BP overhauls performance benefit plan

BP has embarked on a far-reaching reform of performance-related benefits that will result in 330 senior managers receiving up to 40 per cent of their salary in the form of shares, writes Mary Fagan.

The scheme replaces the share options programme for almost all those involved and is expected to be measured against much more stringent criteria.

At present the long-term performance (LTP) plan includes only the top 80 executives in BP but from this year it is expected to include a further 250 people on salaries of about pounds 60,000 to pounds 75,000 and above. City sources said yesterday that on the criteria set, these individuals could earn 40 per cent of their salary annually in shares but that the likely average would be 20 per cent.

An earlier scheme, which operated over five years, ends this year and according to some City analysts could yield shares worth pounds 1.5m or more at current market prices for John Browne, the chief executive. Sir David Simon, chairman, could be awarded shares worth more than pounds 700,000.

In all cases those awarded shares under this earlier scheme must be held for at least five years.

The extension of the LTP plan, which is likely to be announced within weeks, is intended to boost BP's performance against other oil majors. It will run on a three-year rolling basis with performance criteria measured over that period. Shares awarded for each performance period must be retained for a further three years.

Those involved have accountability in terms of business units as well as a series of responsibilities including energising and streamlining operations and enabling confidence and creativity among staff.