Shell chief's pay rises to £1.8m despite plunge in profits

Sir Philip Watts, the chairman of Royal Dutch/Shell, enjoyed a 55 per cent increase in his basic pay package last year even though the oil giant's profits fell by almost a quarter.

Excluding one-off gains from the exercise of share options, Sir Philip's pay rose by £635,000 to £1.793m. His basic salary increased by 23 per cent to £746,000 while his annual bonus virtually doubled to £874,000. Including one-off share option gains, his total package came to £1.8m compared with £1.67m in 2001 – an increase of 8 per cent. In 2001, Sir Philip was only chairman for half the year.

The 23 per increase in base salary was matched by a 23 per cent decrease in profits for the year to $9.2bn (£5.8bn) compared with $12bn in 2001. Return on capital employed also fell by a quarter to 14 per cent while earnings per share were 26 per cent lower.

The pay increases at Shell are in stark contrast to its rival BP where the chief executive, Lord Browne of Madingley, saw his remuneration fall by a third to £3.9m last year.

Shell's 2002 report and accounts also show a $10bn deterioration in the group's pension fund because of the dramatic decline in share values. At the end of 2001, the fund had a surplus of $4.2bn but by the end of last year this had turned into a $6bn deficit – the largest of any UK company.

A spokeswoman said that Shell would resume pension contributions this year of about $300m after having taken a holiday for several years. She added that the main UK scheme was in surplus and there were no plans to change the defined-benefit nature of the scheme.

The transfer value of Sir Philip's pension pot – the amount it would cost to provide him with a retirement income – rose by £1.48m to £7.9m last year and his accrued pension now stands at £480,000 a year.

Paul Skinner, Shell's other UK managing director and chief executive of the group's oil products business, saw his base pay package rise 32 per cent to £1.2m, including a £632,500 annual bonus. Share option gains netted him a further £8,238 against a gain of £505,902 in 2001.