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Shell Abandons ‘Self First’ Bonus Culture

The Scotsman.com: Shell Abandons ‘Self First’ Bonus Culture

“Shell was found by the Financial Services Authority in the UK and the Securities and Exchange Commission in the US to have committed market abuse and breached listing rules by misleading the market over the extent of its reserves.”

By Nicky Burridge, Personal Finance Correspondent, PA News

Posted 31 August 04

Oil giant Shell is changing its bonus scheme to encourage staff to focus on the whole company not just their own division, it emerged today.

The group, which has been embroiled in a crisis over its reserves, hopes the move will convert a “self first” culture into an “enterprise first” one.

The new scheme, which it hopes to have in place for 2005, will no longer pay out bonuses based on a combination of an individual’s performance and that of their division.

Instead payouts for the group’s 90,000 staff will be based on the performance of the company as a whole.

Unlike the old system, where the group’s five divisions each had different performance targets to meet, the new one will be based on company-wide targets.

The group has already abandoned a system which saw staff in its exploration and production division rewarded according to the level of replacement oil reserves found.

A Shell spokeswoman said: “Multiple score cards will be replaced by single group score cards, focusing on execution of strategy, delivery of operational objectives and enterprise first.

“Enterprise first addresses the importance of group needs over the needs of individual or operating units.

“It is still subject to discussions. We hope to have the new score cards in place for the calendar year 2005 bonus scheme.”

The new scheme has the backing of president of Royal Dutch and chairman of the committee of managers Jeroen van der Veer, who was reported to have been unhappy about the focus of the current bonus system.

The revision of the bonus scheme is the latest attempt by Shell to move on following its reserves crisis.

Around £2.9 billion was wiped off the value of Shell on January 9 when it stunned the market by revealing its reserves were 20% lower than previously thought.

It later cut its reserves a further three times in a crisis that claimed the scalps of three senior executives, including chairman Sir Philip Watts.

Last week fines totalling £82.7 million were confirmed against the group following investigations by financial watchdogs in the US and UK into the issue.

Shell was found by the Financial Services Authority in the UK and the Securities and Exchange Commission in the US to have committed market abuse and breached listing rules by misleading the market over the extent of its reserves.

The group also announced last week that it plans to invest an extra 150 million US dollars (£83.5 million) in the division which was at the centre of the crisis.

Shell said it now planned to spend 1.8 billion US dollars (£1 billion) on exploration and production in the North Sea, including building a pipeline to transfer gas from Norway to the UK.

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