The Sunday Telegraph: Van der Veer and Shell bosses set for huge pay rises: “The shock revision to the company's proven reserves - it has potentially overbooked almost one-third of reserves - means that Shell will have to find more oil. In an exclusive interview with The Sunday Telegraph, van der Veer said he would consider acquisitions and that Shell's new plc structure would allow it to use its shares as an acquisition currency.” (ShellNews.net)
By Sylvia Pfeifer (Filed: 31/10/2004)
Jeroen van der Veer, the new chief executive of Royal Dutch Shell, and his fellow executive directors are set to see their total pay packages surge after the historic merger of the oil giant's two operating companies into one UK-listed group.
It is understood that the board has recognised the need for a radical shake-up of the remuneration arrangements for Shell's top executives in the light of its new status as a publicly-listed company and one of the largest members of the FTSE100.
Although van der Veer, who earned 1.13m (£785,000) last year, and Shell's executive directors, are not expected to receive an increase in their basic salaries, the oil giant's board is considering putting in place substantial new performance targets worth millions of pounds.
These could bring Shell executives, who have historically been among the lowest-paid managers in the oil industry, in line with rivals such as BP.
"It is true that the creation of a chief executive and the replacement of a collegiate committee of managing directors [which used to run Shell] could have consequences in terms of pay. New performance targets for the whole management team will be laid down," said one executive close to the company.
Van der Veer, who took over from Sir Philip Watts as chairman of the committee of managing directors in March, and who became Shell's first chief executive last week, earned a basic salary of 1.12m last year. His total package for the year, however, came to just 1.13m after the company scrapped its annual bonus awards to executives in the wake of its shock admission earlier this year that it had overstated its proven oil and gas reserves.
By contrast, Lord Browne, BP's highly-regarded chief executive, earned a basic salary of £1.28m in 2003, but his total pay totalled £3.2m after an annual bonus and other benefits. Lee Raymond, his counterpart at ExxonMobil, the US oil giant, earned $7.25m (£4m) in total compensation in 2003.
The plan for a radical remuneration plan will be intensely scrutinised by Shell investors. The group's previous bonus scheme was widely discredited because it was controversially linked to increases Shell made in booking reserves. This element has now been scrapped.
After last week's momentous decision to abandon Shell's 100-year-old corporate structure, which was widely welcomed by institutional shareholders, van der Veer is now under pressure to deliver. The shock revision to the company's proven reserves - it has potentially overbooked almost one-third of reserves - means that Shell will have to find more oil.
In an exclusive interview with The Sunday Telegraph, van der Veer said he would consider acquisitions and that Shell's new plc structure would allow it to use its shares as an acquisition currency.
"When oil prices are high, the most logical way to grow the company is organic growth . . . Wall Street constructions [share deals], as I call them, are very expensive. Having said that . . . if we would like to do Wall Street-type constructions, we are now on a level playing field with competitors."
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/10/31/cnshel31.xml