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Royal Dutch/Shell to revise staff bonus scheme

Financial Times: Royal Dutch/Shell to revise staff bonus scheme: “The scandal prompted the resignation of three senior executives, investigations by US, UK and Dutch regulators, a criminal probe by the US Department of Justice and investor lawsuits.”

By Jonathan Moules

Published: August 30 2004

Royal Dutch/Shell, the oil company, is planning to revise its company-wide bonus scheme to create incentives for staff to look beyond their specific section of the business and focus on improving the entire company.

At the moment, staff at the Anglo-Dutch company are rewarded for both their individual performance and the success of their division.

However, under changes that are due to come into effect this January, the divisional element will be dropped and a bonus will be added based on the entire company’s performance.

The new scheme is expected to effect 90,000 staff. Final details of the plans are still subject to negotiations in some of the countries Shell operates in.

However, Shell said it hoped the revised scheme would encourage staff to think “enterprise first” rather than “self first”.

The scheme has the backing of Jereon van der Veer, Shell’s chairman, who was unhappy with the existing balance between personal and corporate loyalty.

Shell has five divisions, including oil production, chemicals, as well as exploration and production.

In 2003 none of the divisional managing directors received a performance-related bonus, according to the latest annual report.

Mr van der Veer has warned national governments to do more to encourage oil companies to invest in riskier projects now that all the easier developments have been made. He believes that this would increase the supply of oil and bring down its price, which has spiked in recent weeks.

Last week, Shell announced that it would spend an extra $150m (£84m) on its European exploration and production operations this year. The increase is part of the company’s planned worldwide capital expenditure for 2004 and will bring the European exploration and production budget to $1.8bn.

Inquiries continue into Shell’s reserves announcements following the company’s admission in January that it had improperly booked 20 per cent of its oil and natural gas reserves with the US Securities and Exchange Commission.

The scandal prompted the resignation of three senior executives, investigations by US, UK and Dutch regulators, a criminal probe by the US Department of Justice and investor lawsuits.

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