It has written to BP's chairman, Lord Ashburton, to demand that a resolution approving rules for the scheme, passed at the company's recent annual meeting, should be declared void.
The association is angry that shareholders were not given the opportunity to vote on criteria for setting performance targets that would have to be met before executives could exercise their options.
Guidelines published last July by the National Association of Pension Funds and the Association of British Insurers said shareholders should be told of performance targets before a scheme was approved.
At the annual meeting Lord Ashburton admitted there were shortcomings in the proposed rules and that the ABI had criticised them for not disclosing performance criteria. He said the rules would be corrected in time for shareholders to vote on them at next year's annual meeting.
But the UKSA wants BP to convene an emergency meeting as soon as possible to vote on a redrafted resolution.
Although a show of hands of those attending the annual meeting appeared evenly split between those supporting and opposing the resolution, the resolution was carried by a billion institutional proxy votes.
The association argues that there were, confusingly, two versions of the resolution. It says the wording in the notice of the meeting on which the proxies relied to vote said the scheme complied with NAPF- ABI guidelines.
But it insists that the wording on the agenda given to shareholders who attended the meeting contained no reference to the rules.
A BP spokesman said that following the annual meeting the scheme had been reviewed and the company was happy there were no shortcomings in it.
BP also denies there were two versions of the resolution, saying that the second version was an aide memoire for those attending without copies of the original resolution.
PIRC, the independent consultancy, says institutional investors should use their proxy power to vote against executive share option schemes except where they are open to all employees and a full valuation of the value of the options is given in the accounts.
In new guidelines on voting policies for insitutional shareholders, it also recommends that no more than a quarter of an auditor's fees should relate to non-audit work, that there should be separate individuals as chairman and chief executive and that all executive directors should face re-election.Reuse content