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Shell tries to appease investors with caps on pay

Times Online

The Times
February 17, 2010

Robin Pagnamenta and Robert Lindsay

Royal Dutch Shell said that it would freeze the salaries of its top directors and reform a generous bonus scheme as the oil giant moved to soothe shareholders’ anger over excessive boardroom pay before its annual meeting.

In a letter to investors, Hans Wijers, the new chairman of the Anglo-Dutch company’s remuneration committee, said that the changes were being made after extensive talks with shareholders, 60 per cent of whom voted down the executive pay plans at a stormy annual meeting last year.

The shareholder revolt triggered the resignation of Sir Peter Job, Mr Wijers’s predecessor.

In the letter, Mr Wijers said that Shell would be capping the salaries of its top three executives — Peter Voser, chief executive, Simon Henry, finance director, and Malcolm Brinded, head of exploration — until 2011. He said that Mr Voser had been appointed last July on a salary 20 per cent lower than that of his predecessor, Jeroen van der Veer, who earned $2 million (£1.3 million) in basic pay in 2008 but $15 million in total compensation. Mr Wijers said that Mr Voser and Mr Henry had received pay rises last year but only because they had been promoted to new roles

He also announced plans to scrap a heavily criticised bonus scheme that last year allowed top directors to collect multimillion-pound payouts, even though they failed to meet performance targets.

“I believe it is appropriate in the current economic environment to state up front that no upward discretion will be applied to the Long Term Incentive Plan or Deferred Bonus Plan vesting in 2010. In future, there will be no use of upward discretion in the vesting of these plans without prior shareholder engagement,” Mr Wijers said.

Meanwhile, in an unprecedented move for a global oil group, Mr Wijers unveiled plans to link bonus payouts to Shell’s performance on the Dow Jones Sustainability Index, which ranks corporate performance using a variety of social and environmental indicators, including cuts to carbon emissions.

From 2010, 10 per cent of the targets used to calculate payouts will be linked to the index, with the remaining 90 per cent related to operational and financial performance as well as the delivery of big projects on time and on budget. The key measure in Shell’s bonus plan remains the group’s performance against its peers — BP, Total, ExxonMobil and Chevron.

In another concession to investors, Mr Wijers said that in future Shell’s chief executive would be obliged to have shares in the company equivalent to three times his basic salary, in order “to provide greater alignment with shareholder interests”. The existing guidelines for executive directors are for a holding of two times salary.

Shell’s 2010 annual meeting will be held on May 18.

TIMES ARTICLE

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