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Financial Times: BP chiefs miss out on bonuses

By Ed Crooks in London
Published: March 5 2008 02:00 | Last updated: March 5 2008 02:00

BP’s top executives, including Tony Hayward, chief executive, missed out on share bonuses last year after the UK company performed worse than its peers in terms of shareholder returns.

The company’s annual report shows that five directors failed to qualify for awards worth up to £2.7m ($5.3m) available under BP’s long-term incentive plan for 2005-07.

The report also revealed that Mr Hayward’s basic pay was significantly less than that of Lord Browne, whom he replaced last May.

Pay-outs from the share incentive plan are based on BP’s total shareholder return relative to the other four “supermajor” inter-national oil companies: ExxonMobil, Royal Dutch Shell, Total and Chevron.

In the three years to 2007, BP’s performance was the worst in that group, as a result of operational problems, including project delays, shutdowns at US refineries and an oil spill in Alaska that hit production.

BP’s remuneration committee judged there were no extenuating circumstances to outweigh the plan’s recommendation that no award should be made when the company’s performance was fourth or fifth among its peers.

In 2006, only 30 per cent of the maximum possible award was granted, and in 2005, 37.5 per cent.

Mr Hayward would have received up to 436,623 shares, worth about £2.3m at last night’s closing price of 536p.

His salary of £950,000 a year is less than two-thirds that of Lord Browne’s, whose final basic pay was £1.575m. Lord Browne left BP with total pay for 2007, including a year’s salary lump sum of £3.25m, plus a pension pot worth £21.6m.

However, Mr Hayward did receive a cash bonus of £1.26m for last year, 133 per cent of his salary, which was above the “target” bonus of 120 per cent.

Although Mr Hayward has won praise for his drive to improve BP’s operational and safety performance, reduce the company’s complexity and cut costs, the share price has yet to show any sustained uplift.

Since Mr Hayward took over last May, BP’s shares have fallen 5 per cent, Shell’s are un-changed and Exxon’s are up 8 per cent.

The annual report also re-vealed that BP had set aside $2.13bn for compensation claims following the explosion at its Texas City refinery in 2005, which killed 15 people. That represents provision of an additional $525m on top of the $1.6bn already paid out.

Copyright The Financial Times Limited 2008

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