Report
Expert Corporate Governance Service (ECGS)
EUR 1000.00 For Business Accounts Only

BP – AGM 27 May 2020

Items 1 and 12:

 

In response to a global crisis, BP has dramatically reduced spending to back a 65% drop in oil prices in the first quarter 2020. BP slashed its 2020 budget by 25% to around $12bn and reduced output at its U.S shale operations. However, BP has not reduced its dividend which we consider unsustainable: the payout is excessive, the dividends often are not covered by EPS and/or FCF. This year, BP proposes a total dividend of $8.3bn, which will be financed by increased debt (+$2.6bn in 2019 with a further increase in 2020), divestments and budget reductions. Its competitors privilege liquidity, like Norwayns Equinor who was the first to cut its dividend by two thirds and suspend a $5bn share buyback. And BP continues to pay dividends without shareholder approval. Moreover, the dividend increased by 1.2% despite the fall in EPS of 58%. Considering this, ECGS does not approve the proposed repurchase of shares.

 

Item 2: Remuneration report

 

We have concerns about the alignment of the CEO's STI and BP's overall performance: the bonus increased by 67% while the EPS dropped by 58%. In aggregate, Bob Dudley the CEO of BP was granted a total remuneration of $13.74m (+2.1%). The variable incentive is 6.1x the base salary. The CEO's total remuneration is excessive and corresponds to 282% of the median CEO remuneration of UK companies in the MSCI Europe index or 261% of the Oil and Gas sector median.

 

Item 3: Remuneration policy

 

The CEO's maximum variable remuneration opportunity (both short-term and long-term) is 725%, which largely exceeds our limit of 300% of the base salary. The remuneration package is excessively weighted towards performance-pay.

Underlying
BP p.l.c.

BP is an integrated oil and gas group based in the United Kingdom. Co. is engaged in the exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and the manufacture and marketing of petrochemicals. Co. operates globally, with business activities in Europe, the U.S., Canada, Russia, South America, Australasia, Asia and parts of Africa. Co. operates in two business segments: Exploration and Production - including oil and natural gas exploration and development and production; and Refining and Marketing- activities include the refining, manufacturing, supply and trading, marketing and transportation of crude oil, petroleum and petrochemicals.

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Analysts
Expert Corporate Governance Service (ECGS)

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