BP 2012 Annual Report Download - page 135

Corporate governance
Corporate governance
BP Annual Report and Form 20-F 2012
133
Deferred bonus – 2012 outcomes
Framework
One-third of the total bonus awarded to the executive directors is deferred
into shares on a mandatory basis under the terms of the deferred bonus
element. Deferred shares are matched on a one-for-one basis and both
deferred and matched shares vest after three years contingent on an
assessment of safety and environmental sustainability over the three-year
deferral period.
Individuals may elect to defer an additional one-third of total bonus into
shares on the same basis and subject to the same contingency as the
mandatory deferral.
Outcomes
No plans matured in 2012 for executive directors. The deferred element for
executive directors was approved by shareholders and implemented in 2010.
Therefore the first plan will be eligible to vest in early 2014 following the
three-year deferral period and contingent on the assessment of safety and
environmental sustainability over the same period.
Dr Brian Gilvary participated in a deferred bonus plan prior to his
appointment as an executive director and details of this are provided in the
table on page 144.
Performance shares – 2012 outcomes
Framework
Performance shares were awarded to each executive director in early
2010 with vesting after three years dependent on performance relative
to measures reflecting the company’s strategic priorities at the time. For
the 2010-2012 plan, vesting was based one-third on total shareholder
return (TSR) compared to the other oil majors, and two-thirds on a
balanced scorecard of underlying performance factors compared to the
same peers. The underlying performance factors were production
growth, Downstream profitability, and underlying net income growth. The
peer group includes ExxonMobil, Shell, Chevron, Total and ConocoPhillips.
Vesting was set at 100%, 70% and 35% for performance equivalent to
first, second and third rank respectively and none for fourth or fifth place
of the peer group, with BP’s position interpolated amongst them.
Outcomes
As the starting point for all measures was before the Deepwater Horizon
accident, the impact of this continues to be dominant. Results for all
measures were below the third place required and so no shares vested.
The resulting shares and value of the vesting for each individual are shown
to the right (as well as in the total remuneration summary chart on
page 130).
Original
award
Shares
vested
(including
dividends)
Value of
vested shares
thousand
Bob Dudley
performance shares 581,082 0 $0
Iain Conn
performance shares
restricted shares
656,813
133,452
0
145,489
£0
£666
Dr Byron Grote
performance shares 801,894 0 $0
Dr Brian Gilvary 82,500 65,414 £299
Iain Conn was awarded restricted shares in early 2008 subject to
continued service and satisfactory performance. The first tranche of these
vested in February 2011 and the second in February 2013. This final
tranche has been included in this year’s disclosure for completeness.
Dr Brian Gilvary’s vesting reflects awards granted prior to him joining the
board under equivalent plans below board level which vest at the same
time as the executive director performance shares.
Pensions – 2012 outcomes
Framework
Executive directors are eligible to participate in regular company pension
schemes that apply in their home countries which follow national norms in
terms of structure and levels.
Bob Dudley and Dr Byron Grote both participate in the US plan and Iain Conn
and Dr Brian Gilvary in the UK plan. Full details on these plans are set out in
the policy section of this report (page 141).
Outcomes
The table below sets out the change in pension for 2012. This table follows
the format required by current UK reporting regulations rather than the draft
regulations that are expected to come into effect in late 2013.
Bob Dudley’s pension increase is largely due to his promotion to group chief
executive in late 2010. Since his pension is based on three-year average
salary and bonus, the impact of a promotion takes a number of years to be
fully reflected in his pension. Dr Brian Gilvary’s pension, based on final
salary, also shows a significant increase due to his promotion in January
2012.
Under the draft regulations, the disclosure of total pension includes any cash
in lieu of additional accrual that is paid to individuals in the UK scheme who
have exceeded the annual allowance or lifetime allowance under UK
regulations. Both Iain Conn and Dr Brian Gilvary fall into this category and in
2012 received cash supplements of 35% of salary in lieu of future service
accrual.
In terms of calculating the increase in pension value both a column on 20
times additional pension earned during the year as per the draft regulations,
as well as the transfer value increase as currently stipulated have been
included in the table below. The summary table on page 130 uses the
increase in transfer value (last column below) to which the cash
supplements are separately identified.
Pensions (audited)
thousand
Service at
31 Dec 2012
Accrued pension
entitlement
at 31 Dec 2012
A:Additional pension
earned during the
year ended
31 Dec 2012a
B:Transfer value of
accrued benefit
at 31 Dec 2011b
C:Transfer value of
accrued benefit
at 31 Dec 2012b
Amount of
20 times A
Amount of C-B less
contributions
made by the director
in 2012
Bob Dudley (US) 33 years $1,381 $433 $15,244 $22,561 $8,660 $7,317
Iain Conn (UK) 27 years £316 £9 £6,582 £7,522 £180 £940
Dr Brian Gilvary (UK) 26 years £317 £64 £5,486 £7,618 £1,280 £2,132
Dr Byron Grote (US) 33 years $1,388 $60 $18,251 $19,238 $1,200 $987
a Additional pension earned during the year includes an inflation increase of 4.8% for UK directors and 1.7% for US directors.
b Transfer values have been calculated in accordance with guidance issued by the actuarial profession.