THE GUARDIAN (UK): Activists voice dismay at BP's pay plan for directors: “BP rival Shell is also talking to its major shareholders about the package for Jeroen van der Veer, the company's first chief executive. He earned less than £800,000 last year - mainly due to no bonuses being paid in the aftermath of the oil reserves scandal - but the company wants to put him on an even footing with other FTSE 100 chief executives. (ShellNews.net) 24 Feb 05
Terry Macalister
Thursday February 24, 2005
Shareholder activists are up in arms over plans by BP to introduce a more generous executive remuneration scheme at a time when the oil group is reporting sky-high profits.
The Pension Investor Research Council said yesterday that it was "unlikely" to support the latest pay package at the annual meeting on April 14 unless it was watered down.
Britain's biggest company, which has reported a sharp rise in annual profits on the back of soaring crude prices, has drawn up a new three-year executive directors' incentive plan.
Pirc revealed it had held meetings with BP at which there were "significant differences" between the two sides. "We advised them that we were unlikely to support their proposals," said Pirc yesterday.
A Pirc spokesman declined to give further details of its concerns but they are said to centre on proposals to pay out a big chunk of shares if BP delivered a "median" perfor mance compared with its rivals over the three years.
There is also understood to be concern that BP was opting for a single performance target - tied to total shareholder return relative to its peers - rather than the three targets in the previous plan, which used return on capital employed and earnings per share growth.
The chief executive, Lord Browne, earned a basic salary of £1.3m in 2003 but topped this up with a bonus to total £3.3m. There has been speculation that the new scheme, if adopted, could give him £4m in shares alone if BP came in near the top of its sector.
Sources said last night that BP had originally proposed paying out a maximum of 50% of the bonus if the company delivered a median performance. Following shareholder disapproval, the company has opted instead for a 35% cap and will take this proposal to the annual meeting. It is unclear whether this will persuade Pirc to withdraw its opposition.
BP rival Shell is also talking to its major shareholders about the package for Jeroen van der Veer, the company's first chief executive.
He earned less than £800,000 last year - mainly due to no bonuses being paid in the aftermath of the oil reserves scandal - but the company wants to put him on an even footing with other FTSE 100 chief executives.
Meanwhile the US securities and exchange commission rules, under which Shell was forced to change its reserves, were attacked yesterday for being outdated, unnecessarily conservative and not a realistic snapshot of future production.
A study by Cambridge Energy Research Associates suggested the SEC revamp its decades-old formula for measuring companies' underground assets. The study was partly funded by oil companies.
"We call it the 1978 system, because that's basically when it was fashioned, and it doesn't fit the oil and gas industry of the 2000s," said CERA chairman Daniel Yergin.