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Shell to scrap bonus link to sustainability index

Reuters Africa

AMSTERDAM, March 7 (Reuters) – Royal Dutch Shell said it would not tie executives’ bonuses in 2011 to a benchmark index after its expulsion from that index over its Nigerian operations scuppered its 2010 sustainability-linked bonuses.

Shell was dropped from the Dow Jones Sustainability Index (DJSI) in September 2010 by the index’s design committee, partly because of concerns about oil spills in Nigeria, according to Allie Boyer, a spokeswoman for Sustainable Asset Management which compiles the data for the index.

Exclusion from the DJSI doesn’t mean Shell will scrap its sustainability-linked executive bonus scheme, Shell spokesman Kim Blomley told Reuters on Monday.

For 2011, Shell will link 10 percent of each executive’s bonus to its own criteria for assessing environmental practices, said Blomley.

Shell, the largest operator in Nigeria’s oil industry, has been criticised for spills in the Niger Delta. The Anglo-Dutch giant has said its joint venture in Nigeria lost almost 14,000 tonnes of oil through spills last year alone, largely because of attacks on its facilities.

Blomley told Reuters on Monday that even though the firm’s Dow Jones Sustainability scorecard had improved overall in 2010, it was excluded from the index because of the oil spills.

Last week Hans Wijers, the chairman of Shell’s renumeration committee — who is also AkzoNobel’s chief executive — sent a letter to Shell shareholders, saying the committee had decided to “exercise downward discretion and set the DJSI-linked element of the bonus assessment to zero,” as a result of Shell being excluded from the index.

The firm had linked 10 percent of the executive bonus package to the DJSI scorecard. Shell, which has been ranked on the DJSI since 1999, started linking executive bonuses to the index for the first time in 2010, according to Blomley.

Oil majors are under pressure to polish their sustainable development credentials, not just to boost their public image, but also to avoid being blacklisted by those investors who only buy shares in sustainable companies.

“That Shell is going to identify their own performance indicators and then mark themselves on them, shows they are even less in touch with the concerns of their shareholders and their customers, rather than more engaged,” said Greenpeace spokesman Charlie Kronick.

BP Plc was also dropped from the Dow Jones Sustainability Index in 2010 after the Gulf of Mexico disaster, but unlike Shell and according to a BP spokesman, BP has never linked executive bonuses to the DJSI index. (Reporting by Roberta B. Cowan and Greg Roumeliotis; Additional reporting by Sarah Young in London; Editing by Sara Webb and Jon Loades-Carter)

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