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Shell under fire over Arctic plans and pay

Michael Kavanagh: Financial Times

22 May 2012

Environmental campaigners and shareholders clashed with Royal Dutch Shell at an annual meeting dominated by concerns over exploration in Alaska, slow progress tackling oil leakages in Nigeria, dividend policy and executive pay.

Shell, which faced criticism from retail investors at the meeting over pay increases for top executives, said 9 per cent of its shareholders voted against its remuneration report.

In March, it revealed that its chief executive Peter Voser took home €11.7-million last year, more than doubled his pay in the previous 12 months, after lucrative long-term incentive plans paid out.

However, Mr. Voser, along with the head of Shell’s remuneration committee Hans Wijers and other directors, were re-elected by overwhelming votes of 99 per cent or more to the board despite the revolt on pay.

“Shell’s remuneration policy firmly links executive compensation with the performance of the company, and the 2011 outcomes reflect what was a positive year for the company,” it said.

Shares in Shell, which rose 11 per cent in 2011 but are down 15 per cent this year, gained 1.8 per cent to £20.20 on Tuesday.

Amid tight security at venues in The Hague in the Netherlands and London’s Barbican Centre, Shell’s chairman Jorma Ollila and Mr. Voser politely batted away dozens of questions criticizing the environmental record of the Anglo-Dutch oil major.

Shell said it was still in talks with the Nigerian government and other parties about how best to proceed with proposals to spend $1-billion (U.S.) on a clean-up and rehabilitation of the polluted areas of Ogoniland in the Niger Delta.

The $1-billion estimated budget emerged from a UN Environment Programme report presented to Goodluck Jonathan, Nigeria’s president, last August which argued that tackling decades of environmental damage would be the “world’s most wide-ranging and long-term oil clean-up exercise ever undertaken.”

The abandonment of operations in Ogoniland in 1993 by Shell and its partners followed a campaign against production in the region led by activist Ken Saro-Wiwa, who was later executed by Nigeria’s then military government.

During protracted but generally well-tempered questioning on Shell’s handling of its Nigerian operations, one Dutch shareholder said: “I don’t want to be ashamed, and I don’t want to sell my shares.”

The company, which in March was issued with a claim for damages over two oil spills in the delta in 2008, said it was keen to push ahead with the investment in remedying pollution damage in the region.

Mr. Voser accepted that Shell bore much of the operational responsibility for oil spills which continue in the delta but insisted the bulk of continuing spillage was the result of “illegal bunkering and refining.”

He added that remedying damage was also often hindered by “some people” who made money from exploiting oil spills and who might expect higher compensation.

“I just want to push back on the accusation that we have done nothing,” he said, rejecting claims from a shareholder from Friends of the Earth that Shell had “clearly evaded” the recommendations of the report.

He estimated 70 per cent of spillages resulted from deliberate sabotage.

Mr. Ollila also defended Shell’s ability to develop oilfields safely in Arctic waters as it prepares for exploratory drilling this summer, in the face of arguments from a representative of local native Americans that the project ran a substantial risk of ecological devastation. “It is 50 years since the industry took its first steps of drilling in the Arctic,” he said.

He also defended Shell’s position of offering no increase in quarterly dividend payments of 42 cents over three years since 2009. It nudged the payment up by 1 cent to 43 cents in April.

“Last year we represented 12 per cent of all dividends on the FTSE 100,” he said.


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