Additional remuneration disclosures

Percentage change in remuneration of the Directors and employees

As the Company does not have any direct employees, the table below compares the remuneration of the Executive and Non-executive Directors of Shell plc with an employee comparator group consisting of local employees in the UK, the Netherlands, and the USA. The local employee population of these countries is considered to be a suitable employee comparator group because: these are countries with a significant Shell employee base; a large proportion of senior managers come from these countries; and the REMCO considers remuneration levels in these countries when setting base salaries for Executive Directors. For the purposes of comparison, the change in employee remuneration is calculated by reference to the change in salary scale, benefits and annual bonus for a notional employee in each of the base countries, not by reference to the actual change in pay for a group of employees.

Taxable benefits are those that align with the definition of taxable benefits applying in the respective country. In line with the “Single figure of total remuneration for Executive Directors” table, the annual bonus is included in the year in which it was earned.

Relative importance of spend on pay

The table below sets out distributions to shareholders by way of dividends and share buybacks, and remuneration paid to or receivable by employees for the last five years, together with annual percentage changes.

Spend on pay can be compared with the major costs associated with generating income by referring to the “Consolidated Statement of Income”. Over the last five years, the average spend on pay was 5% of the major costs of generating income. These costs are considered to be the sum of: purchases; production and manufacturing expenses; selling, distribution and administrative expenses; research and development; exploration; and depreciation, depletion and amortisation.

Total pension entitlements (audited)

During 2022, Jessica Uhl accrued retirement benefits under a defined benefit plan. The pension accrued under this plan at March 31, 2022 is set out below.

The age at which Jessica Uhl can receive any pension benefit without an actuarial reduction under her US pension plan is 65. Any pension benefits on early retirement are reduced using actuarial factors to reflect early payment. No payments were made in 2022 regarding early retirement or in lieu of retirement benefits.

After his relocation to the UK on December 31, 2021, Ben van Beurden became a deferred member of his Dutch defined benefit plan, and therefore did not accrue any pension benefit under a defined benefit plan during 2022. The increase in his accrued pension over the year is due only to indexation in line with inflation on his deferred pension, consistent with treatment for any other deferred member in the plan.

External appointments

Ben van Beurden served on the Supervisory Board of Daimler AG as a Non-executive Director in 2022, and Jessica Uhl served on the Board of Goldman Sachs Group as Non-executive Director in 2022. Sinead Gorman did not hold any Non-executive Director positions during 2022.

Statement of voting at 2022 AGM

Shell’s 2022 AGM was held on May 24, 2022. The result of the poll in respect of Directors’ remuneration was as follows:

The result of the poll in respect of the Directors’ Remuneration Policy last approved at the 2020 AGM was as follows:

Shell has chosen to use option A to calculate the CEO pay ratio in accordance with guidance from the UK government that this is the preferred approach and the most statistically accurate method for identifying the ratios. Under option A, a comparable single figure for all UK employees has been calculated in order to identify the employees whose pay and benefits are at the 25^th, 50^th (median) and 75^th percentiles for comparison with the CEO. Employee pay has been calculated based on the total pay and benefits paid in respect of 2022 for all employees who were employed on December 31, 2022. For part-time workers and joiners in the year, pay and benefits have been annualised based on the proportion of their working time in the UK during the year. This is calculated with an approach consistent with the methodology for determining annual bonuses. The REMCO believes that this provides a fair and reasonable calculation of the pay ratios for Shell employees in the UK.

The ratio of the CEO’s pay to the median UK employee is 80. The global pay ratio, calculated by comparing the CEO’s single figure with the average employee headcount cost, is 79. The ratio at median for 2022 is higher than for 2021, reflecting an increase in variable pay outcomes for the CEO. While variable pay outcomes have also increased for other UK employees, a higher proportion of the CEO’s remuneration is variable, meaning the pay ratio is higher in years of higher variable pay outcomes. Overall, the pay ratios are lower than in 2018 (the first year of reporting), reflecting reductions in the CEO bonus and LTIP opportunities over time, as well as changes in variable pay outcomes. The REMCO believes the CEO pay ratio for 2022 is appropriate and consistent with Shell’s philosophy of pay for performance.

Directors’ employment arrangements and letters of appointment

Executive Directors are employed for an indefinite period. Non-executive Directors, including the Chair, have letters of appointment. Details of Executive Directors’ employment arrangements can be found in the proposed Policy in the section “Other regulatory and statutory information”.

Further details of Non-executive Directors’ terms of appointment can be found in the “Other regulatory and statutory information” and the “Governance framework” report.

Compensation of Directors and Senior Management

During the year ended December 31, 2022, Shell paid and/or accrued compensation totalling $53 million (2021: $48 million) to Directors and Senior Management for services in all capacities while serving as a Director or member of Senior Management, including $2 million (2021: $3 million) accrued to provide pension, retirement and similar benefits. The amounts stated are those recognised in Shell’s income on an IFRS basis. See Note 33 to the “Consolidated Financial Statements”. Personal loans or guarantees were not provided to Directors or Senior Management.

Workforce engagement on remuneration matters

Workforce engagement

The Board’s view is that all Directors have a collective responsibility for workforce engagement, ensuring that employees’ voices are heard on all business matters, including pay, and that the Company communicates effectively to employees on our remuneration policies and practices. The Board and management regularly engage with the workforce through a range of formal and informal channels, including webcasts, town halls, team meetings, face-to-face gatherings, employee surveys, and online publications via the intranet. During live webcasts and other interactive sessions, employees have the opportunity to pose questions on any topic, including pay. The Board’s preference is to build on existing, long-standing channels of engagement for discussions around remuneration.

During the year, the Board reviewed the results of the 2022 Shell People Survey, and was pleased to note further improvements, including the achievement of the best “employee engagement” result in the last 12 years and the highest ever “organisational leadership” and “team leadership” scores across Shell. The Board was also pleased with the significant levels of employee engagement with intranet articles explaining the Powering Progress Share Award and EC Special Recognition Award, and how the refreshed Group scorecard connects with Shell’s strategic priorities.

Wider employee context

The REMCO receives annual updates on workforce remuneration topics, including employees’ views on pay matter; CEO pay ratio; UK gender and ethnicity pay gap information; planned general employee salary increases; and bonus scorecard and Performance Share Plan (PSP) outcomes. In addition, the REMCO receives ad hoc papers covering other pay matters periodically, e.g. a consideration of workforce remuneration policies and their alignment with culture.

Management understands that employees have been through a challenging period, and has recognised their efforts in various ways, as referred to in the Chair’s Statement. In addition, at the beginning of the year, management reviewed the bonus scorecard outcome for 2021 and determined to apply a discretionary uplift to the formulaic outcome for below-Board employees, to recognise financially the extraordinary lengths that colleagues have gone to. For the avoidance of doubt, the uplift was not applied to Executive Directors. The REMCO noted this decision as part of its review of workforce matters. These materials provide an important backdrop for the REMCO when making judgements on the design and award of Executive Director remuneration.

Shell adheres to its fair pay principles in all remuneration-related matters. Pay in Shell is market-competitive, free from bias, and provides security to our employees. Shell sets clear performance expectations, gives employees the opportunity to share in Shell’s success through a variety of variable pay schemes, and is transparent and clear in its communication of remuneration. For more information, visit the ”Human Rights” section of www.shell.com.

How executive remuneration aligns with wider Company pay policy

Executive remuneration structures in Shell are strongly aligned with the structures for the broader workforce, as set out in the table below.