Shell plans to curb executive pay

Amsterdam - Royal Dutch Shell PLC said on Tuesday it was freezing executive pay and revamping bonus policy in the wake of a shareholder rebellion at its annual meeting last year.

In a letter to investors, the company outlined changes including barring the payment of bonuses when executives fail to meet their performance targets.

In addition, new Chief Executive Peter Voser was appointed in July 2009 at a salary level 20% less than his predecessor Jeroen van der Veer, who earned $15m.

The company said the changes as a whole would "demonstrate appropriate restraint in the current economic environment" and "increase alignment between executive and shareholder interests".

At the company's annual meeting in 2009, shareholders voted down proposed executive pay package, a major rebuke for Shell's supervisory board.

"We subsequently undertook a wholesale review... including advice from recognised external experts," wrote Hans Wijers, the chairman of the company's pay committee.

Shell's new bonus policy is tied to both share performance and other criteria such as production and cash-flow increases.

The new system does not necessarily reduce executive bonuses, but shifts some incentives toward a five-year horizon.

If an executive accepts half his bonus in shares, they may be matched in part or whole after three years, depending on how well Shell performs compared to competitors such as Exxon and BP.

The shares must then be held two more years before they can be sold.

"In the oil and gas business, with such long business performance periods, I believe that holding shares probably aligns executive interests with those of shareholders better than any long-term incentive plan," Wijers wrote.

The new plan must be approved at this year's annual meeting, scheduled for May 10.

- AP