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Shell and Next face investor anger over pay

May 19, 2009

Martin Waller

The rumbling outcry over executive remuneration will break out again at two annual meetings today, when the boards of Royal Dutch Shell, the oil group, and Next, the retail group, come under fire from angry shareholders over alleged overly generous bonus packages.

At Shell, investors are concerned that the remuneration committee has “moved the goalposts” and agreed awards even though the necessary performance targets have not been met. One, the Co-op, has said it will oppose the re-election of Lord Kerr of Kinlochard, who sits on the remuneration committee.

Another, Standard Life, has also spoken out against Shell’s remuneration polices. Under a three-year incentive scheme agreed in 2005, directors would have earned up to 200 per cent of their salaries in stock if the company had outperformed three of its peers. However, even though Shell ended in fourth place, directors decided to exercise their discretion and allow some of the award.

Next is facing investor anger for trying to boost directors’ pay by rewriting the bonus policy. The influential Association of British Insurers (ABI) claims that Next has flouted good corporate governance by changing the rules over bonuses part way through the financial year.

Simon Wolfson, Next’s chief executive, has countered that the big investors were consulted over the changes, brought in last summer. These allowed directors an extra £351,000. The ABI has issued a rare “red top” report, which alleges a serious breach of the rules over corporate governance.

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