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Investors take aim after Shell takes them for granted

Financial Times

By Andrew Hill

Published: May 20 2009 03:00 | Last updated: May 20 2009 03:00

John Kerr wasn’t offered a final cigarette, but there was a moment yesterday when the former diplomat, chainsmoker and Royal Dutch Shell director looked to be facing the firing squad.

As the only member of the oil company’s remuneration committee up for re-election, he was the non-executive most likely to take a bullet for the board at the annual meeting. Lord Kerr lived to smoke another day – in fact, only 5 per cent of votes were not cast in favour of the former British ambassador to the US. But institutional investors’ other shot – the 59 per cent vote against Shell’s remuneration policy – should be heard around the corporate world.

In boardrooms, in clubs – and at certain flower shows one might mention – you will hear much huffing and puffing from some directors about having their hands tied. Others will still feel they can shrug off non-binding votes, even on this scale.

But this protest is, in its way, as important as the majority vote against GlaxoSmithKline’s pay policies six years ago. The main difference – and one that may blunt the public impact – is that investors did not focus on a single individual at Shell, Lord Kerr apart. In 2003, Jean-Pierre Garnier, then GSK’s chief executive, was directly in the line of fire, and will be again today when the legacy of his performance-related share package is put to a vote of GSK investors.

Shell can’t say it wasn’t warned. Last year, discretionary awards to three directors only just gained a majority. This year, the remuneration committee again exercised its discretion, ignoring the narrow margin by which Shell missed targets for share awards. That they did so in a climate of obvious concern about pay and without further consultation with investors fully justifies investors’ irritation.

The remuneration committee did most things by the book . But its luminaries – Sir Peter Job, Josef Ackermann, Lord Kerr and, until he became chairman, Jorma Ollila – have taken Shell’s owners for granted for the last time. Other directors take note: next time, the protest could get personal.

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