Shell's top executives hit by pay freeze

Published on Tuesday 16 February 2010 21:22

ROYAL Dutch Shell is freezing salaries for its top executives in the wake of last year's shareholder protests at its pay plans.

Under the reforms, chief executive Peter Voser and finance director Simon Henry – who took on the roles last year – will not see their pay reviewed again until January 2011.

International exploration director Malcolm Brinded, who has already seen his salary on hold since July 2008, will also be affected.

The company said it wanted to "demonstrate appropriate restraint in the current economic environment" and had come up with other changes to its executive pay structure following meetings with major shareholders.

Last May, the oil giant suffered a shareholder revolt at its annual general meeting when almost 60 per cent of investors voted against its pay proposals.

It also came under heavy criticism for making huge pay-outs as part of its long-term incentive plan, despite missing performance targets. Former chief executive Jeroen van der Veer received a total package worth 8.2 million in 2008 and was also awarded 77,518 shares worth around 1.3m. Although the shareholder vote at the AGM was only advisory and did not mean the company having to change its pay policy, the Anglo-Dutch group said at the time that it would reflect on the opposition.

Royal Dutch Shell has stressed that although new chief executive Voser and finance director Henry were given salary increases when they took on their roles last year, their salaries were around 20 per cent lower than those paid to previous bosses.

Shell is also enforcing a mandatory deferral of 25 per cent of any executive annual bonus into its deferred bonus plan, which is in addition to an existing voluntary deferral of up to 25 per cent.

In the letter published on its website Hans Wijers, chairman of Shell's remuneration committee, outlined plans to "strengthen the links" between performance measures and company strategies.

He said the feedback from major shareholders had been that the "basic structure of the remuneration policy at Shell is still appropriate going forward" but there needed to be changes to better align the policy with shareholder interests and the company's long-term strategy.

Bonus awards will be based on how well projects are delivered rather than total shareholder return, he added.

The Anglo-Dutch group was heavily criticised for admitting that it had used its discretion under previously agreed rules when deciding on the controversial 2008 bonuses.

Wijers said: "It is appropriate in the current economic environment to state upfront that no upward discretion will be applied."

Shell reported a 69 per cent fall in 2009 profits to 6.3 billion earlier this month.