Daily Telegraph

Royal Dutch Shell has frozen the pay of its top executive directors and imposed new rules on bonuses, as it tries to appease investor anger over excessive remuneration.

By Rowena Mason, City Reporter (Energy)
Published: 9:11AM GMT 16 Feb 2010

Last year, Shell’s board suffered an embarrassing shareholder revolt over their pay packages, which awarded bonuses to executives who had failed to hit their targets.

Since then, the company has been consulting with major shareholders about more appropriate remuneration policies.

In a letter to investors , Hans Wijers, chairman of the remuneration committee, said the move would “better align remuneration policy with shareholder interests and long-term strategy”.

Peter Voser, who took over as chief executive of Shell last year, has already accepted a pay package 20pc below that of his predecessor, in line with other new employees.

He, along with Simon Henry, finance director, and Malcolm Brinded, director of upstream, will not be eligible for a rise until at least January 2011.

A greater proportion of bonus payments will now be in shares, to be vested over a longer period of time, which will tie the money made by directors to performance.

Mr Voser will also have a personal say in how successful his executive directors have been at hitting targets each year. The remuneration committee has also agreed not to award bonuses where directors fail to meet their targets.

It is understood major shareholders are happy with the concessions, which will be presented at the group’s annual meeting in May.

The shareholder revolt last year was one of the largest in UK corporate history, with 59.42pc of shareholders voting against Shell’s pay deal during at fiery meeting at the Hague.

Peter Job, the former chairman of Royal Dutch Shell’s remuneration committee, stepped down in September, five months after the rebellion. He angered investors by recommending that directors take up half their share awards even though Shell missed its target of finishing third in terms of performance against a peer group of five rivals.

Jeroen van der Veer, Shell’s former chief executive, received a package worth £9.1m, up 58pc on 2007.

At the time, several investors spoke out. Errol Keyner, from Dutch shareholder association VEB, called the system “sick and in need of fixing”. Guy Jubb, of Standard Life, told the board he was “dismayed” over Mr van der Veer remuneration package.

The rebellion was seen as an indication of increasing activism among institutional shareholders and a sign that anger at bonuses paid to management in the banks had spilled over into other sectors.

TELEGRAPH ARTICLE

• Shell responds to last May’s shareholder revolt over pay

• Salaries frozen until 2011, with pledge on bonuses and targets

Zoe Wood
Tuesday 16 February 2010 10.36 GMT

Shell has frozen salaries after a row with shareholders. Photograph: Leon Neal/AFP/Getty Images

Royal Dutch Shell has today bowed to pressure from major investors by announcing a major overhaul of executive pay. It will freeze the salaries of top directors and set new limits on bonuses.

The oil group has been in talks with major shareholders since the embarrassing revolt at last May’s annual meeting when 60% voted against a pay deal that included discretionary bonuses for top directors who had failed to hit targets.

The chief executive, Peter Voser, and finance director Simon Henry will have their salaries frozen until January 2011. Their pay is already 20% less than their predecessors’. The company said the move demonstrated “appropriate restraint in the current economic environment”.

In a letter to shareholders setting out the changes, Hans Wijers, chairman of the remuneration committee, said the freeze aimed to “better align remuneration policy with shareholder interests and long-term strategy”.

Shell said it had conducted a “wholesale review” of pay since the May showdown and had drafted the proposals with the help of external consultants.

Wijers, who took over the post in September, said that while investors had accepted the “basic” structures were correct they had demanded change elsewhere.

Base salaries are frozen and new appointment salaries will be lower. In the letter Wijers promised there would be no review of salary, bonus, and share levels until 1 January 2011.

Accountability

The company also said directors would no longer be allowed to award management bonuses if they missed targets.

Furthermore, it is introducing a new “individual performance” element to payments. With the goal of increasing personal accountability for short-term results among senior managers they will be scored by Voser, affecting the payout.

The company will also demand executives own more shares, and keep them for longer, to better entwine their fortunes with the company. The previous shareholding guideline for the chief executive was two times salary but that will now rise to three.

“I believe that holding shares probably aligns executive interests with those of shareholders better than any long-term incentive plan,” said Wijers.

Shell has also ruled that executives must hold long-term incentive plan shares for two years after qualifying for them.

Wijers conceded that shareholders still had reservations, particularly over targets within the long-term incentive plan, but added: “In the absence of perfect metrics we will have to work with these new measures and adapt as necessary … However, I do believe these proposals will provide an improvement and sit within more broadly balanced structures.”

In the letter Wijers promised more transparency around executive pay in general, with the 2009 annual report to spell out remuneration of current as well as former directors. This would include the head of its gas business, Linda Cook, who quit with a controversial golden goodbye, and former chief executive Jeroen van der Veer, who also left last year.

SOURCE ARTICLE

The Times
February 17, 2010

Robin Pagnamenta and Robert Lindsay

Royal Dutch Shell said that it would freeze the salaries of its top directors and reform a generous bonus scheme as the oil giant moved to soothe shareholders’ anger over excessive boardroom pay before its annual meeting.

In a letter to investors, Hans Wijers, the new chairman of the Anglo-Dutch company’s remuneration committee, said that the changes were being made after extensive talks with shareholders, 60 per cent of whom voted down the executive pay plans at a stormy annual meeting last year.

The shareholder revolt triggered the resignation of Sir Peter Job, Mr Wijers’s predecessor.

In the letter, Mr Wijers said that Shell would be capping the salaries of its top three executives — Peter Voser, chief executive, Simon Henry, finance director, and Malcolm Brinded, head of exploration — until 2011. He said that Mr Voser had been appointed last July on a salary 20 per cent lower than that of his predecessor, Jeroen van der Veer, who earned $2 million (£1.3 million) in basic pay in 2008 but $15 million in total compensation. Mr Wijers said that Mr Voser and Mr Henry had received pay rises last year but only because they had been promoted to new roles

He also announced plans to scrap a heavily criticised bonus scheme that last year allowed top directors to collect multimillion-pound payouts, even though they failed to meet performance targets.

“I believe it is appropriate in the current economic environment to state up front that no upward discretion will be applied to the Long Term Incentive Plan or Deferred Bonus Plan vesting in 2010. In future, there will be no use of upward discretion in the vesting of these plans without prior shareholder engagement,” Mr Wijers said.

Meanwhile, in an unprecedented move for a global oil group, Mr Wijers unveiled plans to link bonus payouts to Shell’s performance on the Dow Jones Sustainability Index, which ranks corporate performance using a variety of social and environmental indicators, including cuts to carbon emissions.

From 2010, 10 per cent of the targets used to calculate payouts will be linked to the index, with the remaining 90 per cent related to operational and financial performance as well as the delivery of big projects on time and on budget. The key measure in Shell’s bonus plan remains the group’s performance against its peers — BP, Total, ExxonMobil and Chevron.

In another concession to investors, Mr Wijers said that in future Shell’s chief executive would be obliged to have shares in the company equivalent to three times his basic salary, in order “to provide greater alignment with shareholder interests”. The existing guidelines for executive directors are for a holding of two times salary.

Shell’s 2010 annual meeting will be held on May 18.

TIMES ARTICLE

BP, Europe’s biggest oil company, has pulled out of the leading business group lobbying for curbs on US greenhouse gas emissions, a sign of fragmentation in the campaign for climate and energy legislation.

ConocoPhillips and Caterpillar of the US have also dropped out of USCAP, the group revealed on Tuesday. Royal Dutch Shell is now the only large oil company still a member.

Copyright The Financial Times Limited 2010.

FULL FT ARTICLE (Subscription)

THE NEW YORK TIMES

Energy companies are on the prowl again.

After a two-year slowdown in mergers and acquisitions in the industry, companies are once again looking for ways to use their checkbooks to expand their reserves, buy new technology or snap up promising oil and gas fields.

Unlike the round of mergers that created today’s behemoths in the late 1990s, the current round is not expected to form new giant companies like Exxon Mobil or ConocoPhillips. This time, companies are focused on buying fast-growing small companies, or on acquisitions that expand their reserves in an era when it is hard for them to find new places to drill.

The targets include companies that own new fields in nations like Ghana and Sierra Leone, independent gas producers in the United States, and companies that control fields in the deep waters of the Gulf of Mexico.

“In this industry, where you’re in the business of increasing your reserves, there are two ways to do so — to drill or to acquire,” said Christopher W. Sheehan, director for mergers and acquisitions research at IHS Herold. “There is an intense competition for access to resources through mergers.”

This latest wave of consolidation comes amid fresh enthusiasm for natural gas production, especially in the United States, where new technology has significantly expanded the nation’s reserves. The huge potential of new gas fields has driven most mergers in the North American energy sector in recent months, with more to come this year, according to bankers and analysts.

Buying interest is particularly strong among the international oil majors, which had sold off many of their onshore assets in the United States over the last decade and are now eager to come back. Anthony B. Hayward, the chief executive of BP, said last month at the World Economic Forum in Davos, Switzerland, that the gas being extracted from beds of shale was “a complete game-changer. It probably transforms the U.S. energy outlook for the next 100 years.”

The biggest deal in that sector was announced in December, when Exxon Mobil said it would buy XTO Energy for $31 billion. Shortly after, Total of France said it would pay $800 million for a minority share in Chesapeake Energy’s Barnett shale gas portfolio. Chesapeake has raised about $11 billion from joint ventures for its shale gas assets in the last two years; BP and Royal Dutch Shell have struck similar agreements in recent months.

In a humorous note to investors, Bernstein Research analysts quipped recently: “Frankly, you can virtually plan your gym sessions around these deals, they are becoming so regular. Thinking about it, isn’t it about time for another Statoil deal?”

Statoil, the Norwegian national oil company, recently struck a deal with ConocoPhillips to trade some of its assets in the Gulf of Mexico for acreage that Conoco holds in the Chukchi Sea of Alaska; in November, Statoil agreed to pay $3.4 billion for a 32.5 percent stake in Chesapeake’s assets in the Marcellus shale formation in the Appalachian region.

“The growth opportunities from shale gas are something we haven’t seen in the United States for decades,” said Roger D. Read, managing director and senior energy analyst at Natixis Bleichroeder in Houston. “The United States, which had been a static market, now has the chance to grow its production.”

Bankers and energy consultants expect deals to pick up this year after a two-year lull. There were 244 deals in the global oil and gas industry last year, down from 285 in 2008, and 336 at the peak in 2007, according to data from IHS Herold, a consulting and advisory firm.

While the number of transactions was down, the size of the Exxon-XTO transaction helped raise the total value of last year’s mergers to $144 billion, up from $104 billion in 2008. (Merger values peaked at $200 billion in 1998, a year when many of today’s giant companies were created.)

Analysts point to a wide range of companies that are potentially on the market, including EOG Resources, Southwestern Energy, PetroHawk Energy, the Encana Corporation, Chesapeake Energy, Devon Energy and Anadarko Petroleum.

“There will be a shakeout there. It will be eat, or be eaten,” said James Bogues, who leads Accenture’s North America energy mergers and acquisition unit. “Given Exxon’s reputation as a very deliberate, cautious company, the fact they made such a bold move with XTO will no doubt inspire others that a price has been set for shale gas assets and technology.”

Outside of the United States, the pace of mergers has also picked up. Suncor Energy of Canada bought Petro-Canada in a deal valued at $18 billion at the time to form a national giant and stave off possible bids from foreign buyers, particularly Chinese companies. In West Africa, Exxon has offered $4 billion for a stake in an offshore field in Ghana, though that deal could fall through given the government’s threat to block the transaction; international firms, including Eni of Italy, are battling over some prospective fields in Uganda.

Chinese companies have also been particularly active. In August, Sinopec, one of China’s biggest oil companies, closed a $9 billion acquisition, buying Addax Petroleum, a Geneva-based oil explorer that is most active in Nigeria, Gabon and the Kurdistan region of Iraq.

Sinopec, formally known as the China Petroleum and Chemical Corporation, said the deal “represents the largest successful acquisition of overseas oil and gas assets by a Chinese company.”

The interest of national oil companies, like Sinopec, could prove a powerful and lasting driver for merger deals in the energy sector.

“The mandate of national oil companies is to go and find reserves around the world,” said Jon McCarter, the oil and gas transactions leader for the Americas at Ernst & Young. “They have been very active and very aggressive.”

NYT ARTICLE

A lengthy document sent by allegedly disillusioned Shell employees to leading environmental and human rights activists sought to launch a corporate revolution at the oil giant.

The document, which was given to IT PRO, was attached to a leaked database containing contact details of nearly every Shell employee. It was sent by 116 disillusioned full-time employees in the US, the UK and the Netherlands to Greenpeace and other campaign groups active in Nigeria.

The document contained information on how the contact database could be used change the way Shell operates, by influencing employees, the public, top institutional investors and non-governmental organisations.

“Using the files we have attached… the Royal Dutch Shell Corporate Revolution that we propose and describe in large detail in Section 5 of this document provides a step-by-step guide on how to shatter the walls of mass ignorance in the corporation in order to bring about informed and meaningful insider dissent from Shell’s common-folk robot employees,” the document reads.

One recipient of the files, John Donovan, a campaigner at anti-Shell website www.royaldutchshellplc.com, told IT PRO that the disillusioned employees may have been planted there by activists solely to extract information such as the database. Donovan said more data breaches would be forthcoming at the oil giant.

According to the document, the employees are upset at a range of environmental and human rights abuses that they believe their employer is taking in Nigeria, one of its key markets for energy exploration.

“We are extremely concerned regarding Shell’s behaviour in Nigeria and we are disgusted by the injustices that Shell is committing in Nigeria,” they wrote.

The document was not signed by the authors, they say, to protect their own jobs. They fear they would be sacked if they revealed their identities.

Shell accepts that the database is genuine, but says it believes that the covering letter is not.

The oil giant publicly argues that individuals’ security has not been affected by the distribution of the database. However, an email apparently sent by Shell’s chief ethics and compliance officer Richard Wiseman suggests there are wider internal security concerns.

“Although the vast majority of information in the [Shell corporate] Address Book is largely business related, there may be cases where the security of an individual may be impacted by release of such information,” Wiseman wrote.

Some personal phone numbers are included in the database where the individual uses that number to work from home. IT PRO understands that Wiseman sent a memo to Shell staff declaring that some might receive nuisance phone calls.

Donovan said: “We expect to receive further leaked information from Shell insiders.”

Shell is currently investigating the circumstances under which the database was leaked. This investigation includes trying to identify if hackers were involved.

The company could offer no comment on whether the leak was caused by people or if it’s a process or technology issue, and what actions it would take to prevent the issue happening again.

SOURCE ARTICLE

THE WALL STREET JOURNAL

FEBRUARY 16, 2010

By JAMES HERRON

LONDON—Royal Dutch Shell PLC on Tuesday proposed changes to the way it pays its executive directors in an attempt to assuage concerns that led shareholders to reject its remuneration package last year.

The proposals constitute a significant step toward greater pay restraint at one of the world’s largest companies at a time when excessive awards to executives, particularly at banks, are a political hot potato.

The salaries of Shell Chief Executive Peter Voser and Finance Chief Simon Henry will be 20% lower than those paid to their predecessors and will be frozen from July 2009 until January next year, according to proposals outlined in a letter from the chairman of Shell’s remuneration committee, Hans Wijers.

However, the maximum shares the CEO could be awarded under the performance-related long-term incentive program would be increased from two times to three times salary, “thereby providing greater alignment with shareholders’ interests,” Mr. Wijers said in the letter, which has been posted on the company’s Web site.

Shell has broadened the criteria by which this performance is assessed. Formerly, the only measure of performance was comparing total shareholder return against Shell’s peer group of integrated oil companies. This has now been broadened to include earnings per share, net cash flow from operations and oil and gas production.

The main concern that led shareholders to reject last year’s pay package was that directors were awarded a share bonus under the company’s long-term incentive plan despite performance targets being missed. The new proposals would prevent the remuneration committee from doing this, the letter said, although only for 2010. “In future, there will be no use of upward discretion in the vesting of these plans without prior shareholder engagement,” said Mr. Wijers.

The proposals are the result of a “wholesale review of remuneration policy” and extensive consultations with Shell investors, following a highly unusual vote at last year’s annual general meeting, where 60% of shareholders rejected the executive directors’ remuneration package, the letter said.

“I believe there was broad support [from shareholders] for the direction we are taking,” wrote Mr. Wijers.

Write to James Herron at james.herron@dowjones.com

REUTERS

LONDON (Reuters) – Royal Dutch Shell Plc (RDSa.L) said it was overhauling its pay practices for top management, including a pay freeze for its chief executive, Peter Voser, and a limit on bonuses, after a shareholder revolt last year.

The head of Shell’s remuneration committee said salaries for Voser and Chief Financial Officer Simon Henry, which are 20 percent lower than their predecessors’, were being frozen until 2011.

Directors will not, this year, be allowed to award management bonuses if they fail to meet pre-agreed targets.

Top management received bonuses for 2008, despite not hitting targets, prompting 60 percent of Shell investors who voted, to oppose the 2008 remuneration report.

Hans Wijers, Chairman of Shell’s Remuneration Committee told investors in a letter, a copy of which was published on Shell’s web site on Tuesday, that he wanted to “demonstrate appropriate restraint in the current economic environment”.

Investors in European corporates, who traditionally vote overwhelmingly in favor of managements’ plans, registered their dissatisfaction with companies’ handling of and contribution to the global economic crisis in unprecedented numbers in 2009.

One third of voters at mining group Xstrata’s (XTA.L) annual general meeting opposed its pay policy, and more than a third of investors opposed oil major BP’s (BP.L) executive pay.

A majority of investors in troubled bank Royal Bank of Scotland (RBS.L), housebuilder Bellway (BWY.L) and Provident Financial (PFG.L) opposed pay plans in 2009 and last week, residential landlord Grainger (GRI.L) lost a shareholder vote on executive pay.

STRUCTURE REMAINS THE SAME

Hague-based Shell’s bonus structure remains largely intact and of the same magnitude.

Nonetheless, in addition to the restrictions on directors issuing discretionary bonuses, Europe’s second-largest oil company by market capitalization has introduced measures which it says will help align management and investors’ interests.

Under the new rules, management will be forced to hold shares awarded under Shell’s long term incentive plan for two years after they are awarded.

Annual bonuses will be tied to project delivery, with delay or budget overshoots being punished.

Also, as the bonuses are based on percentages of base salaries, the pay freeze, effective July 2009 to January 2011, will restrain the total amount of the bonuses somewhat.

Shell said it had also introduced a right to claw-back incentives paid within the previous 12 months, in the case of any material misstatements.

In 2004, Shell’s shares dived after it admitted overstating its reserves.

The key metric in the bonus plan remains Shell’s performance against other supermajors — U.S. rivals Exxon Mobil (XOM.N) and Chevron (CVX.N) and London-based BP and France’s Total (TOTF.PA).

In future, Shell’s CEO will have to have a shareholding in the company equal to three times his salary, to provide “greater alignment with shareholders’ interests”.

The current shareholding guideline for executive directors, including the CEO and CFO, is two times salary, Shell said.

Jeroen van der Veer, who retired as Chief Executive in June 2009, received total compensation of $15 million for 2008, according to Shell’s annual report.

Voser, who was Chief Financial Officer until he took over in July, earned $6 million.

Shell’s London-listed “A” shares were unmoved by the news, trading up 0.8 percent at 1,740 pence, compared to a 1.0 percent rise in the DJ Stoxx European oil and gas sector index .SXEP.

(Reporting by Tom Bergin; Editing by Erica Billingham and Louise Heavens)

REUTERS ARTICLE

16.02.10

Shell today bowed to shareholder anger over its senior staff pay by announcing it was freezing the salaries of its three top directors this year.

Chief executive Peter Voser and chief financial officer Simon Henry, whose salaries are 20 per cent lower than previous pay for their positions, will not get a rise until 2011. The international exploration boss, Malcolm Brinded, will also be affected by the freeze.

Shell also said it was preventing bonuses from rising this year and told shareholders of its decision. Last May, shareholders owning almost 60 per cent of the business voted against directors’ pay deals.

It said the new pay policies “demonstrate appropriate restraint in the current economic environment” and increased the alignment between executive and shareholder interests. Shell said the changes had been made after detailed negotiations with major shareholders.

SOURCE ARTICLE

By John Donovan

Shell media spin machine went into overdrive last week trying to downplay the worlds biggest ever leak of employee details, including personal information, which Shell Ethics boss Richard Wiseman, has twice admitted puts the safety of some employees at risk.

A copy of a related email from Mr Wendel Broere, Group spokesman, Global media relations, Shell International B.V, desperately engaged on a damage limitation exercise with the news media, was leaked to me on the day it was sent. My role is discussed in the email, no doubt because I am the person who broke the story which turned into a global PR disaster for Shell, with all kinds of unwelcome repercussions, including an investigation by the Information Commissioners Office and the prospect of a fine for being reckless with confidential employee data.

The information sent by Broere on the record says that Shell is investigating the matter and will comply with all legal requirements. The issue of personal security is only mentioned “Off the record” in his email, down-played to being no greater risk to Shell employee personal safety than merely handing out a business card.

Shell now says there was no private address information. That was not the case in the leaked employee data I received which Shell pressured me into destroying before Shell media started pumping out smoke. In fact, many post-codes were included in the data: Far more than could be only Shell addresses. Also personal mobile phone numbers, along with an array of other contact information.

The line now being taken by Shell is totally incompatible with the unambiguous statement on the personal security aspect made by Shell Ethics Richard Wiseman that he subsequently reconfirmed to me by email. This was after I published a leaked email Wiseman had sent to all employees, which failed to mention any risk to personal safety.

And it was not just Shell employee information that was leaked, but four other data files, all forming part of an carefully contrived plan – formulated with almost military precision – for a claimed corporate revolution at Shell by a subversive group that appears to have successfully infiltrated the oil giant. The whole thrust of the plan directed at Shell is motivated by its alleged crimes in Nigeria, which are listed in the extraordinary document.

Following contact with the Information Commissioners Office, we have also destroyed the other related files supplied within the attachment containing the Shell Global Address Book. However, we understand that now that the information has escaped into cyber-space, it will always be potentially retrievable.

Although Shell Corporate Affairs Security (CAS) is mounting a major investigation, how much confidence can employees have in a department headed by retired spooks, when CAS was presumably ultimately responsible for safeguarding security in the first place? At least it might divert CAS from carrying out “invisible” investigations against the Donovans.

Clearly the global spying by CAS against Shell employees to try to stop information from reaching us has not been entirely successful. The flood of leaked Shell information continues unabated.

According to a posting on our Shell Blog by a Shell IT insider (a regular contributor of articles to this website) a breach of the employee Directory could have happened at anytime in the last decade:

IT4me: What interests me about the Directory Leak story is that any competent scripter could have done this at any time in the last 10 years using just NOTEPAD and maybe 20 lines of VBS code. That’s because Active Directory (parts of it anyway) have been left open for use by RDS’s diverse collection of systems. So why didn’t it happen before ? And why doesn’t this sort of thing ever happen at GOOGLE ?