(ARTICLE)---BP slashes CEO\'s remuneration by 40% after shareholder backlash [LO
ID: 3253745 • Letter: #
Question
(ARTICLE)---BP slashes CEO's remuneration by 40% after shareholder backlash
[LONDON] BP has trimmed Chief Executive Bob Dudley's annual remuneration package by almost US$8 million to US$11.6 million, it said in its annual report on Thursday, after shareholders last year voted against his pay deal.
The 40 per cent cut comes after the company made a number of changes to its renumeration policy, including a 25 per cent reduction in bonuses for reaching certain targets, BP said.
Last year, some 59 percent of shareholders opposed Mr Dudley's US$19.4 million pay and benefits package which rose 20 per cent despite the company reporting steep losses]]
*Given the reduction of his pay benefit, Mr.Dudley may try to convince the shareholders that he deserved the $US19.4million pay benefit package.
*Two positive accouting theories that can predict how Mr.Dudley may behave are: Bonus-Plan hypothesis and Excessive Dividend Payout Hypothesis.
Required:
(i) For each hypothesis identify the agendas and principles involved. (2marks)
(ii) Clearly describe each hypothesis and illustrate how it can help to explain Mr.Dudley's behaviour (in your answer refer to the above news article as much as possible). (12 marks)
(iii) Clearly explain how the principles identified in (i) above can protect themselves from Mr.Dudley's expected behaviour. (6 marks)
Explanation / Answer
(i) For bonus plan hypothesis, to changes to its renumeration policy by reducing bonuses to reaching certain targets because annual remuneration package by almost US$8 million to US$11.6 million and try to convince the shareholders that he deserved the $US19.4million pay benefit package whereas Excessive Dividend payout hypothesis pay and benefits package which rose 20 per cent despite the company reporting steep losses.
(ii)
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