Shell proposes to link directors’ pay to climate performance

Energy major Shell has proposed linking its directors’ pay more closely to the group’s climate performance and severing the link between bonuses and liquefied natural gas (LNG) production volumes.

According to an article by Reuters, the weighting of Shell’s energy transition performance on its targeted path to net-zero emissions by 2050 would double to 20 per cent of the directors’ long-term incentive plan calculation if shareholders vote for the plan at a meeting on 18 May.

The media outlet claims that the weighting of the energy transition metric to calculate directors’ bonuses would increase to 15 per cent from 10 per cent under the changes.

This places Shell’s efforts to curb its planet-warming emissions on an equal footing with financial metrics such as free cash flow generation when it comes to remunerating directors in Shell shares.

Shell also paid its chief executive officer Ben van Beurden no bonus in 2020. Apart from this, the company also decreased the pay package of van Beurden by 42 per cent in 2020, due to hits Shell took in a year marked by low oil prices and the coronavirus pandemic.

Van Beurden’s total remuneration for 2020 was $6.93 million, compared with about $11.95 million the year before. It is worth noting that his remuneration also dropped by 51 per cent in 2019. Along with the decrease, van Beurden proposed not to raise his salary in 2021.

In late April 2020, Shell decided to reduce its quarterly dividend by 66 per cent to $0.16 per share. As global demand for oil and gas plunged last year, Shell’s profit tumbled to a two-decade low while its shares hit their lowest since the 1990s.

Shell did hike the dividend by a little in the third quarter of 2020. The dividend grew by around four per cent to $0.1665 for the third quarter of 2020.