Directors’ Remuneration Policy

This section describes the Directors’ Remuneration Policy (the Policy) which, subject to shareholder approval at the 2023 Annual General Meeting (AGM), will come into effect from May 23, 2023, and will be effective until the 2026 AGM, unless a revised Policy is proposed by 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 and sustainability: the Executive Directors’ compensation package should promote the long-term, sustainable success of Shell, and be strongly linked to the achievement of stretching targets that are 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; and
• Risk assessment: decisions should be made in the context of the Shell General Business Principles and Code of Conduct. The remuneration structures and rewards should meet risk assessment tests to ensure that shareholders’ 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 and share price 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 the Company and experience the same outcomes as our shareholders.

During 2022, the REMCO reviewed the Policy to ensure that it continued to support Shell’s strategy. The REMCO determined that the current Policy remained appropriate in most respects, and required changes only to reflect the transition of our Executive Directors to the UK to align with market practice and for simplification. For each area of the Policy, the REMCO reviewed the alignment with strategy, market practice, the corporate governance environment, and feedback from shareholders, and additionally spent time updating the selection and calibration of performance metrics in variable pay schemes. Any potential conflict of interest was mitigated by the independence of the REMCO members and the REMCO Terms of Reference. The REMCO also considered the provisions of the UK Corporate Governance Code when reviewing the Policy, and sought to reflect the principles of clarity, simplicity, risk management, predictability, proportionality and alignment with culture.

A summary of the main changes to the Policy is set out below.