Executive Directors
Executive Directors’ Remuneration Policy table
Base salary
Purpose and link to strategy
Provides a fixed level of earnings to attract and retain Executive Directors.
Maximum opportunity
£2,000,000
Operation and performance management
Reviewed annually with adjustments effective from January 1.
In making salary determinations, the REMCO will consider:
- the market positioning of the compensation packages;
- comparison with Senior Management salaries;
- the employee context, and planned average salary increase for other employees across the UK, the Netherlands, and the USA;
- the experience, skills and performance of the Executive Director, or any change in the scope and responsibility of their role;
- general economic conditions, Shell’s financial performance, and governance trends; and
the impact of salary increases on pension benefits and other elements of the package.
Benefits
Purpose and link to strategy
Provides benefits, typically in line with those applicable to the wider workforce, in order to attract and retain Executive Directors.
Maximum opportunity
Determined by the nature of the benefit itself and costs of provision, and may depend on external factors, e.g. insurance costs.
Operation and performance management
Typical benefits include car allowances, home-to-office transport, risk benefits (for example ill health, disability or death-in-service), security provision, and employer contributions to insurance plans (such as medical) including Directors’ liability insurance. In the event an international relocation is required either prior to appointment or while appointed, Shell’s mobility policies may apply and the REMCO may offer appropriate provisions in respect of items including, but not limited to, relocation, assistance with visa/immigration/tax issues, and tax return support. It may also provide housing and education assistance for a specified period of time, expected to be no more than two years. Tax equalisation related to expatriate employment prior to Board appointment, or in other limited circumstances to offset double taxation, may also be provided.
Precise benefits will depend on the Executive Director’s specific circumstances and may include any tax liabilities relating to business-related benefits such as in the case of security or relocation provisions.
The REMCO may adjust the range and scope of the benefits offered in the context of developments for other employees in the country which the Executive Director is based. Personal loans or guarantees are not provided to Executive Directors.
Pension
Purpose and link to strategy
Provides a competitive defined contribution pension provision applicable to the wider workforce in the UK to attract and retain Executive Directors.
Maximum opportunity
Determined by the rules of the defined contribution UK pension arrangements.
Operation and performance management
Executive Directors’ retirement benefits are maintained in line with those of the wider Shell workforce in the UK. Only base salary is pensionable, unless plan regulations specify otherwise and cannot legally be disapplied. The rules of the relevant plan detail the pension benefits which members can receive. The REMCO retains the right to amend the form of any Executive Director’s pension arrangements where appropriate, for example in response to changes in legislation to ensure the original objective of this element of remuneration is preserved.
New Executive Directors based in the UK, whether internal appointees or external hires, will be provided with the defined contribution arrangement, applicable to the wider Shell workforce in the UK, which currently includes the flexibility to take this as a pension cash alternative.
Annual bonus
Purpose and link to strategy
Rewards the delivery of short-term operational targets as derived from Shell’s operating plan.
Aligns the interests of Executive Directors and shareholders, and supports retention, through long-term holding in shares.
Maximum opportunity
Target bonus: 125% of base salary.
Maximum bonus: 200% of target.
Operation and performance management
- The bonus is determined by reference to performance from January 1 to December 31 each year.
- Annual bonus = base salary x target bonus % x scorecard result (0–2).
- The scorecard is reviewed each year, taking account of Shell’s operating plan, to ensure that the performance measures, targets and weightings are appropriate. Performance measures typically relate to financial delivery, operational excellence, progress in the energy transition, and safety, with indicative weightings of 35%, 35%, 15% and 15% respectively. This helps to balance short-term financial performance with the achievement of a broader set of strategic and operational objectives to support long-term shareholder value creation. The REMCO retains the flexibility to adjust performance measures, weightings and targets on a year-by-year basis, within the terms of the Policy.
- Scorecard targets are disclosed on a retrospective basis in a subsequent Annual Report on Remuneration, when they are no longer deemed commercially sensitive.
- To reinforce alignment with shareholder interests, 50% of any bonus earned is delivered in cash and 50% is delivered in net-of-tax shares. The shares are subject to a three-year holding period from the end of the performance period the award relates to, which applies beyond an Executive Director’s tenure. The REMCO retains discretion to waive any part of this holding period in exceptional circumstances (primarily death).
- The bonus is subject to malus provisions before it is delivered, and to clawback thereafter for a period of three years.
Long-term Incentive Plan (LTIP)
Purpose and link to strategy
Rewards longer-term value creation linked to Shell’s strategy. The measures focus on financial performance, capital discipline and the achievement of Shell’s ambitions in the energy transition.
Aligns the interests of Executive Directors and shareholders, and supports retention through long-term holding in shares.
Maximum opportunity
Target award: 300% of base salary.
Awards may vest at up to 200% of the shares originally awarded, plus dividends.
Operation and performance management
- Award levels are determined in respect of any financial year by the REMCO within the Policy maximum.
- Awards may vest at between 0% and 200% of the initial award, depending on Shell’s performance, assessed over a three-year performance period, on an absolute basis and/or on a relative basis against an appropriate comparator group.
- Performance measures and weightings are reviewed and set by the REMCO at the beginning of each three-year performance period, taking account of Shell’s strategic priorities.
- Notional dividends accrue over the vesting period in respect of awards that vest.
- To reinforce alignment with shareholder interests, net of tax shares delivered from vested awards are subject to a three-year holding period from the end of the performance period the award relates to, which applies beyond an Executive Director’s tenure. The REMCO retains discretion to waive any part of this holding period in exceptional circumstances (primarily death).
- Dividends accrue over the vesting period in respect of awards that vest.
- The award is subject to malus provisions before vesting, and to clawback provisions thereafter for a period of three years.
Discretion, malus and clawback
Purpose and link to strategy
Enables the management of risks from behaviour-based incentive schemes and the REMCO to manage the range of pay outcomes.
Maximum opportunity
Adjustment events exist for the purposes of applying malus and clawback.
The REMCO retains discretion to adjust pay outcomes
Operation and performance management
- The REMCO retains the discretion to adjust mathematical outcomes of the annual bonus scorecard and/or LTIP vesting for any Executive Director if and to the extent that it considers this appropriate at their sole discretion.
- The REMCO may adjust pay outcomes for the purposes of managing quantum. This would be done at the REMCO’s discretion after considering single figure outcome for the year, taking into account Shell’s performance, the operation of the remuneration structures and any other relevant considerations.
- In exceptional circumstances, the REMCO may determine that the vesting of an annual bonus or a share award should be suspended pending the outcome of an investigation. The suspension may be for such period as the REMCO considers sufficient to permit the investigation to be concluded.
- The use of any discretion will be disclosed and explained.
Shareholding requirements
Purpose and link to strategy
Aligns interests of Executive Directors with those of shareholders by creating a connection between individual wealth and Shell’s long-term performance
Maximum opportunity
Shareholding (% of base salary):
CEO: 700%
CFO: 500%
Operation and performance management
- Executive Directors are expected to build up their shareholding to the required level over a period of five years from appointment and, once reached, to maintain this level for the full period of their appointment. The intention is for the shareholding guideline to be reached through retention of vested shares from share plans. The REMCO will monitor progress and retains the ability to adjust the guideline in special circumstances on an individual basis.
- In the event of an increase to the guideline, this timeframe is increased by one year for every additional multiple of salary required, subject to a maximum of five years from the date of the change.
- The Executive Director will be required to maintain their shareholding requirement (or existing shareholding if lower) for a period of two years from the date they cease to be an employee. Post-termination holding is enforced through the arrangements put in place with the employee on termination.
- In the event that another Executive Director joins the Board, the REMCO will determine their shareholding requirement level, which will not be less than 200% of salary, in line with corporate governance best practice.
- Vested shares from incentive plans (including bonus and LTIP shares subject to holding period) count towards the requirement. The REMCO monitors individual progress and retains the ability to adjust the guideline in special circumstances on an individual basis.
