The Guardian (UK): Shell to drop options for directors : “Shell failed to give any details of a possible rise in basic pay for the new chief executive Jeroen van der Veer, who was appointed after last year's reserving scandal.” (ShellNews.net) 18 March 05

Jill Treanor

Friday March 18, 2005

Shell, one of Britain's most profitable companies, is joining BP in proposing to drop the use of potentially lucrative share options to reward top executives.

Yesterday's announcement by the oil group followed months of consultation with City investors who had been asking the group to adjust its initial pay review plans after concerns that the scheme would pay too generously for only average performance.

Shell failed to give any details of a possible rise in basic pay for the new chief executive Jeroen van der Veer, who was appointed after last year's reserving scandal. It insisted the proposals would not lead to a rise in the overall value of pay.

The company intends to ask shareholders at its June 28 general meeting for permission to stop using share options which can allow executives to enjoy large rewards purely because a share price is rising. BP has also pledged to stop using options.

Shell would instead award shares in amounts linked to the company's total shareholder return - price changes and dividends - relative to its four main rivals: Exxon, BP, Total and ChevronTexaco.

Aarnout Loudon, chairman of the Shell remuneration committee, said: "These proposals are designed to reward performance that enhances the value of the group and we believe they will serve shareholders well."

Shell's proposed long-term reward package for its executives would comprise two elements: a long-term investment plan based on the award of shares, and a deferred bonus plan. Under the long-term plan, shares with a value of up to two and a half times salary can be awarded and will be released after three years, depending on Shell's performance measured against its peer group. For top place, 200% of the shares will be paid, for second 150% and for third 80%. For fourth or fifth place there will be no payout.

The deferred bonus plan will require executives to put at least 25% of their bonus into shares from 2006 - with another 25% at their discretion. Shell will match the deferred shares after three years, again on a formula linked to the total shareholder return.

The Association of British Insurers, which represents big investors, said: "Our key concern has been to ensure that high levels of reward are only paid for high levels of performance."

http://www.guardian.co.uk/business/story/0,,1440556,00.html 

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