Extract from IDS Executive Compensation Review 326

Business performance cuts executive pay at BP

In recent years, critics of executive remuneration arrangements in UK companies have pointed to the many examples of bonus and incentive schemes paying out ever greater sums to participants. But now, against a background of continued warnings about the economy, this article takes a look at how BP’s directors failed to qualify for awards under its long-term incentive plan this year.

Bonus awards constrained by disappointing financial results, shares failing to vest under the directors’ incentive plan and a new group chief executive paid a basic salary less than two-thirds of the predecessor’s rate. This picture of current executive pay at BP suggests that, contrary to common perceptions, the only way is not always up when it comes to directors’ remuneration. At BP, remuneration policy for executive directors aims to ‘ensure there is a clear link between the company’s purpose, its business plans and executive reward, with pay varying with performance’. Remuneration is made up of different components, and in addition to salary, directors’ are eligible for annual bonus awards and long-term incentives. This article looks at the performance measures and targets for the 2007 awards and whether they were met and tables provide information on the remuneration levels of directors as well as long-term incentive scheme awards.