BP Oil Spill Settlement: Excessive Executive Payouts Draw CriticismMarch 9, 2012
According to an article on the Washington Post, BP has continued to handsomely reward its executives despite facing billions of dollars in payouts to plaintiffs and the United States government. The Post reports that BP paid out $1.1 million worth of shares to former chiefexecutive Tony Hayward under a three-year incentive plan. The interesting fact is that Hayward resigned in the wake of the Gulf of Mexico oil spill in2010. The Post reports that Hayward earned $194,973 in fees in 2011 as a directorof BP’s TNK-BP joint venture in Russia.
Moreover, the Post points out that BP also gave current chief executive Bob Dudley a raise in the form of a $6.8 million pay package of salary, annual bonus awards, and stock grants and options. Reportedly, on March 9, 2011, Dudley received a stock award under the Executive Directors Incentive Plan that at today’s stock price would be worth about$10 million when vested in February 2014. BP’s financial information, made public in compliance with the Securities and Exchange Commission’s disclosures rule, comes as BP is working to settle claims related to the 2010 oil spill. The claims stem from a Gulf of Mexico exploration well which suffered a blowout, killing 11 people, sinking the costly drillingrig, and ultimately spilling as much as 4.9 million barrels of oil into the sea.
BP’s excessive executive payment has raised some brows as it faces stiff fines from both the government and well as plaintif fsettlements in the future. In response the director and chair of BP gavethe following statement: “We recognize a concern by government, and society atlarge, of excess in this area, but cannot ignore the reality of a global competitive market for top executive talent.We respect investors’ expectation for pay to be strongly tied to performance while also wanting to ensure that executives receive fair reward for their achievements.”
According to BP, 30 percent of the annual bonus is tied to safety, but the larger performance bonus is focused on shareholder returns, reserve replacement and operating cash flow. BP financial reports suggest that in 2011, Dudley received a salary of $1.7 million and a 150 percent bonus, $850,000 of which was paid in cash and the rest deferred. Further, Dudley also received contributions to a pension and $788,300 worth of stock because 2011 was the endof an earlier three-year performance plan. Business insiders suggest that Dudley’s salary this year will again be $1.7 million. Reportedly, he can get a 225 percent bonus if the company exceeds its targets. The company can also award Dudley “performance shares” worth 5.5 times his salary.