UK - Local authority pension funds will oppose the remuneration report of BP at its AGM as it funds want it to link executive pay with health and safety performance.
The £70bn Local Authority Pension Fund Forum (LAPFF) has recommended that its members, who own an estimated 1.2% of BP shares, vote against the company’s remuneration report as a result of the company’s failure to clearly tie executive rewards to safety performance.
The Forum also wants extra-financial performance metrics to apply to all executive directors, not only the outgoing CEO, it says they should also apply to the CEO designate, Tony Hayward, who is set to take over from Lord Browne in July 2007.
BP said it has reduced directors’ bonuses, and that safety components will be part of the 2007 annual bonus calculation. The Forum said it will assess the stringency of these targets in its analysis of the 2007 annual report.
LAPFF chairman Cllr Darrell Pulk said: “It is plainly right that BP should not pay directors full bonuses in the wake of the highly critical Baker and CSB reports. But we do not see any linkage between long-term incentives and BP’s stated desire to be a leader in process safety management."
He added: "Whilst we welcome the company’s openness to investor engagement, and decision to include process safety as a factor in determining future bonuses, we have no choice but to oppose the remuneration report in this instance."
Pulk concluded: "It is important the investors give the company a clear message - if safety culture is to be at the heart of the business going forward, then it must also be inherent in the board’s remuneration policy.”
The Forum has been engaging with BP for six months over the company’s response to recent safety failures, including the Texas City Refinery blast in March 2005 and the Prudhoe Bay spill in July 2006. The company has been criticised for its management of safety issues in reports by former US Secretary of State James Baker and, more recently, the Chemical Safety and Hazard Investigation Board (CSB).
BP’s AGM is scheduled for 12th April.
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