BP’s board didn’t see it coming.
The oil company was braced for 20%, maybe 25%, of shareholders to vote against its pay report. But 59% was a drubbing. It is the second-biggest protest over pay at a FTSE 100 company. That inglorious league table, incidentally, is headed by Royal Bank of Scotland, in the days when the government had to be seen to rebel against Fred Goodwin’s egregious pension arrangements.
BP’s corporate blindness goes deep. Read the remuneration report and there is barely a hint of awareness that paying the chief executive, Bob Dudley, £14m in a loss-making year might cause a spot of bother with the owners. Prof Dame Ann Dowling, chair of the remuneration committee, concludes by saying she is “pleased” that BP’s pay policy has “appropriately recognised” the company’s excellent performance.
Dowling’s remarks only make any vague sense within BP’s narrow view of how it measures its progress. Shareholders are thrown statistics of how few accidents happened last year, how many big development projects were completed on time, and how much cash was generated against budget. These factors – rather than the oil price – are the things management can affect and thus are useful yardsticks for pay, runs the argument.
As a philosophy, it is internally coherent. But it is crying out for somebody to apply common sense when the pay calculator spits out a plainly ridiculous figure of £14m, up 20%, for the boss in a year such as the one BP has just had. The company imposed a pay freeze on staff and cut 7,000 jobs; its share price fell 13% and it recorded a loss of $5bn.
Yes, as BP would point out, the financial score was hit by charges from the Deepwater Horizon disaster in 2010. But, even ignoring those costs, BP’s profits plunged 50%. And you really think it was pleasing and appropriate that Dudley should receive £1m a month? He has a tricky job but that rate of reward just looks greedy.
Dowling’s response to the 59% vote was to play a dead bat. “Shareholder criticism raises some fundamental questions around our policy and we will consider those in the coming months,” she said. Put like that, it almost sounds like a technical problem that a highly regarded mechanical engineer – she is president of the Royal Academy of Engineering – can solve easily.
But it’s not merely a technical issue. It’s about making good judgments, reading shareholders’ mood and knowing instinctively when you’ve overstepped the mark. On those scores, Dowling failed. The vote was merely advisory, so Dudley will keep his winnings if he is sufficiently bloody minded, but the message to Dowling in that 59% figure is straightforward. She should resign.
Bailey’s Burberry honeymoon period over
It is almost two years since Christopher Bailey, Burberry’s lauded (rightly) chief designer, also became its chief executive, thereby becoming a sort of superstar player-manager. The obvious difficulty in doing two big jobs at once is that there are only 24 hours in the day, to which the corporate answer was not to worry.
Bailey was “one of this generation’s greatest visionaries”, declared his predecessor Angela Ahrendts, and anyway chief operating officer John Smith would be on hand to deal with fuddy-duddy details like negotiating an exit from licensing contracts in Japan.
For a while, all went swimmingly. Burberry’s share price was at about the £15 mark when Bailey started his dual role in May 2014 and by the following spring it was £19. Now, though, it is £12.96, falling 3.6% on Thursday’s mild profits warning, and has been as low as £11.
One cannot, of course, conclude that Bailey’s heavy workload has played any role in Burberry’s weaker run. The company is not alone among upmarket labels in finding that Chinese tourists aren’t spending as freely as they were. What’s more, fashionistas say the Burberry clobber retains the right edge.
But the company needs to be careful. One more trading setback and the unorthodox dual role will invite tougher scrutiny from shareholders. Bailey could help himself by explaining how the system works in practice and whether it is sustainable indefinitely. If the sometimes-rumoured bid for Burberry ever materialises, the issue will be top of the agenda.
Alexa Chung’s M&S line hit by stock trouble
Those Alexa Chung outfits at Marks & Spencer look terrific; no wonder the collection grabbed oodles of editorial space in the papers. And that £89 khaki trenchcoat is perfectly pitched for the M&S shopper – a sure-fire winner that surely even M&S couldn’t forget to stock in sufficient quantities, as it did before with coats and skirts in recent years.
Well, at 6pm on Thursday the Frances Trench was unavailable online in five of seven sizes. Don’t worry, says M&S, we’ve bought with confidence this time, it’s just a matter of getting the garments into the distribution centre. Maybe, but isn’t the idea to shift the stuff when the buzz is still fresh?
- The standfirst of this article was amended on 14 April 2016 to reflect the fact that Bob Dudley’s pay package is worth £14m
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