BP 2009 Annual Report Download - page 93

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BP Annual Report and Accounts 2009
Directors’ remuneration report
Directors’ remuneration report
Constitution and operation
Each member of the remuneration committee is subject to annual
re-election as a director of the company. The board considers all
committee members to be independent (see page 72).
They have no personal financial interest, other than as
shareholders, in the committee’s decisions.
The committee met eight times in the period under review.
The chairman of the board attends meetings of the committee and
Mr Svanberg attended meetings prior to becoming chairman on
1 January 2010.
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
Mr Aronson, an independent consultant, is the committee’s secretary
and independent adviser. Advice was also received from Mr Jackson, the
company secretary, and from the company secretary’s office, which is
independent of executive management and reports to the chairman of
the board.
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 2009, the committee continued to engage Towers Watson
as its principal external adviser. Towers Watson also provided other
remuneration and benefits advice to parts of the group.
Freshfields Bruckhaus Deringer LLP 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 83, to ensure they met an independent, objective standard. They
also provided audit, audit-related and taxation services for the group.
Part 3 Non-executive directors’
remuneration
The board sets the level of remuneration for all non-executive directors
within a limit approved from time to time by shareholders. Key elements
of BP’s policy on non-executive director remuneration include:
• Remuneration should be sufficient to attract and retain world-class
non-executive talent.
• Remuneration of non-executive directors is proposed by the chairman
and agreed by the board.
• Remuneration practice should be consistent with recognized best
practice standards for non-executive directors’ remuneration.
• Remuneration should be in the form of cash fees, payable monthly.
• Non-executive directors should not receive share options from the
company.
• Non-executive directors are encouraged to establish a holding in BP
shares of the equivalent value of one year’s base fee.
Process
BP reviews the quantum and structure of chairman and non-executive
remuneration on an annual basis. The chairman’s remuneration is
reviewed by the remuneration committee, which makes a
recommendation to the board; the chairman does not vote on his own
remuneration. Non-executive director remuneration is reviewed by the
chairman, who makes a recommendation to the board; non-executive
directors do not vote on their own remuneration.
2009 review of chairman and non-executive director remuneration
In 2009, the chairman reviewed non-executive director remuneration
taking into account the review completed in 2008. The chairman made a
recommendation to the board (which was agreed) to maintain the 2008
structure until a further review in 2010.
Carl-Henric Svanberg was appointed to the board in September
2009. At the time of his appointment, the remuneration committee
looked at a comparison of remuneration for FTSE and international
chairmen in determining his fee. The committee determined that in
common with the previous chairman, he should receive the use of a
chauffeured car, a maintained office for company business and security
advice. In addition, the committee recognized that the appointment was
to be Mr Svanberg’s main commitment and as he would be performing a
proportion of his duties from Sweden, limited but appropriate secretarial
support in Sweden would be provided. Mr Svanberg is also eligible for a
single relocation allowance of up to £100,000 to cover expenses incurred
in relocating to London from Sweden.
Mr Svanberg received the basic non-executive director fee and
transatlantic attendance allowance for the period between his
appointment and his assumption of the role of chairman on 1 January
2010. On his appointment as chairman in 2010, the chairman’s fee
increased to £750,000.