BP 2007 Annual Report Download - page 73

Service contracts
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Director Contract date Salary as at 31 Dec 2007
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Dr A B Hayward 29 Jan 2003 £950,000
Dr D C Allen 29 Jan 2003 £510,000
I C Conn 22 Jul 2004 £650,000
Dr B E Grote 7 Aug 2000 $1,300,000
A G Inglis 1 Feb 2007 £650,000
Service contracts are expressed to expire at a normal retirement age of
60 (subject to age discrimination). The contracts have a notice period of
one year.
The service contracts of UK directors may be terminated by the
company at any time with immediate effect on payment in lieu of notice
equivalent to one year’s salary or the amount of salary that would have
been paid if the contract had terminated on the expiry of the remainder
of the notice period.
Dr Grote’s contract is with BP Exploration (Alaska) Inc. He is seconded
to BP p.l.c. under a secondment agreement of 7 August 2000, which
expires on 31 March 2010. The secondment can be terminated by one
month’s notice by either party and terminates automatically on the
termination of Dr Grote’s service contract.
There are no other provisions for compensation payable on early
termination of the above contracts. In the event of the early termination
of any of the contracts by the company, other than for cause (or under
a specific termination payment provision), the relevant director’s then-
current salary and benefits would be taken into account in calculating
any liability of the company.
Since January 2003, new service contracts include a provision to allow
for severance payments to be phased, when appropriate. The committee
will also consider mitigation to reduce compensation to a departing
director, when appropriate to do so.
Directors leaving the board
2007
Both Lord Browne and Mr Manzoni, who were employed by the
company under service contracts dated 11 November 1993 and
29 January 2003 respectively, left the company during the year. Lord
Browne, who left on 1 May 2007, was eligible for an ex gratia lump
sum superannuation payment equal to one year’s salary (£1,575,000)
but, in light of his resignation, did not receive the compensation for
loss of office previously notified to shareholders. Mr Manzoni, who
left on 31 August 2007, was entitled to one year’s salary (£485,000)
as compensation on termination in accordance with his contractual
entitlement. Both individuals were eligible for a pro-rata bonus for 2007,
reflecting achievement of bonus targets and their period of employment
during the year. As regards long-term incentives, both individuals retain
their performance awards under the EDIP in respect of 2005-2007 and
2006-2008 share element and these will vest at the normal time to the
extent the performance targets are met. Both individuals forfeited their
participation in the 2007-2009 share element. Further details of these
awards are set out in the table on page 69. Both individuals retained their
outstanding share options, as set out in the table on page 70.
In connection with the shareholder derivative actions brought in the US
against the directors of the company, the company has agreed with the
plaintiffs in the Alaska action, with the consent of Lord Browne and
Mr Manzoni, to defer the release of certain amounts and preserved share
awards to those individuals (other than Lord Browne’s ex gratia
superannuation payment) pending resolution of the action. The company
has agreed to pay the individuals simple interest at the rate of 6.5% in
respect of the period of deferral.
2008
As has been announced, Dr Allen will leave the company at the end
of March 2008. He will be entitled to one year’s salary (£510,000) as
compensation in accordance with his contractual entitlement, as well
as a pro-rata bonus for 2008 and continued full participation in the
2006-2008 and 2007-2009 share elements, according to the normal
rules of the plan.
Executive directors – external appointments
The board encourages executive directors to broaden their knowledge
and experience by taking up appointments outside the company. Each
executive director is permitted to accept one non-executive appointment,
from which they may retain any fee. External appointments are subject
to agreement by the chairman and must not conflict with a director’s
duties and commitments to BP.
During the year, the fees received by executive directors for external
appointments were as follows:
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Executive director Appointee company Total fees
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Dr A B Hayward Corus £62,250
Tata Steel £177
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I C Conn Rolls Royce £57,166
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Dr B E Grote Unilever Unilever PLC £31,000
Unilever NV E45,000
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A G Inglis BAE Systems £39,661
Remuneration committee
All the members of the committee are independent non-executive
directors. Throughout the year, Dr Julius (chairman), Mr Davis,
Sir Tom McKillop and Sir Ian Prosser were members. Mr Bryan retired
as a member in April 2007. The group chief executive at the time was
consulted on matters relating to the other executive directors who report
to him and on matters relating to the performance of the company;
he was not present when matters affecting his own remuneration
were discussed.
Tasks
The remuneration committee’s tasks are:
– To determine, on behalf of the board, the terms of engagement and
remuneration of the group chief executive and the executive directors
and to report on these to the shareholders.
– To determine, on behalf of the board, matters of policy over which
the company has authority regarding the establishment or operation
of the company’s pension scheme of which the executive directors
are members.
– To nominate, on behalf of the board, any trustees (or directors of
corporate trustees) of the scheme.
– To review the policies being applied by the group chief executive in
remunerating senior executives other than executive directors to
ensure alignment and proportionality.
Constitution and operation
Each member of the remuneration committee is subject to annual re-
election as a director of the company. The board considers all committee
members to be independent (see page 75).
They have no personal financial interest, other than as shareholders,
in the committee’s decisions.
The committee met six times in the period under review. There was a
full attendance record. Mr Sutherland, as chairman of the board, attended
all the committee meetings.
The committee is accountable to shareholders through its annual
report on executive directors’ remuneration. It will consider the outcome
of the vote at the AGM on the directors’ remuneration report and
take into account the views of shareholders in its future decisions.
The committee values its dialogue with major shareholders on
remuneration matters.
BP ANNUAL REPORT AND ACCOUNTS 2007 71