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Angry investors to question Shell over payout plans

Scotland on Sunday

Published Date: 17 May 2009
THE FTSE’s two-month climb came to an end as a warning from the Bank of England that Britain would experience a “slow and protracted” recovery quashed investor enthusiasm.
The markets closed down 2.6 per cent at 4348.1 on Friday after a warning from the Bank’s governor, Mervyn King, that talk of “green shoots” is likely to prove premature. 

Shares in BT were particularly hard hit following the announcement on Thursday that it would be forced to axe a further 15,000 jobs this year. BT stock ended the week 9 per cent lower at 85p after chief executive Ian Livingston unveiled a loss of more than £1 billion in the fourth quarter.

Bosses at oil major Royal Dutch Shell are facing a challenging meeting with investors on Tuesday when recent pay awards are likely to come under scrutiny.

Several voting advisory firms have recommended investors throw out Shell’s remuneration report due to the sizeable payouts made under its long-term incentive plan, despite missing performance targets.

Despite record £22bn profits last year on soaring oil prices, the Anglo-Dutch firm was ranked fourth out of five for its performance against peers BP, US firms Chevron and ExxonMobil and France’s Total.

This should have meant no share awards were made under the group’s incentive plan, but Shell’s remuneration committee decided that the difference between third and fourth place was “marginal”. 

It released half the shares that directors would have been entitled to for the 2006–08 period under the scheme.

According to the firm’s annual report, chief executive Jeroen van der Veer, who received a total package worth £8.2m in 2008, was awarded 155,036 shares for 2006–08 under the plan.

Pension fund advisory firm PIRC said: “We have concerns over the awards vesting under the long term incentive plan as performance targets were not met but the remuneration committee exercised its discretion.”

British Airways shareholders are being warned to brace themselves for operating losses of around £150m when annual figures are unveiled on Friday.

The company’s figures for the year to 31 March will bear the scars of last year’s soaring fuel costs as well as the impact of a deepening recession in the autumn. 

Prospects for the current financial year are little brighter as BA is expecting operating losses of a similar size and is looking to squeeze costs across the group. BA currently predicts revenues will be down 5 per cent and fuel costs down 10 per cent from the estimated £3bn paid out this year – although lower fuel prices are being offset by reduced fuel hedging benefits as well as the weakness of the pound.

Analysts will be keeping a close eye on the outlook for any hint of worsening expectations. Another factor to note is the price of oil, which has crept back towards the $60 (£39.60) a barrel mark in recent weeks.

In its most recent traffic figures for April, it said market conditions remained “very challenging”, although it added it was too early to judge the impact of the swine flu outbreak on the business.

Chief executive Willie Walsh may also give an update on the firm’s merger plans with the Spanish carrier Iberia at Friday’s figures. 

The firm was also in discussions with Qantas before ending talks late last year.

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