BP 2013 Annual Report Download - page 109

Corporate governance
BP Annual Report and Form 20-F 2013 105
Recruitment
The committee expects any new executive directors to be engaged on
terms that are consistent with the policy as described on the preceding
pages. The committee recognizes that it cannot always predict accurately
the circumstances in which any new directors may be recruited. The
committee may determine that it is in the interests of the company and
shareholders to secure the services of a particular individual which may
require the committee to take account of the terms of that individual’s
existing employment and/or their personal circumstances. Accordingly, the
committee will ensure that:
• Salary level of any new director is competitive relative to the peer group.
• Variable remuneration will be awarded within the parameters outlined on
pages 98-99, save that the committee may provide that an initial award
under the EDIP (within the salary multiple limits on page 98) is subject to
a requirement of continued service over a specified period, rather than a
corporate performance condition.
• Where an existing employee of BP is promoted to the board, the
company will honour all existing contractual commitments including any
outstanding share awards or pension entitlements.
• Where an individual is relocating in order to take up the role, the
company may provide certain one-off benefits such as reasonable
relocation expenses, accommodation for a period following appointment
and assistance with visa applications or other immigration issues and
ongoing arrangements such as tax equalization, annual flights home, and
housing allowance.
• Where an individual would be forfeiting valuable remuneration in
order to join the company, the committee may award appropriate
compensation. The committee would require reasonable evidence of
the nature and value of any forfeited award and would,
to the extent practicable, ensure any compensation was no more
valuable than the forfeited award and that it was paid in the form of
shares in the company.
The committee would expect any new recruit to participate in the
company pension and benefit schemes that are open to senior employees
in his home country but would have due regard to the recruit’s existing
arrangements and market norms.
In making any decision on any aspect of the remuneration package for a
new recruit, the committee would balance shareholder expectations,
current best practice and the requirements of any new recruit and would
strive not to pay more than is necessary to achieve the recruitment. The
committee would give full details of the terms of the package of any new
recruit in the next remuneration report.
Service contracts
Summary details of each executive director’s service agreement are as
follows:
Service
agreement date
Salary as at
1 Jan 2014
Bob Dudley 6 Apr 2009 $1,800,000
Iain Conn 22 Jul 2004 £774,000
Dr Brian Gilvary 22 Feb 2012 £710,000
Bob Dudley’s contract is with BP Corporation North America Inc. He is
seconded to BP p.l.c. under a secondment agreement dated 15 April 2009,
which has been further extended to 15 April 2019. His secondment can be
terminated with one month’s notice by either party and terminates
automatically on the termination of his service agreement. Iain Conn’s and
Dr Brian Gilvary’s service agreements are with BP p.l.c.
Each executive director is entitled to pension provision, details of which are
summarized on page 103.
Each executive director is entitled to the following contractual benefits:
• A company car and chauffeur for business and private use, on terms that
the company bear all normal servicing, insurance and running costs.
Alternatively, the executive director is entitled to a car allowance in lieu.
• Medical and dental benefits, sick pay during periods of absence and tax
preparation assistance.
• Indemnification in accordance with applicable law.
• Each executive director participates in bonus or incentive arrangements
at the committee’s sole discretion. Currently, each participates in the
discretionary bonus scheme and the deferred bonus and performance
share plans as described on pages 100, 101 and 102 respectively.
Each executive director may terminate his employment by giving his
employer 12 months’ written notice. In this event, for business reasons,
the employer would not necessarily hold the executive director to his full
notice period.
Other than in the case of Dr Brian Gilvary (who became a director on
1 January 2012), the service agreements are expressed to expire at a
normal retirement age of 60; however, such executive directors could not,
under UK law, be required to retire at this (or any other) age following
abolition of the default retirement age.
The employer may lawfully terminate the executive director’s employment
in the following ways:
• By giving the director 12 months’ written notice.
• Without compensation, in circumstances where the employer is entitled
to terminate for cause, as defined for the purposes of his service
agreement.
Additionally, in the case of Iain Conn and Dr Brian Gilvary, the company
may lawfully terminate employment by making a lump sum payment in lieu
of notice equal to 12 months’ base salary. The company may elect to pay
this sum in monthly instalments rather than as a lump sum.
The lawful termination mechanisms described above are without prejudice
to the employer’s ability in appropriate circumstances to terminate in
breach of the notice period referred to above, and thereby to be liable for
damages to the executive director.
In the event of termination by the company, each executive director may
have an entitlement to compensation in respect of his statutory rights under
employment protection legislation in the UK and potentially elsewhere.
Where appropriate the company may also meet a director’s reasonable
legal expenses in connection with either his appointment or termination of
his appointment.
The committee considers that its policy on termination payments arising
from the contractual provisions summarized above provides an appropriate
degree of protection to the director in the event of termination and is
consistent with UK market practice.
Exit payments
Should it become necessary to terminate an executive director’s
employment, and therefore to determine a termination payment, the
committee’s policy would be as follows:
• The director’s primary entitlement would be to a termination payment in
respect of his service agreement, as set out above. The committee will
consider mitigation to reduce the termination payment to a leaving
director when appropriate to do so, taking into account the
circumstances and the law governing the agreement. Mitigation would
not be applicable where a contractual payment in lieu of notice is made.
In addition, the director may be entitled to a payment in respect of his
statutory rights. Other potential elements are as follows:
– First, the committee would consider whether the director should be
entitled to an annual bonus in respect of the financial year in which the
termination occurs. Normally, any such bonus would be restricted to
the director’s actual period of service in that financial year.
– Second, the committee would consider whether conditional share
awards held by the director under the EDIP should lapse on leaving or
should, at the committee’s discretion, be preserved (in which event
the award would normally continue until the normal vesting date and
be treated in the manner described on pages 101-102 of this report).
Any such determination will be made in accordance with the rules of
the EDIP, as approved by shareholders.