Cairn Energy shakes up CEO pay policy

While all the attention today is likely to fall on the pay of BP chief executive Bob Dudley, another, much smaller oil company is also making some changes to its own remuneration policy.

Edinburgh-based Cairn Energy, which has assets in Senegal, has also published the details of a new pay strategy upon which shareholders will be asked to vote at its annual general meeting.

It has also published details of chief executive Simon Thomson’s pay for 2016, which rose 61 per cent to £2m. His pay was bolstered by higher payouts under long-term incentive awards than in 2015. Mr Thomson’s basic salary last year was £554,390.

Under the new policy, which will come into effect this year if approved by shareholders, Mr Thomson will be able to earn up to 125 per cent of his basic salary as an annual bonus compared to 100 per cent under the previous scheme. Any amount earned above 100 per cent will be deferred into shares for three years.

However, his maximum earning opportunity under the company’s long-term incentive plan has been reduced to 200 per cent of salary plus a 50 per cent “kicker” for outstanding performance. Under the previous scheme – which has been in place since 2014 – he could earn up to 400 per cent of his basic salary, including any additional award for outstanding performance.

When all is said and done, his maximum potential earnings from long-term incentives and annual bonuses will therefore reduce to 375 per cent from 500 per cent under the old policy, although a greater proportion of executive pay will now be linked to short-term performance.

The company, which is currently not producing any oil, did not generate any revenue last year, but its loss before tax narrowed to $151.5m in 2016, from $497.8m in 2015.