Approved remuneration policy

This table has been extracted from the full policy report which was approved by shareholders at BP's AGM 2014. The full policy report can be downloaded below.

Salary and benefits

Provides base-level fixed remuneration to reflect the scale and dynamics of the business, and to be competitive with the external market.

Operation and opportunity

  • Salaries are normally set in the home currency of the executive director and reviewed annually.
  • Salary levels and total remuneration of oil and other top European multinationals, and related US corporations, are considered by the committee. Internally, increases for the group leaders as well as all employees in relevant countries are considered.
  • Salary increases will be in line with all employee increases in the UK and US and limited to within 2% of average increase for the group leaders.
  • Benefits reflect home country norms. The current package of benefits will be maintained, although the taxable value may fluctuate.

Performance framework

  • Salary increases are not directly linked to performance. However a base-line level of personal contribution is needed in order to be considered for a salary increase and exceptional sustained contribution may be grounds for accelerated salary increases.

Changes to policy

No change to policy.

Annual bonus

Provides a variable level of remuneration dependent on short-term performance against the annual plan.

Operation and opportunity

  • Total overall bonus (before any deferral) is based on performance relative to measures and targets reflected in the annual plan, which in turn reflects BP’s strategy.
  • On-target bonus is 150% of salary with 225% as maximum.
  • Achieving annual plan objectives equates to on-target bonus. The level of threshold payout for minimum performance varies according to the nature of the measure in question.

Performance framework

  • Specific measures and targets are determined each year by the remuneration committee.
  • A proportion will be based on safety and operational risk management and is likely to include measures such as loss of primary containment, recordable injury frequency and tier 1 process safety events.
  • The principal measures of annual bonus will be based on value creation and may include financial measures such as operating cash flow, replacement cost operating profit and cost management, as well as operating measures such as major project delivery, Downstream net income per barrel and Upstream unplanned deferrals. The specific metrics chosen each year will be set out and explained in the annual report on remuneration.

Changes to policy

No change to policy.

Deferred bonus

Reinforces the long-term nature of the business and the importance of sustainability, linking a further part of remuneration to equity.

Operation and opportunity

  • A third of the annual bonus is required to be deferred and up to a further third can be deferred voluntarily. This deferred bonus is awarded in shares.
  • Deferred shares are matched on a one-for-one basis, and both deferred and matched shares vest after three years depending on an assessment by the committee of safety and environmental sustainability over the three-year period.
  • Where shares vest, additional shares representing the value of reinvested dividends are added.
  • Before being released, all matched shares that vest after the three-year performance period are subject (after tax) to an additional three-year retention period.

Performance framework

  • Both deferred and matched shares must pass an additional hurdle related to safety and environmental sustainability performance in order to vest.
  • If there has been a material deterioration in safety and environmental metrics, or there have been major incidents revealing underlying weaknesses in safety and environmental management then the committee, with advice from the safety, ethics and environmental assurance committee, may conclude that shares vest in part, or not at all.
  • All deferred shares are subject to clawback provisions if they are found to have been granted on the basis of materially misstated financial or other data.

Changes to policy

Introduction of an additional three-year retention period on matched shares that vest. This results in a six-year plan, the same as for the performance shares.

Performance shares

Ties the largest part of remuneration to long-term performance. The level varies according to performance relative to measures linked directly to strategic priorities.

Operation and opportunity

  • Shares up to a maximum value of five and a half times salary for the group chief executive and four times salary for the other executive directors can be awarded annually.
  • Vesting of shares after three years is dependent on performance relative to measures and targets reflecting BP’s strategy.
  • Where shares vest, additional shares representing the value of reinvested dividends are added.
  • Before being released, those shares that vest after the three-year performance period are subject (after tax) to an additional three-year retention period.

Performance framework

  • Performance shares will vest on the following three performance measures: – Total shareholder return relative to other oil majors. – Operating cash flow. – Strategic imperatives.
  • Measures based on relative performance to oil majors will vest 100%, 80%, 25% for first, second and third place finish respectively and 0% for fourth or fifth position.
  • The committee identifies the specific strategic imperatives to be included every year and may also alter the other measures if others are deemed to be more aligned to strategic priorities. These are explained in the annual report on remuneration.
  • The committee may exercise judgement to adjust vesting outcomes if it concludes that the formulaic approach does not reflect the true underlying performance of the company’s business or is inconsistent with shareholder benefits.
  • All performance shares are subject to clawback provisions if they are found to have been granted on the basis of materially misstated financial or other data.

Changes to policy

Override provision extended requiring high levels of vesting to be consistent with shareholder benefit.

More stringent vesting schedule for those metrics that are measured on performance relative to the other four oil majors. Third place finish reduced from 35% to 25% and second place increased from 70% to 80%.

Pension

Recognizes competitive practice in home country.

Operation and opportunity

  • Executive directors participate in the company pension schemes that apply in their home country.
  • Current UK executive directors remain on a defined benefit pension plan and receive a cash supplement of 35% of salary in lieu of future service accrual when they exceed the annual allowance set by legislation.
  • Current US executive directors participate in transition arrangements related to heritage plans of Amoco and Arco and normal defined benefit plans that apply to executives with an accrual rate of 1.3% of final earnings (salary plus bonus) for each year of service.

Performance framework

  • Pension in the UK is not directly linked to performance.
  • Pension in the US includes bonus in determining benefit level.

Changes to policy

No change to policy.

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