BP 2006 Annual Report Download - page 75

BP Annual Report and Accounts 2006 73
Part 3 – Additional statutory
and other disclosures
Remuneration committee
All the members of the committee are independent non-executive
directors. Throughout this year, Dr Julius (chairman), Mr Bryan, Mr Davis,
Sir Tom McKillop and Sir Ian Prosser were members. Lord Browne was
consulted on matters relating to the other executive directors who report
to him and on matters relating to the performance of the company;
he was not present when matters affecting his own remuneration
were discussed.
Tasks
The remuneration 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 these to the shareholders.
– To determine, on behalf of the board, matters of policy over which
the company has authority regarding 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 the scheme.
– To monitor the policies being applied by the group chief executive in
remunerating senior executives who are not executive directors.
Constitution and operation
Each member of the remuneration committee (named on page 80) is
subject to annual re-election as a director of the company. The board
considers all committee members to be independent (see page 77).
They have no personal financial interest, other than as shareholders, in the
committee’s decisions.
The committee met five times in the period under review. There was
a full attendance record except for Mr Davis, who was unable to attend
one meeting. Mr Sutherland, as chairman of the board, attended all the
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, the company secretary.
The committee also appoints external advisers to provide specialist
advice and services on particular remuneration matters. The
independence of the advice is subject to annual review.
In 2006, the committee continued to engage Towers Perrin as its
principal external adviser. Towers Perrin also provided limited ad hoc
remuneration and benefits advice to parts of the group, principally
changes in employee share plans and some market information
on pay structures. The committee continued to engage Kepler Associates
to advise on performance measurement. Kepler Associates also
provided performance data and limited ad hoc advice on performance
measurement to the group.
Freshfields Bruckhaus Derringer provided legal advice on specific
matters to the committee, as well as providing some legal advice to
the group.
Ernst & Young reviewed the calculations on the financial-based targets
that form the basis of the performance-related pay for executive directors,
that is, the annual bonus and share element awards described on page 69,
to ensure they met an independent, objective standard. They also
provided audit, audit-related and taxation services for the group.
Historical TSR performancea
This graph shows the growth in value of a hypothetical £100 holding in
BP p.l.c. ordinary shares over five years, relative to the FTSE 100 and to
the FTSE All World Oil & Gas Index. BP is a constituent of both indices,
which are the most relevant broad equity market indices for this purpose.
FTSE All World Oil & Gas Index
aThis information has been subject to audit.
Past directors
Until 30 September 2006, Mr Olver acted as a consultant to BP in
relation to its activities in Russia and served as a BP-nominated director
of TNK-BP Limited, a joint venture company owned 50% by BP.
Under the consultancy agreement, he received £225,000 in fees in
2006 as well as reimbursement of costs and support for his role. He
was also entitled to retain fees paid to him by TNK-BP up to a maximum
of $120,000 a year for his role as a director, deputy chairman and
chairman of the audit committee of TNK-BP Limited.
Mr Miles (non-executive director of BP until April 2006) was appointed
as a director and non-executive chairman of BP Pension Trustees Limited
in October 2006. This position is for a term of three years and he receives
£150,000 per annum.