The Scotsman: Shell Directors Lose Stock-Option Grants: “overshadowed by the fifth downgrade to the company’s oil and gas reserves of 10%, or 1.4 billion barrels. In addition, Shell said it only replaced between 15% and 25% of oil used in 2004. The string of reserves downgrades sparked the biggest crisis in the company’s history, leading to the departure of three senior executives, regulatory fines and prompting moves to merge Shell’s UK and Dutch parent firms after nearly 100 years of separate operations.” (ShellNews.net) 17 March 05
By David Winning, PA City Staff
Executive directors of oil giant Shell were today told their pay awards would no longer be inflated by grants of potentially-lucrative stock options.
Shell will eliminate a practice where bosses can benefit from a rapid rise in its share price at a time when the company’s performance lags behind major rivals.
The move forms part of measures to tighten its remuneration policies after a rocky 15-month period in which the company cut its reserves five times – but saw its shares rise 17%.
Oil stocks have been popular with investors because of the rocketing price of crude, which gushed to another all-time high today of 57.19 US dollars a barrel.
Shell said today that it was also changing the long-term incentive plans for executive directors and amending their deferred bonus scheme.
Under the revised long-term incentive plan, an executive can potentially claim shares worth five times their salary if Shell beats four key rivals by comparison.
But a fourth or fifth-placed finish behind BP, ExxonMobil, Total and ChevronTexaco in terms of shareholder return will mean directors will be ineligible for shares via the long-term incentive plan or the deferred bonus scheme.
BP – the largest quoted company in the UK – is also phasing out share option grants in a move due to be approved by its shareholders next month.
Aarnout Loudon, chairman of the remuneration and succession review committee at Shell, said: “These proposals are designed to reward performance that enhances the value of the group, and we believe they will serve shareholders well.”
Full details of the review of executive pay, which will not lead to an increase in overall compensation, will be published in Shell’s annual report in May.
The company said it had consulted shareholders before proposing the changes and has taken account of current market practices and developments in corporate governance.
Shell set a new record for a UK company last month after annual profits totalled £9.3 billion – equivalent to more than £1 million an hour.
But the result was overshadowed by the fifth downgrade to the company’s oil and gas reserves of 10%, or 1.4 billion barrels. In addition, Shell said it only replaced between 15% and 25% of oil used in 2004.
The string of reserves downgrades sparked the biggest crisis in the company’s history, leading to the departure of three senior executives, regulatory fines and prompting moves to merge Shell’s UK and Dutch parent firms after nearly 100 years of separate operations.
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