BP cut the pay of its chief executive after a chastening year in which the British oil company missed profit targets and ditched its green investment strategy as it came under pressure from a US-based activist investor.
Murray Auchincloss’s pay decreased by 30% to £5.4m for 2024, according to the company’s annual report, published on Thursday.
While his basic salary rose from £1m to £1.45m, the failure to hit targets in categories such as profit, cashflow and safety meant the variable element of his pay slumped from £3.4m to less than £1m.
Auchincloss announced a “fundamental reset” of BP’s strategy last month after it reported lacklustre financial performance in 2024, posting annual profits of $8.9bn (£7.9bn), down from almost $14bn in 2023.
On the eve of the profits announcement it emerged that the activist investor Elliott Investment Management had built up a stake and was pushing the company to overhaul its strategy.
Auchincloss has since confirmed plans to cut more than £4bn from low-carbon investment plans, saying that optimism about the pace of the green transition had been “misplaced”.
While BP’s adoption of green targets went to a shareholder vote in 2022, the strategic volte-face will not be put to a vote, according to an agenda published on Thursday that outlined resolutions to be decided on at BP’s annual meeting next month.
Follow This, a Netherlands-based group of green activists who have stakes in oil companies, criticised the decision, saying BP had indicated at the 2022 meeting that it might offer a new vote in 2025.
“BP’s disregard for shareholders will not sit well with a sizable number of investors who want the company to continue their transition,” said the chief executive of Follow This, Mark van Baal. “Apparently, BP is afraid of its shareholders.”/
The abandonment of green investment targets will also affect how executive bonuses at BP are calculated this year, according to the annual report.
In 2024, 10% of executive pay was linked to profits from the company’s “transition growth” plans, of which 80% was made up of low-carbon projects.
“Reflecting the focus of our strategy, we have removed the transition growth engine growth measure,” the company said.
Instead, it will increase the portion of the bonus linked to free cashflow and operational reliability.
This would not have made a difference in 2024 because BP failed to hit targets in any of these three categories.
However, improved financial performance next year would yield a higher bonus, without having to hit transition targets, although 15% of executive variable pay will still be linked to reducing carbon emissions.
Despite the fall in Auchincloss’s overall pay, campaigners at Global Witness, which investigates environmental and human rights abuses, said the BP boss’s £5.4m pay was “obscene” and pointed out that it was 143 times the average UK salary.
“While households worry about their energy bills amid a soaring cost of living crisis, BP’s boss is lining his pockets with a fat-cat paycheck,” said the group’s head of fossil fuels campaigning, Alice Harrison.
“People have every right to be furious. It’s obscene that climate-wrecking oil firms continue to gouge the market for billions in profit and then hand millions to their executives off the back of our misery.”
Auchincloss’s fellow FTSE 100 CEO, the Rolls-Royce boss, Tufan Erginbilgiç, also took a pay cut last year.
Rolls-Royce’s annual report shows that his total remuneration dropped to £4.11m in 2024, down from £13.6m in 2023. The decline was due to Erginbilgiç having being handed £7.5m of shares when he joined Rolls-Royce in 2023, as compensation for remuneration forfeited at his previous employer.
