Royal Dutch Shell shareholders outraged at Remuneration Committee

Majority of Shell investors vote against pay plans

Tue May 19, 2009 10:20am EDT

* 59.42 pct of investors vote against pay report

* Shareholders outraged at Remuneration Committee

* Shell says to reflect carefully on advisory vote (Recasts with shareholders rejecting pay plan)

By Catherine Hornby

THE HAGUE, May 19 (Reuters) – Three fifths of Royal Dutch Shell (RDSa.L) investors opposed the oil major’s executive pay plan at its annual meeting on Tuesday, after several advisory groups had raised concerns about the scheme.

The advisory vote followed gruelling questioning of Shell’s Remuneration Committee from angry shareholders at the AGM due to its decision to exercise discretion and award managers bonuses despite the company’s failure to meet pre-set targets.

“The system is sick and needs fixing,” said Errol Keyner from Dutch shareholders association VEB, before 59.42 percent of shareholders voted against the resolution.

There has been growing criticism of executive pay and bonuses in the fall-out of the credit crisis in both Europe and the United States, particularly among banks and insurers, but the dissatisfaction has expanded to any large company with highly-paid executives.

Corporate governance body Pirc had advised investors to vote against the scheme at the AGM, and The Association of British Insurers (ABI) has issued an ‘amber top’ notice to its members over the plan indicating a deviation from best practice.

“We as the board take the outcome of this vote very seriously and we will reflect carefully upon it,” said Shell Chairman Jorma Ollila.

“We have already introduced additional performance measures for future awards reflecting on comments from shareholders.”

Major shareholder Standard Life Investments (SLI) said on Tuesday it had voted against the resolution.

“We were not impressed by the remuneration committee’s decision to exercise its discretion, for the second year in a row, to reward its executives for below average performance,” said Guy Jubb, head of Corporate Governance at SLI.

Shell has defended its decision to pay out bonuses despite the company not achieving a targeted ranking within its peer group, but critics saw it as effectively rewarding directors for failure.

Last year, just under 8 percent of shareholders voted against the company’s remuneration report.

Over a third of investors opposed rival BP Plc’s (BP.L) remuneration report at its AGM last month, after management were awarded bonuses without achieving peer group ranking targets.[ID:nLG187185]

Chief Executive Jeroen van der Veer also said on Tuesday that this year Shell was focusing on growing its dividend and planned to keep investments at a relatively high level.

He said the firm was assuming the economic downturn could last several years when assessing the outlook for oil prices and planning investment. Volatility in oil prices and downstream margins is expected to continue, he said.

From a peak of near $150 a barrel last July oil collapsed to around $30 a barrel last December. Since then it has doubled to around $60. (Reporting by Catherine Hornby; Editing by Rupert Winchester )