Shell placates angry investors by freezing bosses' salaries

Pay for senior executives to be reined in following revolt by investors last year

Senior executives at Royal Dutch Shell are to have their pay frozen for at least 12 months after shareholders rejected the company's remuneration report last year.

In May, 60 per cent of investors voted against the Anglo-Dutch company's pay proposals for senior managers after the group's shares staged only a feeble recovery following the financial crisis. The energy giant responded yesterday, saying that chief executive Peter Voser and finance director Simon Henry would have their salaries frozen until next year. Both are already paid 20 per cent less than their predecessors.

In 2008, the last year for which figures are available, Mr Voser – who was then finance director – earned of £3.3m in pay, bonuses and the vesting of long-term incentives. Shell declined to comment yesterday on whether he would receive more this year following his promotion to chief executive.

Writing to shareholders a week after Shell announced a 75 per cent fall in profits for the last three months of 2009, Hans Wijers, the chairman of the company's remuneration committee, said the announcement would "demonstrate appropriate restraint in the current economic environment".

As part of the move, directors will not be allowed to pocket management bonuses unless specific, pre-arranged targets are hit. There was a fiery backlash at last year's annual general meeting when investors were told some board members would be paid large bonuses despite Shell missing targets.

Yesterday there were other disclosures, including that managers will be forced to hold shares awarded under the company's long-term incentive plan for at least two years.

Directors also face the prospect of having incentives clawed back for 12 months if performance deteriorates, while Mr Voser will now have to hold shares worth three times his salary. The reforms, which come into place after what Shell described as "extensive discussions" with investors, are designed to avoid a repeat of the ugly scenes at last year's AGM. Remuneration for 2010 will be considered at this year's meeting in May.

Shell's two biggest investors, Capital Research, which holds 2.3 per cent of the stock, and Fidelity, which has a 1.6 per cent stake, refused to comment.

Shell was not the only company to come under pressure about its remuneration policy last year, which led to accusations from a number of investor groups that executive pay did not reflect the more strained economic circumstances during the recession.

Shell's rival BP faced major opposition to its executive pay awards, with more than a third of investors voting against its annual report. About the same proportion objected to pay awards at the mining group Xstrata.

BP refused to say whether it was planning changes yesterday, adding that any announcement on executive pay would be made in early March when it publishes details of its AGM. Xstrata refused to comment, but it is unlikely to markedly change the terms of its remuneration.

In the financial sector, banks have faced a public backlash against plans to pay their vast bonuses. Barclays Capital, which received no direct assistance from taxpayers under the Government banking bailout, said yesterday that staff were in line for average bonuses of £100,000. Royal Bank of Scotland, which is 84 per cent state-owned, is expected to set aside up to £1.3bn for employee bonuses when it reveals its full-year results next week.