Tony Hayward's salary surges to £4m as BP profits slump 45%

Published on Friday 5 March 2010 20:34

A BUMPER bonus helped the boss of oil giant BP notch up a 41 per cent rise in total pay over the past year, despite the company's profits plummeting by 45 per cent.

Tony Hayward, chief executive of Europe's largest oil company by production, took home 4.01 million in salary, cash bonus and share awards last year, up from 2.85m in 2008.

His performance-related pay jumped from 1.5m to 2.1m, which BP said reflected the "impressive achievements of the year and the turnaround of performance over the past three years".

The company reported a full-year surplus of $13.96 billion (9.22bn) in the year to 31 December – down 45 per cent on the year – as it wrestled with far lower oil and gas prices than the record highs seen in 2008.

It did, however, also see a 4 per cent rise in crude production in 2009, compared with stagnant or lower output at rivals, and the company's refineries ramped back up to full production after outages.

BP said its pay plan was structured to ensure that executives are paid based on the underlying profitability of the company and to avoid managers enjoying windfalls simply due to oil price surges.

The head of BP's remuneration committee, DeAnne Julius, said Hayward had been rewarded for boosting operational performance. BP's bonus targets are based around safety, staff and performance indicators, she said.

"Nearly all targets were exceeded, some substantially, with particularly strong performance on cost reduction, exploration success, production start-ups and refining performance," she said.

BP added that it had also beaten the share performance of peers.

Hayward has been engaged in a turnaround plan at BP since he inherited a company beset by problems in 2007. It has shed some 7,500 jobs in the past two years and saved an estimated $4bn.

The oil firm has recently revealed expansion plans, with production expected to start on 42 major projects worldwide over the next five years as existing fields go into decline.

Hayward's pay packet is in line with the $6m that Peter Voser, the chief executive of rival Royal Dutch Shell, earned in 2009, though Voser only assumed the top job in July. That payment was made despite Shell reporting a 69 per cent drop in annual profits to $9.8bn.

In 2008, Voser's predecessor Jeroen van der Veer earned $13m – a figure that was met with anger from shareholders. However, Shell recently said it had frozen salaries for top bosses.

BP followed Shell, too, in announcing a change in future pay awards, with executives set to receive a portion of their annual bonus in deferred shares.