Executive pay: BP pay gusher reignites shareholder rows, but new research shows that average pay growth for chief executives has slowed down to below national average
BP shareholders will vote on a near $20m pay package for the oil major's chief executive tomorrow, reigniting the row over boardoom pay despite greater restraint being shown by many FTSE companies.
The pay deal, if approved, would see BP chief executive Bob Dudley take home $19.6m (£13.8m) – a hefty 19.7 per cent pay rise on last year's $16.4m – despite the company racking up heavy losses in its most recent set of accounts.
Advisory groups Institutional Shareholder Services, Glass Lewis and Pensions and Investment Research Consultants have all advised shareholders to vote against Dudley's pay packet, while major shareholder Royal London Asset Management has slammed the potential reward for being "unreasonable and insensitive".
James Bevan, investment chief at CCLA, told the BBC yesterday that his firm would "almost certainly" vote down Dudley's pay deal, adding that he had nothing against "paying high salaries to people who deserve them; [but] in this instance, I see a big disconnect between what is being paid and what is justified".
With arguments heating up among BP's shareholders over the chief exec's pay packet, a new report reveals that many other big bosses have seen their salaries frozen over the last year.
Analysis by accountancy giant PwC of 47 FTSE 100 companies discovered that total pay packets for chief executives rose by around one per cent in the most recent annual reports – below the increase in national average earnings.
Median salary for chief executives had nudged up just two per cent in the last year, while two out of five (42 per cent) had seen their salaries frozen. Bonuses were also far from bumper, rising only 6.3 per cent.
"We're definitely seeing moderation building into the system," said Fiona Camenzuli, reward and employment partner at PwC, told City PM
Camenzuli remarked that pay restraint was most likely being caused by a combination of pressure from shareholders and intense scrutiny from the public of the gap between pay at the top and that of those on the shop floor.
She added: "I don't think you can get away from the fact that for the general public, executive pay will always look high, so I think that debate will continue. I don't think it will go anywhere any time soon."
Oliver Parry, head of corporate governance at the Institute of Directors, told City PM that, after the so-called shareholder spring of 2012, "there became a lot more scrutiny on the performance of our largest companies".
Co-operative chief executive Richard Pennycook is one of those who has heeded public sentiment, requesting that his basic salary will slashed from £1.25m to £750,000 and his maximum bonus will be capped at 40 per cent of base salary because his job was now a cakewalk compared to when he was first appointed.
However, WPP's Martin Sorrell has bucked the trend, recently receiving a share package worth £62.8m. In May, Reckitt Benckiser's shareholders will vote on the £23m deal proposed for chief executive Rakesh Kapoor.
Mark Littlewood, director general at the Institute of Economic Affairs, added: "What private sector companies such as BP pay their executives is a decision for their shareholders and them alone. It is rightly entirely up to them to determine pay in line with ambitions for the firm, not just on performance."
BP was not available for comment.