table below.
UK directors
UK directors are members of the regular BP Pension Scheme. The core
benefits under this scheme are non-contributory. They include a pension
accrual of 1/60th of basic salary for each year of service, up to a
maximum of two-thirds of final basic salary and a dependant’s benefit of
two-thirds of the member’s pension. The scheme pension is not
integrated with state pension benefits.
The rules of the BP Pension Scheme were amended in 2006 such
that the normal retirement age is 65. Prior to 1 December 2006, scheme
members could retire on or after age 60 without reduction. Special early
retirement terms apply to pre-1 December 2006 service for members
with long service as at 1 December 2006.
Pension benefits in excess of the individual lifetime allowance set by
legislation are paid via an unapproved, unfunded pension arrangement
provided directly by the company.
Although Mr Inglis is, like other UK directors, a member of the
BP Pension Scheme, he is currently based in Houston, US. His
participation in the BP Pension Scheme gives rise to a US tax liability.
During 2008, the committee approved the discharge of this US tax liability
under a tax equalization arrangement in respect of the period since
Mr Inglis became a director in February 2007, amounting to $553,175.
US directors
Dr Grote participates in the US BP Retirement Accumulation Plan
(US plan), which features a cash balance formula. Pension benefits are
provided through a combination of tax-qualified and non-qualified benefit
restoration plans, consistent with US tax regulations as applicable.
The Supplemental Executive Retirement Benefit (supplemental
plan) is a non-qualified top-up arrangement that became effective on
1 January 2002 for US employees above a specified salary level. The
benefit formula is 1.3% of final average earnings, which comprise base
salary and bonus in accordance with standard US practice (and as
specified under the qualified arrangement), multiplied by years of service.
There is an offset for benefits payable under all other BP qualified and
non-qualified pension arrangements. This benefit is unfunded and
therefore paid from corporate assets.
Dr Grote is eligible to participate under the supplemental plan.
His pension accrual for 2008, shown in the table below, includes the
total amount that could become payable under all plans.
Other benefits
Executive directors are eligible to participate in regular employee benefit
plans and in all-employee share saving schemes and savings plans
applying in their home countries. Benefits in kind are not pensionable.
Expatriates may receive a resettlement allowance for a limited period.
As Mr Inglis is currently based in Houston, US, BP provides
accommodation in London.
Pensionsa
thousand
Additional pension
Accrued pension earned during the Transfer value of Transfer value of Amount of B-A less
Service at entitlement year ended accrued benefitc accrued benefitc contributions made by
31 Dec 2008 at 31 Dec 2008 31 Dec 2008b at 31 Dec 2007 (A) at 31 Dec 2008 (B) the director in 2008
Dr A B Hayward (UK) 27 years £561 £72 £7,986 £8,045 £9
I C Conn (UK) 23 years £264 £26 £3,375 £3,161 (£214)
Dr B E Grote (US) 29 years $868 $45 $7,901 $11,220 $2,860
A G Inglis (UK) 28 years £326 £30 £4,613 £4,399 (£214)
Directors leaving the board in 2008
Dr D C Allen (UK)d n/a £260 £12 £4,256 £5,580 £1,324
aThis information has been subject to audit.
bAdditional pension earned during the year includes an inflation increase of 4.0% for UK directors and 5.8% for US directors.
cTransfer values have been calculated in accordance with version 8.1 of guidance note GN11 issued by the actuarial profession.
dDr D C Allen retired on 31 March 2008 and commuted part of his pension for a lump sum. The figures above make no allowance for the payment of this lump sum. If allowance is made (in line with the
strict requirements of the regulations), and the transfer value at the end of the year is based on the pension in payment at that time, then the transfer value at 31 December 2008 would be £4.55 million
and the change in value over the year would be £0.29 million.
82