More than a third of BP shareholders voted against the company's executive remuneration plan at yesterday's centenary annual general meeting (AGM), and nearly 5 per cent voted against the reappointment of the chairman.
Investors were supportive of annual packages that saw Tony Hayward, the chief executive, take home more than £2.5m in 2008, of which nearly £1.5m was a bonus. But the company's long-term executive incentive plan caused problems.
Using a formula that compares BP's shareholder returns with those of four rivals, the management should not be eligible to any extra money. But the company's 2008 performance was sufficiently improved from the year before that the remuneration committee allocated additional sums of £336,000 for Mr Hayward, £279,000 for Andy Inglis, the head of exploration and production, and $603,000 (£404,000) for Bryon Grote, the finance director. Some 37.6 per cent of shareholders registered their disapproval.
The AGM also saw nearly 5 per cent of investors vote against the reappointment of Peter Sutherland, the chairman, because of his role on the Royal Bank of Scotland (RBS) remuneration committee which approved the controversial £703,000-a-year pension for Sir Fred Goodwin, the bank's disgraced former chief executive.
Sir Tom McKillop, the former RBS chairman who also held a non-executive position on the BP board, formally stepped down today.
Last week Pensions Investment Research Consultants (Pirc), an investor advisory group, called for shareholders to vote down Mr Sutherland's reappointment because of his RBS connections. Pirc claimed that the Goodwin pension represented a "big governance failure" that left Mr Sutherland's suitability to lead BP's board open to question.
Although the vast majority of shareholders voted in favour of Mr Sutherland, there were outspoken critics at yesterday's meeting. One small investor said: "When Sir Tom's job is untenable, I do not understand why your job is not."
Mr Sutherland had been intending to step down at the end of 2008. But attempts to find a replacement ran into difficulties when the front runner – Rio Tinto's chairman, Paul Skinner – dropped out. Insiders claim that major BP shareholders were wary of Mr Skinner, given the mining giant's debt issues after its $40bn (£27bn), top-of-the-market purchase of Alcan in 2007. In February Mr Skinner officially announced his intention to remain at Rio, saying he wanted to help push through the controversial $19.5bn cash injection from Chinalco.
Despite the apparent repeat of last year's AGM farewell, Mr Sutherland confirmed yesterday that he will not stand for re-election again. "The board has asked me to stand for re-election this year even though, after 12 years as chairman, I was intending not to do so," he said. "This is not through any personal ambition on my own part, but because some more time has been required to complete our search for a successor. Let me reassure you that our search is now well advanced... and therefore this will now definitely, absolutely, conclusively be my last AGM."
The meeting was a surprisingly muted celebration of 100 years since BP's incorporation. The economic climate, the company's 5,000-strong headcount reduction programme, and Mr Hayward's desire to set himself apart from his ostentatious predecessor, Lord Browne, were behind the downbeat festivities.
Mr Hayward said: "We have been here for 100 years and our resolve is as strong as ever. I am confident that BP can face the next 100 years with pride and a renewed sense of purpose."
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