Shell shareholders rebel on board pay

David Gow
Thursday April 24, 2003
The Guardian, UK

Almost a quarter of Shell shareholders yesterday spearheaded one of Britain's most significant revolts against excess boardroom pay by voting against the oil group's remuneration policy.

Investors representing 22.8% of shares made a substantial protest at Shell's decision to award its chairman, Sir Phil Watts, a 55% pay rise last year when the group saw its profits and share price slump 23%.

A spokesman for the National Association of Pension Funds, which lobbied for a no vote, said: "I think this is a shot across the bows as far as shareholders are concerned."

The NAPF, representing a quarter of the stock market, is campaigning for boardrooms to be held to account for their policy on executive rewards.

The NAPF also advised voting against the remuneration report at financial firm Schroders, where less than 60% of shareholders endorsed the company's pay policy at yesterday's annual meeting.

Shell, priding itself on its track record of good corporate governance, faced an even tougher ride at its annual meeting in London yesterday for the gap between its "spin" on social and environmental responsibility and its real role in damaging local communities.

Activists from the US, South Africa, Nigeria and the Philippines, among others, publicly slated the group for variously acting as a "colonial force", being the source of diseases such as leukaemia and cancer, and offering bribes to circumvent local planning laws.

Sir Phil, who was paid £1.8m last year, was visibly more stretched assuaging the critics of Shell's genuine record on sustainable development than heading off a small scale rebellion over directors' pay, share buybacks and dividends within the hall.

His mellifluous offers of dialogue to overcome "a lack of trust and communication" and willingness to let critics have their say prompted one South African activist to say: "We don't need dialogue to find out that people are suffering."

In a subsequent series of polls, shareholders overwhelmingly endorsed the board's policies, with Sir Phil winning 94% approval for his re-election to the board.

But private shareholders such as John Farmer voiced serious concern about remuneration. Mr Farmer said it was "inappropriate, not to say outrageous and insensitive" for Sir Phil to be given such a large pay increase when the share price had plummeted. "If these people are not motivated already, why are they in their jobs? If they leave, then let them go and appoint some successors."

Sir Peter Job, speaking for the remuneration committee, insisted Shell's policy was and would remain "very conservative". Sir Phil, he said, was paid far less than his counterparts in the other four oil majors.

Defending a long-term incentive plan enabling executives to double their salaries, he said that gap was growing too large to tolerate. "This is the biggest profit-making company in Europe and we can't have anything but the best structure." The plan was approved by 92% of shareholders.

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