Executive Remuneration. Controversy over Executive Remuneration at BP

Controversy over Executive Remuneration at BP
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Controversy over Executive Remuneration at BP
The case involves a dispute between the company and shareholders who defer over a compensation package that the Chief Executive Officer would receive. In 2016, BP announced in March that Bob Dudley, the CEO, would receive a compensation package that comprised of $19.6 million dollars. The quotation was an increase of 20% from the amount quoted during the previous year. The point of contention arose from the Royal London Asset Management, a shareholder, who claimed that the figure was unreasonable. BP provided the deliverance of excellent results by the company as justification. The previous year had offered a challenging environment characterized by a crash of oil prices down to almost 50%. The company still managed to produce good results. The shareholders were dissatisfied and rejected the remuneration report BP provided in April of the same year. There was need to determine whether the company made the right move by deciding to offer a generous package to the CEO. The essay explores the factors that affect the making of such a decision, and suggests a way forward on the matter based on the evidence available.
Any decision the company makes will need to consider the standing of the company in the energy sector. BP is an international company that majors in oil and gas (V.C. & Hartman, 2016). In 2015, the company managed to generate total revenue of $223 billion, and recorded $104.8 billion as marketplace capitalization. The company has developed a reputation of successful endeavors in outsourcing, development and production of energy sources, and a subsequent conversion of the resources into useful consumer products. Before the dispute arose over the remuneration package, the company recorded the worst loss in the history of the company existence of $6.5 billion dollars. The CEO, Bob Dudley, maintained his outlook based on the sturdy cash flow the company experienced despite a 9% drop in prices of shares. Dudley insisted upon the dive in prices and continuous payment of liabilities arising from the disaster at Deepwater Horizon as the causes for the poor performance by the company. An analysis of the justification of the remuneration package has basis on the position and history of the company, and the market indicators present (V.C. & Hartman, 2016). Dudley received a salary of $1.9 million and a cash bonus of $1.4 million, which was an increase from $1 million, and a doubled retirement salary of $6.5 million. BP explained that the pension figure arises from a multiplication of the initial value by 20 to conform to the reporting regulations in the UK. The figure is what constitutes the Lifetime Allowance.
Shareholders are the party responsible for the generation of the remuneration package. The group developed the current package in 2014, for use until 2017 (V.C. & Hartman, 2016). The policy had basis on longevity, performance, strategy applied, and delivery. Annual cash bonuses had direct relation to measures taken to ensure safety and value, with respective contributions of 30 and 70 percent. The goals one needed to achieve for safety measures were a reduction in cases of leaks and spillages, red...