BP 2014 Annual Report Download - page 81

Corporate governance
2014 annual cash bonus
Measures
Safety Value
Loss of
primary
containment
Tier 1
process
safety
eventsa
Recordable
injury
frequency
Operating
cash
flowb
Underlying
replacement
cost profitb
Corporate
and
functional
costs
Downstream
net income/
bblb
Major
project
delivery
Upstream
unplanned
deferrals
Total
Weight
On target
Maximum
10%
20%
10%
20%
10%
20%
16.33%
32.67%
16.33%
32.67%
16.33%
32.67%
7%
14%
7%
14%
7%
14%
100%
200%
Weighted
outcome % 7. 9 6 Ni l 6 .0 7 32 .6 7 13 .7 8 28 .2 6 4 .7 7 10 .5 0 5. 9 5
110% =
score
1.10
Target
Met
Not met
Group key
performance
indicator
Plan/target 3-10% improvement $30bn $14.5bn 7%
reduction $6.4/bbl 6 project
start-ups
9%
reduction
Outcome 246 events 28 events 0.307 per
200k hrs $32.8bn $12.1bn 9%
reduction $4.4/bbl 7 project
start-ups
6%
reduction
a Defined by American Petroleum Institute (API).
b Assessment of the financial outcomes was done using the same conditions as the targets were set at – oil price, refining margin and other environmental factors were taken into account.
targeted reduction of 7%. In terms of operational performance seven major
projects were successfully delivered in 2014 against the plan of six.
Upstream unplanned deferrals were reduced by 6% against a targeted
reduction of 9%. Downstream net income per barrel of $4.4/bbl was below
target of $6.4/bbl.
Based on these results, the overall group performance score was 1.10.
The committee, as is its normal practice, considered this result in the
context of the underlying financial performance of the group, competitors’
results, shareholder feedback and input from the board and other
committees. After review, it concluded that this result fairly represented the
overall performance of the business during the year.
In the downstream segment, safety results were good with improvements
in loss of primary containment and process safety tier 2 events. Operating
cash flow was ahead of plan but refining availability and net income per
barrel were below plan expectations. The performance score was 0.98.
A summary of the outcomes for each measure, set against the target for
the year, is shown below.
2014 outcomes
In January 2015, the committee considered the group’s performance during
2014 against the measures and targets set out below.
In safety, the committee recognized that ambitious targets had been set
and the improvements in the year varied between the measures. In loss of
primary containment, the improvement was above the threshold but below
the target resulting in a weighted score of 7.96 out of 10; similarly in
recordable injury frequency (RIF) the improvement was above the threshold
but below the target resulting in a weighted score of 6.07 out of 10.
Importantly, these levels of performance still represented an improvement
on the previous year. Tier 1 process safety events did not reach the
threshold expectation and therefore did not score. The outcomes relative to
these targets were mixed, however the underlying trend remained positive,
reflecting continued improvement over the past three years.
Operating cash flow of $32.8 billion was well ahead of target of $30 billion.
Underlying replacement cost profit of $12.1 billion was below target of
$14.5 billion. Through greater simplification and efficiency across all
functions, corporate and functional costs were reduced by 9% against a
The overall bonus for directors was determined by multiplying the group
score of 1.10 times target by the on-target bonus level of 150% of salary.
Bob Dudley’s total overall bonus was 165% of salary, as was Dr Brian
Gilvary’s. Iain Conn’s total overall bonus was 159% of salary, based on
both group and downstream segment performance (accounting for 30% of
his bonus). Under the terms of the deferred element of the EDIP, one third
of the total bonus is paid in cash. A director is required to defer a further
third and the final third is paid either in cash or voluntarily deferred at the
individual’s election.
Bob Dudley and Dr Brian Gilvary have both elected to defer the final third of
their annual bonus. Iain Conn, who left at the end of the year, was not
eligible for deferral and so all his bonus (reflecting his 12 months of service)
was paid in cash. The following table outlines the amounts paid in cash and
amounts deferred into shares.
10.50%
13.78%
32.67%
28.26%
4.77% 5.95%
0% 6.07%
7.96%
Annual bonus summary
Overall bonus Paid in cash Deferred in BP shares
Bob Dudley $3,014,550 $1,004,850 $2,009,700
Dr Brian Gilvary £1,189,238 £396,413 £792,825
Iain Conn £1,252,480 £1,252,480 £0
BP Annual Report and Form 20-F 2014 77