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Shell rocked by investor revolt


Financial Times

Shell rocked by investor revolt

By Tom Burgis, Michael Steen and Kate Burgess

Published: May 21 2008 03:00 | Last updated: May 21 2008 03:00

Royal Dutch Shell yesterday faced an investor revolt at its annual meeting when just under half of voting shareholders failed to back a plan to award three executives €1m (£795,000) bonuses to stay in their jobs.

The pay protest at Shell’s annual meeting in The Hague was one of the most significant for a UK company since GlaxoSmithKline’s investors rejected the healthcare group’s controversial pay policies for senior executives in 2003.

One third of Shell shareholders who voted on the bonus plan opposed it. Combined with those who withheld their votes, 49.5 per cent of voting shareholders did not support the bonuses.

The Shell rebellion adds to a chorus of dissent over so-called “retention payments” – bonuses for executives to dissuade them from leaving a company.

The Anglo-Dutch oil company plans to make retention payments to the three likely candidates to succeed Jeroen van der Veer, who steps down as chief executive in June next year: Peter Voser, chief financial officer; Malcolm Brinded, head of exploration and production; and Linda Cook, gas and power chief.

The fifth board executive, Rob Routs, head of oil sands and refining, is due to depart by the end of the year.

The bonuses, each worth about €1m in stock, become payable in 2011, provided the three are still in their posts. Investors objected in part because of the lack of performance hurdles. The awards could, however, be reduced.

Peter Montagnon, director of investment affairs at the Association of British Insurers, said: “Dissent of this size is something that should make companies think quite carefully about using retention payments in the future.” BP, Rexam, the packaging group, Bradford and Bingley and Reed Elsevier also have been rebuked by shareholders this year for making or planning retention payments.

David Paterson, head of UK research at shareholder advisory service Risk Metrics, said retention awards were “not consistent with the normal structure that aligns the individual executive’s interests with that of the shareholders”.

The rebellion at Shell was not enough to stall the plan. Sir Peter Job, chairman of Shell’s remuneration committee, said ahead of the vote: “We are going into a period of scheduled change at the top and we thought this was the right thing to do.”

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