As highlighted in our annual April Fool's Day prank, executive compensation is a hot-button issue of late. In addition to blanket legislation pending in the U.S. House of Representatives, "say on pay" proposals have been filed at more than 60 companies this proxy season, according to Institutional Shareholder Services. Such proposals, which are on the ballot at companies such as Coca-Cola
Advisory, or non-binding, votes on pay have already been implemented in the U.K., Australia, and Sweden. These votes are far from a simple rubber stamp. In 2003, the first year of such votes in the U.K., shareholders balked at GlaxoSmithKline's
The compensation flap centered on Browne's full inclusion in the 2006-2008 share incentive plan, 18 months beyond his summer 2007 retirement date. BP chair Peter Sutherland defended Browne's stake in the plan by noting that "his retirement was brought forward by mutual agreement. He should not be penalised for that decision." Well, sure, he shouldn't be penalized, but this looks like a reward, not an absence of penalty. Crazier perquisites have been handed out to departing CEOs, but I can't blame shareholders for being peeved about this aspect of Browne's pay package.
BP investors, or anyone interested in transparent compensation schemes, should certainly take a look at the company's remuneration report. Some critics called for BP to better align its pay with safety outcomes, but I'm not sure they read the report, which is very clear on this point. Bonuses were halved in light of BP's significant safety and operational shortcomings. It could be argued that management ought to have taken no bonus at all, but I don't see an egregious misalignment of pay and performance here.
The dissident shareholders delivered their message, with almost one in five rejecting the remuneration report. The occasion did not prove to be anything momentous, but it did underline the recent feelings of disappointment toward the British stalwart. We've praised Lord Browne elsewhere, so there's no need to retread that position, but it is unfortunate that after such a long and rich career with the company, the man once dubbed the "Sun King" of the oil industry had to go out on such a discordant note.
Fool contributor Toby Shute actually kind of likes discordant notes, and is mourning the closure of Tonic, his favorite music venue in New York City. He doesn't own shares in any company mentioned. Coca-Cola is an Inside Value pick, and GlaxoSmithKline is an Income Investor selection. The Motley Fool has a harmonious disclosure policy.