Board activities and evaluation

Board Activities

A rolling Board agenda is reviewed at Board meetings, enabling effective forward management of meetings and focused discussions. Forthcoming Board agenda items are categorised as: Strategy & Portfolio, Delivery & Performance, External Environment, Corporate & Miscellaneous or Standard items. Of the standard items, Board agendas regularly include reports from the Chief Executive Officer, the Chief Financial Officer and each Board committee. Core values moments and Shell Hero stories featured in early 2021 while updates continued throughout the year from various businesses and key functions, including Investor Relations; Health and Safety, Security and Environment; Information Technology; Human Resources; and Legal, as well as the Company Secretary. The Board also considers and approves the quarterly, half-year and full-year financial results, shareholder distributions and the associated announcements, and, at most meetings, considers investment, divestment and/or financing proposals. To enable purposeful debates and focus on particular aspects of agenda topics, including the impact on key stakeholders, Directors have an opportunity to specify information they require to be provided in advance of Board meetings. Finally, given the number of new Non-executive Directors over 2020 and 2021 in a continued virtual environment, virtual break-out sessions were built in to try to nurture relationship-building while promoting focused discussions on discrete topics.

During the year, where possible, certain Non-executive Directors conducted site visits. These visits were predominantly virtual, as a result of continued COVID-19 restrictions. The visits were designed to provide Directors with a deeper insight into certain business operations. Directors also held various virtual workforce engagements, as well as virtual external stakeholder engagements. More detail on these can be found in the table below .

Some of the activities and areas of Board focus over the year are summarised in the table below. The information below is not exhaustive. Information on other topics discussed by the Board and details of the resulting decisions are covered elsewhere, primarily in the "Section 172 Statement" contained in the Strategic Report. In some cases, a brief outline has been provided below, and page references are provided for additional and more comprehensive information.

June strategy days

As in 2020 and in lieu of the traditional physical June Strategy off-site meetings or Board’s Strategy Day, virtual meetings were held over the course of three days in June 2021. Effort was again invested into making the virtual sessions as engaging and interactive as possible, including break-out sessions and staff engagements. Directors shared the feedback obtained during the staff engagements on topics such as staff views on Shell strategy (including acceleration of Shell’s energy transition strategy), Project Reshape, pride in the Shell brand, diversity, and pride and concerns regarding Shell’s future.

Strategy Day 2021 marked the start of the roll-out of Shell’s Powering Progress strategy. The agenda focused on implementing this strategy and the critical enablers. Delivering the Powering Progress strategy requires us to transform Shell. The challenge is to navigate how we move from the certainty of familiar and proven business models to the uncertainty of a new energy environment, which is still evolving at variable pace in different sectors and regions. The Board Strategy Day agenda was built on the theme of Powering Progress in an Accelerating World, explored the topics which pose strategic risk or opportunity for Shell. The Board also reviewed areas where the strategy is already in action as implementation is under way and new businesses are developing.

The Board Strategy Days included discussions on various topics including:

• energy transition and commitment to net zero emissions;
• simplification of Shell’s equity capital and corporate structure;
• review of Upstream strategy;
• review of Power strategy;
• update on Financial Framework and financing the energy transition; and
• deep dive on electric vehicle charging.

Use the interactive tool to filter our different topics by considered stakeholders

Board Evaluation

Insight

The feedback from the Board Directors was positive throughout their responses to the evaluation. Views were provided on what additional expertise or experience might benefit Board composition through the energy transition. These views were actively considered, along with other factors, in Nomination and Succession Committee discussions.

Board dynamics – The Non-executive Directors’ engagement, support and challenge of management was rated very highly, with the quality of the interaction and the openness of the Executive team being commended. The Boardroom atmosphere was also highly rated.

Board oversight – The Board’s oversight of the Powering Progress strategy was rated highly overall, as was the understanding of the capacity of the Company to deliver the strategy. Some recommendations for further enhancement were received in this area. Board oversight of monitoring various external forces was also highly rated, although the Board noted an appetite for improved oversight of new technologies and digitalisation. The Board viewed its oversight of various specific aspects of risk positively and suggested further enhancements to improve risk discussions between the Board and management. The Board’s oversight of the Company’s processes for managing and developing senior executive talent was rated very highly, with a focus on the work in progress on further improving the ethnic diversity of senior talent.

Management and focus of meetings – Themes included: Board papers (a common topic for many corporates), which would still benefit from further simplification; and a desire to return to physical meetings when circumstances permit. The support available to the Board in terms of the induction/onboarding, Company Secretarial support and access to external advice was rated highly.

Stakeholder oversight – The mechanisms by which the Board obtains insight into the views and needs of major investors and employees were highly rated. At the same time, it was again noted that mechanisms for obtaining views of customers, private/retail investors, communities and suppliers should be explored to see whether feasible and relevant enhancements could be made. The Board’s effectiveness in monitoring and assessing culture throughout the organisation was rated positively overall, although the Board indicated interest in further enhancing its oversight in this area, particularly as the Company transforms through the energy transition.

Delivery against the 2021 ambitions

The COVID-19 pandemic continued to impact both the near- and long-term business outlook. Although government restrictions in many countries loosened as vaccinations increased, resulting in some regions starting to return to offices, international travel continued to present challenges well into the fourth quarter of 2021 and into 2022. Through the use of additional meetings, the Board balanced its focus on short-term operational matters and long-term strategy. However, delivery of some of the Board’s ambitions were affected by the need to focus attention and resources on other key events, such as the completion of Reshape, Shell’s company-wide reorganisation, and the simplification announced towards the end of 2021.

The Board progressed and supported significant projects throughout the year. Some of these are discussed in more detail in the “Section 172 statement”. These efforts were made throughout 2021 alongside numerous sessions to monitor and support management in implementing strategy. Management sought the Board’s input and support on the proposed announcements for Strategy Day 2021, the presentations on stakeholder feedback from Strategy Day 2021, and the Board’s review, and approval of Shell’s energy transition strategy.

The Board continued to monitor the Reshape reorganisation and had regular engagements on culture and workforce engagement through various sources. Because information on culture is dispersed across various reports and activities, and because of timeliness after launching Powering Progress and finalising Reshape, a discussion was originally planned for the latter part of 2021 to determine how best to address this topic in a unified and pragmatic way. Subsequently this was deferred to early 2022 because of the other pressing Board agenda topics that arose in the second half of 2021.

Other 2021 ambitions were: Chair succession, which has received positive reviews from the Chair evaluation; and enhancements for the greater oversight of litigation, which were also implemented. Further optimisation of the Non-executive Director onboarding programme was largely completed (except for items still impacted by travel restrictions, such as sharing Board travel). The plan to enhance ongoing training and explore pragmatic ways to further improve Board materials was impacted by the prioritisation of resources towards other significant projects.

Planned enhancements for 2022

The 2021 Board evaluation findings provided areas of focus or priorities for 2022. There was strong agreement between the Board and Executive Committee around:

• building on the “monitoring execution and strategic implementation” focus area from the 2020 evaluation, (including ensuring continued alignment on the Financial Framework). Directors’ suggestions were relayed to appropriate individuals for incorporation into the Strategy Agenda for 2022;
• clarifying the need for, and how best to obtain, wider external stakeholder views in feasible and relevant ways; and
• enhancing the risk management dialogue between management and the Board.

Powering Progress strategy/strategic direction/energy transition

This is very important for the years ahead. The Board and Executive Committee will continue to oversee the strategic execution as a priority (particularly Powering Progress, and the net zero/Carbon Management Framework).

External engagement

Enhancing interactions and/or obtaining the views of relevant external stakeholders, including external experts, customers, partners and society, was highlighted within the evaluation. The Board began discussions on this objective at its February 2022 meeting, considering how it could best be accomplished, and the informational scope that would be most relevant from various stakeholder groups. The Board plans to explore this topic further in 2022.

Financial framework

Capital investment allocation and operating expense are key to achieving the Company’s 2030 net-zero goals and intermediate actions. Alignment on the distribution policy/strategy and on the long-term financial framework will also be areas of focus.

Chair evaluation

The Chair was very highly rated as having made a strong start under difficult circumstances, with the COVID-19 pandemic limiting opportunities for face-to-face interaction. It was noted that his relationship with the CEO is balanced and positive. Transparency and good alignment between the Chair and the Non-executive Directors was highlighted. Directors praised his clear communication skills, noting only minor areas for improvement. The Chair’s management of the individual input of Directors both inside and outside Board meetings was highly rated, and his availability to individual Directors was valued and appreciated. The Board also praised his ability to keep agendas focused with sufficient time for full discussion.

The Deputy Chair communicated the feedback to the Chair, along with requests to:

• consider feasible and reasonable improvements in reducing Board materials and meetings; and
• continue to apply his industry experience and expertise as relevant in Board discussions, which adds strong contextual perspectives.

The Chair fully accepted the feedback, agreed to reflect and act upon it, and offered additional development points not identified that he was working on.