Shareholders of one of the world’s biggest companies vote to reject excessive pay for CEO

Could this be a sign of things to come?  For decades, the pay of top managers in big corporations has escalated to the point where they become mega-wealthy.  This not only angers the rank and file who earn a tiny fraction of the boss’s pay and hands an issue to the left, but also penalizes shareholders.

It’s one thing when top management executes creative strategies with diligence and brilliance.  But when a company falls on hard times, it is very difficult to justify paying an actual large fortune each year to the boss who presided over a disastrous year.

Something like a populist capitalist revolt just happened at global energy giant BP.

Rami Patel of the International Business Times reports:

Anger at boardroom excesses in Britain hit breaking point after BP shareholders resoundingly rejected a £14m ($19.8m, €17.5m) pay deal for chief executive Bob Dudley. Nearly 60% of shareholders voted against Dudley's 20% pay increase in a rebellion that was surpassed only by the 2009 Royal Bank of Scotland (RBS) mutiny when 80% rejected Fred Goodwin's pay deal.

Investors said the huge increase in pay could not be justified in a year where the company racked upits biggest annual loss of £3.6bn amid a collapse in oil price and slashed 5,000 jobs. Although the vote is non-binding, the company took notice of investor sentiment with chairman Carl-Henric Svanberg promising to review future pay terms.

The Church of England pension board asked "whether this level [of pay] is morally right" and small shareholder, Captain David Hawker, slammed the fiasco as a "PR nightmare." Speaking at the ExCel conference centre in London, he said: "The situation today in this country is austerity. While so much of our population must accept austerity, it's not the time to increase directors' remuneration."

Will this example spread?  Probably not.  Many board members are executives at other big companies and benefit from inflated pay packages.  But it is a helpful shot across the bow of boards of directors tempted to use shareholders’ money to pay off their buddies.

Could this be a sign of things to come?  For decades, the pay of top managers in big corporations has escalated to the point where they become mega-wealthy.  This not only angers the rank and file who earn a tiny fraction of the boss’s pay and hands an issue to the left, but also penalizes shareholders.

It’s one thing when top management executes creative strategies with diligence and brilliance.  But when a company falls on hard times, it is very difficult to justify paying an actual large fortune each year to the boss who presided over a disastrous year.

Something like a populist capitalist revolt just happened at global energy giant BP.

Rami Patel of the International Business Times reports:

Anger at boardroom excesses in Britain hit breaking point after BP shareholders resoundingly rejected a £14m ($19.8m, €17.5m) pay deal for chief executive Bob Dudley. Nearly 60% of shareholders voted against Dudley's 20% pay increase in a rebellion that was surpassed only by the 2009 Royal Bank of Scotland (RBS) mutiny when 80% rejected Fred Goodwin's pay deal.

Investors said the huge increase in pay could not be justified in a year where the company racked upits biggest annual loss of £3.6bn amid a collapse in oil price and slashed 5,000 jobs. Although the vote is non-binding, the company took notice of investor sentiment with chairman Carl-Henric Svanberg promising to review future pay terms.

The Church of England pension board asked "whether this level [of pay] is morally right" and small shareholder, Captain David Hawker, slammed the fiasco as a "PR nightmare." Speaking at the ExCel conference centre in London, he said: "The situation today in this country is austerity. While so much of our population must accept austerity, it's not the time to increase directors' remuneration."

Will this example spread?  Probably not.  Many board members are executives at other big companies and benefit from inflated pay packages.  But it is a helpful shot across the bow of boards of directors tempted to use shareholders’ money to pay off their buddies.