BP 2005 Annual Report Download - page 166

164 Making energy more
Directors’ remuneration report
second part, which was prepared by the company secretary on
behalf of the board.
The report has been approved by the board and signed on its
behalf by the company secretary. This report is subject to the
approval of shareholders at the annual general meeting (AGM).
The directors’ remuneration report covers all directors, both
executive and non-executive, and is set out on pages 164-173.
It is divided into two parts. Executive directors’ remuneration
is in the first part, which was prepared by the remuneration
committee. Non-executive directors’ remuneration is in the
Part 1 – Executive directors’ remuneration
DEAR SHAREHOLDER As described in this Annual Report, 2005 was a year of strong financial performance for the group set against a background
of a number of significant events – both positive and negative. It was also a year in which you, our shareholders, approved the renewal of the
long-term incentive plan for the executive directors.
I am pleased to report that this plan has been implemented and is a key part of our policy on remuneration. This revised policy has provided an
effective framework against which to evaluate the performance of the executive directors. In a performance-driven organization, the measurement
of that performance is critical. We believe that we have an appropriate balance of quantitative and qualitative measures. Equally, the policy allows
the remuneration committee to exercise judgement when it is appropriate to do so.
During the year, the executive team demonstrated strong leadership and delivery against a demanding set of targets. They managed events
well and group performance was also strong. Against this backdrop, the significant events of the year were also taken into account in the
committee’s overall judgement of results.
Full details of executive directors’ remuneration are set out in the pages that follow. I am confident that the committee’s approach aligns
executive remuneration with the interests of shareholders as well as rewarding and engaging the world-class team of people that we have leading
this company.
Dr D S Julius
Chairman, Remuneration Committee
6 February 2006
the committee’s decisions. The committee met six times in the
period under review. There was a full attendance record, except
for Mr Davis and Sir Robin Nicholson who were each unable to
attend one meeting and Mr Knight who was unable to attend two
meetings. Mr Sutherland, as chairman of the board, attended all
committee meetings.
The committee is accountable to shareholders through its annual
report on executive directors’ remuneration. It will consider the
outcome of the vote at the AGM on the directors’ remuneration
report and take into account the views of shareholders in its future
decisions. The committee values its dialogue with major shareholders
on remuneration matters.
Advice Advice is provided to the committee by the company
secretary’s office, which is independent of executive management
and reports to the chairman of the board. Mr Aronson, an independent
consultant, is the committee’s secretary and special adviser.
Advice was also received from Mr Jackson (company secretary)
and Mrs Martin (senior counsel, company secretary’s office).
The committee also appoints external professional advisers to
provide specialist advice and services on particular remuneration
matters. The independence of advice is subject to annual review.
THE REMUNERATION COMMITTEE
Tasks The committee’s tasks are:
••• To determine, on behalf of the board, the terms of engagement
and remuneration of the group chief executive and the executive
directors and to report on those to the shareholders.
••• To determine, on behalf of the board, matters of policy over
which the company has authority relating to the establishment or
operation of the company’s pension scheme of which the executive
directors are members.
••• To nominate, on behalf of the board, any trustees (or directors of
corporate trustees) of such scheme.
••• To monitor the policies being applied by the group chief executive
in remunerating senior executives other than executive directors.
Constitution and operation The committee members are all
non-executive directors. Dr Julius (chairman), Mr Bryan, Mr Davis,
Sir Tom McKillop and Sir Ian Prosser were members of the committee
throughout the year. Sir Robin Nicholson and Mr Knight retired from
the committee at the 2005 AGM. Each member is now subject to
annual re-election as a director of the company. The board considers
all committee members to be independent (see pages 159-160). They
have no personal financial interest, other than as shareholders, in