FINANCIAL TIMES: Shell to pay in restricted shares: “Royal Dutch/Shell has announced details of new executive pay plans designed to motivate senior management after a year of turmoil in which it cut its proved oil and gas reserves by almost a third and parted company with its three top executives.” (ShellNews.net) 18 March 05
By Sundeep Tucker and James Boxell in London
Published: March 18 2005 02
Royal Dutch/Shell has announced details of new executive pay plans designed to motivate senior management after a year of turmoil in which it cut its proved oil and gas reserves by almost a third and parted company with its three top executives.
In line with UK corporate trends, Shell proposes to pay out mainly in restricted shares - which can be forfeit if future performance is poor - and scrap unconditional share options.
Yesterday's announcement follows a series of meetings with City investors over the new incentives. Leading investors signalled that the pay plans would receive broad support at Shell's annual meeting in June although concerns remained about some of the details.
Last month the company signalled that its long-term incentive plan would award 50 per cent of the maximum shares allowed if Shell achieved "median" performance relative to its benchmark. Shareholders said that the percentage was too high and the company has since backed down - the maximum award will now be 40 per cent.
Shareholders forced a similar retreat at BP last month, although the company cut the potential award for median performance to about 35 per cent.
Another similarity with BP is that Shell intends to use a comparator group of just four companies - BP and the other oil "supermajors", ExxonMobil, Total and ChevronTexaco - a number that many shareholders believe is too narrow.
One shareholder said: "I don't think that there will be major ructions at the AGM over this, although in an ideal world the comparator group would be larger. The base salaries for leading executives at Shell are quite low compared with BP's and investors have to remember that."
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