Oil giant BP PLC (LON:BP.) has slashed the annual pay package of its chief executive Bob Dudley as it seeks to avoid a repeat of last year’s shareholder rebellion.
The 61-year-old was paid US$11.6mln (£9.3mln) in 2016, a 40% decrease on the US$19.4mln paid out to him a year earlier.
Almost 60% of investors voted against Dudley’s shock pay rise for 2015 – a year in which the group posted its worst ever loss.
Although the vote wasn’t binding, it was still an embarrassing defeat for BP and the company ordered a review looking into future pay-outs.
It says the resulting proposals will “better align pay and performance”.
Among the changes brought in, Dudley’s maximum award under BP’s long-term incentive plan will be reduced from seven times his basic salary, currently US$1.85mln a year, to five times.
His short-term annual bonus will also only be paid out if the company delivers on every measure, while the level of bonus paid for an ‘on-target’ score will be reduced by 25%.
“The proposed remuneration policy is designed to ensure a clear link between delivery of BP's strategy and pay,” the company said.
“From 2017, we propose a simplified approach with a significant reduction in overall remuneration levels.”
It’s not just BP which has faced opposition from shareholders over executive pay recently.
Only last week, consumer goods giant Reckitt Benckiser Group PLC (LON:RB.) announced it had cut its chief’s 2016 pay by more than a third.
Rakesh Kapoor’s bonus for the year was also scrapped and his long-term incentives slashed after nearly 20% of investors objected to his £25.5mln pay package in 2015.
Tobacco group Imperial Brands PLC (LON:IMB) pulled the plug on plans to hike its boss’s pay by up to £3mln in January before they were put to a shareholder vote.
BP faces a similar binding vote this year on its remuneration policy, hence the need to placate investors. If shareholders vote against the proposals, it will have to rethink its plans and put them to another vote to try and gain approval.
Shares in BP were down 0.7% to 462p on Thursday afternoon.