Tony Hayward, who business school students will be studying for generations as an example of ineptitude, is back in the news again.
BP Plc.’s board of directors has decided that Hayward, the former CEO, and other members of senior management, didn’t deserve a bonus for 2010 because of the disaster in the Gulf of Mexico. That was a no-brainer. If any group of executives were less deserving of a reward for a job well done, it was this group. Their incompetence cost lives and fouled the environment. But the magnitude of their blunders were not confined to last year.
Indeed, BP’s Texas City refinery exploded in 2005, killing 15 and injuring 170. Later investigations found the company to be at fault and included a then-record fine by the federal Occupational Safety and Health Administration. The company announced in February that the refinery was for sale. A year later, there were two major BP oil spills in Alaska’s Prudhoe Bay.
Hayward, who joined BP in 1982, moved up through the ranks fairly quickly. He gained headlines after Texas City for his stinging criticism of BP’s corporate culture. After replacing Lord John Brown as CEO in 1997, he vowed to focus on safety like a laser. Given what happened in the Gulf, that obviously never happened. The answer is simple — go after his bonus. The Board believed in him so much that it gave him a 2008 bonus of £1,496,000 ($1.87 million) and a 2009 bonus of £2,090,000 ($3.39 million). This money was clearly given with the expectations that things would change, and they did not. But, as the Daily Mail pointed out, the largese to Hayward knows no bounds.
“His pension pot is valued at £13.7 million ($22.3 million), equivalent to £605,000 a year ($984,000),” the paper says. “And while BP cancelled its share incentive plan for 2008- 2010, Hayward’s awards under two other reward schemes are worth up to £5.2 million ($8.45 million). However, a spokesman pointed out that the award is traditionally a fraction of the potential total.”
Hayward also is being paid £ 92,000 ($149,628) for his part-time job as head of non-executive director of BP’s Russian joint venture TNK-BP, which he took on after being dumped as CEO. He also owns 535,000 shares of BP, which have slumped nearly 13% over the past year despite surging oil prices.
Among the other executives not getting a bonus is Andy Inglis, the head of exploration and production at the time of the accident who was fired by Hayward’s successor Bob Dudley. He was paid £1.4 million ($2.27 million) including £200,000 ($325,280) in repatriation costs, the paper says. Inglis’ predecessor was Hayward.
For his part, Dudley got $1.875 million . He elected not to receive a bonus. Good thing because he didn’t deserve one.
BP’s board has turned the idea of pay for performance on its head.