BP 2006 Annual Report Download - page 74

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Part 2 – Non-executive directors’ remuneration
Policy
The board sets the level of remuneration for all non-executive directors
within the limit approved from time to time by shareholders. The
remuneration of the chairman is set by the board rather than the
remuneration committee, in line with BP’s governance policies, as we
believe the performance of the chairman is a matter for the board as a
whole rather than any one committee. The board’s policy is that non-
executive remuneration should be consistent with recognized
best-practice standards. Non-executive directors are encouraged to
establish a holding in BP shares broadly related to one year’s base fee.
Annual fee structure
Non-executive directors’ remuneration consists of the following elements:
– Cash fees, paid monthly, with increments for positions of additional
responsibility, reflecting workload and potential liability.
– A fixed allowance, currently £5,000, for transatlantic or equivalent
inter-continental travel to attend a board or board committee meeting
(excluding the chairman).
– Reasonable travel and related business expenses.
No share or share option awards are made to any non-executive
director in respect of service on the board.
The fees were reviewed in 2005 by an ad hoc board committee and
were increased with effect from 1 January 2005 to reflect the change
in workload and global market rates for independent or non-executive
directors since the previous review in 2002. There was no increase
in 2006.
Current fee structure
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£thousand
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Chairmana500
Deputy chairmanb100
Board member 75
Committee chairmanship fee 20
Transatlantic attendance allowancec5
aThe chairman is not eligible for committee chairmanship fees or transatlantic
attendance allowance but has the use of a fully maintained office for company
business, a chauffeured car and security advice.
bThe deputy chairman receives a £25,000 increment on top of the standard board
fee. In addition, he is eligible for committee chairmanship fees and the transatlantic
attendance allowance. The deputy chairman is currently chairman of the audit
committee.
cThis allowance is payable to non-executive directors undertaking transatlantic or
equivalent intercontinental travel for the purpose of attending a board meeting or
board committee meeting.
Superannuation gratuities
In accordance with the company’s long-standing practice, non-executive
directors who retired from the board after at least six years’ service are, at
the time of their retirement, eligible for consideration for a superannuation
gratuity. The board is authorized to make such payments under the
company’s Articles of Association. The amount of the payment is
determined at the board’s discretion (having regard to the director’s
period of service as a director and other relevant factors).
In 2002, the board revised its policy with respect to superannuation
gratuities so that: (i) non-executive directors appointed to the board after
1 July 2002 would not be eligible for consideration for such a payment;
and (ii) while non-executive directors in service at 1 July 2002 would
remain eligible for consideration for a payment, service after that date
would not be taken into account by the board in considering the amount
of any such payment.
The board made superannuation gratuity payments during the year
to the following former directors: Mr Miles £46,000 (who retired in
April 2006) and Mr Wilson £21,000 (who resigned from the board in
February 2006). These payments were in line with the policy
arrangements agreed in 2002 (outlined above).
Remuneration of non-executive directors in 2006a
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£thousand
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Current directors 2006 2005
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J H Bryan 110 110
A Burgmans 85 90
Sir William Castellb38.5 n/a
E B Davis, Jr 100 110
D J Flint 100 90
Dr D S Julius 105 107
Sir Tom McKillop 85 90
Dr W E Massey 130 130
Sir Ian Prosser 130 135
P D Sutherland 500 500
Directors leaving the board in 2006
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H M P Milescd 30 90
M H Wilsone22.5 105
aThis information has been subject to audit.
bAppointed on 20 July 2006.
cAlso received a superannuation gratuity of £46,000.
dAlso received £37,500 for serving as a director and non-executive chairman of BP
Pension Trustees Limited.
eAlso received a superannuation gratuity of £21,000.
Based on the current fee structure, the table above shows the 2006
remuneration of each non-executive director.
Non-executive directors have letters of appointment that recognize
that, subject to the Articles of Association, their service is at the
discretion of shareholders. All directors stand for re-election at each AGM.
Non-executive directors of Amoco Corporation
Non-executive directors who were formerly non-executive directors of
Amoco Corporation have residual entitlements under the Amoco Non-
Employee Directors’ Restricted Stock Plan. Directors were allocated
restricted stock in remuneration for their service on the board of Amoco
Corporation prior to its merger with BP in 1998. On merger, interests in
Amoco shares in the plan were converted into interests in BP ADSs. The
restricted stock will vest on the retirement of the non-executive director
at the age of 70 (or earlier at the discretion of the board). Since the
merger, no further entitlements have accrued to any director under
the plan. The residual interests, as interests in a long-term incentive
scheme, are set out in the table below, in accordance with the Directors’
Remuneration Report Regulations 2002.
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Interest in BP ADSs
at 1 Jan 2006 and
31 Dec 2006a
Date on
which director
reaches age 70b
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J H Bryan 5,546 5 Oct 2006
E B Davis, Jr 4,490 5 Aug 2014
Dr W E Massey 3,346 5 Apr 2008
Director leaving the board in 2006
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M H Wilsonc3,170 4 Nov 2007
aNo awards were granted and no awards lapsed during the year. The awards were
granted over Amoco stock prior to the merger but their notional weighted average
market value at the date of grant (applying the subsequent merger ratio of 0.66167
of a BP ADS for every Amoco share) was $27.87 per BP ADS.
bFor the purposes of the regulations, the date on which the director retires from
the board at or after the age of 70 is the end of the qualifying period. If the director
retires prior to this date, the board may waive the restrictions.
cMr Wilson resigned from the board on 28 February 2006. Mr Wilson had received
awards of Amoco shares under the plan between 1 November 1993 and 28 April
1998 prior to the merger. These interests had been converted into BP ADSs at the
time of the merger. In accordance with the terms of the plan, the board exercised its
discretion over this award on 11 May 2006 and the shares vested on that date
(when the BP ADS market price was $76.07) without payment by him.