Statement of 2020 Planned Implementation of Policy

The proposed Directors’ Remuneration Policy will, subject to shareholder approval, take effect from May 19, 2020 and will be effective until the 2023 AGM, unless a further policy is proposed by Shell and approved by shareholders in the meantime. This section describes elements that apply for 2020, within the boundaries of the policy.

Executive Directors

Salaries

Effective from January 1, 2020, the base salaries were set at €1,588,000 (+2.0%) for Ben van Beurden and at €1,035,000 (+2.0%) for Jessica Uhl, in accordance with the proposed 2020 remuneration policy as set out in section “Executive Directors”. These increases are consistent with planned salary increases in the US, UK and NL for the general employee population which range from 1.7% – 3.4%.

Annual bonus

There are no changes to the scorecard measures and weightings for 2020. Performance measures are comprised of cash flow from operating activities, operational excellence and sustainable development measures. These measures and weightings were reviewed by the REMCO as part of the 2020 policy review, with the REMCO determining that these remain well-aligned with our strategic and operational priorities and consistent with the performance indicators.

The performance measures, weightings and link to strategy for the 2020 performance year are set out below:

2020 annual bonus scorecard measures and weightings

Annual bonus scorecard targets are not disclosed prospectively because to do so in a meaningful manner would require the disclosure of commercially sensitive information. As in previous years, scorecard targets will be disclosed in the subsequent Directors’ Remuneration Report when they are no longer deemed to be commercially sensitive.

Long-term Incentive Plan

On January 31, 2020, a conditional award of performance shares under the LTIP was made to the Executive Directors resulting in 200,589 Royal Dutch Shell plc A shares (A shares) being conditionally awarded to Ben van Beurden and 59,062 Royal Dutch Shell plc A American Depositary Shares (A ADSs) to Jessica Uhl. The award had a face value of 300% (maximum performance outcome 600%) of the base salary for the CEO and 270% (maximum performance outcome 540%) of the base salary for the CFO, excluding potential share price appreciation and dividends. In making these awards, the REMCO considered the Company’s share price and determined that there was no significant share price volatility that would require an adjustment to the size of the awards.

The award for the CEO has been reduced from a face value award of 340% (maximum vesting outcome 680%) in prior years. This reduction is part of the REMCOs response to addressing quantum and further details are provided in section “Directors’ Remuneration Report”.

For LTIP awards made in 2020, performance will be assessed over a three-year period based on four financial measures and an energy transition condition.

The target for the FCF metric is the aggregate of our annual operational business plan FCF targets over the three-year performance period. These are considered to be commercially sensitive and will be disclosed retrospectively, with annual updates on progress provided.

The NCF target range for the 2020 – 2022 LTIP grant is set as a 3-4% reduction from the 2016 NCF of 79g CO₂e/MJ. This target is aligned with the trajectory of our NCF ambition set out in November 2017. There is no change to the other energy transition measures other than the advanced biofuel technology measure is extended to include a measure of alternative fuel development. The targets for the other leading energy transition measures are commercially sensitive, and will be disclosed retrospectively.

2020 LTIP measure and vesting schedule

Discretion, adjustment (malus) and recovery (clawback)

Variable pay elements are subject to adjustment (malus) and recovery (clawback) provisions, which may apply in case of direct responsibility or supervisory accountability. The REMCO may adjust an award, for example by lapsing part or all of it, reducing the number of shares which would otherwise vest, by imposing additional conditions on it, or imposing a new holding period or applying clawback.

Please refer to the policy section for a full description of the circumstances under which discretion, malus and clawback might be applied to a variable pay award.

Pension

Ben van Beurden’s pension arrangements comprise a defined benefit plan for which the maximum pensionable salary has increased to €98,993 for 2020 and a net pay defined contribution pension plan with an employer contribution of 27% of salary in excess of this amount.

Jessica Uhl’s US retirement benefit arrangements include the Shell Pension Plan, a defined benefit plan, and a defined contribution plan with an employer contribution of 10% of salary. She also has a deferred Dutch defined benefit pension plan, as a result of a prior Shell assignment on local Dutch terms and conditions.

Further details of Executive Director pension arrangements can be found in section “Remuneration for 2019”.

Non-executive Directors’ fees

The Chair’s fee is determined by the REMCO and the annual fee for Charles O. Holliday was set at €850,000 upon appointment in 2015 and will remain unchanged for 2020. The Chair of the Board does not receive any additional fee for chairing the Nomination and Succession Committee or attending any other Board committee meeting.

The Non-executive Directors receive a basic fee. There are additional fees for the Senior Independent Director, a Board committee chair or a Board committee member for each committee. Non-executive Directors receive an additional fee of €5,000 for any Board meeting involving intercontinental travel, except for one meeting a year held in a location other than The Hague. Business expenses (including transport between home and office and occasional business-required spouse travel) and associated tax are paid or reimbursed by Shell. The Chair has use of a Shell-provided apartment while in The Hague.

The Board reviews Non-executive Directors’ fees periodically to ensure that they are aligned with those of other major listed companies using the FTSE 30 and the Europe Comparator group as the primary points of reference. The last general review was carried out in 2018 with a review of the Nomination and Succession Committee fees in 2019 and fees will remain unchanged for 2020.