BP 2015 Annual Report Download - page 93

Corporate governance
Performance framework
Corporate governance
• Salary increases are not directly linked to
performance. However a base-line level of
personal contribution is needed in order to be
considered for a salary increase and
exceptional sustained contribution may be
grounds for accelerated salary increases.
• Both deferred and matched shares must
pass an additional hurdle related to safety and
environmental sustainability performance in
order to vest.
• If there has been a material deterioration in
safety and environmental metrics, or there
have been major incidents revealing underlying
weaknesses in safety and environmental
management then the committee, with advice
from the safety, ethics and environmental
assurance committee, may conclude that
shares vest in part, or not at all.
• All deferred shares are subject to clawback
provisions if they are found to have been
granted on the basis of materially misstated
financial or other data.
• Performance shares will vest on the following
three performance measures:
– Total shareholder return relative to other
oil majors.
– Operating cash flow.
– Strategic imperatives.
• Measures based on relative performance to oil
majors will vest 100%, 80%, 25% for first,
second and third place finish respectively and
0% for fourth or fifth position.
• The committee identifies the specific strategic
imperatives to be included every year and may
also alter the other measures if others are
deemed to be more aligned to strategic
priorities. These are explained in the annual
report on remuneration.
• The committee may exercise judgement to
adjust vesting outcomes if it concludes that the
formulaic approach does not reflect the true
underlying performance of the company’s
business or is inconsistent with shareholder
benefits.
• All performance shares are subject to
clawback provisions if they are found to have
been granted on the basis of materially
misstated financial or other data.
• Salary increases will be in line with all
employee increases in the UK and US
and limited to within 2% of average
increase for the group leaders.
• Benefits reflect home country norms.
The current package of benefits will be
maintained, although the taxable value
may fluctuate.
• Where shares vest, additional shares
representing the value of reinvested
dividends are added.
• Before being released, all matched shares
that vest after the three-year performance
period are subject (after tax) to an
additional three-year retention period.
• Current US executive directors participate
in transition arrangements related to
heritage plans of Amoco and Arco and
normal defined benefit plans that apply to
executives with an accrual rate of 1.3% of
final earnings (salary plus bonus) for each
year of service.
• Where shares vest, additional shares
representing the value of reinvested
dividends are added.
• Before being released, those shares that
vest after the three-year performance
period are subject (after tax) to an
additional three-year retention period.
• Specific measures and targets are determined
each year by the remuneration committee.
• A proportion will be based on safety and
operational risk management and is likely to
include measures such as loss of primary
containment, recordable injury frequency
and tier 1 process safety events.
• The principal measures of annual bonus will
be based on value creation and may include
financial measures such as operating cash
flow, replacement cost operating profit and cost
management, as well as operating measures
such as major project delivery, Downstream
net income per barrel and Upstream unplanned
deferrals. The specific metrics chosen each year
will be set out and explained in the annual report
on remuneration.
• Achieving annual plan objectives equates
to on-target bonus. The level of threshold
payout for minimum performance varies
according to the nature of the measure
in question.
• Pension in the UK is not directly linked to
performance.
• Pension in the US includes bonus in
determining benefit level.
BP Annual Report and Form 20-F 2015 89