Shell faces revolt on executive pay

LONDON (Reuters) - Royal Dutch Shell RDSa.L faces a possible shareholder revolt over its executive pay policy after the Association of British Insurers (ABI), a large investor and a corporate governance agency expressed concerns about the plan.

In this file photo Shell's Chief Executive Officer Jeroen van der Veer speaks during the presentation of Shell's fourth-quarter and 2008 results in the Hague January 29, 2009. REUTERS/Robin van Lonkhuijsen/United Photos

The ABI said on Tuesday it had issued an “amber top” notice to members about the Shell Remuneration Committee’s decision to exercise their discretion and award managers bonuses despite the company’s failure to meet pre-set targets.

The ABI issues an “amber top” notice when it believes a company has deviated from best corporate governance practice.

ABI members account for around 20 percent of investments in the London stock market.

One of Shell’s 10 largest institutional investors said it had already voted against the plan.

“We have voted against the company’s remuneration report mainly because discretion seems to have been applied without any justification - there seems to be no control over remuneration,” said an official at the group, who spoke on condition of anonymity.

“I think there will be a significant vote against the company -- possibly 30-40 percent,” the official said.

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Sarah Wilson, chief executive of Manifest, an independent governance and proxy voting agency, also criticised Shell’s remuneration report, which will be put to investors at the oil major’s Annual General Meeting later this month.

“We are concerned that it would be effectively rewarding directors for failure, so they are likely to receive a very heavy dissent vote against the remuneration report.”

Shell defended the decision to pay out bonuses despite the company not achieving a targeted ranking within its peer group.

“Financial performance was good over the period” a spokesman said.

Over a third of investors opposed rival BP’s remuneration report at its AGM last month, after management were awarded bonuses without achieving peer group ranking targets.

The Financial Times said advisory group RiskMetrics has recommended a vote against Shell’s remuneration report at its annual general meeting on May 19.

Shell's London-listed "A" shares traded up 1.4 percent at 1,592 pence at 2:55 p.m., outperforming a 0.4 percent rise in the DJ Stoxx European oil and gas sector index .SXEP.

Reporting by Raji Menon and Tom Bergin; Editing by Jon Loades-Carter