Performance-related pay helps BP chief to a total reward of £4m

Chief executive Tony Hayward took home 4.01m in salary, cash bonus and share awards, up from 2.85m in 2008.

BP said that Mr Hayward's variable performance-related pay increased from 1.5m to 2.1m last year reflecting "the impressive achievements of the year and the turnaround of performance over the past three years".

The company reported a full-year surplus of $13.96bn (8.75bn) in the year to December 31 – down 45 per cent on 2008 – as it wrestled with much lower oil prices than the record levels seen in 2008.

But it accelerated production by four per cent over the year, helped by the lack of a significant hurricane season.

The head of BP's remuneration committee, DeAnne Julius, said its bonus targets were based around safety, staff and performance indicators. "Nearly all targets were exceeded, some substantially, with particularly strong performance on cost reduction, exploration success, production start-ups and refining performance," she said.

BP says that its pay plan is structured to ensure that its executives receive their rewards based on the underlying profitability of the company and to avoid managers enjoying windfalls simply because oil prices surge.

Mr Hayward has been engaged in a turnaround plan at BP since he took over at a company beset by problems in 2007.

Two high-profile reports into the 2005 explosion at its Texas City refinery in the United States, which killed 15 people, put the firm's safety record under scrutiny, while refining problems and high overheads helped to make 2007 a dire year for the company, with profits plunging by more than a fifth.

A root and branch overhaul has seen BP shed around 7,500 jobs in the past two years, amid estimated cost savings of $4bn (2.5bn).

BP saw its final-quarter surplus rise 33 per cent to $3.45bn (2.16bn) last year and Mr Hayward hailed the progress the firm has made.

It recently revealed expansion plans, with production expected to start on 42 major projects worldwide over the next five years as existing production fields decline.

BP announced a change in future pay awards yesterday, with plans for executives to receive a portion of their annual bonus paid in deferred shares.

The move echoes similar efforts from rival Royal Dutch Shell, which recently said that it had frozen salaries for top bosses.

The group's last annual report revealed that former chief executive Jeroen van der Veer received a total package worth 8.2m in 2008 and was awarded 77,518 shares – worth around 1.3m.

Shell, whose 2009 profits fell 69 per cent to $9.8bn (6.3bn), has said new chief executive Peter Voser's salary is around 20 per cent lower than that paid to previous bosses.

Rex Tillerson, the chief executive officer of Exxon, which is the largest non-government controlled oil company in the world by market capitalisation, was paid total compensation worth $22.4m in 2008.

Even so, the chief executive officers CEOs of successful oil explorers often earn much more than their counterparts in the better-known oil producing companies.