UK: Shell at risk of investor pay revolt

Royal Dutch Shell
is facing the risk of a shareholder rebellion over pay for the second
successive year after two influential investor advisory groups raised
concerns about discretionary pay awards made to board-level executives.

RiskMetrics,
which provides advice on voting to investors including members of the
National Association of Pension Funds, has recommended a vote against
Shell's remuneration report at its annual meeting on May 19.

The
Association of British Insurers' voting service has also issued an
"amber top" alert on Shell's pay report, warning its members of a
potential breach of good governance.

Shell is asking its
investors to approve the board's decision to make a performance-based
award of shares to executive directors, even though the group has
failed to reach set targets for shareholder returns.

Shell's
incentive scheme for senior executives was set up to pay out according
to the company's performance against its peer group of "big five"
international oil companies (ExxonMobil and Chevron of the US, BP of
the UK and Total of France).

Under the scheme's terms, it was
intended that executives would be paid nothing if Shell ranked fourth
or fifth in that group by total shareholder returns during 2006-08.

The
group ranked fourth but the remuneration committee, led by Sir Peter
Job, the former Reuters chief executive, decided to award half the
shares they would have received if the company had been ranked third.
The value of the award has not been disclosed.

Shell has argued
that while it ranked fourth, the difference with the third-ranked
company was "marginal" and "Shell's overall performance warranted
discretion".

But a voting adviser to shareholders said: "It is
excessive application of discretion." The vote on May 19 follows
shortly after BP faced shareholder protests over its decision to pay
directors a bonus even though the group failed to beat set targets.

It is also the second year that shareholders have raised concerns about Shell's pay plans.

The
latest award comes after Jeroen van der Veer, the chief executive who
steps down at the end of June, was paid a total of €10.3m (£9.2m) in
2008, up 58 per cent on his remuneration in 2007. His package included
€2.69m and €386,946 from long-term incentive plans related to
performance in 2005-07 during which Shell also ranked fourth in its
peer group.