Another day, another furore over pay. The latest boss in the firing line is BP’s Bob Dudley, who is set to collect a total pay package of £13.9m for 2015.
A hefty total, even amid the culture of high-paid execs. But what's really made investors' blood pressure rise is that it’s a 20% pay rise for the same year that the oil company reported its worst ever annual loss.
In a report to shareholders, Dame Ann Dowling, the chair of the remuneration committee, said, ‘In an ever more challenging world BP executives performed strongly in 2015 in managing the things they could control and for which they were accountable.’ And to be fair Dudley would be hard-pressed to single-handedly manipulate the global price of oil in BP's favour.
‘Highlights’ if you can call them that were apparently acting early and decisively in response to low oil prices to preserve future growth and exec director pay reflects ‘strong operating performance relative to plan’.
But that’s not washing with some shareholders, whose protest is building steam ahead of the company’s annual meeting next Thursday. The FT reported that BP was holding last-minute talks with investors in an effort to smooth ruffled feathers before then and it doesn't expect to lose the vote.
But it does raise fresh questions about whether firms continue to reward poor performance – BP’s shares fell 13.5% last year. Which made yesterday’s announcement that Co-op boss Richard Pennycook would be taking a 40% pay cut even more unusual (and a not unwelcome bit of PR), particularly when 40,000 of its shop workers will receive an 8.5% pay rise.
The fact that was so surprising is a reflection of just how much executive pay has escalated. Last year the High Pay Centre found that the average FTSE 100 CEO makes 183 times the average full-time worker’s pay.
It’s difficult enough for some people to stomach when chief execs are delivering good results for their firms (see Martin Sorrell); when companies are suffering bruising losses it becomes rage inducing. Especially when BP is carrying out severe cost-cutting measures, including ongoing staff redundancies. But it has become so normalised that firms will continue to pay a shedload for execs because if they don’t, it’s likely another business will.
BP says its pay structure is relatively simple – ‘It is long-term, performance-based and tied directly to strategy and deliver.’ But the rationale behind Dudley’s pay package is unlikely to win over those who believe that executive pay is increasingly getting out of control.