Investors angry about a golden goodbye for BP’s chief executive, Lord Browne, were planning to reject the company’s remuneration report at the annual meeting.
Some of the biggest institutional investors in the City of London, the British capital’s financial district, are understood to have contacted the oil company about its plan to allow Lord Browne to join a three-year reward scheme even though he will be leaving in July, only seven months into the performance period. He could receive a payout of up to £11-million in shares at the end of the three years if the company meets all the performance criteria attached to the plan.
The shareholders have warned BP, which has suffered a string of problems recently, that they will not support the remuneration report because they think the pay deal is overly generous and they are concerned about the precedent. “If we don’t stop it, this will set a new benchmark,” one shareholder said.
Some investors believe the rebellion could reach the scale of that suffered by GlaxoSmithKline (GSK) in 2003 when the government introduced votes on remuneration reports. GSK was the first company to have its remuneration report thrown out by investors. Although the shareholder vote is only advisory, it prompted the pharmaceutical company to review its entire pay policies.
BP shareholders are not trying to penalise Lord Browne for his performance or stop any of his entitlements under his contract after 40 years at the oil company. He is stepping down as BP chief executive at the end of July, 17 months earlier than planned, and will be replaced by Tony Hayward, BP’s head of exploration and production.
The BP annual report states that the remuneration committee has agreed Lord Browne can be granted shares under the 2007-to-2009 plan. The number of shares will depend on performance conditions relating to BP’s “financial, strategic and organisational health” as well as total shareholder return. The remuneration report said the committee had used its discretion to allow Lord Browne to join the scheme to ensure there was a long-term link between executives and the company. — Â