BP 2011 Annual Report Download - page 147

Directors’ remuneration report
Directors’ remuneration report
BP Annual Report and Form 20-F 2011 145
Remuneration policy overview
Component Policy 2012 application
Salary Base salaries should be competitive relative to relevant market
peer groups.
Peer group for executive directors includes large European
multinationals and the oil majors.
Pension and other
benefits
Executive directors should participate in the normal pension and
benefit schemes applying in their home countries.
Both UK and US executive directors remain on defined benefit
pension plans reflecting respective national norms. 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.
Variable remuneration
Annual bonus Annual bonus should be based on performance relative to
measures and targets reflecting the annual plan.
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 2012 are:
• Safety and risk management (30%).
– Recordable injury frequency.
– Loss of primary containment.
– Process safety related major incident announcements
and high potential incidents.
• Rebuilding trust (20%).
– External reputation.
– Internal morale and alignment.
• Value creation (50%).
– Operating cash flow.
– Underlying replacement cost profit.
– Total cash costs.
– Gearing.
– Divestments.
– Upstream production efficiency.
– Upstream major project delivery.
– Refining and Marketing net income per barrel.
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.
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 2012-2014 share element will vest based equally on the
following three performance metrics:
• Total shareholder return versus oil majors.
• Operating cash flow.
• Strategic imperatives.
– Reserves replacement versus oil majors.
– Process safety.
– Rebuilding trust.
Personal
shareholding
in BP
Executive directors should develop significant personal
shareholding in order to align their interests with shareholders.
Executive directors are required to develop, and maintain, a
shareholding equivalent to five times salary, within a reasonable
time of appointment.