Investors rebel over Shell executive pay

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A global investor backlash over executive pay escalated on Tuesday when shareholders turned on Royal Dutch Shell and voted against its executive pay plan.

In one of the biggest investor rebellions over directors’ pay, about 59 per cent of the oil multi­national’s shareholders voted down the company’s remuneration report.

They objected to the discretionary award to executive directors of bonuses for 2006-08 performance, which were made even though the company failed to meet targets.

The scale of the No vote was strong evidence of the growing anger over remuneration and bonuses among shareholders, who have been criticised by regulators and politicians in the wake of the financial crisis for failing to hold boards to account.

Guy Jubb, head of corporate governance at Standard Life Investments, said he was “dismayed” at the pay of Jeroen van der Veer, Shell’s chief executive. He warned that shareholders would “respond robustly” to “persistent offenders”.

Mr van der Veer, who steps down in June, received a bonus from the 2006-08 incentive scheme worth €1.35m (£1.19m). He was also paid €10.3m in 2008, up 58 per cent on his remuneration in 2007, according to Shell’s annual report.

The protest was the second straight year that Shell and investors have clashed over pay and follows disputes between shareholders and companies including BP, Xstrata, Heineken and Volvo.

Institutional investors from the US, Europe and Canada, including Franklin Mutual as well as Standard Life Investments, lined up at Shell’s annual meeting in The Hague and London to speak out against the report. Their biggest objection was the decision of the remuneration committee, led by Sir Peter Job, to award the performance bonuses.

“The system is sick and needs amending,” said Errol Keyner of VEB, the Dutch shareholders’ association.

The Shell No vote was the second biggest against a UK company’s remuneration report this year, topped only by the 80 per cent of votes cast against Royal Bank of Scotland, according to Manifest, the voting agency.

RiskMetrics, the proxy voting agency that advised investors to vote against Shell’s report, said investors were uniting on pay issues in the UK and much of the rest of Europe. “When dialogue has clearly failed, shareholders are now prepared to vote against,” said Jean-Nicolas Caprasse, its head of European and Middle Eastern business.

Votes on remuneration reports are not binding. But Jorma Ollila, chairman, said: “We take the outcome of this vote very seriously and we will reflect carefully upon it.” He said the group would accelerate its timetable of meetings with big shareholders.

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