Shell's former head of exploration and production, who was sacked in March over the reserves scandal at the Anglo-Dutch oil giant, is to receive a £2.5m pay-off, but it will be contingent on helping regulators with ongoing criminal investigations into the affair.
Walter van de Vijver, who was forced out in March, will receive severance of €3.8m, two and a half times the size of the pay-off given to Shell's former chairman Sir Philip Watts, who was fired at the same time.
Mr van de Vijver's settlement would be payable in instalments and "subject to continuing co- operation with and review by the relevant authorities", the company said. When Sir Philip's £1m pay-off was announced in June it was not subject to any such conditions.
The terms of Mr van de Vijver's severance package would suggest that he may be granted immunity from prosecution in return for providing evidence to investigators, should criminal charges be laid. The US Justice Department is carrying out a criminal inquiry into how Shell came to overstate its reserves by 4.5 billion barrels, or a quarter. The scandal is also still the subject of investigations by the Dutch financial services regulator and stock exchange authorities.
Shell announced a settlement with the UK's Financial Services Authority and the US Securities and Exchange Commission last month, agreeing to pay £83m in fines in return for them ending their inquiries. However, the FSA stressed that its settlement related only to the company and not to serving and former directors of Shell, who are still being investigated.
A Shell spokesman was unable to say why Mr van de Vijver's severance deal was payable in stages and subject to him co-operating with the authorities when Sir Philip's was not. He suggested, however, that the amount of the pay-off was higher because Mr van de Vijver was a Dutch citizen employed under Dutch employment law and also had longer to go to retirement.
An investigation by Shell into the scandal published in April revealed how Mr van de Vijver had sent an e-mail to Sir Philip complaining that he was "sick and tired of lying" about the extent of Shell's reserves problems. The investigation, carried out by a firm of US lawyers, Davis Polk, on Shell's behalf, also disclosed that senior executives within Shell, including its current chairman, Jeroen van der Veer, had been aware of the possibility that Shell was over-estimating reserves two years before the company publicly disclosed the fact in January.
In addition to the €3.8m, Mr van de Vijver is also eligible to receive a €385,000 annual pension from 2015 onwards and can keep 271,000 share options, none of which have any exercise value. Although Mr van de Vijver was fired in March, his termination of employment only takes effect from 1 September, meaning that he will have remained on the pay-roll in the intervening period. However, he has had to give up 64,000 performance-linked shares worth £252,000 and received no performance bonus for last year or this year.
The size of the two men's pay-offs, which together amount to £3.5m, are likely to add salt to the wounds of shareholders. As a sop, Shell has agreed to overhaul its corporate governance arrangements by abandoning its much-criticised dual board structure. It may also take the more radical step of merging its British and Dutch halves into a single company.
Shell has promised investors an update of its plans in November. The plan is to implement them from next year's annual shareholders meetings.
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