LONDON: BP has moved to appease disgruntled investors, promising that it will overhaul the way its pays its most senior directors after almost 60pc of shareholders who voted did so against its highly criticised remuneration report.
The pay revolt, stemming from the pounds 14m chief executive Bob Dudley was awarded for 2015, was the biggest to date in the current annual general meeting season.
The size of the vote against the company is reminiscent of the 2012 "Shareholder Spring" when a number of FTSE 100 companies received similar bloody noses at the hands of unhappy shareholders, leading to the departures of executives at companies as varied as Aviva and Trinity Mirror.
The results from the meeting showed of the 62pc of investors who voted in relation to the remuneration report, 40.71pc did so in favour, while 59.29pc did so against.
Sacha Sadan, head of corporate governance at Legal & General Investment Management, BP's second largest shareholder, said the oil giant's 15-man board should have "used discretion" to scale back bonus payments before they were awarded. Mr Dudley's total pay pot rose 20pc in 2015, in a year when the company reported record losses.
"We felt there was poor alignment between long-term shareholder returns and executive remuneration," he said.
Royal London Asset Management, another major investor, said the "extraordinary" result reflects "a lack of discretion by BP's board" and "a serious disconnect" with the expectation of shareholders.
BP's remuneration plans are put to a binding shareholder vote every three years and new plans were already due to be drawn up this year in time for the 2017 meeting. But a spokesman for the group said that the shareholders' "very clear expression of dissatisfaction" would "supercharge" this process.
"We need to understand why some of BP's largest shareholders have voted against this policy in this way," the spokesman continued.
BP's remuneration committee chair Ann Dowling pledged to review the criteria used to judge executive performance, including how oil price fluctuations are taken into account and how they link to shareholder value.
"I will engage directly with major shareholders and ensure they are heard," she vowed.
But former business secretary Vince Cable insisted that both Mr Dudley and Ms Downing should be fired.
"The message still hasn't got through to chief executives about completely irrational and unreasonable pay demands," Mr Cable, who was responsible for crafting new legilsation in this area, told Sky News.
Simon Walker, head of the Institute of Directors, said that how BP reacts to the rebellion could determine the future of corporate governance. "The shareholders have spoken, and BP cannot shrug off this significant expression of disapproval with the CEO's pay package. British boards are now in the last chance saloon, if the will of shareholders in cases like this is ignored, it will only be a matter of time before the Government introduces tougher regulations on executive pay," he said.