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Petroleum

BP Turns to Remuneration Consultants Amid Amoco Merger

Strategic Insights

— 2 min read

As British Petroleum (BP) navigates the complex aftermath of its acquisition of US oil company Amoco, the company is seeking the expertise of remuneration consultants to re-evaluate pay scales for senior management. This move will likely result in higher compensation packages for executives who survive the shakeout following the merger. Notably, BP's CEO, John Browne, earns less than his counterpart at Amoco, Larry Fuller, despite the latter's company being less profitable. With the deal triggering a "change of control" clause in Amoco's employment contracts, Fuller stands to receive an estimated $US25 million from his stock options, in addition to the $US18.6 million he had already accumulated.

Key Takeaways:

  • BP is turning to remuneration consultants to re-evaluate pay scales for senior management in the aftermath of the Amoco merger.
  • The move is expected to result in higher compensation packages for executives who survive the shakeout.
  • BP CEO John Browne earns less than Amoco CEO Larry Fuller, despite Fuller's company being less profitable.
  • Fuller stands to receive an estimated $US25 million from his stock options as a result of the merger, in addition to the $US18.6 million he had already accumulated.
  • The merger will trigger the "change of control" clause in Amoco's employment contracts, making all options exercisable immediately.
  • BP intends to put golden handcuffs on key Amoco employees to deter an exodus in the wake of the announcement.
  • The group will inherit Amoco's disastrous investment in a $US200 million power station in Colombia, which has been shut down due to over-optimistic gas reserve estimates.
  • Amoco's writedown of the power plant and gas field contributed to a collapse in its second-quarter earnings from $US622 million to $US287 million.
  • DP has problems of its own in Colombia, including attacks on its facilities, extensive delays in building up production, and a high tax regime.

Statistics:

  • Amoco CEO Larry Fuller's salary and bonus totaled £1.2 million last year.
  • BP CEO John Browne earned £938,000 in salary and annual bonus last year.
  • Fuller's stock options are estimated to be worth $US25 million as a result of the merger.
  • The "change of control" clause in Amoco's employment contracts will make all options exercisable immediately, in addition to the $US18.6 million Fuller had already accumulated.
  • The $US200 million power station in Colombia was built to find a use for surplus gas from the Opon gas field, 200km north of Bogota.
  • The power plant has the capacity to supply power to a town of 70,000 people.

Sources:

  • "BP Turns to Remuneration Consultants Amid Amoco Merger" (exact source not specified)
  • A spokesman for BP
  • A spokeswoman for Amoco

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