THE LONDON TIMES: Directors strike it rich after Shell's investors lament their lost billions: “SHELL lost billions of barrels of oil, investors lost billions of pounds in value and the famous brand lost a century of hard-earned credibility but the directors profited handsomely in 2004, notwithstanding.” (ShellNews.net) 1 April 05
By Carl Mortished, International Business Editor
April 01, 2005
SHELL lost billions of barrels of oil, investors lost billions of pounds in value and the famous brand lost a century of hard-earned credibility but the directors profited handsomely in 2004, notwithstanding.
Shell’s annual 20-F filing to the US Securities and Exchange Commission reveals that Jeroen van der Veer, the chief executive, was paid a bonus of €1.35 million last year, almost doubling his total earnings to €2.6 million. Mr Van der Veer, who took the top job after the dismissal of Sir Philip Watts in March 2004, was also awarded a substantial increase in his basic pay from €1.2 million to €1.5 million in November.
Justifying the rise, the remuneration committee “recognised the enhanced role of the Chief Executive, compared to his previous role”. Previously, the top job at Shell was chairman of a committee of managing directors, the job to which Mr Van der Veer was promoted in March last year.
Other directors were not overlooked by the committee, notably Malcolm Brinded, head of exploration, who received a bonus of £634,500, bringing his total pay to £1.15 million, and Rob Routs, head of oil products, whose bonus of €810,000 raised his pay to €1.8 million. Peter Voser, appointed finance director in October, received £645,000, described as “a one-off transition payment”. His annual salary will be £545,000.
Shell’s bonus policy, as explained in the 20-F, is based on a scorecard with four components. Total shareholder return and operational cashflow together account for half the score. Operational excellence and sustainable development account for 30 and 20 per cent respectively. The remuneration report says that the target level of the bonus was 100 per cent of pay and the committee judged that the directors had achieved 90 per cent.
The filing to the SEC, which this year fined Shell $120 million for violating its rules on reporting reserves, confirms that Shell replaced only 19 per cent of last year’s oil and gas output, including disposals. At the year-end, reserves were 11.9 billion barrels, down from a restated 12.9 billion in December 2003.
No provision is being made for shareholder litigation against Shell arising from the reserves scandal but the company is still apparently paying the price for Walter van de Vijver and Sir Philip, the directors who left. The SEC filing notes that “the Group advanced a total of $12,048,441 . . . for litigation costs for former Board members”.
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