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Financial Times: Browne’s just deserts

EXTRACT: It should come in well north of the £1m lump sum received by Sir Philip Watts, who left Royal Dutch Shell under a much larger cloud than that dogging Lord Browne…

By ANDREW HILL
Published: January 20 2007 02:00 | Last updated: January 20 2007 02:00

For campaigners against excessive executive pay, there is something that particularly grates about an ageing ex-captain of industry sitting in his rocking chair and still receiving more annually than mere drones accumulate in a lifetime. Look at the outrage in the US at the $98m (£50m) lump-sum pension payment awarded last year by Lee Raymond, outgoing chief executive of ExxonMobil, or at the benefits General Electric granted to a retired Jack Welch, until, under pressure, he renounced them in 2002.

Mr Raymond and Mr Welch were both executives who left at or near the top of their game. Lord Browne’s departure from BP, 18 months ahead of schedule, will be marred by the problems that have come to light in the past two years of his 12 at the top. Should he be punished through his final pay-packet?

The way BP links remuneration to performance, the chief executive is likely to take an automatic hit. BP’s lurch downwards compared with its peer group and a failure to meet internal business and financial targets will mean he misses out on some £25m of shares. Lord Browne’s bonus may also be cut, as in 2005, when the performance pay-out slipped from £2.3m to £1.75m partly because the fatal accident at the group’s Texas City refinery and other negative events counted against him.

As for his pension, the chief executive had built up benefits worth almost £20m by end-2005. He is also the only BP executive still eligible for a special one-off retirement payment equal to his annual salary, which in 2005 was £1.5m.

Together with BP shares accumulated over his career – and those from share plans that have not yet matured – that should easily last until Lord Browne’s body is a-mouldering in its grave. But the farewell package – which will be laid out in the accounts for 2006, despite the July 2007 retirement – is unlikely to be over-generous. It should come in well north of the £1m lump sum received by Sir Philip Watts, who left Royal Dutch Shell under a much larger cloud than that dogging Lord Browne, and well south of the $98m awarded to Mr Raymond, whose performance at ExxonMobil was more impressive: in other words, roughly where it should be.

Copyright The Financial Times Limited 2007

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