Recruitment and employment arrangements
The REMCO determines the remuneration package for new Executive Director appointments. These appointments may involve external or internal recruitment, or reflect a change in role of a current Executive Director.
When determining remuneration packages for new Executive Directors, the REMCO will seek a balanced outcome which allows Shell to:
- Attract and motivate candidates of the right quality;
- Take into account the individual’s current remuneration package and other contractual entitlements;
- Seek a competitive pay position relative to our comparator group, without overpaying;
- Encourage relocation if required; and
- Honour entitlements (for example, variable remuneration) of internal candidates before their promotion to the Board, with the exception of any previous pension arrangements.
The REMCO will follow the approach set out below when determining the remuneration package for a new Executive Director.
The salary, benefits, annual bonus, long-term incentives and pension benefits will be positioned and delivered within the framework of the Policy.
Compensation for the forfeiture of any awards under variable remuneration arrangements
To facilitate external recruitment, one-off compensation in consideration for forfeited awards under variable remuneration arrangements entered into with a previous employer may be required. The REMCO will use its judgement to determine the appropriate level of compensation by matching the value of any lost awards under variable remuneration arrangements with the candidate’s previous employer. This compensation may take the form of a one-off cash payment or an additional award under the LTIP. The compensation can alternatively be based on a newly created long-term incentive plan arrangement where the only participant is the new Director. The intention is that any such compensation would, as far as possible, align to the duration and structure of the award being forfeited. Where appropriate, performance conditions, holding periods, and malus and clawback provisions will apply.
An amount equal to the value of the forfeited variable remuneration awards, as assessed by the REMCO. Consideration will be given to appropriate performance conditions, performance periods and clawback arrangements.
Replacement of forfeited entitlements other than any awards under variable remuneration arrangements
There may also be a need to compensate a new Executive Director in respect of forfeited entitlements other than any awards under variable remuneration arrangements. This could include, for example, contractual entitlements or other benefits. On recruitment, these entitlements may be replicated within the Executive Director’s remuneration package or valued by the REMCO and compensated in cash.
In cases of internal promotion to the Board, any commitments made which cannot be effectively replaced within the Executive Director’s remuneration package may, at the REMCO’s discretion, continue to be honoured.
An amount equal to the value of the forfeited entitlements, as assessed by the REMCO.
Exceptional recruitment incentive
Apart from the ongoing annual remuneration package and any compensation in respect of the replacement of forfeited entitlements, there may be circumstances in which the REMCO needs to offer a one-off recruitment incentive in the form of cash or shares to ensure the right external candidate is attracted (e.g. to the industry). The REMCO recognises the importance of internal succession planning but it must also have the ability to compete for talent with other global companies. The necessity and level of this incentive will depend on the individual’s circumstances. The intention will be that this is only used in genuinely exceptional circumstances.
A one-off amount up to the limits set out in the Executive Directors’ Remuneration Policy table, in addition to the ongoing package.
In the event that an internal or external candidate were required to relocate internationally to take up the Executive Director position, the REMCO may offer appropriate relocation provisions in respect of items including, but not limited to, relocation, assistance with visa/immigration issues, housing, and education assistance. If provided, these will be for a specified period of time, expected to be no more than two years.
The level of such benefits would be set at an appropriate level by the REMCO, taking into account the circumstances, provisions applicable to the wider internationally mobile workforce, and typical market practice.
Executive Directors’ service contracts and end of employment arrangements (including change of control provisions)
Executive Directors are employed for an indefinite period. Executive Directors based in the UK will be employed on service contracts governed by the laws of England and Wales.
The Executive Director or the Company may terminate employment by giving 12 months’ written notice. The Company may require the Executive Director to be on garden leave during all or any of the notice period (whether notice is given by the Company or the Executive Director).
Payment in lieu of notice (PILON)
The Company may terminate an Executive Director’s service contract at any time with immediate effect and pay a sum in lieu of the unexpired portion of any notice period to the value of no more than 12 months’ fixed pay (salary and regular allowances) and other benefits (unless statutory requirements to pay additional sums apply).
The Company has the contractual right to make any PILON in monthly instalments in its discretion. Once the right to make a PILON is exercised, its delivery in instalments is mitigated by a contractual obligation on the Executive Director to seek alternative employment.
Compensation for loss of office
Executive Directors will not usually receive additional payments for loss of office, other than, as appropriate, payments in lieu of notice as described above or payments in respect of damages if the Company terminates an Executive Director’s employment in breach of contract (taking into account, as appropriate, the Executive Director’s responsibility to mitigate any losses).
The REMCO reserves the right to make payments it considers reasonable in settlement of potential legal claims taking into account contractual provisions, applicable law, corporate governance provisions, the applicability of any statutory compensation and the best interests of Shell and shareholders as a whole.
The Company may terminate employment immediately in particular defined circumstances such as gross misconduct, with no further payment or PILON.
Annual bonus accrued prior to termination
The following provisions will normally apply:
- In the event of death, disability, injury or ill health, retirement, redundancy, completion of a fixed-term contract, and other circumstances at the REMCO’s discretion, any annual bonus in the year of departure is pro-rated based on service. Depending on the timing of the departure, the REMCO may consider the latest scorecard position or defer payment until the full-year scorecard result is known.
- In the event of a change of control, the REMCO will assess the most appropriate treatment for the outstanding bonus period according to the circumstances.
- Bonuses delivered in shares represent the bonus which a participant has already earned, and carry no further performance conditions. Therefore, these shares will normally be unrestricted at the conclusion of the normal holding period otherwise, and no pro-ration will apply.
- In other circumstances (including resignation), no award will be made unless statutory requirements apply.
- The REMCO retains discretion to waive any part of a bonus holding period in exceptional circumstances (primarily death).
Share awards will be treated in accordance with the relevant plan rules. The following provisions will normally apply:
- In the event of disability, injury or ill health, retirement, redundancy, completion of a fixed-term contract, and other circumstances at the REMCO’s discretion: outstanding awards are reduced pro-rata (on a monthly basis) for time elapsed during the performance period. They will generally survive the end of employment and remain subject to the same vesting performance conditions, holding period and malus and clawback provisions, as if the Executive Director had remained in employment. The extent to which awards vest will be determined by the REMCO, taking into account the extent to which the performance conditions have been satisfied.
- In the event of death: the award will vest in full on the date of death or, if there is a target level set out in the performance condition, then at that target level, unless the REMCO determines otherwise.
- Change of control: awards will be exchanged for equivalent new awards issued by the acquirer, if agreed to by the acquirer and the Board. If there is no agreement to exchange awards, awards will (i) vest immediately in full if there is no performance condition, or (ii) vest immediately to the extent that any performance condition has been satisfied to the date of vesting. Such awards will be reduced pro-rata for time elapsed during the performance period unless agreed otherwise.
- Other circumstances (including resignation): awards will lapse on cessation of employment unless statutory requirements apply.
- The REMCO retains discretion to waive any part of a holding period in exceptional circumstances (primarily death).
The provision of end-of-employment benefits such as a contribution to the Executive Director’s legal fees for the review of any settlement agreement, repatriation costs, and outplacement support may also be included, as deemed reasonable by the REMCO. The Executive Director may also remain eligible for other benefits, such as security provision or tax return preparation, in line with policies for the wider workforce. The Company may pay the Executive Director’s tax on such benefits.
REMCO may adjust the range and scope of the benefits offered in the context of developments for other employees in relevant countries.
In the event an Executive Director is based outside of the UK, the REMCO will determine the appropriate service contract and end of employment arrangements.
The table below sets out the effective dates of the Executive Directors' service contract.
Date of contract
January 1, 2023
April 1, 2022
Executive Directors’ employment arrangements are available for inspection at the AGM or on request. For further details on appointment and re-appointment of Directors, see the “Governance Framework” and “Other regulatory and statutory information”.