Pirc urges rebellion against excessive pay awards for head of BP

OIL giant BP is facing another embarrassing showdown with shareholders, after corporate governance body Pirc urged investors to vote against executive pay.

Last month, the oil group's annual report showed that chief executive Tony Hayward notched up a 41 per cent rise in total pay over the past year, despite the company's profits having plummeted by 45 per cent.

He earned 4.01 million in salary, cash bonus and share awards, up from 2.85m in 2008, helped by a bumper bonus, which jumped from 1.5m to 2.1m.

BP said its pay plan was structured to ensure executives were paid based on the underlying profitability of the firm and to avoid them enjoying windfalls simply due to oil price surges.

However, Pirc said in a report yesterday that it considered 2009 remuneration for BP directors "excessive" and expressed concern over a "lack of transparency" on the performance-related conditions attached to BP's executive directors incentive plan (EDIP).

The corporate governance body added that it was contrary to best practice that BP's remuneration committee could override the results of one performance condition of the EDIP.

Investors and industry groups have become increasingly vocal in their opposition to big pay deals since the global financial crisis started. BP saw more than a third of its investors vote against its executive pay plan in 2009, up from 12 per cent the previous year.

Rival Royal Dutch Shell said in February that it would overhaul pay practices for top management, including freezing pay for chief executive Peter Voser, after a shareholder revolt.

Meanwhile, a number of investors in Royal Bank of Scotland, housebuilder Bellway and Provident Financial opposed pay plans in 2009, and residential landlord Grainger lost a shareholder vote on executive pay this year.

The vote on BP's remuneration report will take place at the company's annual general meeting on 15 April.

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.