BP plc shareholders staged a rare protest at the usually sedate annual meeting in London Thursday, roundly rejecting a decision to increase CEO Bob Dudley's 2015 compensation by 20%, despite massive job cuts and record losses.
The 59.11% vote to oppose the pay raise was nonbinding, which means Dudley still is eligible to receive the more generous compensation package, calculated at around $20 million total for 2015. However, Chairman Carl-Henric Svanberg ensured that he understood shareholder anger.
"It is a message, and we listen very carefully and we will continue to do so," Svanberg said. "The remuneration policy is up for renewal next year regardless, but this means we will be much more careful and listen very carefully. We want to make sure we come back with something that is acceptable." The "real concern among shareholders about remuneration this year is clearly demonstrated by this vote. We have already spoken to a number of shareholders and they are seeking changes to our remuneration policy for the future. We will continue this engagement and bring a revised policy" to the next annual meeting.
"Let me be clear. We hear you," Svanberg told investors. "We will sit down with our largest shareholders to make sure we understand their concerns and return to seek your support for a renewed policy."
Shareholder Royal London Asset Management Ltd. had said it would vote against the compensation package, calling it "unreasonable and insensitive" during the oil crash. The pay increase sent the "wrong message” to investors and other companies, said the UK Institute of Directors,
Dudley received a $1.4 million cash bonus in 2015, versus $1 million in 2014, and his retirement package was doubled year/year to $6.5 million, according to the annual report. Meanwhile, executive management salaries were frozen and are to remain static this year. Dudley's annual salary of $1.9 million was about the same as in 2014.
Management also signaled at the meeting that it may reduce the dividend as low oil prices threaten investor payouts across the industry. Svanberg did not say a payout reduction was in the works, but he said the company would take action if oil prices remain low.
"Our goal is to maintain the dividend but at the same time we must secure the future by investing wisely," he said. "Be assured that we keep this balance under regular review. Should the oil price remain lower, longer than expected, we will need to revisit our financial framework."
Several large operators, including super independent ConocoPhillips have reined in dividends, while others, such as Chesapeake Energy Corp., have canceled them until market conditions improve.
During the first quarter conference call, BP CFO Brian Gilvary had assured that the dividend "remains sustainable," but he acknowledged that it could be under pressure if the company's view of the market changed (see Daily GPI, Feb. 2).