The subject of executive pay keeps coming up in the wake of a severe oil industry downturn where company profits are down and many independent operators and oil majors continue to see net losses in income. The movement to reduce or limit compensat ion for CEOs and other top executives was initiated by activist investors such as Carl Icahn who has criticized executive pay that does not take into account market conditions or the company’s financial performance.
The latest development occurred on April 14 when BP shareholders voted to oppose a $20 million pay package for CEO Bob Dudley after the UK-based oil and gas company recorded its largest annual loss ever. Nearly 60% of the company’s shareholders voted against rewarding Dudley with what amounts to a 20% pay hike even while the company laid off more than 5,000 employees in 2015 and profit margins were shrinking.
Stockholders and boards of directors of many US and European companies have been taking a closer look at executive compensation, according to industry consultants who provide advice to corporate boards. In the US and elsewhere, some lawmakers and political candidates have made executive pay an issue in national elections, which has turned a spotlight on industry practices.
Before the investor activism took hold in the past year or so, up to 90% of shareholders had supported pay increases for company executives. In today’s business climate, many shareholders are refusing to rubber-stamp large increases.
In the case of BP, the stockholder vote is non-binding, but company executives said they would consider it very seriously and that they were planning to review the remuneration mechanism in the next few months and possibly link it to oil prices.
Dudley, an American born in Queens, NY, succeeded Tony Hayward as CEO of BP in October of 2010, months after the deadly Deepwater Horizon incident in the Gulf of Mexico. He also serves on the company’s board of directors. Dudley received an estimated $15.3 million in total compensation last year.