The View | How much are chief executives really worth?
Shareholder revolts put sharper focus on rewards given to top management
How much would you say Bob Dudley, the chief executive of BP is worth? Last year he was paid US$16.4 million; this year the company’s board planned to pay him US$19.6 million. However shareholders in the British-based company staged a revolt and voted down the pay rise. The vote is non-binding, so it will be interesting to see how this pans out.
Fueling their anger was the fact BP’s earnings plunged from a US$8.2 billion profit in 2014 to a US$5.2 billion loss. In these circumstances how on earth could the company’s board be recommending a 20 per cent pay rise for Dudley?
As ever this is not an open and shut case because BP’s heavy losses resulted both from the slumping oil price and the settlement of enormous claims arising out of the Deepwater Horizon oil spill. That disaster occurred long before Dudley came on the scene and, as for oil prices, well even a miracle-making CEO’s hands are tied in moving the price of a global commodity.
Britain’s Institute of Directors ... is clearly worried about growing anti-big-business sentiment that will be fuelled by pay awards of this kind
Although BP took a mighty earnings hit last year, Dudley is widely credited with meeting all the targets he was set and for having done much to restore the underlying strength of the business.
Pay levels in big companies tend to be determined by a set of matrices, usually revolving around targets met or missed. In this sense pay determination can be described as being “objective”, however, and this observation is hardly confined to remuneration matters, public companies have a particular responsibility to peer beyond the figures and display more than a modicum of regard for the wider considerations that flow from their decisions.
It really will not do for loss-making companies to up executive rewards any more than it would be acceptable for a company to hire more staff during a business downturn.
The word “public” attached to the term public companies should not only entail a high level of accountability to shareholders but also involves a wider level of accountability than is strictly required under the law. A case in point is the reputational damage inflicted on corporations like Amazon who have been exposed as being active tax dodgers.