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Directors’ Remuneration Policy

The Directors’ Remuneration Policy sets out:

A summary of proposed changes to the Directors’ Remuneration Policy;

Executive Directors’ Remuneration Policy; and

Non-executive Directors’ Remuneration Policy.

This section describes the Directors’ Remuneration Policy (Policy) which, following shareholder approval at the 2020 Annual General Meeting (AGM), came into effect from May 19, 2020, and will be effective until the 2023 AGM, unless a further policy is proposed by Shell plc (the Company) and approved by shareholders in the meantime.

The principles underpinning the REMCO’s approach to executive remuneration are the foundation for everything we do, and are:

  • Alignment with Shell’s strategy: the Executive Directors’ compensation package should be strongly linked to the achievement of stretching targets that are seen as indicators of the execution of Shell’s strategy;
  • Pay for performance: the majority of the Executive Directors’ compensation, (excluding benefits and pensions), should be linked directly to Shell’s performance through variable pay instruments;
  • Competitiveness: remuneration levels should be determined by reference internally against Shell’s Senior Management and externally against companies of comparable size, complexity and global scope;
  • Long-term creation of shareholder value: Executive Directors should align their interests with those of shareholders by holding shares in Shell;
  • Consistency: the remuneration structure for Executive Directors should generally be consistent with the remuneration structure for Shell’s Senior Management. This consistency builds a culture of alignment with Shell’s purpose and a common approach to sharing in Shell’s success;
  • Compliance: decisions should be made in the context of the Shell General Business Principles and Code of Conduct. The REMCO also seeks to ensure compliance with applicable laws and corporate governance requirements when designing and implementing policies and plans; and
  • Risk assessment: the remuneration structures and rewards should meet risk-assessment tests to ensure that shareholder’s interests are safeguarded and that inappropriate actions are avoided.

The Executive Directors’ remuneration structure is made up of a fixed element of basic pay and two variable elements: the annual bonus (50% delivered in shares) and the Long-term Incentive Plan (LTIP). Variable pay outcomes are conditional on the successful execution of the operating plan in the short term and the delivery of strategic goals and financial outperformance over the longer term. The award of shares under the bonus and LTIP, along with significant shareholding requirements, are intended to ensure executives have a sizeable shareholding in Royal Dutch Shell plc (the Company) and experience the same outcomes as shareholders.

During 2018 and 2019, the REMCO reviewed the Remuneration Policy to ensure that the Policy continues to be aligned with Shell’s strategy, including delivery of shareholder returns. REMCO determined that while the current policy remains appropriate in many respects, certain changes will support the REMCO to simplify remuneration structures and address the management of quantum. For each area of the policy, the REMCO has considered market practice, the corporate governance environment and feedback from shareholders. The Safety, Environment and Sustainability Committee (SESCo) has provided input to the development of the sustainable development and energy transition metrics. Any potential conflict of interest is mitigated by the independence of the REMCO members and the REMCO Terms of Reference.

A summary of the main changes to the Policy for the Executive Directors is outlined below. No significant changes were made to the Policy for Non-executive Directors.

Remuneration element

Proposed Changes to Policy

Rationale for the change

Annual Bonus

  • Reduction of the CEO’s target bonus from 150% to 125%; and

  • Removal of the individual performance factor for Executive Directors.
  • Simplification: the asymmetry in the CEO’s bonus structure and the inclusion of individual performance factors were creating undue complexity; and

  • Transparency: The annual bonus is now solely linked to the performance of Shell to support clarity and transparency of outcomes.

Long-Term Incentive Plan

  • Reduction of the target LTIP grant from 400% to 300% of base salary; and

  • Inclusion of an energy transition metric.
  • Management of Quantum: To moderate the quantum of pay and assist the REMCO in managing the range of outcomes; and

  • Alignment to Strategy: Inclusion of the energy transition metric strengthens the LTIP’s alignment to the strategy and purpose.

Discretion, Malus and Clawback

  • After reviewing the single figure outcomes for the year, the REMCO will consider an adjustment for the purposes of managing remuneration quantum, taking into account performance, the operation of the remuneration structures and any other relevant considerations. An explanation of any discretionary adjustment would be set out in the relevant Director’s Remuneration Report;

  • Alignment of malus and clawback provisions so that these are the same. Inclusion of corporate failure as an adjustment event; and

  • Amendment of provisions in the share plan such that for future grants, awards may be adjusted for any reason.
  • Corporate Governance: Assist the REMCO in managing the risks from behavioural-based incentive schemes; and

  • Management of Quantum: To assist the REMCO in managing the range of outcomes.


  • New Executive Directors who are members of a defined benefit pension arrangement will have their pensionable salary capped at the salary applicable immediately prior to appointment, with the exception of existing US base country participants who will have the bonus removed from the definition of pensionable base salary instead. The Executive Director will join a defined contribution scheme in their base country for contributions made in respect of salary above the defined benefit pensionable salary, or in exceptional circumstances, receive a cash allowance equivalent to the contribution above the cap; and

  • For recruitment: Explicit confirmation that new appointees, whether internally promoted or newly hired, will be provided with a pension in line with the wider workforce in their base country.
  • Management of Quantum: To moderate the quantum of pay and assist the REMCO in managing the range of outcomes; and

  • Corporate Governance: To adopt best practice in line with external guidelines.

Shareholding Requirement

  • CFO requirement increased to 500% of base salary; and

  • Extended so it applies for a period of two years post-employment (at the lower of the shareholding requirement or the number of shares held at departure).
  • Alignment with Shareholders: Further aligns executives with the long-term interests of shareholders.
Annual General Meeting
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Long-term Incentive Plan
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Remuneration Committee
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