The Guardian: Apologetic Shell promises culture change
Saturday May 29, 2004
Shell's long-delayed annual report - a 125-page document riddled with apologies and admissions of blame - was finally made public yesterday.
Jeroen van der Veer, Shell's new chairman, promised radical cultural change within the oil group as it confirmed that it had paid no bonuses last year to his predecessor or other executives in the wake of the reserves debacle.
The report, published after a two-month delay, said Sir Philip Watts, who was ousted as chairman in March, had seen his pay almost halved last year because of the 23% downgrade in the group's reserves.
Sir Philip, who is still in talks with Shell about his severance package, saw his pay slashed from £1.64m in 2002 to £865,000 last year as his bonus was cut to zero, several of his share options lapsed and he received no shares under the company's long-term incentive plan. The latter would have been worth £1.7m alone.
The former chairman, who presided over a 28.5% rise in restated annual earnings to £12.5bn last year and had a 13% rise in basic salary last July, is sitting on share options worth a nominal £480,000 after a lifetime career at Shell.
Mr van der Veer has ordered a complete review of executive pay criteria after telling 500 senior managers at a meeting in Houston he planned to rebuild Shell's reputation and credibility, and replace a "bullying, arrogant" culture with one based on "clear thinking, straight talking and humility".
The new chairman, who is concentrating Shell's activities on upstream production and profitable downstream operations, is said to have questioned whether higher managerial pay resulted in improved performance. He told the managers that their tenures were often too short.
Remuneration committee chairman Aarnout Loudon said in the annual report a policy reappraisal of executive pay would be presented at the 2005 annual meeting; this year's meeting is scheduled for June 28.
A company spokesman said the decision to scrap bonuses and withdraw half of the stock options granted in 2001 showed "a commitment to the rigorous application of the pay for performance principle". In the report, which includes a detailed and agonised restatement of the group's oil and gas reserves, Shell said basic salaries, including that of Mr van der Veer who earned €1.1m (£730,000), rose by 10% on July 1 2003. None received a bonus.
Judy Boynton, the group's finance director who resigned on April 18 as the reserves crisis deepened, was paid £400,000 last year and is theoretically entitled to severance pay of at least $1m (£540,000) if dismissed "for reasons other than gross misconduct".