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Shell board told to pay back bonuses home

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Investors call on head of pay committee to resign

  • The Observer, Sunday 24 May 2009

The backlash against executive pay took a dramatic new turn this weekend when shareholder activists demanded that Royal Dutch Shell directors return their bonuses.

They also called for the resignation of Sir Peter Job, the former senior Reuters executive who chairs the energy multinational’s remuneration committee.

The demands for bonuses to be given back echo the row over Sir Fred Goodwin’s pension, when MPs campaigned for the former RBS boss to return all or part of his £703,000-a-year award. He has refused to do so.

Shell was engulfed in controversy at its annual meeting in the Netherlands on Tuesday when 59% of shareholders opposed its remuneration report. Bonuses were paid to directors despite performance targets being missed.

Last night, Abigail Herron of Co-operative Asset Management, which controls investments worth £18bn, said: “Legally, Shell can do what it wants on this one, but on moral grounds, the bonuses should be paid back to shareholders.”

Alan MacDougall, managing director of the investor activist group Pirc, was equally forthright, saying the bonuses should be “returned forthwith”. He also believed Job should step down. He said: “Job was chairman of the committee that decided to use its discretion to award these bonuses, so he must carry the can.

“Shell is another example of how executive pay and performance are so often misaligned.”

Several big City fund managers, who spoke on the basis of anonymity, also called for Job to stand aside after there was uproar at the shareholder meeting in The Hague over the pay of the chief executive, Jeroen van der Veer, who received a £1.1m bonus and a £9m salary.

Job was on the remuneration committee at the drugs giant GSK, where there were constant rumblings of discontent over the pay of boss Jean-Pierre Garnier, although he wasn’t at the company when Garnier’s pay award was opposed by a majority of shareholders in 2003.

He is now chairman of the remuneration committee at Schroders, where 7% of shareholders voted against the fund manager’s pay deal earlier this year.

Herron said that if Job had been up for re-election as a non-executive director at Shell, the Co-op would have voted against him. She said: “The annual re-election of board directors should become mandatory.”

Pirc agrees and has written to City minister Lord Myners suggesting that directors’ annual re-election be part of new rules on corporate governance. MacDougall said: “The votes against Shell and other companies should disabuse them of the idea that shareholders will meekly accept whatever companies put in front of them.”

A Shell spokesman said: “We take the outcome of this vote seriously and will reflect carefully on it.”

Shell is one of several British firms faced with investor anger over boardroom pay. Most recently, the Association of British Insurers issued its highest-level “red top” warning about a proposed five-year $95m (£60m) bonus scheme for WPP boss Sir Martin Sorrell ahead of its annual meeting next month.

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