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Parliament offers Shell’s oil men a lesson on the expense of overpaying

Daily Telegraph

Order! Order! First, the Speaker. Then, a 60pc vote against Shell. What a good day for democracy. 

Drill into it and the parallels are uncanny. On his watch, Michael Martin allowed the rules to be bent so far that a slick of oleaginous MPs took a liberty with their expenses. Roll on to Shell and up pops Sir Peter Job in the Speaker’s role, trying to defend the indefensible over boardroom pay.

As the head of Shell’s remuneration committee, you’d think Sir Peter could spot an oil rig when he sees one. But that’s just what he has attempted to foist on Shell’s shareholders.

When the directors missed their performance targets, Sir Peter and his committee simply rigged the rules. Its incentives were based on Shell’s performance against its four big peers – BP, Chevron, ExxonMobil and Total. To turn on the bonus gushers, Shell had to rank at least third. Despite its record £22bn profits – largely due to last year’s soaraway oil price – Shell came fourth.

No matter. Sir Peter and his fellow riggers decided that there wasn’t a bronze medal of difference between third and fourth. So they allowed Jeroen van der Veer, chief executive, and his fellow directors to take 50pc of the maximum bonus in their long-term incentive plan (LTIP).

It turned out to be one ‘L of a tip. Mr van der Veer gets another 78,889 shares, worth almost £1.2m. It’s not as if he needs the money. His total package last year was £9.1m.

Shareholders are rightly furious. “The system is sick and needs fixing,” said one. “Not acceptable” said Standard Life’s Guy Jubb, in a rare public intervention from an institutional shareholder.

The last major FTSE company to have its pay report voted down – by a narrow 50.7pc – was GlaxoSmithKline in 2003. Coincidentally, Sir Peter was also on that remuneration committee which produced a £22m golden parachute for Glaxo’s then-chief executive Jean-Pierre Garnier.

The Glaxo vote became a cause célèbre – and while a “no” vote does not bind the company, Shell must go further than simply tweaking the rules for next year. Sir Peter might reconsider whether Mr van der Veer really deserves his £1.2m. After all, the Speaker Mr Martin tried to ignore the clamour from the floor – and look what happened to him. 

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