BP 2010 Annual Report Download - page 121

ctors’ remuneration report
Directors’remunerationreport
Dire

Servicecontracts
Director
    Contract Salaryasat
    date 31Dec2010
RWDudley 6Apr2009 $1,700,000
ICConn  22Jul2004 £690,000
DrBEGrote 7Aug2000 $1,380,000
Servicecontractshaveanoticeperiodofoneyearandmaybeterminated
bythecompanyatanytimewithimmediateeffectonpaymentinlieuof
noticeequivalenttooneyear’ssalaryortheamountofsalarythatwould
havebeenpaidifthecontracthadbeenterminatedontheexpiryofthe
remainderofthenoticeperiod.Theservicecontractsareexpressedto
expireatanormalretirementageof60(subjecttoagediscrimination).
DrGrote’scontractiswithBPExploration(Alaska)Inc.Heis
secondedtoBPp.l.c.underasecondmentagreementof7August2000,
whichexpiresatthedateofthe2012AGM.MrDudley’scontractiswith
BPCorporationNorthAmericaInc.HeissecondedtoBPp.l.c.undera
secondmentagreementof15April2009,whichexpireson15April2012.
Bothsecondmentscanbeterminatedbyonemonth’snoticebyeitherparty
andterminateautomaticallyontheterminationoftheirservicecontracts.
Therearenootherprovisionsforcompensationpayableonearly
terminationoftheabovecontracts.Intheeventoftheearlyterminationof
anyofthecontractsbythecompany,otherthanforcause(orundera
specicterminationpaymentprovision),therelevantdirector’sthencurrent
salaryandbenetswouldbetakenintoaccountincalculatinganyliabilityof
thecompany.Thecommitteewillconsidermitigationtoreduce
compensationtoadepartingdirector,whenappropriatetodoso.
Directorsleavingtheboard
MrInglisandDrHaywardsteppeddownfromtheboardon
31October2010and30November2010respectively.MrInglisremained
inemploymentonhisexistingsalaryandbenetsuntilceasing
employmenton31December2010;DrHaywardceasedemployment
on30November2010.
MrInglisandDrHayward,whowereemployedunderservice
contractswiththecompanydated1February2007and29January2003
respectively,wereeachentitledtooneyear’ssalary(£690,000and
£1,045,000respectively)onterminationascompensationinaccordance
withtheircontractualentitlements.DrHaywardwaspaidafurther£30,000
compensationinrespectofUKstatutoryemploymentrights.AsMrInglis
wasbasedinHouston,thecompanyagreed,inaccordancewithhis
internationalassignmentarrangements,tomakeapaymentof£200,000to
covervariousrepatriationandrelocationcosts.Thecompanyreimbursed
bothindividuals’legalfeesinconnectionwiththeirtermination
arrangements,andagreedtopaycertainoutplacementfeesinthecaseof
MrInglis.
Bothindividualswereeligibleforabonusfor2010basedonthe
achievementofbonustargetsandtheirperiodofserviceduringtheyear.
Thecommitteeconsideredbonusesfortheseindividualsatthesametime
asfortheremainingexecutivedirectorsand,forthereasonsexplained
above,determinedthatnobonusesshouldbeawarded.
Asregardslong-termincentives,bothindividualsretainedtheir
unvestedperformanceawardsundertheEDIPinrespectofthe2008-10,
2009-11and2010-12shareelementsandthesewillvestatthenormal
timetotheextenttheperformancetargetsaremet(butsubjectto
pro-ratingforserviceduringtheperformanceperiod).Furtherdetailsof
theseawardsaresetoutonpage117.Bothindividualsretainedtheir
outstandingshareoptionsassetoutinthetableonpage118.Theretention
shareawardgrantedundertheEDIPtoMrInglisin2008lapsedasaresult
oftheterminationofhisemployment.
Witheffectfrom1December2010,DrHaywardhasbeenengaged
byBPtoserveasanon-executivedirectorofTNK-BP,forwhichhewillbe
paidafeeof$150,000perannum.
Remunerationcommittee
DrJulius(chairman),MrBurgmans,MrDavidandMrDavisare
independentnon-executivedirectorsandwerecommitteemembersduring
theyear.Thechairmanoftheboardalsoattendsmeetings.Thegroupchief
executivewasconsultedonmattersrelatingtotheotherexecutive
directorswhoreporttohimandonmattersrelatingtotheperformanceof
thecompany;neitherhenorthechairmanwerepresentwhenmatters
affectingtheirownremunerationwerediscussed.MrBurgmanswill
becomechairmanofthecommitteefollowingDrJulius’sretirementatthe
2011AGM.
Theremunerationcommittee’stasksare:
• Todetermine,onbehalfoftheboard,thetermsofengagementand
remunerationofthegroupchiefexecutiveandtheexecutivedirectors
andtoreportonthesetotheshareholders.
• Todetermine,onbehalfoftheboard,mattersofpolicyoverwhichthe
companyhasauthorityregardingtheestablishmentoroperationofthe
company’spensionschemeofwhichtheexecutivedirectorsare
members.
• Tonominate,onbehalfoftheboard,anytrustees(ordirectorsof
corporatetrustees)ofthescheme.
• Toreviewandapprovethepoliciesandactionsbeingappliedbythe
groupchiefexecutiveinremuneratingseniorexecutivesotherthan
executivedirectorstoensurealignmentandproportionality.
• Torecommendtotheboardthequantumandstructureofremuneration
forthechairman.
Constitution and operation
Eachmemberoftheremunerationcommitteeissubjecttoannual
re-electionasadirectorofthecompany.Theboardconsidersallcommittee
memberstobeindependent(see page 95).
Theyhavenopersonalnancialinterest,otherthanasshareholders,
inthecommittee’sdecisions.
Thecommitteemetsixtimesintheperiodunderreview.
Thecommitteeisaccountabletoshareholdersthroughitsannual
reportonexecutivedirectors’remuneration.Itwillconsidertheoutcomeof
thevoteattheAGMonthedirectors’remunerationreportandtakeinto
accounttheviewsofshareholdersinitsfuturedecisions.Thecommittee
valuesitsdialoguewithmajorshareholdersonremunerationmatters.
Advice
MrAronson,anindependentconsultant,isthecommittee’ssecretaryand
independentadviser.AdvicewasalsoreceivedfromMrJackson,the
companysecretary,andfromthecompanysecretary’sofce,whichis
independentofexecutivemanagementandreportstothechairmanof
theboard.
Thecommitteealsoappointsexternaladviserstoprovidespecialist
adviceandservicesonparticularremunerationmatters.Theindependence
oftheadviceissubjecttoannualreview.
In2010,thecommitteecontinuedtoengageTowersWatsonasits
principalexternaladviser.TowersWatsonalsoprovidedotherremuneration
andbenetsadvicetopartsofthegroup.
FresheldsBruckhausDeringerLLPprovidedlegaladviceon
specicmatterstothecommittee,aswellasprovidingsomelegaladvice
tothegroup.
BPAnnualReportandForm20-F2010 119