Shell investors in revolt over remuneration for executives

A GLOBAL investor backlash over executive pay escalated yesterday when institutional shareholders turned on Royal Dutch Shell, the multinational oil group, and voted down its remuneration report.

In one of the biggest investor rebellions over executive pay, about 59 per cent of Shell shareholders objected to a discretionnary award to executive directors of bonuses for 2006-08 performance after the company failed to meet set targets. It was the second year in a row that Shell has clashed with investors over pay.

The scale of the no vote provided strong evidence of the growing anger over remuneration and bonuses among shareholders in the wake of the financial crisis.

Investors have come in for heavy criticism from financial regulators and politicians around the world for failing to hold executives to account and allowing company pay structures to foster a culture that encouraged excessive short-term risk-taking, particularly among banks. The revolt over Shell’s pay followed disputes between shareholders and companies including BP, Xstrata, Heineken in the Netherlands and Volvo in Sweden.

The Shell no vote was the second biggest against a British company’s remuneration report this year, topped only by the 80 per cent of votes cast against Royal Bank of Scotland.

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

David Patterson from the UK’s National Association of Pension Funds, said: “This is the culmination of a series of protest votes by shareholders this year and emphasises that shareholders are concerned about remuneration.

“The broader message is that companies need to look hard at the alignment of pay and performance and question some of the basic tenets of conventional pay policies.” – Copyright The Financial Times Limited 2009