BP PLC boss Bob Dudley’s pay fell by a fifth last year because of performance measures set over a three-year period that began in 2010, the year of the oil spill.
The company’s 2012 annual report released on Wednesday shows a zero in the column for performance shares where chief executive Mr. Dudley earned some $788,000 (U.S.) in 2011.
The performance measure, applied by BP’s own auditors, is based on oil and gas production growth, profitability in the refining, marketing and chemicals division, and underlying net income growth over the past three years, all measured against its peers. The peer group is Exxon Mobil Corp., Shell Oil Co., Chevron Corp., Total Petroleum (North America) Ltd. and ConocoPhillips Co.
First place in the group results in a 100-per-cent vesting of stock, second place results in a 70-per-cent payout, and coming in third results in a 35-per-cent vesting.
“As the starting point for all measures was before the Deepwater Horizon accident, the impact of this continues to be dominant,” the report said. “Results for all measures were below the third place required and so no shares vested.”
Mr. Dudley’s total pay, including salary, bonus, and shares, fell 21 per cent to $2.673-million from $3.404-million a year earlier, even though his salary and bonus both increased.
BP’s annual report was released during the second week of BP’s trial in a New Orleans court over the spill, which happened when the Deepwater Horizon rig exploded and sank, killing 11 men. The Macondo well it was working on spewed some 4 million barrels of crude into the Gulf of Mexico in the United States’ worst offshore oil spill disaster.
BP has already been forced to sell a large chunk of its business, raising some $37-billion to pay for cleanup costs, fines and compensation which already more than match this amount.
The effect has been to reduce its cash flow – a basic measure of earning power – by some $5-billion a year, or 14 per cent.
Plaintiffs are seeking tens of billions of dollars in further damages and fines.